UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C.
20549
Form 10-K
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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For the fiscal
year ended December 31,
2010
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OR
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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For the transition period
from to
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Commission File Number
000-50743
ALNYLAM PHARMACEUTICALS,
INC.
(Exact Name of Registrant as
Specified in Its Charter)
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Delaware
(State or Other Jurisdiction
of
Incorporation or Organization)
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77-0602661
(I.R.S. Employer
Identification No.)
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300 Third
Street, Cambridge, MA 02142
(Address of Principal Executive
Offices) (Zip Code)
Registrants telephone number, including area code:
(617) 551-8200
Securities registered pursuant to Section 12(b) of the
Act:
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Title of Each Class
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Name of Each Exchange on Which Registered
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Common Stock, $0.01 par value per share
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The Nasdaq Global Market
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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
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No
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Indicate by check mark if the registrant is not required to file
reports pursuant to Section 13 or Section 15(d) of the
Act. Yes
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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
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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
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No
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Indicate by check mark if 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 registrants knowledge, in definitive proxy or
information statements incorporated by reference in
Part III of this
Form 10-K
or any amendment to this
Form 10-K.
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Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company. See the definitions of
large accelerated filer, accelerated
filer and smaller reporting company in
Rule 12b-2
of the Exchange Act. (Check one):
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Large
accelerated
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Non-accelerated
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Smaller reporting
company
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(Do not check if a smaller
reporting company)
Indicate by check mark whether the registrant is a shell company
(as defined in
Rule 12b-2
of the
Act). Yes
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The aggregate market value of the registrants common
stock, $0.01 par value per share (Common
Stock), held by non-affiliates of the registrant, based on
the last sale price of the Common Stock at the close of business
on June 30, 2010, was $446,579,243. For purposes hereof,
shares of Common Stock held by each executive officer and
director of the registrant and holder of ten percent or more of
the outstanding Common Stock have been excluded from the
foregoing calculation because such persons and entities may be
deemed to be affiliates of the registrant. This determination of
affiliate status is not necessarily a conclusive determination
for other purposes.
At January 31, 2011, the registrant had
42,343,623 shares of Common Stock, $0.01 par value per
share, outstanding.
DOCUMENTS
INCORPORATED BY REFERENCE
Portions of the registrants definitive proxy statement for
its 2011 annual meeting of stockholders, which the registrant
intends to file pursuant to Regulation 14A with the
Securities and Exchange Commission not later than 120 days
after the registrants fiscal year end of December 31,
2010, are incorporated by reference into Part II,
Item 5 and Part III of this
Form 10-K.
ALNYLAM
PHARMACEUTICALS, INC.
ANNUAL REPORT ON
FORM 10-K
For the Year Ended December 31, 2010
TABLE OF CONTENTS
1
This annual report on
Form 10-K
contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as
amended, that involve risks and uncertainties. All statements
other than statements relating to historical matters should be
considered forward-looking statements. When used in this report,
the words believe, expect,
anticipate, may, could,
intend, will, plan,
target, goal and similar expressions are
intended to identify forward-looking statements, although not
all forward-looking statements contain these words. Our actual
results could differ materially from those discussed in the
forward-looking statements as a result of a number of important
factors, including the factors discussed in this annual report
on
Form 10-K,
including those discussed in Item 1A of this report under
the heading Risk Factors, and the risks discussed in
our other filings with the Securities and Exchange Commission.
Readers are cautioned not to place undue reliance on these
forward-looking statements, which reflect managements
analysis, judgment, belief or expectation only as of the date
hereof. We explicitly disclaim any obligation to update these
forward-looking statements to reflect events or circumstances
that arise after the date hereof.
PART I
Overview
We are a biopharmaceutical company developing novel therapeutics
based on RNA interference, or RNAi. RNAi is a naturally
occurring biological pathway within cells for selectively
silencing and regulating the expression of specific genes. Since
many diseases are caused by the inappropriate activity of
specific genes, the ability to silence genes selectively through
RNAi could provide a new way to treat a wide range of human
diseases. We believe that drugs that work through RNAi have the
potential to become a broad new class of drugs, like small
molecule, protein and antibody drugs. Using our intellectual
property and the expertise we have built in RNAi, we are
developing a set of biological and chemical methods and know-how
that we apply in a systematic way to develop RNAi therapeutics
for a variety of diseases.
Our core product strategy, which we refer to as Alnylam
5x15, is focused on the development and commercialization
of innovative RNAi therapeutics for the treatment of genetically
defined diseases. Under our core product strategy, we expect to
progress five RNAi therapeutic programs into advanced stages of
clinical development by the end of 2015. As part of this
strategy, our goal is to develop product candidates with the
following shared characteristics: a genetically defined target
and disease; the potential to have a significant impact in high
unmet need patient populations; the ability to leverage our
existing RNAi delivery platform; the opportunity to monitor an
early biomarker in Phase I clinical trials for human proof of
concept; and the existence of clinically relevant endpoints for
the filing of a new drug application, or NDA, with a focused
patient database and possible accelerated paths for
commercialization. We intend to commercialize products arising
from this core product strategy on our own in the United States
and potentially certain other countries, and we intend to enter
into alliances to develop and commercialize any such products in
other global territories. We are currently advancing three core
programs in clinical or pre-clinical development: ALN-TTR for
the treatment of transthyretin-mediated amyloidosis, or ATTR;
ALN-PCS for the treatment of severe hypercholesterolemia; and
ALN-HPN for the treatment of refractory anemia. As part of our
core product strategy, we also expect to designate and start
pre-clinical development of two additional RNAi therapeutic
candidates targeting genetically defined diseases by the end of
2011.
While focusing our efforts on our core product strategy, we also
intend to continue to advance additional development programs
through existing or future alliances. We have three
partner-based programs in clinical or pre-clinical development,
including ALN-RSV01 for the treatment of respiratory syncytial
virus, or RSV, infection, ALN-VSP for the treatment of liver
cancers and ALN-HTT for the treatment of Huntingtons
disease, or HD.
Our most advanced core product development program, ALN-TTR,
targets the transthyretin, or TTR, gene, for the treatment of
ATTR, a hereditary, systemic disease associated with severe
morbidity and mortality caused by a mutation in the TTR gene
that leads to the extracellular deposition of amyloid fibrils.
In July 2010, we initiated a Phase I clinical trial for
ALN-TTR01, a systemically delivered RNAi therapeutic. ALN-TTR01
employs a first-
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generation lipid nanoparticle, or LNP, formulation. The Phase I
clinical trial for ALN-TTR01 is being conducted in Portugal,
Sweden, the United Kingdom and France, and is a randomized,
blinded, placebo-controlled dose escalation study designed to
enroll approximately 28 ATTR patients. The primary objective is
to evaluate the safety and tolerability of a single dose of
intravenous ALN-TTR01. Secondary objectives include
characterization of plasma and urine pharmacokinetics of
ALN-TTR01 and assessment of pharmacodynamic activity based on
measurements of circulating TTR serum levels. In January 2011,
The Committee for Orphan Medicinal Products, or COMP, of the
European Medicines Agency, or EMA, adopted a positive opinion
for ALN-TTR01 designation as an orphan medicinal product for the
treatment of familial amyloidotic polyneuropathy, or FAP, one of
the predominant forms of ATTR. A positive opinion by the COMP
precedes official designation of ALN-TTR01 as an orphan drug by
the European Commission, or EC. In parallel with the development
of ALN-TTR01, we are also advancing ALN-TTR02 utilizing a
second-generation LNP formulation.
Our second core product development program is ALN-PCS. We are
developing ALN-PCS, a systemically delivered RNAi therapeutic,
for the treatment of severe hypercholesterolemia. ALN-PCS
targets a gene called proprotein convertase subtilisin/kexin
type 9, or PCSK9, which is involved in the regulation of LDL
receptor, or LDLR, levels on hepatocytes and the metabolism of
LDL cholesterol, or LDL-c, which is also commonly referred to as
bad cholesterol. Pre-clinical studies with ALN-PCS
demonstrated a greater than 50% reduction in levels of LDL-c,
which result is rapidly achieved and durable after a single
dose. ALN-PCS employs a second-generation LNP formulation.
We recently designated ALN-HPN as our third core product
development program. ALN-HPN is a systemically delivered RNAi
therapeutic targeting hepcidin, a genetically validated gene in
iron homeostasis, for the treatment of refractory anemia. Anemia
of chronic disease, or ACD, occurs in patients with end-stage
renal disease, cancer and chronic inflammatory disease. ACD
patients who are refractory to erythropoiesis-stimulating agents
and intravenous iron define a condition of refractory anemia for
which there is substantial unmet need. Pre-clinical studies with
a small interfering RNA, or siRNA, targeting hepcidin
demonstrated the ability to silence the gene and increase serum
iron levels. ALN-HPN also employs a second-generation LNP
formulation.
As noted above, while focusing our efforts on our core product
strategy, we also intend to continue to advance additional
partner-based development programs, including ALN-RSV, ALN-VSP
and ALN-HTT, through existing or future alliances.
In February 2010, we initiated a multi-center, global,
randomized, double-blind, placebo-controlled Phase IIb clinical
trial to evaluate the clinical efficacy as well as safety of
aerosolized ALN-RSV01 in adult lung transplant patients
naturally infected with RSV. This trial is ongoing and is
expected to enroll up to 76 adult lung transplant patients who
will be randomized in a
one-to-one
drug to placebo ratio. The primary endpoint is a reduction in
the incidence of new or progressive bronchiolitis obliterans
syndrome, or BOS, a potentially life-threatening complication in
lung transplant patients. We have formed collaborations with
Cubist Pharmaceuticals, Inc., or Cubist, and Kyowa Hakko Kirin
Co., Ltd., or Kyowa Hakko Kirin, for the development and
commercialization of RNAi products for the treatment of RSV.
Under our agreement with Cubist, we are developing ALN-RSV01 for
adult transplant patients at our sole discretion and expense and
Cubist has the right to opt into collaborating with us on
ALN-RSV01 in the future. In December 2010, we and Cubist jointly
made a portfolio decision to put the development of ALN-RSV02, a
second-generation compound for the pediatric population, on hold.
In March 2009, we initiated a Phase I clinical trial for
ALN-VSP, which was our first systemically delivered RNAi
therapeutic to enter clinical development. ALN-VSP is comprised
of two siRNAs, one targeting vascular endothelial growth factor,
or VEGF, and the other targeting kinesin spindle protein, or
KSP, and employs a first-generation LNP formulation. We are
developing ALN-VSP for the treatment of liver cancers, including
both primary and secondary liver cancers. This Phase I clinical
trial is a multi-center, open label, dose escalation study to
evaluate the safety, tolerability, pharmacokinetics and
pharmacodynamics of intravenous ALN-VSP in up to approximately
55 patients with advanced solid tumors with liver
involvement. During 2010 and early 2011, we reported preliminary
results from this Phase I clinical trial demonstrating that
ALN-VSP was generally well tolerated. Results from
pharmacodynamic measurements provide preliminary evidence of
biological activity, and biopsy data demonstrate both tissue
levels of ALN-VSP and also human
proof-of-concept
for an RNAi mechanism of action. We intend to partner our
ALN-VSP program prior to initiating a Phase II clinical
trial.
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A third partner-based development program is ALN-HTT, an RNAi
therapeutic candidate targeting the huntingtin gene, for the
treatment of HD, which we are developing in collaboration with
Medtronic, Inc., or Medtronic. In November 2010, we and
Medtronic entered into an agreement with CHDI Foundation, Inc.,
or CHDI, under which CHDI has agreed to initially fund
approximately 50% of the costs of this program up to the point
at which an investigational new drug application, or IND, can be
filed with the United States Food and Drug Administration, or
FDA, or a comparable foreign regulatory filing can be made.
We also continue to work internally and with third-party
collaborators to develop new technologies to deliver our RNAi
therapeutics both directly to specific sites of disease, and
systemically by intravenous or subcutaneous administration. We
have numerous RNAi therapeutic delivery collaborations and
intend to continue to collaborate with government, academic and
corporate third parties to evaluate different delivery options.
We believe that the strength of our intellectual property
portfolio relating to the development and commercialization of
siRNAs as therapeutics provides us a leading position with
respect to this therapeutic modality. This includes ownership
of, or exclusive rights to, issued patents and pending patent
applications claiming fundamental features of siRNAs and RNAi
therapeutics as well as those claiming crucial chemical
modifications and promising delivery technologies. We believe
that no other company possesses a portfolio of such broad and
exclusive rights to the patents and patent applications required
for the commercialization of RNAi therapeutics. Given the
importance of our intellectual property portfolio to our
business operations, we intend to vigorously enforce our rights
and defend against challenges that have arisen or may arise in
this area.
In addition, our expertise in RNAi therapeutics and broad
intellectual property estate have allowed us to form alliances
with leading companies, including Isis Pharmaceuticals, Inc., or
Isis, Medtronic, Novartis Pharma AG, or Novartis, Biogen Idec
Inc., or Biogen Idec, F. Hoffmann-La Roche Ltd, or Roche,
Takeda Pharmaceutical Company Limited, or Takeda, Kyowa Hakko
Kirin and Cubist. We have also entered into contracts with
government agencies, including the National Institute of Allergy
and Infectious Diseases, or NIAID, a component of the National
Institutes of Health, or NIH. We have established collaborations
with and, in some instances, received funding from major medical
and disease associations, including CHDI. Finally, to further
enable the field and monetize our intellectual property rights,
we also grant licenses to biotechnology companies for the
development and commercialization of RNAi therapeutics for
specified targets in which we have no direct strategic interest
under our
InterfeRx
tm
program, and to research companies that commercialize RNAi
reagents or services under our research product licenses.
We also seek to form or advance new ventures and opportunities
in areas outside our primary focus on RNAi therapeutics. For
example, during 2009 and 2010, we presented data regarding the
application of RNAi technology to improve the manufacturing
processes for biologics, including recombinant proteins and
monoclonal antibodies. We are advancing these applications of
RNAi technology in an internal effort referred to as Alnylam
Biotherapeutics. We have formed, and intend to form additional,
collaborations through this effort with third-party
biopharmaceutical companies. Additionally, in 2007, we and Isis
established Regulus Therapeutics Inc., or Regulus, a company
focused on the discovery, development and commercialization of
microRNA therapeutics. Because microRNAs are believed to
regulate whole networks of genes that can be involved in
discrete disease processes, microRNA therapeutics represent a
possible new approach to target the pathways of human disease.
Regulus has formed collaborations with GlaxoSmithKline, or GSK,
and sanofi-aventis to advance its efforts. Given the broad
applications for RNAi technology, in addition to our efforts on
Alnylam Biotherapeutics and Regulus, we believe new ventures and
opportunities will be available to us.
In September 2010, as a result of the planned completion of the
fifth and final year of the research program under our
collaboration and license agreement with Novartis and our
reduced need for service-based collaboration resources, we
undertook a corporate restructuring to focus our resources on
our most promising programs and significantly reduce our cost
structure. The corporate restructuring included a reduction of
our overall workforce by approximately 25%.
4
RNA
Interference
RNAi is a natural biological pathway that occurs within cells
and can be harnessed to selectively silence the activity of
specific genes. The discovery of RNAi first occurred in plants
and worms in 1998, and two of the scientists who made this
discovery, Dr. Andrew Fire and Dr. Craig Mello,
received the 2006 Nobel Prize for Physiology or Medicine.
Opportunity
for Therapeutics Based on RNAi
Beginning in 1999, our scientific founders described and
provided evidence that the RNAi mechanism occurs in mammalian
cells and that its immediate trigger is a type of molecule known
as an siRNA. They showed that laboratory-synthesized siRNAs
could be introduced into the cell and suppress production of
specific target proteins by cleaving and degrading the messenger
RNA, or mRNA, of the specific gene that encodes that specific
protein. Because it is possible to design and synthesize siRNAs
specific to any gene of interest, the entire human genome is
accessible to RNAi, and we therefore believe that RNAi
therapeutics have the potential to become a broad new class of
drugs.
In May 2001, one of our scientific founders, Dr. Thomas
Tuschl, published the first scientific paper demonstrating that
siRNAs can be synthesized in the laboratory using chemical or
biochemical methods and when introduced or delivered into
mammalian cells, can silence the activity of a specific gene.
Since the Tuschl publication and the seminal Tuschl II
patent, which is licensed exclusively to us for therapeutic
applications, the use of siRNAs has been broadly adopted by
academic and industrial researchers for the fundamental study of
the function of genes. This has resulted in a significant number
of publications focused on the use of RNAi and has made the
Tuschl publication one of the most cited papers in basic
biologic research. Reflecting this, siRNAs are a growing segment
of the market for research reagents and related products and
services.
Beyond its use as a basic research tool, we believe that RNAi
can form the basis of a broad new class of drugs for the
treatment of disease. Drugs based on the RNAi mechanism could
offer numerous opportunities and benefits, which may include:
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Ability to target proteins that cannot be targeted
effectively by existing drug classes.
Over the
last decade, the understanding of human disease has advanced
enormously, and many proteins that play fundamental roles in
human disease have been identified. Paradoxically, greater than
80% of these key proteins cannot be targeted effectively with
existing drug approaches like small molecules or proteins such
as monoclonal antibodies. These so called
undruggable targets are potentially accessible to
siRNAs as they are made by mRNAs that can be targeted with RNAi.
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Ability to treat a broad range of
diseases.
The ability to make siRNAs that target
virtually any gene to suppress the production of virtually any
protein whose presence or activity causes disease suggests a
broad potential for application in a wide range of diseases.
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Inherently potent mechanism of action.
We
expect the inherent catalytic nature of the RNAi mechanism to
allow for a high degree of potency and durability of effect for
RNAi-based therapeutics, which we believe distinguishes RNAi
from other approaches.
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Simplified discovery of product candidates.
In
contrast to the often arduous and slow drug discovery process
for proteins and small molecules, the identification of siRNA
product candidates has been, and we expect will continue to be,
much simpler, quicker and less costly because it involves
relatively standard processes that are directed by the known
gene target sequences and can be applied in a similar fashion to
many successive product candidates.
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We have reported on our advances in developing siRNAs as
potential drugs in a large number of peer-reviewed publications
and meetings, including publications by Alnylam scientists in
the journals
Nature, Nature Medicine, Nature Biotechnology,
Cell
and
Proceedings of the National Academy of Sciences,
or
PNAS.
5
Our
Product Platform
Our product platform provides a capability for a systematic
approach to identifying RNAi therapeutic product candidates
through sequence selection, potency selection, stabilization by
chemical modification, improvement of biodistribution and
cellular uptake by various chemical conjugates and formulations.
Key to the therapeutic application of siRNAs is the ability to
successfully deliver siRNAs to target tissues and achieve
cellular uptake of the siRNA into the inside of the cell where
the RNAi machinery, called RNA-induced silencing complex, or
RISC, is active. In some tissues, including the respiratory
tract and central nervous system, the direct RNAi delivery
approach, which employs the direct or local application of
siRNAs, achieves cellular uptake and gene knockdown. For other
tissues, such as the liver, systemic RNAi delivery has been
employed, where tissue access comes via intravenous or
subcutaneous injection of the siRNA into the bloodstream and
where cellular uptake can be achieved by formulation with other
biomaterials, such as LNPs, or the conjugation of the siRNA with
other molecules, such as small chemical groups. siRNA delivery
is a key focus for our internal research team and is also the
focus of numerous current academic and corporate collaborations.
We have demonstrated RNAi therapeutic activity towards multiple
genes, in multiple organs and in multiple species, including
humans, as recently demonstrated by biopsy results from our
Phase I clinical trial for ALN-VSP, as well as in the GEMINI
trial for ALN-RSV01.
We believe that we have continued to make considerable progress
in developing our product platform. As part of these efforts and
as documented in several key 2010 publications, during 2010, we
continued to make further advances relating to the delivery of
RNAi therapeutics, both internally and together with our
collaborators. With the progress we have made to date and expect
to make in the future, we believe we are well positioned to
pursue multiple therapeutic opportunities.
Our progress has enabled us to advance a number of development
programs for RNAi therapeutics that are administered directly to
diseased tissues, including ALN-RSV01 and ALN-HTT. Our progress
in achieving delivery of RNAi therapeutics through systemic RNAi
has been demonstrated by Phase I data on our first systemically
delivered RNAi therapeutic, ALN-VSP, for the treatment of liver
cancers, and the initiation in 2010 of a Phase I clinical trial
for ALN-TTR01, our second systemically delivered RNAi
therapeutic, for the treatment of ATTR. ALN-VSP and ALN-TTR01
both utilize a first-generation delivery technology developed by
Tekmira Pharmaceuticals Corporation, or Tekmira. In parallel
with ALN-TTR01, we are advancing ALN-TTR02 utilizing a
second-generation LNP formulation, as well as ALN-PCS, for the
treatment of severe hypercholesterolemia, and ALN-HPN, for the
treatment of refractory anemia. We recognize, however, that
challenges remain with respect to the development of RNAi-based
therapeutics, including achieving effective delivery of siRNAs
to target cells and tissues, and we therefore regard further
development of our product platform as an ongoing priority.
Our
Product Pipeline
Our core product strategy is focused on the development and
commercialization of innovative RNAi therapeutics for the
treatment of genetically defined diseases. Under our core
product strategy, we expect to progress five RNAi therapeutic
programs into advanced stages of clinical development by the end
of 2015. As part of this strategy, our goal is to develop
product candidates with the following shared characteristics: a
genetically defined target and disease; the potential to have a
significant impact in high unmet need patient populations; the
ability to leverage our existing RNAi delivery platform; the
opportunity to monitor an early biomarker in Phase I clinical
trials for human proof of concept; and the existence of
clinically relevant endpoints for the filing of an NDA, with a
focused patient database and possible accelerated paths for
commercialization. We intend to commercialize products arising
from this core product strategy on our own in the United States
and potentially certain other countries, and we intend to enter
into alliances to develop and commercialize any such products in
other global territories. We are currently advancing three core
programs in clinical or pre-clinical development: ALN-TTR for
the treatment of ATTR; ALN-PCS for the treatment of severe
hypercholesterolemia; and ALN-HPN for the treatment of
refractory anemia. As part of our core product strategy, we also
expect to designate and start pre-clinical development of two
additional RNAi therapeutic candidates targeting genetically
defined diseases by the end of 2011.
While focusing our efforts on our core product strategy, we also
intend to continue to advance additional development programs
through existing or future alliances. We have three
partner-based programs in clinical or pre-
6
clinical development, including ALN-RSV01 for the treatment of
RSV, ALN-VSP for the treatment of liver cancers and ALN-HTT for
the treatment of HD.
The following is a summary of our product development programs
as of January 31, 2011:
We have spent substantial funds over the past three years to
develop our product pipeline and expect to continue to do so in
the future. We incurred research and development costs of
$106.4 million in 2010, $108.7 million in 2009 and
$96.9 million in 2008.
Core
Product Development Programs
Our core product development programs are described in more
detail below.
TTR-Mediated
Amyloidosis (ATTR)
Market Opportunity.
ATTR is a hereditary,
systemic disease caused by a mutation in a protein predominantly
made in the liver, known as TTR. Mutations in this protein
result in the accumulation of toxic deposits of the wild-type
and mutant protein in several tissues, including the peripheral
nervous system, heart
and/or
gastrointestinal tract, which leads to FAP
and/or
familial amyloidotic cardiomyopathy, or FAC. FAP is associated
with severe pain and loss of autonomic nervous system function,
whereas FAC is associated with heart failure. Typical onset for
ATTR occurs between the fourth and sixth decades of life, and
the disease is often fatal within five to 15 years of
onset. In its severest form, ATTR represents a significant unmet
medical need with high rates of morbidity and mortality. ATTR is
an orphan, or rare, disease, affecting approximately
50,000 people worldwide.
Current Treatments.
There are no existing
disease-modifying treatments for ATTR. Currently, liver
transplantation is the only available treatment for FAP.
However, less than 3,000 FAP patients qualify for this costly
and invasive procedure and, even following liver
transplantation, the disease continues to progress for many of
these patients, presumably due to normal TTR being deposited
into preexisting fibrils. Moreover, there is a shortage of
donors to provide healthy livers for transplantation. The only
currently available treatments for FAC are aimed at relief of
symptoms, such as diuretics, or water pills, to treat the
swelling of the ankles, one of the symptoms of FAC. In 2010,
FoldRx Pharmaceuticals, Inc., or FoldRx, a wholly owned
subsidiary of Pfizer Inc., or Pfizer, filed a marketing
authorization application, or MAA, for tafamidis, an oral small
molecule stabilizer of TTR, with the EMA. Tafamidis has orphan
drug status in the European Union, or EU, for the treatment of
FAP associated with ATTR.
Alnylam Program.
ALN-TTR is an RNAi
therapeutic candidate targeting the TTR gene for the treatment
of ATTR. TTR is a carrier for thyroid hormone and retinol
binding protein and is produced almost exclusively in the liver.
We believe TTR is a suitable target for an RNAi therapeutic
formulated to maximize delivery to liver cells.
7
ALN-TTR targets wild-type and all known mutant forms of TTR,
including the predominant V30M mutation, which is the major
mutation of ATTR, particularly in FAP, and therefore is a
potential therapeutic for the treatment of all forms of ATTR,
including FAP and FAC.
In July 2010, we initiated a Phase I clinical trial for
ALN-TTR01, a systemically delivered RNAi therapeutic, that
employs a first-generation LNP formulation. The Phase I clinical
trial for ALN-TTR01 is being conducted in Portugal, Sweden, the
United Kingdom and France, and is a randomized, blinded,
placebo-controlled dose escalation study designed to enroll
approximately 28 ATTR patients, with patients being enrolled
into sequential cohorts of increasing doses currently ranging
from 0.01 to 0.4 mg/kg. The primary objective is to
evaluate the safety and tolerability of a single dose of
intravenous ALN-TTR01. Secondary objectives include
characterization of plasma and urine pharmacokinetics of
ALN-TTR01 and assessment of pharmacodynamic activity based on
measurements of circulating TTR serum levels. In January 2011,
the COMP adopted a positive opinion for ALN-TTR01 designation as
an orphan medicinal product for the treatment of FAP. A positive
opinion by the COMP precedes official designation of ALN-TTR01
as an orphan drug by the EC. Orphan Drug Designation by the EC
provides regulatory and financial incentives for companies
developing orphan drugs to develop and market therapies that
treat a life-threatening or chronically debilitating condition
affecting no more than five in 10,000 persons in the EU. In
addition to a ten-year period of marketing exclusivity in the EU
after product approval, Orphan Drug Designation provides
companies with protocol assistance from the EMA during the
product development phase, direct access to centralized
marketing authorization and reduced regulatory fees.
In parallel with the development of ALN-TTR01, we are also
advancing ALN-TTR02 utilizing a second-generation LNP
formulation.
In pre-clinical studies with hTTR V30M transgenic mice, ALN-TTR
treatment led to potent and robust reduction of mutant V30M TTR
mRNA levels in the liver and mutant protein levels in the
circulation. In non-human primates, administration of ALN-TTR
resulted in potent reduction of wild-type TTR. Moreover,
durability studies in transgenic mice and non-human primates
demonstrated reduction of TTR serum protein and liver mRNA
levels for at least three weeks post-administration of ALN-TTR.
When administered to hTTR V30M transgenic mice, ALN-TTR blocked
the deposition of mutant V30M TTR protein in a number of tissues
known to be affected by the disease, including sciatic nerve,
sensory ganglion, intestine, esophagus and stomach.
Our findings demonstrate the potential benefit of an RNAi
therapeutic targeting TTR for the treatment of ATTR. Moreover,
siRNA treatment may provide benefits not observed with liver
transplantation based on the ability to simultaneously reduce
the expression of mutant and wild-type TTR. ATTR is also one
example of a number of orphan indications where there is a
significant unmet need and the potential for early biomarker
data in clinical studies, enabling rapid
proof-of-concept
and a clear opportunity for a large therapeutic impact in
patients.
Severe
Hypercholesterolemia
Market Opportunity.
Coronary artery disease,
or CAD, is the leading cause of mortality in the United States,
responsible for 40% of all deaths annually.
Hypercholesterolemia, defined as a high level of LDL-c, or bad
cholesterol, in the blood, is one of the major risk factors for
CAD. This condition occurs when excess LDL-c in the bloodstream
is deposited in the walls of blood vessels. The abnormal buildup
of LDL-c forms clumps, or plaque, that narrow and harden artery
walls. As the clumps grow, they can clog the arteries and
restrict the flow of blood to the heart. The buildup of plaque
in coronary arteries increases a persons risk of having a
heart attack. Although current therapies are effective in many
patients, studies have shown that as many as 45% of high-risk
patients with elevated LDL-c do not achieve adequate control of
their high cholesterol level with existing treatments, which
include drugs known as statins. Currently, in the United States,
there are more than 500,000 patients with high cholesterol
levels not controlled by the use of existing lipid lowering
therapies. These patients are viewed as having severe
hypercholesterolemia and constitute a potential target
population for ALN-PCS.
Current Treatments.
The current standard of
care for patients with hypercholesterolemia includes the use of
several agents. The first treatment often prescribed is a drug
from the statin family. Commonly prescribed statins include
Lipitor
®
(atorvastatin),
Zocor
®
(simvastatin),
Crestor
®
(rosuvastatin) and
Pravachol
®
(pravastatin). A different type of drug, such as
Zetia
®
(ezetimibe) and
Vytorin
®
(ezetimibe/simvastatin), which reduces dietary cholesterol
uptake from the gut, may also be used either on its own or in
combination with a statin. Despite these
8
therapies, there are many patients who have severe
hypercholesterolemia and require more intensive treatment. In
addition, some patients do not tolerate current treatments, with
an estimate, based on extensive clinical study results, of at
least five percent of those treated with a statin having to stop
such treatment because of side-effects. In patients with very
high uncontrolled cholesterol levels, a procedure called lipid
apheresis is used, which effectively removes cholesterol from
the blood using a machine specifically designed for this
process. However, this procedure is inconvenient and
uncomfortable, requiring regular weekly visits to a
doctors office.
Alnylam Program.
ALN-PCS is a systemically
delivered RNAi therapeutic targeting PCSK9 for the treatment of
severe hypercholesterolemia. We are advancing ALN-PCS using a
second-generation LNP formulation for systemic delivery. ALN-PCS
targets PCSK9, which is involved in the regulation of LDLR
levels on hepatocytes and the metabolism of LDL-c. PCSK9 is a
widely acknowledged target for the treatment of
hypercholesterolemia. PCSK9 is a protein that is produced by the
liver and circulates in the bloodstream. The liver determines
cholesterol levels, in part by taking up or absorbing LDL-c from
the bloodstream. PCSK9 reduces the livers capacity to
absorb LDL-c. Published studies indicate that, if PCSK9 activity
could be reduced, the livers uptake of LDL-c should
increase and blood cholesterol levels should decrease. In fact,
published case reports have shown individuals with a genetic
mutation in PCSK9 that lowers its activity and results in
increased liver LDL-c uptake and decreased blood cholesterol
levels. In turn, these individuals have been shown to have a
dramatically reduced risk of CAD, including myocardial
infarction or heart attack. In addition, studies have shown that
PCSK9 levels are increased by statin therapy while LDL-c levels
are decreased, suggesting that the introduction of a PCSK9
inhibitor to statin therapy may result in even further
reductions in LDL-c levels.
We began our ALN-PCS program in collaboration with The
University of Texas Southwestern Medical Center, or UTSW. As
part of the UTSW collaboration, we and UTSW are testing RNAi
therapeutic candidates targeting PCSK9 in certain UTSW animal
models. Non-human primate data for our ALN-PCS program
demonstrated a greater than 50% reduction in levels of LDL-c,
which result is rapidly achieved and durable after a single dose.
Refractory
Anemia
Market Opportunity.
Anemia is the clinical
manifestation of a decrease in circulating red blood cell mass
and is usually detected by low blood hemoglobin concentrations.
Symptoms include fatigue and dizziness, and generally have a
significant impact on the patients quality of life. Anemia
of chronic disease, or ACD, occurs in patients with end-stage
renal disease, or ESRD, cancer and chronic inflammatory
disorders. There are also additional genetic causes, such as
iron-refractory iron deficiency anemia. ACD patients who are
refractory to erythropoiesis-stimulating agents, or ESAs, which
stimulate red blood cell production, and intravenous iron,
define a condition of refractory anemia for which there is a
substantial unmet need. Currently in the United States, there
are approximately 500,000 patients with ESRD and
approximately 50,000 ESRD patients with refractory anemia.
Current Treatments.
There are several
treatment options available for anemia, depending on its cause
and severity, which may include oral or intravenous iron
supplements, blood transfusions and ESAs. However, there are
currently no approved therapies for the treatment of refractory
anemia. Treatment for this condition is largely supportive,
including blood transfusion in patients with symptomatic anemia.
Alnylam Program.
We recently designated
ALN-HPN as our third core development program. ALN-HPN is a
systemically delivered RNAi therapeutic targeting hepcidin, a
genetically validated gene in iron homeostasis, for the
treatment of refractory anemia. Pre-clinical studies with an
siRNA targeting hepcidin demonstrated the ability to silence the
gene and increase serum iron levels. We are advancing ALN-HPN
using a second-generation LNP formulation for systemic delivery.
Partner-Based
Product Development Programs
While focusing our core efforts on advancing the product
development programs described above, we also intend to continue
to advance additional product development programs through
existing or future alliances, including those described below.
9
Respiratory
Syncytial Virus (RSV) Infection
Market Opportunity.
RSV is a highly contagious
virus that causes infections in both the upper and lower
respiratory tract. RSV infects nearly every child by the age of
two years and is responsible for a significant percentage of
hospitalizations of infants, children with lung or congenital
heart disease, the elderly and adults with immune-compromised
systems, including lung transplant recipients. RSV infection
typically results in cold-like symptoms, but can lead to more
serious respiratory illnesses in these populations such as
croup, pneumonia and bronchiolitis, and in extreme cases, severe
illness and death. A study published in 2005 in the
New
England Journal of Medicine
estimates that over 170,000
elderly adults are hospitalized with RSV each year. In addition,
experts estimate that the overall prevalence of lung transplants
in the United States is between 8,000 to 10,000. The annual
incidence of RSV infection in lung transplant patients can be up
to ten percent.
Current Treatments.
The only product currently
approved for the treatment of RSV infection is Ribavirin, which
is marketed as
Virazole
®
by Valeant Pharmaceuticals International, or Valeant. However,
this product is approved only for treatment of hospitalized
infants and young children with severe lower respiratory tract
infections due to RSV. Administration of this product is
complicated and requires elaborate environmental reclamation
devices because of potential harmful effects on healthcare
personnel exposed to the drug. In addition, Ribavirin is used by
some centers in the treatment of RSV in lung transplant patients.
Two other products, a monoclonal antibody known as
Synagis
®
(palivizumab) and an immune globulin known as
RespiGam
tm
,
have been approved for the
prevention
of severe lower
respiratory tract disease caused by RSV in infants at high risk
of such disease. Neither of these products is approved for
treatment
of an existing RSV infection.
Alnylam Program.
In February 2008, we reported
positive results from the GEMINI study, a double-blind,
placebo-controlled, randomized Phase II trial designed to
evaluate the safety, tolerability and anti-viral activity of
ALN-RSV01 in adult subjects experimentally infected with RSV. In
total, 88 subjects were randomized
one-to-one
to receive either ALN-RSV01 or placebo treatment prior to and
after experimental infection with a wild-type clinical strain of
RSV. ALN-RSV01 was found to be safe and well tolerated and
demonstrated statistically significant reduction (40%) in viral
infection rate and a 95% increase in infection-free patients
(p<0.01), as compared to placebo.
In July 2009, we and Cubist reported results from a Phase IIa
clinical trial assessing the safety and tolerability of
aerosolized ALN-RSV01 versus placebo in a randomized,
double-blind trial of 24 adult lung transplant patients
naturally infected with RSV. This clinical trial achieved its
primary objective of demonstrating the safety and tolerability
of ALN-RSV01. In particular, there were no drug-related serious
adverse events or discontinuations. Baseline imbalances in day 0
viral load and the time to symptom onset between the treatment
groups made it difficult to interpret the trends favoring
ALN-RSV01 observed in certain antiviral measures. The
patient-reported symptom scores showed a trend towards reduced
scores favoring ALN-RSV01. At the
90-day
endpoint, all patients survived and the incidence of intubation,
new respiratory infection or acute rejection was comparable
across ALN-RSV01 and placebo groups. The trial was not powered
to demonstrate clinical outcomes due to the small sample size
and, accordingly, such data were considered exploratory.
Prospectively defined clinical secondary endpoints at
90 days included recovery of lung function (forced
expiratory volume in the first second, or
FEV
1
)
as measured by spirometry and clinical determination of new or
progressive BOS, a potentially life-threatening complication in
lung transplant patients. Based on the data from this small
trial, ALN-RSV01 treatment was associated with a statistically
significant decrease in the total incidence of new or
progressive BOS at 90 days compared to placebo (p=0.02),
with 50% of placebo patients showing new or progressive BOS as
compared with only 7.1% of ALN-RSV01-treated patients. Despite
the small patient numbers, we believe that these data may be
important since the incidence of BOS following RSV infection in
lung transplant patients can be a predictor of graft failure and
overall survival. The incidence of BOS in lung transplant
patients infected with RSV results in approximately 50%
mortality within three to five years of onset.
In February 2010, we initiated a multi-center, global,
randomized, double-blind, placebo-controlled Phase IIb clinical
trial to evaluate the clinical efficacy as well as safety of
aerosolized ALN-RSV01 in adult lung transplant patients
naturally infected with RSV. The objective of this Phase IIb
clinical trial is to repeat and extend the clinical results
observed in the Phase IIa clinical trial described above. This
trial is ongoing and is expected to enroll up to 76
10
adult lung transplant patients who will be randomized in a
one-to-one
drug to placebo ratio. The primary endpoint is reduction in the
incidence of new or progressive BOS at day 180.
We have formed collaborations with Cubist and Kyowa Hakko Kirin
for the development and commercialization of RNAi products for
the treatment of RSV. We have an agreement to jointly develop
and commercialize certain RNAi products for the treatment of RSV
with Cubist in North America. Cubist has responsibility for
developing and commercializing any such products in the rest of
the world outside of Asia, and Kyowa Hakko Kirin has the
responsibility for developing and commercializing any RNAi
products for the treatment of RSV in Asia. Under our agreement
with Cubist, we are developing ALN-RSV01 for adult transplant
patients at our sole discretion and expense. Cubist has the
right to opt into collaborating with us on ALN-RSV01 in the
future, which right may be exercised for a specified period of
time following the completion of our Phase IIb trial, subject to
the payment by Cubist of an opt-in fee representing
reimbursement of an agreed upon percentage of certain of our
development expenses for ALN-RSV01. In December 2010, we and
Cubist jointly made a portfolio decision to put the development
of ALN-RSV02, a second-generation compound for the pediatric
population, on hold.
Liver
Cancer
Market Opportunity.
Cancer affecting the
liver, known as either primary or secondary liver cancer, is
associated with one of the poorest survival rates in oncology
and represents a major unmet medical need affecting a large
number of patients worldwide. Primary liver cancer, also known
as hepatocellular carcinoma, or HCC, is one of the most common
cancers worldwide, with more than 700,000 people diagnosed
each year. Secondary liver cancer, also known as metastatic
liver cancer, is cancer that spreads to the liver from another
part of the body like the colon, stomach, pancreas, breast, lung
or skin. Worldwide, more than 500,000 people are diagnosed
with secondary liver cancer each year.
Current Treatments.
The treatment options for
liver cancer are dependent on the stage of disease, site of
tumor and condition of the patient, but can include surgical
resection, radiation, chemotherapy, chemoembolism, liver
transplantation and various combinations of these approaches. In
November 2007, the FDA approved Sorafenib, also called
Nexavar
®
,
for the treatment of un-resectable liver cancer. Even with
relatively early diagnosis and resection, the prognosis remains
very poor for liver cancer patients, who are often diagnosed
late in their clinical course of disease. For primary liver
cancer, with early diagnosis and a resectable tumor, the
five-year disease free survival rate has been reported at
approximately 20%. However, this applies only to about 15% of
primary liver cancer patients. For most primary liver cancer
patients, the disease is fatal within three to six months. The
prognosis for secondary liver cancer is generally also very
poor, due often to the late stage of the disease at the time of
diagnosis and metastatic nature of the neoplasm. For example, in
the absence of treatment, the prognosis for patients with
hepatic colorectal metastases is extremely poor, with five-year
survival rates of three percent or less. Among patients that can
be treated with complete resection of hepatic colorectal
metastases, only 30% to 40% will survive for five years
following resection.
Alnylam Program.
ALN-VSP is a systemically
delivered RNAi therapeutic for the treatment of advanced solid
tumors with liver involvement. ALN-VSP contains two siRNAs
formulated using a first-generation LNP formulation. ALN-VSP is
designed to target two genes critical in the growth and
development of cancer, KSP and VEGF. KSP is a key component of
the cellular machinery that mediates chromosome separation
during cell division, which is critical for tumor proliferation.
As such, it represents an important target for blocking tumor
growth. VEGF is a potent angiogenic factor that drives the
development of blood vessels that are critical to ensuring
adequate blood supply to the growing tumor.
In March 2009, we initiated a Phase I clinical trial for
ALN-VSP. This Phase I clinical trial is a multi-center, open
label, dose escalation study to evaluate the safety,
tolerability, pharmacokinetics and pharmacodynamics of
intravenous ALN-VSP in approximately 55 patients with
advanced solid tumors with liver involvement. We intend to
partner our ALN-VSP program prior to initiating a Phase II
clinical trial.
In November 2010, we reported interim safety data from this
Phase I clinical trial showing that 127 doses of ALN-VSP at dose
levels of 0.1 to 1.25 mg/kg had been administered to
28 patients, with two to 13 doses administered per patient,
and was generally well tolerated. The majority of the patients
treated had colorectal cancer, a primary tumor that often
metastasizes to the liver. No dose-dependent trends were
observed in clinical or
11
laboratory adverse events, including liver function tests. A
patient with advanced pancreatic neuroendocrine cancer with
extensive involvement of the liver developed hepatic failure
five days following the second dose at 0.7 mg/kg, and
subsequently died; this was deemed possibly related to the study
drug. At 1.25 mg/kg, a patient experienced grade three
thrombocytopenia after the first dose; this was deemed related
to the study drug and was resolved within five days. There have
been three acute infusion reactions at 0.4, 0.7 and
1.25 mg/kg; all three patients tolerated further treatment
with prolongation of infusion duration.
In addition to the safety data reported in November, in June
2010, we reported DCE-MRI results from patients treated at the
0.1 to 0.7 mg/kg dose levels that suggested an anti-VEGF
effect in the majority of treated patients. In 62% of evaluable
liver tumors, there was a greater than 40% decline in Ktrans
(measure of blood flow), an effect that is comparable to what
has been observed with other anti-VEGF drugs in solid tumors.
This Phase I clinical trial is also designed to obtain tumor
biopsies for histological and molecular analyses from patients
on a voluntary basis. In January 2011, we reported preliminary
results from the molecular analyses of post-treatment tumor
biopsies from eight patients receiving doses of ALN-VSP ranging
from 0.4 to 1.25 mg/kg. Five of these biopsy samples were
obtained from tumor in the liver and three were taken from tumor
located outside the liver. The two siRNAs targeting VEGF and KSP
that comprise ALN-VSP were detected in almost all of these
biopsy samples at concentrations ranging from 0.3 to 142 ng/g
tissue. These levels of siRNA are pharmacologically relevant
since in pre-clinical studies with systemically delivered
siRNAs, a tissue level of 1 ng/g has been shown to be associated
with 50% target gene silencing.
RNAi is an endogenous cellular enzymatic process whereby siRNAs
mediate sequence-dependent cleavage of target mRNAs; cleavage of
the target mRNA is highly precise, occurring exactly ten
nucleotide positions from the 5-end of the siRNA antisense
strand. 5 RACE is a non-quantitative method that has been
established to identify the specific cleavage product that would
be indicative of the RNAi mechanism. As reported in a January
2011 presentation, three patients in the Phase I clinical trial
have had biopsies that were of sufficient quality to permit
blinded 5 RACE analysis for the VEGF target mRNA. All
three biopsy samples were from the 0.4 mg/kg dose group,
and post-treatment biopsy samples were comprised of 80% to 100%
normal liver. In two patients whose post-treatment biopsies were
performed two days after dosing, the 5 RACE assay combined
with deep sequencing showed that approximately 27% and 29% of
all VEGF-derived mRNA fragments corresponded exactly to the
predicted RNAi-mediated cleavage product. By contrast, a
pre-dose biopsy available for one of those patients contained
only approximately one percent predicted VEGF cleavage product,
and analysis of banked normal liver and tumor samples from
untreated patients showed a background level of only 0.1% to
0.7%. Compared to these low background levels, the amount of
predicted VEGF cleavage product in the two post-treatment
biopsies was highly statistically significant (p<0.0001).
In the third patient at 0.4 mg/kg whose post-treatment
biopsy was obtained seven days post-dose, there was no
detectable increase in the predicted VEGF cleavage product
compared to the pre-dose biopsy. We believe the 5 RACE
data from these two human biopsies provide clear evidence of
RNAi in humans following systemic administration of
LNP-formulated siRNA.
Pre-clinical data in mouse tumor model studies have demonstrated
efficacy of ALN-VSP, including suppression of the targeted
genes, demonstration of an RNAi mechanism of action, formation
of monoasters, a characteristic feature of KSP inhibition,
anti-angiogenic effects resulting from VEGF inhibition, tumor
reduction, and extension of survival. Moreover, the
pharmacodynamic effect of KSP targeting has been demonstrated in
both hepatic and extrahepatic tumors in murine models of
hepatocellular carcinoma and colorectal cancer.
Huntingtons
Disease (HD)
Market Opportunity.
HD is an inherited and
progressive brain disease that results in uncontrolled
movements, loss of intellectual faculties, emotional disturbance
and premature death. HD patients typically first start to
develop the disease in their third or fourth decade of life and
have an average survival of ten to 20 years after initial
diagnosis. The disease is associated with the production of an
altered form of a protein known as huntingtin, the presence of
which is believed to trigger the death of important cells in the
brain. This autosomal dominant, neurodegenerative disease
afflicts approximately 30,000 patients in the United
States. An estimated 150,000 additional people in the United
States carry the mutant huntingtin gene and have an approximate
50% risk of developing the disease in their lifetimes.
12
Current Treatments.
The current treatment of
this severe disease is supportive care and therapy for
symptomatic relief, with no drugs or therapies available that
have been shown to slow the underlying disease progression and
the inexorable erosion of the patients nerve cell
functionality.
Alnylam Program.
In collaboration with
Medtronic, we are developing a novel drug-device product
incorporating an RNAi therapeutic candidate targeting the
huntingtin gene, delivered using an implantable infusion device,
that will protect these cells by suppressing huntingtin mRNA and
the disease causing protein. Alnylam scientists and
collaborators have presented the data from our ALN-HTT program
comprised of
in vitro
, rodent and non-human primate
data supporting the continued development of ALN-HTT for the
treatment of HD, including: demonstration that an siRNA
targeting the huntingtin gene achieves sufficient distribution
for coverage of brain regions affected in HD; data evidencing
that direct delivery of the siRNA to the CNS results in robust
silencing of the huntingtin gene mRNA, which silencing was
achieved at substantial distances from the infusion site, an
important step towards translating this delivery approach from
pre-clinical models to the larger human brain; and, results
showing that ALN-HTT was well tolerated following continuous
direct CNS administration over a period of approximately one
month.
The ALN-HTT program is part of a
50-50
co-development/profit share relationship with Medtronic for the
United States market. Outside the United States, Medtronic will
be solely responsible for the development and commercialization
of the drug-device. In November 2010, we and Medtronic entered
into an agreement with CHDI, under which CHDI has agreed to
initially fund approximately 50% of the costs of this program up
to the point at which an IND or comparable foreign regulatory
application can be filed.
Discovery
Programs
In addition to our core development efforts on ATTR, severe
hypercholesterolemia and refractory anemia, and our additional
partner-based programs in RSV, liver cancer and HD, we are
conducting additional research activities to discover novel RNAi
therapeutic product candidates with a focus on genetically
defined diseases.
In addition to these programs, as part of our collaboration with
Takeda, we have research activities to discover RNAi
therapeutics directed to one or more undisclosed targets.
Our
Collaboration and Licensing Strategy
Our business strategy is to develop and commercialize a pipeline
of RNAi therapeutic products. As part of this strategy, we have
entered into, and expect to enter into additional, collaboration
and licensing agreements as a means of obtaining resources,
capabilities and funding to advance our RNAi therapeutic
programs.
Our collaboration strategy is to form (1) non-exclusive
platform
and/or
multi-target discovery alliances where our collaborators obtain
access to our capabilities and intellectual property to develop
their own RNAi therapeutic products; and (2) worldwide or
specific geographic partnerships on select RNAi therapeutic
programs. For example, we have entered into a broad,
non-exclusive platform license agreement with Takeda, under
which we are also collaborating with Takeda on RNAi drug
discovery for one or more disease targets. We have also
established product alliances with Cubist and Medtronic for the
development and commercialization of ALN-RSV and ALN-HTT,
respectively. In addition, we have entered into a product
alliance with Kyowa Hakko Kirin for the development and
commercialization of ALN-RSV in territories not covered by the
Cubist agreement, which include Japan and other markets in Asia.
We also have discovery and development alliances with Isis and
Biogen Idec.
We also seek to form or advance new ventures and opportunities
in areas outside our primary focus on RNAi therapeutics. For
example, during 2009, we established Alnylam Biotherapeutics, an
internal effort regarding the application of RNAi technologies
to improve the manufacturing processes for biologics, an
approach that has the potential to create new business
opportunities. This effort is focused on applying RNAi
technologies to the biologics marketplace, which includes
recombinant proteins and monoclonal antibodies. In addition,
during 2007, we and Isis formed Regulus to capitalize on our
technology and intellectual property in the field of microRNA
therapeutics. Regulus has formed collaborations with GSK and
sanofi-aventis to advance their efforts. Given the broad
applications for RNAi technology, in addition to our efforts on
Alnylam Biotherapeutics and Regulus, we believe new ventures and
opportunities will be available to us.
13
To generate revenues from our intellectual property rights, we
also grant licenses to biotechnology companies under our
InterfeRx program for the development and commercialization of
RNAi therapeutics for specified targets in which we have no
direct strategic interest. We also license key aspects of our
intellectual property to companies active in the research
products and services market, which includes the manufacture and
sale of reagents. Our InterfeRx and research product licenses
aim to generate modest near-term revenues that we can re-invest
in the development of our proprietary RNAi therapeutics
pipeline. As of January 31, 2011, we had granted such
licenses, on both an exclusive and non-exclusive basis, to
approximately 20 companies.
Since delivery of RNAi therapeutics remains a major objective of
our research activities, we also look to form collaboration and
licensing arrangements with other companies and academic
institutions to gain access to delivery technologies. For
example, we have entered into agreements with Tekmira, the
Massachusetts Institute of Technology, or MIT, The University of
British Columbia, or UBC, and AlCana Technologies, Inc., or
AlCana, among others, to focus on various delivery strategies.
We have also entered into license agreements with Isis, Max
Planck Innovation GmbH (formerly known as Garching Innovation
GmbH), or Max Planck Innovation, Tekmira, MIT, Cancer Research
Technology Limited, or CRT, Whitehead Institute for Biomedical
Research, or Whitehead, Stanford University, or Stanford, UTSW,
as well as a number of other entities, to obtain rights to
intellectual property in the field of RNAi.
Finally, we seek funding for the development of our proprietary
RNAi therapeutics pipeline from the government and foundations.
For example, in 2006, the NIAID awarded us a contract to advance
the development of a broad spectrum RNAi anti-viral therapeutic
against hemorrhagic fever virus, including the Ebola virus.
Strategic
Alliances
We have formed, and intend to continue to form, strategic
alliances to gain access to the financial, technical, clinical
and commercial resources necessary to develop and market RNAi
therapeutics. We expect these alliances to provide us with
financial support in the form of upfront cash payments, license
fees, equity investments, research and development funding,
milestone payments
and/or
royalties or profit sharing based on sales of RNAi therapeutics.
Platform Alliances.
Roche.
In July 2007, we and, for limited
purposes, Alnylam Europe AG, or Alnylam Europe, entered into a
license and collaboration agreement with Roche. Under the
license and collaboration agreement, which became effective in
August 2007, we granted Roche a non-exclusive license to our
intellectual property to develop and commercialize therapeutic
products that function through RNAi, subject to our existing
contractual obligations to third parties. The license is
initially limited to the therapeutic areas of oncology,
respiratory diseases, metabolic diseases and certain liver
diseases, and may be expanded to include up to 18 additional
therapeutic areas, comprising substantially all other fields of
human disease, as identified and agreed upon by the parties,
upon payment to us by Roche of an additional $50.0 million
for each additional therapeutic area, if any. In November 2010,
Roche announced the discontinuation of certain activities in
research and early development, including their RNAi research
efforts. Our license and collaboration agreement with Roche
currently remains in effect. Roche may assign its rights and
obligations under the license and collaboration agreement to a
third party in connection with the sale or transfer of its
entire RNAi business.
In consideration for the rights granted to Roche under the
license and collaboration agreement, Roche paid us
$273.5 million in upfront cash payments. In addition, in
exchange for our contributions under the collaboration
agreement, for each RNAi therapeutic product developed by Roche,
its affiliates or sublicensees under the collaboration
agreement, we are entitled to receive milestone payments upon
achievement of specified development and sales events, totaling
up to an aggregate of $100.0 million per therapeutic
target, together with royalty payments based on worldwide annual
net sales, if any. Due to the uncertainty of pharmaceutical
development and the high historical failure rates generally
associated with drug development, as well as the discontinuation
of Roches RNAi research efforts, we may not receive any
milestone or royalty payments under the Roche alliance.
14
The term of the license and collaboration agreement generally
ends upon the later of ten years from the first commercial sale
of a licensed product and the expiration of the
last-to-expire
patent covering a licensed product. We estimate that our
fundamental RNAi patents covered under the license and
collaboration agreement will expire both in and outside the
United States generally between 2016 and 2025, subject to any
potential patent term extensions
and/or
supplemental protection certificates extending such term
extensions in countries where such extensions may become
available. Roche may terminate the license and collaboration
agreement, on a licensed
product-by-licensed
product, licensed
patent-by-licensed
patent, and
country-by-country
basis, upon
180-days
prior written notice to us, but is required to continue to make
milestone and royalty payments to us if any royalties were
payable on net sales of a terminated licensed product during the
previous 12 months. The license and collaboration agreement
may also be terminated by either party in the event the other
party fails to cure a material breach under the license and
collaboration agreement.
In connection with the execution of the license and
collaboration agreement, we executed a common stock purchase
agreement with Roche Finance Ltd, or Roche Finance, an affiliate
of Roche. Under the terms of the common stock purchase
agreement, in August 2007, Roche Finance purchased
1,975,000 shares of our common stock at $21.50 per share,
for an aggregate purchase price of $42.5 million. Under the
terms of the common stock purchase agreement, in the event we
propose to sell or issue any of our equity securities, subject
to specified exceptions, we agreed to grant to Roche Finance the
right to acquire additional securities, such that Roche Finance
would be able to maintain its ownership percentage in us. This
right continues until the earlier of any sale by Roche Finance
of shares of our common stock and the expiration or termination
of our license and collaboration agreement, subject to certain
exceptions. Roche Finance also agreed that it will limit the
volume of sales or transfers any of our equity securities for so
long as Roche Finance and its affiliates beneficially own more
than two and one half percent of the total outstanding shares of
our common stock.
In connection with the execution of the license and
collaboration agreement and the common stock purchase agreement,
we also executed a stock purchase agreement with Alnylam Europe
and Roche Beteiligungs GmbH, or Roche Germany, an affiliate of
Roche. Under the terms of the Alnylam Europe stock purchase
agreement, we created a new, wholly-owned German limited
liability company, Roche Kulmbach, into which substantially all
of the non-intellectual property assets of Alnylam Europe were
transferred, and Roche Germany purchased from us all of the
issued and outstanding shares of Roche Kulmbach for an aggregate
purchase price of $15.0 million.
Takeda.
In May 2008, we entered into a license
and collaboration agreement with Takeda to pursue the
development and commercialization of RNAi therapeutics. Under
the Takeda agreement, we granted to Takeda a non-exclusive,
worldwide, royalty-bearing license to our intellectual property
to develop, manufacture, use and commercialize RNAi
therapeutics, subject to our existing contractual obligations to
third parties. The license initially is limited to the fields of
oncology and metabolic disease and may be expanded at
Takedas option to include other therapeutic areas, subject
to specified conditions. Under the Takeda agreement, Takeda will
be our exclusive platform partner in the Asian territory, as
defined in the agreement, through May 2013.
In consideration for the rights granted to Takeda under the
Takeda agreement, Takeda agreed to pay us $150.0 million in
upfront and near-term technology transfer payments. In addition,
we have the option, exercisable until the start of
Phase III development, to opt-in under a
50-50
profit
sharing agreement to the development and commercialization in
the United States of up to four Takeda licensed products, and
would be entitled to opt-in rights for two additional products
for each additional field expansion, if any, elected by Takeda
under the Takeda agreement. In June 2008, Takeda paid us an
upfront payment of $100.0 million and agreed to pay an
additional $50.0 million to us upon achievement of
specified technology transfer milestones. Of this
$50.0 million, $20.0 million was paid to us in October
2008, $20.0 million was paid to us in March 2010, and
$10.0 million is due upon achievement of the last specified
technology transfer activities, but no later than the second
quarter of 2011. If Takeda elects to expand its license to
additional therapeutic areas, Takeda will be required to pay us
$50.0 million for each of up to approximately 20 total
additional fields selected, if any, comprising substantially all
other fields of human disease, as identified and agreed upon by
the parties. In addition, for each RNAi therapeutic product
developed by Takeda, its affiliates and sublicensees, we are
entitled to receive specified development and commercialization
milestones, totaling up to $171.0 million per product,
together with royalty payments based on worldwide annual net
sales, if any. Due to the uncertainty of pharmaceutical
development and the high historical failure rates generally
associated with drug development, we may not receive any
milestone or royalty payments from Takeda.
15
Pursuant to the Takeda agreement, we and Takeda are also
collaborating on the research of RNAi therapeutics directed to
one or two disease targets agreed to by the parties, subject to
our existing contractual obligations with third parties. Takeda
also has the option, subject to certain conditions, to
collaborate with us on the research and development of RNAi drug
delivery technology for targets agreed to by the parties. In
addition, Takeda has a right of first negotiation for the
development and commercialization of our RNAi therapeutic
products in the Asian territory, excluding our ALN-RSV program.
In addition to our
50-50
profit
sharing option, we have a similar right of first negotiation to
participate with Takeda in the development and commercialization
in the United States of licensed products. The collaboration is
governed by a joint technology transfer committee, a joint
research collaboration committee and a joint delivery
collaboration committee, each of which is comprised of an equal
number of representatives from each party.
The term of the Takeda agreement generally ends upon the later
of (i) the expiration of our
last-to-expire
patent covering a licensed product and (ii) the
last-to-expire
term of a profit sharing agreement in the event we elect to
enter into such an agreement. We estimate that our fundamental
RNAi patents covered under the Takeda agreement will expire both
in and outside the United States generally between 2016 and
2025, subject to any potential patent term extensions
and/or
supplemental protection certificates extending such term
extensions in countries where such extensions may become
available. The Takeda agreement may be terminated by either
party in the event the other party fails to cure a material
breach under the agreement. In addition, Takeda may terminate
the agreement on a licensed
product-by-licensed
product or
country-by-country
basis upon
180-days
prior written notice to us, provided, however, that Takeda is
required to continue to make royalty payments to us for the
duration of the royalty term with respect to a licensed product.
In connection with the Takeda agreement, during 2008, we paid
$5.0 million of license fees to our licensors, primarily
Isis, in accordance with the applicable license agreements with
those parties.
Discovery and Development Alliances.
Isis.
In April 2009, we and Isis amended and
restated our existing strategic collaboration and license
agreement, originally entered into in March 2004, to extend the
broad cross-licensing arrangement regarding double-stranded RNAi
that was established in 2004, pursuant to which Isis granted us
licenses to its current and future patents and patent
applications relating to chemistry and to RNA-targeting
mechanisms for the research, development or commercialization of
double-stranded RNA, or dsRNA, products. We have the right to
use Isis technologies in our development programs or in
collaborations and Isis agreed not to grant licenses under these
patents to any other organization for the discovery, development
and commercialization of dsRNA products designed to work through
an RNAi mechanism, except in the context of a collaboration in
which Isis plays an active role. We granted Isis non-exclusive
licenses to our current and future patents and patent
applications relating to RNA-targeting mechanisms and to
chemistry for research use. We also granted Isis the
non-exclusive right to develop and commercialize dsRNA products
developed using RNAi technology against a limited number of
targets. In addition, we granted Isis non-exclusive rights to
research, develop and commercialize single-stranded RNA products.
We agreed to pay Isis milestone payments, totaling up to
approximately $3.4 million, upon the occurrence of
specified development and regulatory events, and royalties on
sales, if any, for each product that we or a collaborator
develops using Isis intellectual property. In addition, we
agreed to pay to Isis a percentage of specified fees from
strategic collaborations we may enter into that include access
to Isis intellectual property. Isis agreed to pay us, per
therapeutic target, a license fee of $0.5 million, and
milestone payments totaling approximately $3.4 million,
payable upon the occurrence of specified development and
regulatory events, and royalties on sales, if any, for each
product developed by Isis or a collaborator that utilizes our
intellectual property. Isis has the right to elect up to ten
non-exclusive target licenses under the agreement and has the
right to purchase one additional non-exclusive target per year
during the term of the collaboration.
As part of the amended and restated Isis agreement, we and Isis
established a collaborative effort focused on single-stranded
RNAi, or ssRNAi, technology, and we obtained from Isis a
co-exclusive, worldwide license to research, develop and
commercialize ssRNAi products. We paid Isis $11.0 million
in license fees upon signing the agreement in connection with
the ssRNAi research program. In addition, we were obligated to
fund research activities conducted by both us and Isis at a
minimum of $3.0 million a year for three years. In November
2010, we
16
exercised our right to terminate the ssRNAi collaborative
effort, and all licenses to ssRNAi products granted by Isis to
us, and any obligation thereunder requiring us to provide
further research funding or pay additional license fees,
milestone payments, royalties or sublicense payments to Isis for
such ssRNAi products, also terminated. The termination of this
collaborative effort did not affect the remainder of the amended
and restated Isis agreement, including our licenses to
Isis current and future patents and patent applications
relating to double-stranded RNAs, which remains in effect.
The term of the Isis agreement generally ends upon the
expiration of the
last-to-expire
patent licensed thereunder, whether such patent is a patent
licensed by us to Isis, or vice versa. As the license will
include additional patents, if any, filed to cover future
inventions, if any, the date of expiration cannot be determined
at this time.
Novartis.
In the second half of 2005, we
entered into a series of transactions with Novartis. In
September 2005, we and Novartis executed a stock purchase
agreement and an investor rights agreement. When the
transactions contemplated by the stock purchase agreement closed
in October 2005, the investor rights agreement became effective
and we and Novartis executed a research collaboration and
license agreement. The collaboration and license agreement had
an initial research term of three years, with an option for two
additional one-year extensions at the election of Novartis.
Novartis elected to extend the term through October 2010, the
fifth and final planned year. In October 2010, the research
program under the collaboration and license agreement was
substantially completed in accordance with the terms of the
collaboration and license agreement, subject to certain
surviving rights and obligations of the parties.
In consideration for rights granted to Novartis under the
collaboration and license agreement, Novartis made an upfront
payment of $10.0 million to us in October 2005, partly to
reimburse prior costs incurred by us to develop
in vivo
RNAi technology. We also received research funding and
development milestone payments from Novartis.
In September 2010, Novartis exercised its right under the
collaboration and license agreement to select 31 designated gene
targets, for which Novartis has exclusive rights to discover,
develop and commercialize RNAi therapeutic products using our
intellectual property and technology. Under the terms of the
collaboration and license agreement, for any RNAi therapeutic
products Novartis develops against these targets, we are
entitled to receive milestone payments upon achievement of
certain specified development and annual net sales events, up to
an aggregate of $75.0 million per therapeutic product, as
well as royalties on annual net sales of any such product. In
September 2010, Novartis declined to exercise its non-exclusive
option to integrate into its operations our fundamental and
chemistry intellectual property under the terms of the
collaboration and license agreement. If Novartis had elected to
exercise the integration option, Novartis would have been
required to make additional payments to us totaling
$100.0 million.
Under the terms of the stock purchase agreement, in October
2005, Novartis purchased 5,267,865 shares of our common
stock at a purchase price of $11.11 per share for an aggregate
purchase price of $58.5 million, which, after such
issuance, represented 19.9% of our outstanding common stock as
of the date of issuance. In addition, under the investor rights
agreement, we granted Novartis the right to acquire additional
equity securities in the event that we propose to sell or issue
any equity securities, subject to specified exceptions, as
described in the investor rights agreement, such that Novartis
would be able to maintain its then-current ownership percentage
in our outstanding common stock. This right continues until the
earlier of any sale by Novartis of shares of our common stock
and the expiration or termination of our license agreement,
subject to certain exceptions. Pursuant to the terms of the
investor rights agreement, Novartis purchased an aggregate of
335,033 shares of our common stock, resulting in aggregate
payments to us of $7.6 million. These purchases allowed
Novartis to maintain its ownership position of approximately
13.4% of our outstanding common stock. The exercises of this
right did not result in any changes to existing rights or any
additional rights to Novartis. Under the terms of the investor
rights agreement, we granted Novartis demand and piggyback
registration rights under the Securities Act of 1933 for the
shares of our common stock held by Novartis.
Biogen Idec.
In September 2006, we entered
into a collaboration and license agreement with Biogen Idec. The
collaboration is focused on the discovery and development of
therapeutics based on RNAi for the potential treatment of
progressive multifocal leukoencephalopathy, or PML. Under the
terms of the Biogen Idec agreement, we granted Biogen Idec an
exclusive license to distribute, market and sell certain RNAi
therapeutics to treat PML and Biogen Idec has agreed to fund all
related research and development activities. We received an
upfront
17
$5.0 million payment from Biogen Idec. In addition, upon
the successful development and utilization of a product
resulting from the collaboration, if any, Biogen Idec would be
required to pay us milestone payments, totaling
$51.0 million, and royalty payments on sales, if any. Due
to the uncertainty of pharmaceutical development and the high
historical failure rates generally associated with drug
development, we may not receive any milestone or royalty
payments from Biogen Idec. The pace and scope of future
development of this program is the responsibility of Biogen
Idec. We expect to expend limited resources on this program in
2011.
Unless earlier terminated, the Biogen Idec agreement will remain
in effect until the expiration of all payment obligations under
the agreement. Either we or Biogen Idec may terminate the
agreement in the event that the other party breaches its
obligations thereunder. Biogen Idec may also terminate the
agreement, on a
country-by-country
basis, without cause upon 90 days prior written
notice.
Product Alliances.
Medtronic.
In July 2007, we entered into an
amended and restated collaboration agreement with Medtronic to
pursue the development of therapeutic products for the treatment
of neurodegenerative disorders. The amended and restated
collaboration agreement supersedes the collaboration agreement
entered into by the parties in February 2005, and continues the
existing collaboration between the parties focusing on the
delivery of RNAi therapeutics to specific areas of the brain
using implantable infusion systems.
Under the terms of the amended and restated collaboration
agreement, we and Medtronic are continuing our existing
development program focused on developing a combination
drug-device product for the treatment of HD. In addition, we and
Medtronic may jointly agree to collaborate on additional product
development programs for the treatment of other
neurodegenerative diseases, which can be addressed by the
delivery of siRNAs to the human nervous system through
implantable infusion devices. We are responsible for supplying
the siRNA component and Medtronic is responsible for supplying
the device component of any product resulting from the
collaboration.
With respect to the initial product development program focused
on our RNAi therapeutic candidate, ALN-HTT for HD, each party is
funding 50% of the development efforts for the United States,
subject to the funding reimbursement received from CHDI
described below. Medtronic is responsible for funding
development efforts outside the United States. Medtronic will
commercialize any resulting products and pay royalties to us
based on net sales of such products, if any, which royalties in
the United States are designed to approximate 50% of the profit
associated with the sale of such product and which royalties in
Europe are similar to more traditional pharmaceutical royalties,
in that they are intended to reflect each partys
contribution.
Each party has the right to opt-out of its obligation to fund
the program under the agreement at certain stages, and the
agreement provides for revised economics based on the timing of
any such opt-out. Other than pursuant to the initial product
development program, and subject to specified exceptions,
neither party may research, develop, manufacture or
commercialize products that use implanted infusion devices for
the direct delivery of siRNAs to the human nervous system to
treat HD during the term of such program.
The amended and restated collaboration agreement expires, on a
product-by-product
and
country-by-country
basis, upon expiration of the royalty term for the applicable
product. The royalty term is the longer of a specified number of
years from the first commercial sale of the applicable product
and the expiration of the
last-to-expire
of specified patent rights. Royalties are paid at a lower level
during any part of a royalty term in which specified patent
coverage does not exist. Either party may terminate the amended
and restated collaboration agreement on 60 days prior
written notice if the other party materially breaches the
agreement in specified ways and fails to cure the breach within
the
60-day
notice period. Either party may also terminate the agreement in
the event that specified pre-clinical testing does not yield
results meeting specified success criteria.
In November 2010, we, Medtronic and CHDI formed a collaboration
in connection with the ALN-HTT program for HD. CHDI is a
not-for-profit
virtual biotech company that is exclusively dedicated to rapidly
discovering and developing therapies that slow the progression
of HD. Under this new collaboration, CHDI has agreed to
initially fund approximately 50% of the costs of this program up
to the point at which an IND or comparable foreign regulatory
application can be filed, which represents over
$10.0 million in potential funding. We and Medtronic agreed
to repay CHDI for this funding, with interest, in the event that
a product is ultimately commercialized from the funded research.
CHDI is not entitled to receive milestone or royalty payments
18
independent of our and Medtronics repayment obligations,
nor does it have any other rights to any product or intellectual
property developed through the funded research.
Kyowa Hakko Kirin.
In June 2008, we entered
into a license and collaboration agreement with Kyowa Hakko
Kirin. Under the Kyowa Hakko Kirin agreement, we granted Kyowa
Hakko Kirin an exclusive license to our intellectual property in
Japan and other markets in Asia for the development and
commercialization of an RNAi therapeutic for the treatment of
RSV infection. The Kyowa Hakko Kirin agreement covers ALN-RSV01,
as well as additional RSV-specific RNAi therapeutic compounds
that comprise the ALN-RSV program. We retain all development and
commercialization rights worldwide outside of the licensed
territory, subject to our agreement with Cubist, described below.
Under the terms of the Kyowa Hakko Kirin agreement, in June
2008, Kyowa Hakko Kirin paid us an upfront cash payment of
$15.0 million. In addition, Kyowa Hakko Kirin is required
to make payments to us upon achievement of specified development
and sales milestones totaling up to $78.0 million, and
royalty payments based on annual net sales, if any, of RNAi
therapeutics for the treatment of RSV by Kyowa Hakko Kirin, its
affiliates and sublicensees in the licensed territory. Due to
the uncertainty of pharmaceutical development and the high
historical failure rates generally associated with drug
development, we may not receive any milestone or royalty
payments from Kyowa Hakko Kirin.
Our collaboration with Kyowa Hakko Kirin is governed by a joint
steering committee that is comprised of an equal number of
representatives from each party. Under the agreement, Kyowa
Hakko Kirin is establishing a development plan for the ALN-RSV
program relating to the development activities to be undertaken
in the licensed territory, with the initial focus on Japan.
Kyowa Hakko Kirin is responsible, at its expense, for all
development activities under the development plan that are
reasonably necessary for the regulatory approval and
commercialization of an RNAi therapeutic for the treatment of
RSV in Japan and the rest of the licensed territory. We are
responsible for supply of the product to Kyowa Hakko Kirin under
a supply agreement unless Kyowa Hakko Kirin elects, prior to the
first commercial sale of the product in the licensed territory,
to manufacture the product itself or arrange for a third party
to manufacture the product.
The term of the Kyowa Hakko Kirin agreement generally ends on a
country-by-country
basis upon the later of (1) the expiration of our
last-to-expire
patent covering a licensed product and (2) the tenth
anniversary of the first commercial sale in the country of sale.
We estimate that our principal patents covered under the Kyowa
Hakko Kirin agreement will expire both in and outside the United
States generally between 2016 and 2025. These patent rights are
subject to any potential patent term extensions
and/or
supplemental protection certificates extending such term
extensions in countries where such extensions may become
available. Additional patent filings relating to the
collaboration may be made in the future. The Kyowa Hakko Kirin
agreement may be terminated by either party in the event the
other party fails to cure a material breach under the agreement.
In addition, Kyowa Hakko Kirin may terminate the agreement
without cause upon 180 days prior written notice to
us, subject to certain conditions.
Cubist.
In January 2009, we entered into a
license and collaboration agreement with Cubist to develop and
commercialize therapeutic products based on certain of our RNAi
technology for the treatment of RSV. Licensed products initially
included ALN-RSV01, as well as several other second-generation
RNAi-based RSV inhibitors. In November 2009, we and Cubist
entered into an amendment to our license and collaboration
agreement, which provided that we and Cubist would focus our
collaboration and joint development efforts on ALN-RSV02, a
second-generation compound, intended for use in pediatric
patients. Consistent with the original license and collaboration
agreement, we and Cubist each were responsible for one-half of
the related development costs for ALN-RSV02. In December 2010,
we and Cubist jointly made a portfolio decision to put the
development of
ALN-RSV02
on
hold.
Pursuant to the terms of the amendment, we are also continuing
to develop ALN-RSV01 for adult transplant patients at our sole
discretion and expense. Cubist has the right to opt into
collaborating with us on ALN-RSV01 in the future, which right
may be exercised for a specified period of time following the
completion of our Phase IIb clinical trial of ALN-RSV01 in adult
lung transplant patients infected with RSV, subject to the
payment by Cubist of an opt-in fee representing reimbursement of
an agreed upon percentage of certain of our development expenses
for ALN-RSV01.
19
Under the terms of the Cubist agreement, we and Cubist share
responsibility for developing licensed products in North America
and each bears one-half of the related development costs,
subject to the terms of the November 2009 amendment. Our
collaboration with Cubist for the development of licensed
products in North America is governed by a joint steering
committee comprised of an equal number of representatives from
each party. Cubist will have the sole right to commercialize
licensed products in North America with costs associated with
such activities and any resulting profits or losses to be split
equally between us and Cubist. Throughout the rest of the world,
referred to as the Royalty Territory, excluding Asia, where we
have previously partnered our ALN-RSV program with Kyowa Hakko
Kirin, Cubist has an exclusive, royalty-bearing license to
develop and commercialize licensed products.
In consideration for the rights granted to Cubist under the
agreement, in January 2009, Cubist paid us an upfront cash
payment of $20.0 million. Cubist is also obligated under
the agreement to pay us milestone payments, totaling up to an
aggregate of $82.5 million, upon the achievement of
specified development and sales events in the Royalty Territory,
if any. In addition, if licensed products are successfully
developed, Cubist will be required to pay us double-digit
royalties on net sales of licensed products in the Royalty
Territory, if any, subject to offsets under certain
circumstances. Upon achievement of certain development
milestones, we will have the right to convert the North American
co-development and profit sharing arrangement into a
royalty-bearing license and, in addition to royalties on net
sales in North America, will be entitled to receive additional
milestone payments totaling up to an aggregate of
$130.0 million upon achievement of specified development
and sales events in North America, subject to the timing of the
conversion by us and the regulatory status of a licensed product
at the time of conversion. If we make the conversion to a
royalty-bearing license with respect to North America, then
North America becomes part of the Royalty Territory. Due to the
uncertainty of pharmaceutical development and the high
historical failure rates generally associated with drug
development, we may not receive any milestone or royalty
payments from Cubist.
Unless terminated earlier in accordance with the agreement, the
agreement expires on a
country-by-country
and licensed
product-by-licensed
product basis, (a) with respect to the Royalty Territory,
upon the latest to occur of (1) the expiration of the
last-to-expire
Alnylam patent covering a licensed product, (2) the
expiration of the Regulatory-Based Exclusivity Period (as
defined in the Cubist agreement) and (3) ten years from
first commercial sale in such country of such licensed product
by Cubist or its affiliates or sublicensees, and (b) with
respect to North America, if we have not converted North America
into the Royalty Territory, upon the termination of the
agreement by Cubist upon specified prior written notice. We
estimate that our fundamental RNAi patents covered under the
Cubist agreement will expire both in and outside of the United
States generally between 2016 and 2025. Certain claims covering
ALN-RSV compounds in the United States would expire in 2026.
These patent rights are subject to any potential patent term
extensions
and/or
supplemental protection certificates extending such term
extensions in countries where such extensions may become
available. In addition, more patent filings relating to the
collaboration may be made in the future. Cubist has the right to
terminate the agreement at any time (1) upon three
months prior written notice if such notice is given prior
to the acceptance for filing of the first application for
regulatory approval of a licensed product or (2) upon nine
months prior written notice if such notice is given after the
acceptance for filing of the first application for regulatory
approval. Either party may terminate the agreement in the event
the other party fails to cure a material breach or upon
patent-related challenges by the other party.
During the term of the Cubist agreement, neither party nor its
affiliates may develop, manufacture or commercialize anywhere in
the world, outside of Asia, a therapeutic or prophylactic
product that specifically targets RSV, except for licensed
products developed, manufactured or commercialized pursuant to
the agreement.
Intellectual
Property Licenses
In December 2002, we entered into a co-exclusive license with
Max Planck Innovation for the worldwide rights to use and
sublicense certain patented technology to develop and
commercialize therapeutic products and related applications. We
also obtained the rights to use, without the right to
sublicense, the technology for all diagnostic uses other than
for the purposes of therapeutic monitoring. In consideration for
the rights to license this technology, we issued to Max Planck
Innovation 723,240 shares of Series B redeemable
convertible preferred stock with a fair value of
$1.8 million. We were also given the right to acquire the
remaining 50% exclusive rights, which right we exercised upon
our acquisition of Ribopharma AG in July 2003. In consideration
for the remaining rights to this technology, we issued Max
Planck Innovation an additional 158,605 shares of
Series B redeemable convertible
20
preferred stock with a fair value of $0.4 million. The
881,845 shares of Series B redeemable convertible
preferred stock held by Max Planck Innovation converted into
464,128 shares of common stock upon the closing of our
initial public offering in June 2004.
In June 2005, we entered into an amendment to our agreement with
Max Planck Innovation that secured our exclusivity to use and
sublicense certain patented technology to develop and
commercialize therapeutic products and related applications. In
connection with this amendment, we issued 270,000 shares of
our common stock, which were valued at $2.1 million, to Max
Planck Innovation and certain of its affiliated entities.
We are not obligated to pay any development or sales milestone
payments to Max Planck Innovation, however, we will be required
to pay Max Planck Innovation future single-digit royalties on
net sales of all therapeutic and prophylactic products developed
with the technology, if any.
Our agreements with Max Planck Innovation generally remain in
effect until the expiration of the
last-to-expire
patent licensed thereunder. We estimate that the principal
issued patents covered under the Max Planck Innovation
agreements will expire both in and outside the United States
during 2021, subject to any potential patent term extensions,
restoration
and/or
supplemental protection certificates extending such term
extensions in countries where such extensions may become
available. We may terminate the agreements without cause with
six months prior notice to Max Planck Innovation, and Max
Planck Innovation may terminate the agreements in the event that
we materially breach our obligations thereunder. Max Planck
Innovation also has the right to terminate the agreements in the
event that we, independently or through a third party, attack
the validity of any of the licensed patents.
Delivery-Related
Collaborations
We are working internally and with third-party collaborators to
develop new technologies to achieve effective and safe delivery
of RNAi therapeutics to a broad spectrum of organ and tissue
types. In connection with these efforts, we have entered into a
number of agreements to evaluate and gain access to certain
delivery technologies. In some instances, we are also providing
funding to support the advancement of these delivery
technologies. During 2010, we continued to make further advances
relating to the delivery of RNAi therapeutics, both internally
and together with our collaborators.
In May 2007, we entered into an agreement with the David H. Koch
Institute for Integrative Cancer Research at MIT, under which we
are sponsoring an exclusive five-year research program focused
on the delivery of RNAi therapeutics. In December 2009, we and
MIT announced the publication of new data in the journal
PNAS
describing further advancements in the discovery and
development of LNPs based on novel lipidoid
formulations for the systemic delivery of RNAi therapeutics.
Lipidoids are lipid-like materials discovered for the delivery
of RNAi therapeutics, and were originally described by us and
our collaborators at MIT. Lipidoid formulations represent one of
several approaches we are pursuing for systemic delivery of RNAi
therapeutics.
In January 2007, we obtained an exclusive worldwide license to
the liposomal delivery formulation technology of Tekmira for the
discovery, development and commercialization of LNP formulations
for the delivery of RNAi therapeutics and a non-exclusive
worldwide license to certain liposomal delivery formulation
technology of Protiva Biotherapeutics Inc., or Protiva, for the
discovery, development and commercialization of certain LNP
formulations for the delivery of RNAi therapeutics. In May 2008,
Tekmira acquired Protiva. In connection with this acquisition,
we entered into new agreements with Tekmira and Protiva, which
provide us access to key existing and future technology and
intellectual property for the systemic delivery of RNAi
therapeutics with liposomal delivery technologies. Under these
agreements, we continue to have exclusive rights to the Semple
(U.S. Patent No. 6,858,225) and Wheeler
(U.S. Patent Nos. 5,976,567 and 6,815,432) patents for
RNAi, which we believe are critical for the use of LNP delivery
technology. Under our agreements with Tekmira and Protiva,
Tekmira and Protiva are eligible to receive up to an aggregate
of $16.0 million in milestone payments for each RNAi
therapeutic formulated using Tekmiras or Protivas
liposomal delivery formulation technologies, together with
single-digit royalty payments on annual product sales. In each
of 2009 and 2010, we paid $0.5 million in milestone
payments to Tekmira under these license agreements. We charge
these milestone payments to research and development expense.
21
We are developing ALN-VSP, a systemically delivered RNAi
therapeutic, for the treatment of primary and secondary liver
cancer. ALN-VSP contains two siRNAs formulated using a
first-generation LNP formulation developed by Tekmira. We also
have rights to use this LNP technology in the advancement of our
other systemically delivered RNAi therapeutic programs, and we
are advancing ALN-TTR01, for the treatment of ATTR, utilizing
this first-generation LNP formulation. In parallel with
ALN-TTR01, we are advancing ALN-TTR02 utilizing a
second-generation LNP formulation. In addition, we have
published pre-clinical results from development programs for
other systemically delivered RNAi therapeutics, including
ALN-PCS, for the treatment of severe hypercholesterolemia. We
are also advancing ALN-PCS using a second-generation LNP
formulation.
Under our agreements with Tekmira and Protiva, we also granted
Tekmira and Protiva three exclusive and five non-exclusive
licenses under our InterfeRx program to develop and
commercialize RNAi therapeutics directed to up to eight gene
targets in which we have no direct strategic interest, including
the targets apolipoprotein B and polo-like kinase 1, or PLK1,
and a recently granted license in connection with Tekmiras
research program directed towards the Ebola virus. We are
eligible to receive up to an aggregate of $8.5 million in
milestone payments for each RNAi therapeutic directed to four of
these targets, together with single-digit royalties on annual
sales of RNAi therapeutic products directed to all of these
targets, if any. In addition, under our agreement with Protiva,
we have the right to opt-in to the Tekmira research
program directed to PLK1 and contribute 50% of product
development costs and share equally in any future product
revenues. We have until the start of a Phase II clinical
trial in this PLK1 research program to exercise our opt-in right.
In connection with Tekmiras acquisition of Protiva, in May
2008, we made an equity investment of $5.0 million in
Tekmira, purchasing 2,083,333 shares of Tekmira common
stock at a price of $2.40 per share, which represented a premium
of $1.00 per share. In November 2010, Tekmira effected a
one-for-five
reverse stock split, after which we own 416,666 shares of
Tekmira common stock.
The terms of our agreements with Tekmira and Protiva generally
end upon the expiration of the
last-to-expire
patent licensed thereunder, whether such patent is a patent
licensed by Tekmira or Protiva to us, or vice versa. As the
licenses from Tekmira and Protiva will include additional
patents, if any, filed to cover future inventions, if any, the
dates of expiration cannot be determined at this time. Either we
or Protiva may terminate a license it granted to the other in
the event that the other party materially breaches its
obligations relating to that license. Furthermore, either we or
Tekmira may terminate our agreements with each other in the
event the other party materially breaches an obligation under
those agreements, but such termination will be limited to a
particular product
and/or
region in the event of a material breach by the other party that
has a material adverse effect only on that particular product in
that region.
In July 2009, we and Tekmira agreed to a new research
collaboration with scientists at UBC and AlCana focused on the
discovery of novel lipids for use in LNPs for the systemic
delivery of RNAi therapeutics. We are funding the collaborative
research over a two-year period, and the work is being conducted
by our scientists together with scientists at UBC and AlCana. We
will receive exclusive rights to all new inventions relating to
the delivery of oligonucleotides and other nucleic acid
constructs, as well as sole rights to sublicense any resulting
intellectual property to our current and future collaborators.
Tekmira will receive rights to use new inventions for its own
RNAi therapeutic programs that are licensed under our InterfeRx
program.
We are pursuing additional approaches for delivery that include
other LNP formulations, mimetic lipoprotein particles and siRNA
conjugation strategies, among others. In addition, we have other
RNAi therapeutic delivery collaborations and intend to continue
to collaborate with government, academic and corporate third
parties to evaluate and gain access to different delivery
technologies.
microRNA
Therapeutics
Regulus.
In September 2007, we and Isis
established Regulus, a company focused on the discovery,
development and commercialization of microRNA therapeutics.
Regulus leverages our and Isis technologies, know-how and
intellectual property relating to microRNA therapeutics.
Regulus, which initially was established as a limited liability
company, converted to a C corporation as of January 2, 2009
and changed its name to Regulus Therapeutics Inc. In
consideration for our and Isis initial interests
22
in Regulus, we and Isis each granted Regulus exclusive licenses
to our intellectual property for certain microRNA therapeutics
as well as certain patents in the microRNA field. In addition,
we made an initial cash contribution to Regulus of
$10.0 million, resulting in us and Isis making initial
capital contributions to Regulus of approximately equal
aggregate value. In addition, in March 2009, we and Isis each
purchased $10.0 million of Series A preferred stock of
Regulus. In October 2010, in connection with its strategic
alliance with Regulus formed in June 2010, sanofi-aventis made a
$10.0 million equity investment in Regulus. At
December 31, 2010, we, Isis and sanofi-aventis owned
approximately 45%, 46% and 9%, respectively, of Regulus. Regulus
continues to operate as an independent company with a separate
board of directors, scientific advisory board and management
team, some of whom have options to purchase common stock of
Regulus. Members of the board of directors of Regulus who are
our employees or Isis employees are not eligible to
receive options to purchase Regulus common stock.
Regulus is exploring therapeutic opportunities that arise from
microRNA dysregulation. Since microRNAs are believed to regulate
broad networks of genes and biological pathways, microRNA
therapeutics define a new and potentially high-impact strategy
to target multiple nodes on disease pathways. microRNAs are
small non-coding RNAs that regulate the expression of other
genes. There are approximately 700 microRNAs that have been
identified in the human genome, and these are believed to
regulate the expression of up to 30% of all human genes. Since
microRNAs may act as master regulators of the genome and are
often found to be dysregulated in disease, microRNAs potentially
represent an exciting new platform for drug discovery and
development.
Regulus is advancing microRNA therapeutics in several areas
including fibrosis, hepatitis C virus, or HCV, infection,
immuno-inflammatory diseases, metabolic and cardiovascular
diseases, and oncology. Regulus lead program in fibrosis
targets microRNA-21, or miR-21. Pre-clinical studies by Regulus
scientists and collaborators have shown that anti-miR-21 can
reverse fibrosis and significantly improve cardiac function in
mice with failing hearts, and more recent studies have
demonstrated similar therapeutic results in other models of
fibrosis. Regulus is advancing anti-miR-21 to clinical studies
for the treatment of fibrotic diseases. Regulus lead
program for HCV infection is focused on microRNA-122, or
miR-122. Regulus scientists and collaborators performed
important studies demonstrating that anti-miR-122 can reduce
cholesterol levels in blood and reverse hepatic steatosis, or
fatty liver, in obese mice. More recent pre-clinical studies
have shown that miR-122 is essential for replication of HCV.
Together, these findings suggest that anti-miR-122 may both
reduce HCV infection and improve HCV-associated pathologies like
steatosis. Regulus is advancing anti-miR-122 to clinical studies
for HCV. Regulus is also advancing additional programs towards
clinical development, including programs targeting microRNA-155,
or miR-155, for inflammatory diseases, microRNA-33, or miR-33,
for cardiovascular disease, and microRNA-21, or miR-21, and
microRNA-34, or miR-34, for the treatment of cancers.
In April 2008, Regulus entered into a worldwide strategic
alliance with GSK to discover, develop and market novel
microRNA-targeted therapeutics to treat inflammatory diseases
such as rheumatoid arthritis and inflammatory bowel disease. In
connection with this alliance, Regulus received
$20.0 million in upfront payments from GSK, including a
$15.0 million option fee and a loan of $5.0 million
(guaranteed by us and Isis) that will convert into Regulus
common stock under certain specified circumstances. Regulus is
eligible to receive development, regulatory and sales milestone
payments for each of the four microRNA-targeted therapeutics
discovered and developed as part of the alliance, and would also
receive royalty payments on worldwide sales of products
resulting from the alliance, if any. In May 2009, Regulus
achieved the first demonstration of a pharmacological effect in
immune cells by specific microRNA inhibition, the initial
discovery milestone under the GSK alliance, which triggered a
payment under the agreement.
In February 2010, Regulus and GSK established a new
collaboration to develop and commercialize microRNA therapeutics
targeting miR-122 in all fields, with the treatment of HCV
infection as the lead indication. Under the terms of this
collaboration, Regulus received $8.0 million in upfront
payments from GSK, including a $3.0 million license fee and
a loan of $5.0 million (guaranteed by us and Isis) that
will convert into Regulus common stock under certain specified
circumstances. Consistent with the original GSK alliance,
Regulus is eligible to receive development, regulatory and sales
milestone payments, as well as royalty payments on worldwide
sales of products resulting from the alliance, if any, as
Regulus and GSK advance microRNA therapeutics targeting
miR-122.
23
In June 2010, Regulus entered into a global, strategic alliance
with sanofi-aventis to discover, develop and commercialize
microRNA therapeutics on up to four microRNA targets. Under the
terms of this alliance, Regulus received $25.0 million in
upfront fees and is entitled to annual research support for
three years with the option to extend research support for two
additional years. In addition, Regulus is eligible to receive
royalties on microRNA therapeutic products commercialized by
sanofi-aventis, if any. Sanofi-aventis will support 100% of the
costs of clinical development and commercialization of each
program. The alliance will initially focus on the therapeutic
area of fibrosis. Regulus and sanofi-aventis will collaborate on
up to four microRNA targets, including Regulus lead
fibrosis program targeting miR-21. Sanofi-aventis also received
an option for a broader technology alliance with Regulus that
provides Regulus certain rights to participate in development
and commercialization of resulting products. If exercised, this
option is worth up to an additional $50.0 million to
Regulus. In addition, we and Isis are each eligible to receive
7.5% of all potential upfront and milestone payments, in
addition to single-digit royalties on product sales, if any. We
received $1.9 million from Regulus in connection with this
alliance, representing 7.5% of the $25.0 million upfront
payment from sanofi-aventis to Regulus.
We, Isis and Regulus have also entered into a license and
collaboration agreement to pursue the discovery, development and
commercialization of therapeutic products directed to microRNAs.
Under the terms of the license and collaboration agreement, we
and Isis assigned to Regulus specified patents and contracts
covering microRNA-specific technology. In addition, each of us
granted to Regulus an exclusive, worldwide license under our
rights to other microRNA-related patents and know-how to develop
and commercialize therapeutic products containing compounds that
are designed to interfere with or inhibit a particular microRNA,
subject to our and Isis existing contractual obligations
to third parties. Regulus also has the right to request a
license from us and Isis to develop and commercialize
therapeutic products directed to other microRNA compounds, which
such license is subject to our and Isis approval and to
each partys existing contractual obligations to third
parties. Regulus granted to us and Isis an exclusive license to
technology developed or acquired by Regulus for use solely
within our respective fields (as defined in the license and
collaboration agreement), but specifically excluding the right
to develop, manufacture or commercialize the therapeutic
products for which we and Isis granted rights to Regulus.
After a sufficient portfolio of data is obtained with respect to
each microRNA therapeutic candidate developed by Regulus,
Regulus may elect to continue to pursue the development and
commercialization of products directed to such microRNA compound
and related microRNA compounds, in which event Regulus would be
obligated to pay us and Isis a royalty on net sales of any such
resulting products. If Regulus decides not to continue to pursue
the development and commercialization of products directed to
particular microRNA compounds, either we or Isis may pursue
development and commercialization of such Regulus products.
Development and commercialization of such products by either
party would be subject to the payment to Regulus of a specified
upfront fee, milestone payments upon achievement of specified
regulatory events, royalties on net sales and a portion of
income received from sublicensing rights.
Alnylam
Biotherapeutics
During 2009 and 2010, we presented data and advanced our efforts
regarding the application of RNAi technologies to improve the
manufacturing processes for biologics, including recombinant
proteins and monoclonal antibodies. These applications of RNAi
technology, which we are advancing in an internal effort
referred to as Alnylam Biotherapeutics, have the potential to
create new business opportunities. In particular, we are
advancing RNAi technologies to improve the quantity and quality
of biologics manufacturing processes using mammalian cell
culture, such as Chinese hamster ovary, or CHO, cells. This RNAi
technology potentially could be applied to the improvement of
manufacturing processes for existing marketed drugs, new drugs
in development and for the emerging biosimilars market. We have
developed proprietary delivery lipids that enable the efficient
delivery of siRNAs into CHO cells when grown in suspension
culture, as well as other cell systems that are used for the
manufacture of biologics. Studies have demonstrated that
silencing certain target genes involved in certain CHO cell
apoptotic and metabolic pathways resulted in improved cell
viability as compared with untreated cells. Additional studies
demonstrated the ability to target a viral infection of CHO
cells and alter glycosylation pathways. During 2010, Alnylam
Biotherapeutics formed two collaborations with leading
biotechnology and pharmaceutical companies. As Alnylam
Biotherapeutics advances the technology, it plans to seek
additional collaborations with established biologic
manufacturers, selling licenses, products and services.
24
Other
RNAi Areas of Opportunity
We are also evaluating various other opportunities in the areas
of stem cell research, genomics, vaccines and other non-coding
RNAs. Given the broad applications for RNAi technology, we
believe additional opportunities exist for new ventures.
Licenses
To further enable the field and monetize our intellectual
property rights, we have established our InterfeRx program and
our research reagents and services licensing program.
InterfeRx Program.
Our InterfeRx program
consists of the licensing of our intellectual property to others
for the development and commercialization of RNAi therapeutic
products relating to specific targets outside our direct
strategic focus. We expect to receive license fees, annual
maintenance fees, milestone payments and royalties on sales of
any resulting RNAi therapeutic products. Generally, we do not
expect to collaborate with our InterfeRx licensees in the
development of RNAi therapeutic products, but may do so in
certain circumstances. To date, we have granted InterfeRx
licenses to a number of companies, including GeneCare Research
Institute Co., Ltd., or GeneCare, Quark Biotech, Inc., or Quark,
Calando Pharmaceuticals, Inc., or Calando, and Tekmira. In
general, these licenses allow the licensees to discover, develop
and commercialize RNAi therapeutics for a limited number of
targets in return for upfront, milestone, license maintenance
and/or
royalty payments to us. In some cases, we also retained a right
to negotiate the ability to co-promote
and/or
co-commercialize the licensed product, and in one case, we
included the rights to discover, develop and commercialize RNAi
therapeutics utilizing expressed RNAi (i.e., RNAi mediated by
siRNAs generated from DNA constructs introduced into cells). In
addition, Benitec Ltd., or Benitec, has an option to take an
InterfeRx license, subject to certain conditions. We have
granted InterfeRx licenses or options relating to approximately
22 gene targets and, as of January 31, 2011, only nine
targets have been selected by InterfeRx partners.
Research Reagents and Services.
We have
granted approximately 15 licenses to our intellectual property
for the development and commercialization of research reagents
and services, and intend to enter into additional licenses on an
ongoing basis. Our target licensees are vendors that provide
siRNAs and related products and services for use in biological
research. We offer these licenses in return for an initial
license fee, annual renewal fees and royalties from sales of
siRNA research reagents and services. No single research reagent
or research services license is material to our business.
Government
Funding
NIH.
In September 2006, the NIAID, a component
of the NIH, awarded us a contract for up to $23.0 million
over four years to advance the development of a broad spectrum
RNAi anti-viral therapeutic for hemorrhagic fever virus,
including the Ebola virus. As a result of the continued progress
of this program, the NIAID appropriated the entire
$23.0 million over the four-year term of the contract,
which was originally expected to be completed in September 2010.
We and the NIAID agreed to a no-cost extension of the contract
through December 2010, during which time we utilized the
remaining available funds under the contract.
Department of Defense.
In August 2007, the
Defense Threat Reduction Agency, or DTRA, an agency of the
United States Department of Defense, awarded us a contract to
advance the development of a broad spectrum RNAi anti-viral
therapeutic for hemorrhagic fever virus. The government
initially committed to pay us up to $10.9 million through
February 2009, which included a six-month extension granted by
DTRA in July 2008. Following a program review in early 2009, we
and DTRA determined not to continue this program and
accordingly, the remaining funds of up to $27.7 million
were not accessed.
25
Patents
and Proprietary Rights
We have devoted considerable effort and resources to establish
what we believe to be a strong intellectual property position
relevant to RNAi therapeutic products and delivery technologies.
In this regard, we have amassed a portfolio of patents, patent
applications and other intellectual property covering:
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fundamental aspects of the structure and uses of siRNAs,
including their use as therapeutics, and RNAi-related mechanisms;
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chemical modifications to siRNAs that improve their suitability
for therapeutic and other uses;
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siRNAs directed to specific targets as treatments for particular
diseases;
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delivery technologies, such as in the field of cationic
liposomes; and
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all aspects of our specific development candidates.
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We believe that no other company possesses a portfolio of such
broad and exclusive rights to the patents and patent
applications required for the commercialization of RNAi
therapeutics. Our intellectual property estate for RNAi
therapeutics includes over 1,800 active cases and over 700
granted or issued patents, of which over 300 are issued or
granted in the United States, the EU and Japan. Given the
importance of our intellectual property portfolio to our
business operations, we intend to vigorously enforce our rights
and defend against challenges that have arisen or may arise in
this area.
Intellectual
Property Related to Fundamental Aspects and Uses of siRNA and
RNAi-related Mechanisms
In this category, we include United States and foreign patents
and patent applications that claim key aspects of siRNA
architecture and RNAi-related mechanisms. Specifically included
are patents and patent applications covering targeted cleavage
of mRNA directed by RNA-like oligonucleotides, dsRNAs of
particular lengths and particular structural features, such as
blunt
and/or
overhanging ends. Our strategy has been to secure exclusive
rights where possible and appropriate to key patents and patent
applications that we believe cover fundamental aspects of RNAi.
The following table lists patents
and/or
patent applications to which we have secured rights that we
regard as being fundamental for the use of siRNAs as
therapeutics.
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Patent
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First
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Licensor/Owner
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Subject Matter
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Priority Date
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Inventors
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Status
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Expiration Date*
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Alnylam Rights
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Isis
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Inactivation of target mRNA
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6/6/1996 and 6/6/1997
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S. Crooke
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U.S. 5,898,031, U.S. 6,107,094,
U.S. 7,432,250 & U.S. 7,695,902
EP 0928290
Additional applications pending in the U.S. and several foreign jurisdictions
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06/06/2016
06/06/2017
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Exclusive rights for therapeutic purposes related to siRNAs**
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Carnegie Institution of Washington
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Double-stranded RNAs to induce RNAi
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12/23/1997
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A. Fire,
C. Mello
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U.S. 6,506,559, U.S.
7,560,438 & U.S. 7,538,095
Additional applications pending in the U.S. and several foreign jurisdictions
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12/18/2018
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Non-exclusive rights for therapeutic purposes
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Medical
College of Georgia Research Institute, Inc.
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Methods for inhibiting gene expression using double-stranded RNA
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1/28/1999
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Y. Li,
M. Farrell,
M. Kirby
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AU 776150 (Australia)
Additional applications pending in the U.S., Europe and Canada
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1/28/2020
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Exclusive rights
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Alnylam
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Small double- stranded RNAs as therapeutic products
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1/30/1999
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R. Kreutzer,
S. Limmer
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EP 1214945 (opposed), EP 1550719 (granted/opposed), EP 1352061
(maintained/under appeal) & EP 1349927 (granted/opposed),
CA 2359180 (Canada), AU 778474 (Australia), ZA 2001/5909 (South
Africa), DE 20023125 U1, DE 10066235 & DE 10080167
(Germany) Additional applications pending in the U.S. and
several foreign jurisdictions
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01/29/2020
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Owned
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26
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Patent
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First
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Licensor/Owner
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Subject Matter
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Priority Date
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Inventors
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Status
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Expiration Date*
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Alnylam Rights
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Alnylam
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Composition and methods for inhibiting a target nucleic acid
with double-stranded RNA
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4/21/1999
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C. Pachuk,
C. Satishchandran
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AU 781598 (Australia)
Additional applications pending in the U.S. and several foreign
jurisdictions
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4/19/2020
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Owned
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Cancer
Research Technology Limited
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RNAi uses in mammalian oocytes, preimplantation embryos and
somatic cells
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11/19/1999
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M. Zernicka-
Goetz,
M.J. Evans,
D.M. Glover
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EP 1230375 (revoked/under appeal), SG 89569 (Singapore), AU
774285 (Australia)
Additional applications pending in the U.S. and several foreign
jurisdictions
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11/17/2020
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Exclusive rights for therapeutic purposes
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Massachusetts Institute of Technology, Whitehead Institute, Max
Planck Gesellschaft***
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Mediation of RNAi by small RNAs 21-23 base pairs long
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3/30/2000
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D.P. Bartel,
P.A. Sharp,
T. Tuschl,
P.D. Zamore
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EP 1309726 (granted/opposed), AU 2001249622 (Australia) , NZ
522045 (New Zealand), KR 08724437 & KR 10-0909681
(Korea)
Additional applications pending in the U.S. and several foreign
jurisdictions
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03/30/2020
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Non-exclusive rights for therapeutic purposes***
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Max Planck Gesellschaft
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Synthetic and chemically modified siRNAs as therapeutic products
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12/01/2000, 04/24/2004 and 04/27/2004
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T. Tuschl,
S. Elbashir,
W. Lendeckel
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U.S. 7,056,704 & U.S. 7,078,196
EP 1407044, AU 2002235744 (Australia), ZA 2003/3929 (South
Africa), SG 96891 (Singapore), NZ 52588 (New Zealand), JP 4 095
895 (Japan), JP 4 494 392 (Japan), RU 2322500 (Russia), CN
1568373 (China)
Additional applications pending in the U.S. and several foreign
jurisdictions
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11/29/2021
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Exclusive
rights for therapeutic purposes
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Alnylam
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Methods for inhibiting a target nucleic acid via the
introduction of a vector encoding a double-stranded RNA
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1/31/2001
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T. Giordano,
C. Pachuk,
C. Satishchandran
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AU 785395 (Australia)
Additional applications pending in the U.S., Australia and Canada
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1/31/2021
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Owned
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Cold Spring Harbor Laboratory
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RNAi uses in mammalian cells
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3/16/2001
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D. Beach,
G. Hannon
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Pending in the U.S. and several foreign jurisdictions
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Non-exclusive rights for therapeutic purposes
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Stanford University
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RNAi uses
in vivo
in mammalian liver
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7/23/2001
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M.A. Kay,
A.P. McCaffrey
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AU 2002326410 (Australia) Additional applications pending in the
U.S. and several foreign jurisdictions
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7/23/2021
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Exclusive
rights for therapeutic purposes
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*
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For applications filed after June 7, 1995, the patent term
generally is 20 years from the earliest application filing
date. However, under the Drug Price Competition and Patent Term
Extension Act of 1984, known as the Hatch-Waxman Act, we may be
able to apply for patent term extensions for our U.S. patents.
We cannot predict whether or not any patent term extensions will
be granted or the length of any patent term extension that might
be granted.
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**
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We hold co-exclusive therapeutic rights with Isis. However, Isis
has agreed not to license such rights to any third party, except
in the context of a collaboration in which Isis plays an active
role.
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***
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We hold exclusive rights to the interest owned by three
co-owners. A separate entity, UMass, has licensed its purported
interest separately to third parties.
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We believe that we have a strong portfolio of broad rights to
fundamental RNAi patents and patent applications. Many of these
rights are exclusive, which we believe prevents potential
competitors from commercializing products in the field of RNAi
without taking a license from us. In securing these rights, we
27
have focused on obtaining the strongest rights for those
intellectual property assets we believe will be most important
in providing competitive advantage with respect to RNAi
therapeutic products.
We believe that the Crooke patent series, issued in several
countries around the world, covers the use of modified
oligonucleotides to achieve enzyme-mediated cleavage of a target
mRNA. We have obtained rights to the Crooke patents through a
license agreement with Isis. Under the terms of our amended and
restated Isis agreement, Isis agreed not to grant licenses under
these patents to any other organization for oligonucleotide
products designed to work through an RNAi mechanism, except in
the context of a collaboration in which Isis plays an active
role.
Through our acquisition of Ribopharma AG, now known as Alnylam
Europe, we own the entire Kreutzer-Limmer patent portfolio,
which includes pending applications in the United States and
many countries worldwide. The first patent to issue in the
Kreutzer-Limmer series (EP 1144623) was granted in Europe
in 2002, and specifically covered the use of small dsRNAs as
therapeutics. This patent was revoked on appeal. The second
European Kreutzer-Limmer patent (EP 1214945) to issue in
the series was granted in Europe in 2005. This patent covers
dsRNA structures of 15 to 49 successive nucleotide pairs in
length. In January 2009, the Opposition Division of the European
Patent Office, or EPO, ruled in favor of the opposing parties in
an opposition proceeding related to the second Kreutzer-Limmer
patent. We appealed this decision, and in May 2010, the Board of
Appeals of the EPO ruled in our favor, rejecting the Opposition
Divisions ruling that the second Kreutzer-Limmer patent
was invalid. The patent was sent back to the Opposition Division
to address the remaining grounds asserted by the opponents. In
December 2008, the EPO granted a third patent in the
Kreutzer-Limmer series (EP 1550719). This patent covers
therapeutic dsRNAs which are 15 to 21 consecutive nucleotide
pairs in length. The third Kreutzer-Limmer patent has been
opposed. In March 2010, the EPO issued a fourth patent in the
Kreutzer-Limmer series (EP 1349927). This patent covers methods
and medicaments having dsRNAs that are less than 25 nucleotides
in length having a 3 nucleotide overhang on the antisense
strand which inhibit anti-apoptotic genes in tumor cells. This
fourth Kreutzer-Limmer patent has also been opposed. We have
also received grants for patents in the Kreutzer-Limmer series
in several other countries, as reflected in the table above. The
decision with respect to EP 1144623 will only affect the granted
or pending claims of other members of the Kreutzer-Limmer patent
series to the extent the same issue arises in the formal
examination or post-grant review proceedings of the other
members of the series. In the event this happens, we believe
that the ruling in the EP 1144623 proceeding would be
controlling.
The Glover patent series has resulted in several patent grants,
including in Europe (EP 1230375). The European Glover patent was
revoked in June 2008 during opposition proceedings and our
appeal of this decision is pending. Broad claims from this
patent cover dsRNAs of any length or structure as mediators of
RNAi in mammalian systems. We have an exclusive license to the
Glover patent for therapeutic uses from Cancer Research
Technology Limited.
The Tuschl patent applications filed by Whitehead, MIT, UMass
and Max Planck Gesellschaft zur Forderung der Wissenschaften
E.V. on the invention by Dr. Tuschl and his colleagues,
which we call the Tuschl I patent series, cover compositions and
methods important for RNAi discovery. While none of the
applications in this family have been granted in the United
States, the EPO granted patent EP 1309726, which has been
opposed. This patent consists of 19 claims broadly covering
in vitro
RNAi methods, including methods of reducing
the expression of a gene, including those of mammalian or viral
origin, with dsRNAs between 21 and 23 nucleotides in length. In
addition, the patent also includes claims covering methods of
examining the function of a gene, as well as the use of both
unmodified and chemically modified dsRNAs. The Tuschl I series
has also been granted in New Zealand (Patent 522045) and
Korea (Patents 0872437 and
10-0909681).
We are the exclusive licensee of the ownership interests of the
Max Planck Society, MIT and Whitehead in the Tuschl I patent
series for RNAi therapeutics.
The Tuschl patent applications filed by Max Planck Gesellschaft
zur Forderung der Wissenschaften E.V. on the invention by
Dr. Tuschl and his colleagues, which we call the
Tuschl II patent series, cover what we believe are key
structural features of siRNAs. Specifically, the Tuschl II
patents and patent applications include claims directed to
synthetic siRNAs and the use of chemical modifications to
stabilize siRNAs. In June 2006, the United States Patent and
Trademark Office, or USPTO, issued U.S. Patent
No. 7,056,704 and in July 2006 the USPTO issued
U.S. Patent No. 7,078,196, each covering methods of
making dsRNAs having a 3 overhang structure. In September
2007, the EPO granted broad claims for the Tuschl II patent
in Europe (EP 1407044). Five parties filed Notices of Opposition
in the EPO against EP 1407044. In December 2010, the Opposition
Division of the EPO ruled in our favor
28
upholding the validity of this patent. The Japanese Patent
Office has granted the Tuschl II patent in Japan (JP 4 095
895 and JP 4 494 392) and the Chinese Patent Office has
granted the Tuschl II patent in China (CN 1568373). We have
also received grants for patents in the Tuschl II series in
several other countries, as reflected in the table above. We
have obtained an exclusive license to claims in the
Tuschl II patent series uniquely covering the use of RNAi
for therapeutic purposes.
The Fire and Mello patent owned by the Carnegie Institution
covers the use of dsRNAs to induce RNAi. The Carnegie
Institution has made this patent broadly available for licensing
and we, like many companies, have taken a non-exclusive license
to the patent for therapeutic purposes. We believe, however,
that the claims of the Fire and Mello patent do not cover the
structural features of dsRNAs that are important for the
biological activity of siRNAs in mammalian cells. We believe
that these specific features are the subjects of the Crooke,
Kreutzer-Limmer, Glover and Tuschl II patents and patent
applications for which we have secured exclusive rights.
The other pending patent applications listed in the table above
either provide further coverage for structural features of
siRNAs or relate to the use of siRNAs in mammalian cells. For
some of these, we have exclusive rights, and for others, we have
non-exclusive rights. In addition, in December 2008, we acquired
the intellectual property assets of Nucleonics, Inc., a
privately held biotechnology company. This acquisition included
over 100 active patent filings, including 15 patents that have
been granted worldwide, of which five have been granted in the
United States and Europe. With this acquisition, we obtained
patents and patent applications with early priority dates,
notably the Li & Kirby, Pachuk
I and Giordano patent families, that cover
broad structural features of RNAi therapeutics, thus extending
the breadth of our fundamental intellectual property.
Intellectual
Property Related to Chemical Modifications
Our amended and restated collaboration and license agreement
with Isis provides us with rights to practice the inventions
covered by over 200 issued patents worldwide, as well as rights
based on future chemistry patent applications through April
2014. These patents will expire both in and outside the United
States generally between 2011 and 2029, subject to any potential
patent term extensions
and/or
supplemental protection certificates extending such term
extensions in countries where such extensions may become
available. These inventions cover chemical modifications we may
wish to incorporate into our RNAi therapeutic products. Under
the terms of our amended and restated license agreement, Isis
agreed not to grant licenses under these patents to any other
organization for dsRNA products designed to work through an RNAi
mechanism, except in the context of a collaboration in which
Isis plays an active role.
In addition to licensing these intellectual property rights from
Isis, we are also working to develop our own proprietary
chemical modifications that may be incorporated into siRNAs to
endow them with drug-like properties. We have filed a large
number of patent applications relating to these novel and
proprietary chemical modifications.
With the combination of the technology we have licensed from
Isis, U.S. Patent No. 7,078,196, a patent in the
Tuschl II patent series, and our own patent application
filings, we possess issued claims that cover methods of making
siRNAs that incorporate any of various chemical modifications,
including the use of phosphorothioates,
2-O-methyl,
and/or
2-fluoro modifications. These modifications are believed
to be important for achieving drug-like properties
for RNAi therapeutics. We hold exclusive worldwide rights to
these claims for RNAi therapeutics.
Intellectual
Property Related to the Delivery of siRNAs to
Cells
We are pursuing internal research and collaborative approaches
regarding the delivery of siRNAs to mammalian cells. These
approaches include exploring technology that may allow delivery
of siRNAs to cells through the use of cationic lipids,
cholesterol and carbohydrate conjugation, peptide and
antibody-based targeting, and polymer conjugations. Our
collaborative efforts include working with academic and
corporate third parties to examine specific embodiments of these
various approaches to delivery of siRNAs to appropriate cell
tissue, and in-licensing of the most promising technology. For
example, we have obtained an exclusive license from UBC and
Tekmira in the field of RNAi therapeutics to intellectual
property covering cationic liposomes and their use to deliver
nucleic acid to cells. The issued United States patents and
foreign counterparts, including the Semple (U.S. Patent No
6,858,225) and Wheeler (U.S. Patent Nos. 5,976,567 and
6,815,432) patents, cover compositions, methods of making and
methods of using cationic liposomes to deliver agents, such as
nucleic acid molecules, to
29
cells. These patents will expire both in and outside the United
States on October 30, 2017, January 6, 2015 and
June 7, 2015, respectively, subject to any potential patent
term extensions
and/or
supplemental protection certificates extending such term
extensions in countries where such extensions may become
available.
Intellectual
Property Related to siRNAs Directed to Specific
Targets
We have filed a number of patent applications claiming specific
siRNAs directed to various gene targets that correlate to
specific diseases. While there may be a significant number of
competing applications filed by other organizations claiming
siRNAs to treat the same gene target, we were among the first
companies to focus and file on RNAi therapeutics, and thus, we
believe that a number of our patent applications may predate
competing applications that others may have filed. Reflecting
this, in August 2005, the EPO granted a broad patent, which we
call the Kreutzer-Limmer II patent, with 103 allowed claims
on therapeutic compositions, methods and uses comprising siRNAs
that are complementary to mRNA sequences in over 125 disease
target genes. In July 2009, the EPO ruled in our favor in an
opposition proceeding related to the Kreutzer-Limmer II
patent. The decision has been appealed by the opponents. The
Kreutzer-Limmer II patent will expire on January 9,
2022, subject to any potential patent term extensions
and/or
supplemental protection certificates extending such term
extensions in countries where such extensions may become
available. Some of these claimed gene targets are being pursued
by our development and pre-clinical programs, such as those
expressed by viral pathogens including RSV and influenza virus.
In addition, the claimed targets include oncogenes, cytokines,
cell adhesion receptors, angiogenesis targets, apoptosis and
cell cycle targets, and additional viral disease targets, such
as hepatitis C virus and HIV. The Kreutzer-Limmer II
patent series is pending in the United States and many foreign
countries. Moreover, a patent in the Tuschl II patent
series, U.S. Patent No. 7,078,196, claims methods of
preparing siRNAs that mediate cleavage of an mRNA in mammalian
cells and, therefore, covers methods of making siRNAs directed
toward any and all target genes. We hold exclusive worldwide
rights to these claims for RNAi therapeutics.
With respect to specific siRNAs, we believe that patent coverage
will result from demonstrating that particular compositions
exert suitable biological and therapeutic effects. Accordingly,
we are focused on achieving such demonstrations for siRNAs in
key therapeutic programs.
Intellectual
Property Related to Our Development Candidates
As our development pipeline matures, we have made and plan to
continue to make patent filings that claim all aspects of our
development candidates, including dose, method of administration
and manufacture.
Intellectual
Property Challenges
As the field of RNAi therapeutics is maturing, patent
applications are being fully processed by national patent
offices around the world. There is uncertainty about which
patents will issue, and, if they do, as to when, to whom, and
with what claims. It is likely that there will be significant
litigation and other proceedings, such as interference,
reexamination and opposition proceedings, in various patent
offices relating to patent rights in the RNAi field. For
example, as noted above, various third parties have initiated
oppositions to patents in our Kreutzer-Limmer and Tuschl II
series in the EPO, as well as in other jurisdictions. We expect
that additional oppositions will be filed in the EPO and
elsewhere, and other challenges will be raised relating to other
patents and patent applications in our portfolio. In many cases,
the possibility of appeal exists for either us or our opponents,
and it may be years before final, unappealable rulings are made
with respect to these patents in certain jurisdictions. Given
the importance of our intellectual property portfolio to our
business operations, we intend to vigorously enforce our rights
and defend against challenges that have arisen or may arise in
this area.
In June 2009, we joined with Max Planck Gesellschaft Zur
Forderung Der Wissenschaften E.V. and Max Planck Innovation,
collectively, Max Planck, in taking legal action against
Whitehead, MIT and UMass. The complaint, initially filed in the
Suffolk County Superior Court in Boston, Massachusetts and
subsequently removed to the U.S. District Court for the
District of Massachusetts, alleges, among other things, that the
defendants have improperly prosecuted the Tuschl I patent
applications and wrongfully incorporated inventions covered by
the Tuschl II patent applications into the Tuschl I patent
applications, thereby potentially damaging the value of
inventions reflected in the Tuschl I and Tuschl II patent
applications. In the field of RNAi therapeutics, we are the
30
exclusive licensee of the Tuschl I patent applications from Max
Planck, MIT and Whitehead, and of the Tuschl II patent
applications from Max Planck.
The complaint seeks, among other things, a declaratory judgment
regarding the prosecution of the Tuschl I patent family and
unspecified monetary damages. In August 2009, Whitehead and
UMass filed counterclaims against us and Max Planck, including
for breach of contract. In January 2010, we and Max Planck filed
an amended complaint expanding upon the allegations in the
original complaint. We currently expect a jury trial to start in
March 2011. In February 2010, we and Max Planck released MIT
from any claims seeking monetary damages, and MIT has stipulated
that it will be bound by any declaratory, injunctive, or
equitable relief granted by the court.
In addition, in September 2009, the USPTO granted Max
Plancks petition to revoke power of attorney in connection
with the prosecution of the Tuschl I patent application. This
action prevents the defendants from filing any papers with the
USPTO in connection with further prosecution of the Tuschl I
patent application without the agreement of Max Planck.
Whiteheads petition to overturn this ruling was denied.
Prosecution before the USPTO for both the Tuschl I and II
pending patent applications was suspended pursuant to a
standstill agreement. This agreement expired on
September 15, 2010, and Max Planck, MIT, Whitehead and
UMass filed several continuation applications in the Tuschl I
patent family to preserve their rights and maintain the status
quo for these applications pending the outcome of the
litigation. Max Planck also filed a continuation application in
the Tuschl II patent family.
Although we, along with Max Planck, are vigorously asserting our
rights in this case, litigation is subject to inherent
uncertainty and a court could ultimately rule against us and Max
Planck. In addition, litigation is costly and may divert the
attention of our management and other resources that would
otherwise be engaged in running our business.
Pool
for Open Innovation against Neglected Tropical
Diseases
In July 2009, we announced that we will make available more than
1,500 patents or pending patent applications in our RNAi
technology patent estate to the Pool for Open Innovation against
Neglected Tropical Diseases, a pool established by GSK in March
2009. We were the first company to add its patents to the
approximately 800 patent filings GSK provided to the pool. The
pool was formed to aid in the discovery and development of new
medicines for the treatment of 16 neglected tropical diseases,
or NTDs, as defined by the FDA, in the worlds least
developed countries. Through our contribution to the pool, we
are providing RNAi intellectual property, technology and
know-how on a royalty-free, non-profit basis worldwide to
research, develop and manufacture therapies for use in the least
developed countries through licensing agreements with qualified
third parties. Such organizations will be engaged in research
efforts focused on discovery of new medicines for NTDs. BIO
Ventures for Global Health, or BVGH, has been appointed to
administer the pool. In 2010, MIT became the first academic
institution to contribute intellectual property to the pool. In
addition, in 2010, South Africas Technology Innovation
Agency, or TIA, became the first government agency to join in
the pool. TIA intends to use intellectual property and know-how
from the pool to accelerate its efforts to grow the South
African biotechnology sector and enhance the quality of life of
those affected by NTDs. Emory Institute for Drug Development and
iThemba Pharmaceuticals also joined the pool in 2010 to access
its know-how, experience and intellectual property to accelerate
their drug discovery initiatives for NTDs, and the Medicines for
Malaria Venture joined as the first product development
partnership to contribute intellectual property to the pool.
Other academic institutions and product development partnerships
have also joined the pool.
Competition
The pharmaceutical marketplace is extremely competitive, with
hundreds of companies competing to discover, develop and market
new drugs. We face a broad spectrum of current and potential
competitors, ranging from very large, global pharmaceutical
companies with significant resources, to other biotechnology
companies with resources and expertise comparable to our own and
to smaller biotechnology companies with fewer resources and
expertise than we have. We believe that for most or all of our
drug development programs, there will be one or more competing
programs under development at other companies. In many cases,
the companies with competing programs will have access to
greater resources and expertise than we do and may be more
advanced in those programs.
31
The competition we face can be grouped into three broad
categories:
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other companies working to develop RNAi therapeutic products;
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companies developing technology known as antisense, which, like
RNAi, attempts to silence the activity of specific genes by
targeting the mRNAs copied from them; and
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marketed products and development programs for therapeutics that
treat the same diseases for which we may also be developing
treatments.
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We are aware of several other companies that are working to
develop RNAi therapeutic products. Some of these companies are
seeking, as we are, to develop chemically synthesized siRNAs as
drugs. Others are following a gene therapy approach, with the
goal of treating patients not with synthetic siRNAs but with
synthetic, exogenously-introduced genes designed to produce
siRNA-like molecules within cells.
Companies working on chemically synthesized siRNAs include
Merck & Co., Inc., or Merck, through its subsidiary
Sirna Therapeutics, Inc., or Sirna, Novartis, Takeda, Kyowa
Hakko Kirin, Marina Biotech, Inc., Calando, Quark, Silence
Therapeutics plc, RXi Pharmaceuticals Corporation, Tekmira,
Sylentis S.A., Dicerna Pharmaceuticals, Inc. and ZaBeCor
Pharmaceuticals. Many of these companies have licensed our
intellectual property. Benitec is working on gene therapy
approaches to RNAi therapeutics.
Companies working on microRNA therapeutics include Rosetta
Genomics, Santaris Pharma A/S, or Santaris, miRagen
Therapeutics, Inc., Mirna Therapeutics, Inc. and Asuragen, Inc.
Antisense technology uses short, single-stranded, DNA-like
molecules to block mRNAs encoding specific proteins. An
antisense oligonucleotide, or ASO, contains a sequence of bases
complementary to a sequence within its target mRNA, enabling it
to attach to the mRNA by base-pairing. The attachment of the ASO
may lead to breakdown of the mRNA, or may physically block the
mRNA from associating with the protein synthesis machinery of
the cell. In either case, production of the protein encoded by
the mRNA may be reduced. Typically, the backbone of an ASO, the
linkages that hold its constituent bases together, will carry a
number of chemical modifications that do not exist in naturally
occurring DNA. These modifications are intended to improve the
stability and pharmaceutical properties of the ASO.
While we believe that RNAi drugs may potentially have
significant advantages over ASOs, including greater potency and
specificity, others are developing ASO drugs that are currently
at a more advanced stage of development than RNAi drugs. For
example, Isis has developed an ASO drug,
Vitravene
®
,
which is currently on the market, and has several ASO product
candidates in clinical trials, including mipomersen, which is a
lipid-lowering drug being developed by Isis in collaboration
with Genzyme Corporation, or Genzyme. In addition, a number of
other companies have product candidates in various stages of
pre-clinical and clinical development. Included in these
companies are Santaris, Genta Incorporated and AVI BioPharma,
Inc. Because of their later stage of development, ASOs, rather
than siRNAs, may become the preferred technology for drugs that
target mRNAs in order to turn off the activity of specific genes.
The competitive landscape continues to expand and we expect that
additional companies will initiate programs focused on the
development of RNAi therapeutic products using the approaches
described above as well as potentially new approaches that may
result in the more rapid development of RNAi therapeutics or
more effective technologies for RNAi drug development or
delivery.
Competing
Drugs for TTR-Mediated Amyloidosis (ATTR)
Currently, liver transplantation is the only available treatment
option for FAP. However, only a subset of FAP patients qualify
for this costly and invasive procedure and, even following liver
transplantation, the disease continues to progress for many
patients, presumably due to normal TTR being deposited into
preexisting fibrils. Moreover, there is a shortage of donors to
provide healthy livers for transplantation. The only currently
available treatments for FAC are aimed at relief of symptoms,
such as diuretics, or water pills, to treat the swelling of the
ankles, one of the symptoms of FAC. There are no existing
disease-modifying treatments to address ATTR.
32
There are a few drugs in clinical development for the treatment
of ATTR. In 2010, FoldRx, a wholly owned subsidiary of Pfizer,
filed a MAA with the EMA for tafamidis, an oral small molecule
stabilizer of TTR. Tafamidis has orphan drug status in the EU
for the treatment of FAP associated with ATTR. Tafamidis is
intended to stabilize wild-type and variant TTR, prevent
misfolding and inhibit the formation of TTR amyloid fibrils. In
clinical trials in patients suffering from FAP, tafamidis was
found to delay disease progression, reduce the burden of disease
after 18 months compared to placebo, and appeared to be
safe and well tolerated. Researchers at Boston University, in
collaboration with the National Institute of Neurological
Disorders and Stroke, are currently conducting a Phase II/III
clinical trial of diflunisal for the treatment of FAP.
Diflunisal is a commercially available non-steroidal
anti-inflammatory agent that has been found to stabilize TTR
in vitro
.
Competing
Drugs for Severe Hypercholesterolemia
The current standard of care for patients with
hypercholesterolemia includes the use of several agents. Front
line therapy consists of HMG CoA reductase inhibitors, commonly
known as statins, which block production of cholesterol by the
liver and increase clearance of LDL-c from the bloodstream.
These include Lipitor, Zocor, Crestor and Pravachol. A different
class of compounds, which includes Zetia and Vytorin, function
by blocking cholesterol uptake from the diet and are utilized on
their own or in combination with statins.
With regard to future therapies in clinical development,
mipomersen, formerly ISIS 301012, is a lipid-lowering drug
targeting apolipoprotein B-100 being developed by Isis in
collaboration with Genzyme that is currently in Phase III
development. Isis and Genzyme have evaluated mipomersen in four
positive Phase III clinical trials in which its primary
endpoints were met. In all four Phase III clinical trials,
treatment with mipomersen lowered
LDL-c
and
had a beneficial impact on other atherogenic lipids. A weekly
injectable therapeutic, mipomersen is being developed primarily
for patients at significant cardiovascular risk who are unable
to achieve target cholesterol levels with statins alone or who
are intolerant of statins. In addition, a few anti-PCSK9
antibodies have advanced into clinical development, including
REGN727, which is being developed by Regeneron Pharmaceuticals,
Inc. in collaboration with sanofi-aventis, and which is
currently in a Phase I clinical trial. Interim data from the
REGN727 Phase I clinical trial have demonstrated a 60% reduction
in LDL-c in healthy volunteers and a 40% reduction in LDL-c in
hyperlipidemic patients. Amgen Inc. and Pfizer also have
anti-PCSK9 antibodies in Phase I development and we are aware of
several additional similar compounds in advanced pre-clinical
development.
Competing
Drugs for Refractory Anemia
There are a few therapies in development that have the potential
to treat refractory anemia. FibroGen, Inc., in collaboration
with Astellas Pharma US, Inc., is developing an oral
hypoxia-inducible factor, or HIF, prolyl hydroxylase inhibitor,
which is currently in a Phase II clinical trial. Akebia
Therapeutics, Inc. is also developing an oral HIF prolyl
hydroxylase inhibitor in a Phase II clinical trial. Amgen
has an anti-hepcidin antibody in pre-clinical research.
Competing
Drugs for RSV
The only product currently approved for the treatment of RSV
infection is Ribavirin, which is marketed as Virazole by
Valeant. This is approved only for treatment of hospitalized
infants and young children with severe lower respiratory tract
infections due to RSV. While it is also used to treat RSV
infection in lung transplant patients, no randomized controlled
trials of Ribavirin have been conducted in the lung transplant
patient population. Ribavirin has been reported to have limited
efficacy and limited anti-viral activity against RSV. Moreover,
administration of the drug is complicated and requires elaborate
environmental reclamation devices because of potential harmful
effects on health care personnel exposed to the drug.
Other current RSV therapies consist of primarily treating the
symptoms or preventing the viral infection by using the
prophylactic drug Synagis (palivizumab), which is marketed by
MedImmune, LLC, the worldwide biologics unit for AstraZeneca
PLC. Synagis is a neutralizing monoclonal antibody that prevents
the virus from infecting the cell by blocking the RSV F protein.
Synagis is injected intramuscularly once a month during the RSV
season to prevent infection. MedImmune has also initiated a
Phase I/IIa clinical trial of a live, attenuated intranasal
vaccine in development to help prevent severe RSV infections and
has several ongoing Phase I clinical trials to
33
evaluate a second live, attenuated intranasal vaccine in
development to help prevent severe lower respiratory tract
disease caused by RSV or parainfluenza virus 3.
Competing
Drugs for Liver Cancer
There are a variety of surgical procedures, chemotherapeutics,
radiation and other approaches that are used in the management
of both primary and secondary liver cancer. However, for the
majority of patients the prognosis remains poor with fatal
outcomes within several months of diagnosis. In November 2007,
the FDA approved Sorafenib, also called
Nexavar
®
,
for the treatment of un-resectable liver cancer. Nexavar is the
product of Onyx Pharmaceuticals, Inc., developed in
collaboration with Bayer Pharmaceuticals Corporation.
There are also a large number of drugs in various stages of
clinical development as cancer therapeutics, although the
efficacy and safety of these newer drugs are difficult to
ascertain at this point of development.
Competing
Drugs for Huntingtons Disease (HD)
While certain drugs are currently used to treat some of the
symptoms of HD, no drug has been approved in the United States
for the treatment of the underlying disease. Current
pharmacological therapy for HD is limited to the management or
alleviation of neurobehavioral or movement abnormalities
associated with the disease. No disease modifying, disease
slowing or neuroprotective agent is currently approved or used
to treat HD, although there are several drugs in development.
Avicena Group Inc.s HD-02, an ultra-pure creatine, is a
candidate for prophylactic use for HD which has shown potential
neuroprotective properties in HD patients in Phase II
clinical trials. HD-02 has been granted orphan drug designation
by the FDA. Medivation Inc.s
Dimebon
tm
is an orally- available small molecule that is believed to block
the mitochondrial permeability transition pore, or MPTP, the
glutamate N-methyl D-asparate, or NMDA, receptor and
cholinesterase activity. The safety and efficacy of Dimebon is
currently being investigated in an international Phase III
clinical trial, in collaboration with Pfizer. Results from a
Phase II clinical trial completed in early 2008 showed
significantly improved cognitive function in patients with
mild-to-moderate
HD over placebo.
Other
Competition
Finally, for many of the diseases that are the subject of our
RNAi therapeutics discovery programs, there are already drugs on
the market or in development. However, notwithstanding the
availability of these drugs or drug candidates, we believe there
currently exists sufficient unmet medical need to warrant the
advancement of RNAi therapeutic programs.
Regulatory
Matters
The research, testing, manufacture and marketing of drug
products and their delivery systems are extensively regulated in
the United States and the rest of the world. In the United
States, drugs are subject to rigorous regulation by the FDA. The
Federal Food, Drug, and Cosmetic Act and other federal and state
statutes and regulations govern, among other things, the
research, development, testing, approval, manufacture, storage,
record keeping, reporting, packaging, labeling, promotion and
advertising, marketing and distribution of pharmaceutical
products. Failure to comply with the applicable regulatory
requirements may subject a company to a variety of
administrative or judicially-imposed sanctions and the inability
to obtain or maintain required approvals to test or market drug
products. These sanctions could include, among other things,
warning letters, product recalls, product seizures, total or
partial suspension of production or distribution, clinical
holds, injunctions, fines, civil penalties or criminal
prosecution.
The steps ordinarily required before a new pharmaceutical
product may be marketed in the United States include
non-clinical laboratory tests, animal tests and formulation
studies, the submission to the FDA of an IND, which must become
effective prior to commencement of clinical testing, including
adequate and well-controlled clinical trials to establish that
the drug product is safe and effective for the indication for
which FDA approval is sought, submission to the FDA of an NDA,
review and recommendation by an advisory committee of
independent experts (particularly for new chemical entities),
satisfactory completion of an FDA inspection of the
manufacturing
34
facility or facilities at which the product is produced to
assess compliance with current good manufacturing practice, or
cGMP, requirements, satisfactory completion of an FDA inspection
of the major investigational sites to ensure data integrity and
assess compliance with good clinical practices, or GCP,
requirements, and FDA review and approval of the NDA.
Satisfaction of FDA pre-market approval requirements typically
takes several years, but may vary substantially depending upon
the complexity of the product and the nature of the disease.
Government regulation may delay or prevent marketing of
potential products for a considerable period of time and impose
costly procedures on a companys activities. Success in
early stage clinical trials does not necessarily assure success
in later stage clinical trials. Data obtained from clinical
activities, including the data derived from our clinical trials
for ALN-TTR01, ALN-RSV01 and ALN-VSP, is not always conclusive
and may be subject to alternative interpretations that could
delay, limit or even prevent regulatory approval. Even if a
product receives regulatory approval, later discovery of
previously unknown problems with a product, including new safety
risks, may result in restrictions on the product or even
complete withdrawal of the product from the market.
Non-clinical tests include laboratory evaluation of product
chemistry and formulation, as well as animal testing to assess
the potential safety and efficacy of the product. The conduct of
the non-clinical tests and formulation of compounds for testing
must comply with federal regulations and requirements. The
results of non-clinical testing are submitted to the FDA as part
of an IND, together with manufacturing information, analytical
and stability data, a proposed clinical trial protocol and other
information.
A
30-day
waiting period after the filing of an IND is required prior to
such application becoming effective and the commencement of
clinical testing in humans. If the FDA has not commented on, or
questioned, the application during this
30-day
waiting period, clinical trials may begin. If the FDA has
comments or questions, these must be resolved to the
satisfaction of the FDA prior to commencement of clinical
trials. The IND approval process can result in substantial delay
and expense. We, an institutional review board, or IRB, or the
FDA may, at any time, suspend, terminate or impose a clinical
hold on ongoing clinical trials. If the FDA imposes a clinical
hold, clinical trials cannot commence or recommence without FDA
authorization and then only under terms authorized by the FDA.
Clinical trials involve the administration of an investigational
new drug to healthy volunteers or patients under the supervision
of a qualified investigator. Clinical trials must be conducted
in compliance with federal regulations and requirements,
including GCPs, under protocols detailing, among other things,
the objectives of the trial and the safety and effectiveness
criteria to be evaluated. Each protocol involving testing on
human subjects in the United States must be submitted to the FDA
as part of the IND. The study protocol and informed consent
information for patients in clinical trials must be submitted to
IRBs for approval prior to initiation of the trial.
Clinical trials to support NDAs for marketing approval are
typically conducted in three sequential phases, which may
overlap or be combined. In Phase I, the initial
introduction of the drug into healthy human subjects or
patients, the drug is tested to primarily assess safety,
tolerability, pharmacokinetics, pharmacological actions and
metabolism associated with increasing doses. Phase II
usually involves trials in a limited patient population, to
assess the optimum dosage, identify possible adverse effects and
safety risks, and provide preliminary support for the efficacy
of the drug in the indication being studied.
If a compound demonstrates evidence of effectiveness and an
acceptable safety profile in Phase II clinical trials,
Phase III clinical trials typically are undertaken to
further evaluate clinical efficacy and to further test for
safety in an expanded patient population, typically at
geographically dispersed clinical trial sites. Phase I,
Phase II or Phase III testing of any product
candidates may not be completed successfully within any
specified time period, if at all. After successful completion of
the required clinical testing, generally an NDA is prepared and
submitted to the FDA.
We believe that any RNAi product candidate we develop, whether
for the treatment of ATTR, severe hypercholesterolemia,
refractory anemia, RSV, liver cancers, HD or the various
indications targeted in our pre-clinical discovery programs,
will be regulated as a new drug by the FDA. FDA approval of an
NDA is required before marketing of the product may begin in the
United States. The NDA must include the results of extensive
clinical and other testing, as described above, and a
compilation of data relating to the products pharmacology,
chemistry, manufacture and controls. In addition, an NDA for a
new active ingredient, new indication, new dosage form, new
dosing regimen, or new route of administration must contain data
assessing the safety and efficacy for the
35
claimed indication in all relevant pediatric subpopulations, and
support dosing and administration for each pediatric
subpopulation for which the drug is shown to be safe and
effective. In some circumstances, the FDA may grant deferrals
for the submission of some or all pediatric data, or full or
partial waivers. The cost of preparing and submitting an NDA is
substantial. Under federal law, NDAs are subject to substantial
application user fees and the sponsor of an approved NDA is also
subject to annual product and establishment user fees.
The FDA has 60 days from its receipt of an NDA to determine
whether the application will be accepted for filing based on the
agencys threshold determination that the NDA is
sufficiently complete to permit substantive review. Once the
submission is accepted for filing, the FDA begins an in-depth
review of the NDA. The review process is often significantly
extended by FDA requests for additional information or
clarification regarding information already provided in the
submission. The FDA may also refer applications for novel drug
products or drug products that present difficult questions of
safety or efficacy to an advisory committee, typically a panel
that includes clinicians and other experts, for review,
evaluation and a recommendation as to whether the application
should be approved. The FDA is not bound by the recommendation
of an advisory committee, but it generally follows such
recommendations. The FDA normally also will conduct a
pre-approval inspection to ensure the manufacturing facility,
methods and controls are adequate to preserve the drugs
identity, strength, quality, purity and stability, and are in
compliance with regulations governing cGMPs. In addition, the
FDA often will conduct a bioresearch monitoring inspection of
the clinical trial sites involved in conducting pivotal studies
to ensure data integrity and compliance with applicable GCP
requirements.
If the FDA evaluation of the NDA and the inspection of
manufacturing facilities are favorable, the FDA may issue an
approval letter, which authorizes commercial marketing of the
drug with specific prescribing information for a specific
indication. As a condition of NDA approval, the FDA may require
post-approval testing, including Phase IV trials, and
surveillance to monitor the drugs safety or efficacy and
may impose other conditions, including labeling restrictions,
which can materially impact the potential market and
profitability of the drug. In addition, the FDA may impose
distribution and use restrictions and other limitations on
labeling and communication activities with respect to an
approved drug product through a Risk Evaluation and Mitigation
Strategies, or REMS, plan. Once granted, product approvals may
be further limited or withdrawn if compliance with regulatory
standards is not maintained or problems are identified following
initial marketing.
While we believe that any RNAi therapeutic we develop will be
regulated as a new drug under the Federal Food, Drug, and
Cosmetic Act, the FDA could decide to regulate certain RNAi
therapeutic products as biologics under the Public Health
Service Act. Biologics must have a biologics license
application, or BLA, approved prior to commercialization. Like
NDAs, BLAs are subject to user fees. To obtain BLA approval, an
applicant must provide non-clinical and clinical evidence and
other information to demonstrate that the biologic product is
safe, pure and potent, and like NDAs, must complete clinical
trials that are typically conducted in three sequential phases
(Phase I, II and III). Additionally, the applicant
must demonstrate that the facilities in which the product is
manufactured, processed, packaged or held meet standards,
including cGMPs and any additional standards in the license
designed to ensure its continued safety, purity and potency.
Biologics establishments are subject to pre-approval
inspections. The review process for BLAs is also time consuming
and uncertain, and BLA approval may be conditioned on
post-approval testing and surveillance and subject to
distribution and use restrictions, or other limitations, through
a REMS plan. Once granted, BLA approvals may be suspended or
revoked under certain circumstances, such as if the product
fails to conform to the standards established in the license.
Once an NDA or BLA is approved, a product will be subject to
certain post-approval requirements, including requirements for
adverse event reporting, submission of periodic reports,
recordkeeping, product sampling and distribution. Additionally,
the FDA also strictly regulates the promotional claims that may
be made about prescription drug products and biologics. In
particular, a drug or biologic may not be promoted for uses that
are not approved by the FDA as reflected in the products
approved labeling. In addition, the FDA requires substantiation
of any safety or effectiveness claims, including claims that one
product is superior in terms of safety or effectiveness to
another. Superiority claims generally must be supported by two
adequate and well-controlled
head-to-head
clinical trials. To the extent that market acceptance of our
products may depend on their superiority over existing
therapies, any restriction on our ability to advertise or
otherwise promote claims of superiority, or requirements to
conduct additional expensive clinical trials to provide proof of
such claims, could negatively affect the sales of our products
or our costs. We must also notify the FDA of any change in an
approved product beyond
36
variations already allowed in the approval. Certain changes to
the product, its labeling or its manufacturing require prior FDA
approval and may require the conduct of further clinical
investigations to support the change, which may require the
payment of additional, substantial user fees. Such approvals may
be expensive and time-consuming and, if not approved, the FDA
will not allow the product to be marketed as modified.
If the FDAs evaluation of the NDA or BLA submission or
manufacturing facilities is not favorable, the FDA may refuse to
approve the NDA or BLA or issue a complete response letter. The
complete response letter describes the deficiencies that the FDA
has identified in an application and, when possible, recommends
actions that the applicant might take to place the application
in condition for approval. Such actions may include, among other
things, conducting additional safety or efficacy studies after
which the sponsor may resubmit the application for further
review. Even with the completion of this additional testing or
the submission of additional requested information, the FDA
ultimately may decide that the application does not satisfy the
regulatory criteria for approval. With limited exceptions, the
FDA may withhold approval of an NDA or BLA regardless of prior
advice it may have provided or commitments it may have made to
the sponsor.
Some of our product candidates may need to be administered using
specialized drug delivery systems. We may rely on drug delivery
systems that are already approved to deliver drugs like ours to
similar physiological sites or, in some instances, we may need
to modify the design or labeling of the legally available device
for delivery of our product candidate. In such an event, the FDA
may regulate the product as a combination product or require
additional approvals or clearances for the modified device. In
addition, to the extent the delivery device is owned by another
company, we would need that companys cooperation to
implement the necessary changes to the device and to obtain any
additional approvals or clearances. Obtaining such additional
approvals or clearances, and cooperation of other companies,
when necessary, could significantly delay, and increase the cost
of obtaining marketing approval, which could reduce the
commercial viability of a product candidate. To the extent that
we rely on previously unapproved drug delivery systems, we may
be subject to additional testing and approval requirements from
the FDA above and beyond those described above.
Once an NDA is approved, the product covered thereby becomes a
listed drug that can, in turn, be relied upon by potential
competitors in support of approval of an abbreviated new drug
application, or ANDA, or 505(b)(2) application upon expiration
of relevant patents and non-patent exclusivity periods, if any.
An approved ANDA generally provides for marketing of a drug
product that has the same active ingredients in the same
strength, dosage form and route of administration as the listed
drug and has been shown through appropriate testing (unless
waived) to be bioequivalent to the listed drug. There is no
requirement, other than the requirement for bioequivalence
testing (which may be waived by the FDA), for an ANDA applicant
to conduct or submit results of non-clinical or clinical tests
to prove the safety or effectiveness of its drug product. Drugs
approved in this way are commonly referred to as generic
equivalents to the listed drug, are listed as such by the FDA
and can often be substituted by pharmacists under prescriptions
written for the original listed drug. A 505(b)(2) application is
a type of NDA that relies, in part, upon data the applicant does
not own and to which it does not have a right of reference. Such
applications typically are submitted for changes to previously
approved drug products.
Federal law provides for a period of three years of exclusivity
following approval of a listed drug that contains previously
approved active ingredients but is approved in, among other
things, a new dosage, dosage form, route of administration or
combination, or for a new use, if the FDA determines that new
clinical investigations, other than bioavailability studies,
that were conducted or sponsored by the applicant are essential
to the approval of the application. This three-year exclusivity
covers only the conditions of use associated with the new
clinical investigations and, as a general matter, does not
prohibit the FDA from approving ANDAs or 505(b)(2) applications
for generic versions of the original, unmodified drug product.
Federal law also provides a period of up to five years
exclusivity following approval of a drug containing no
previously approved active moiety, which is the molecule or ion
responsible for the action of the drug substance, during which
ANDAs and 505(b)(2) applications referencing the protected
listed drug cannot be submitted unless the submission
accompanies a challenge to a listed patent, in which case the
submission may be made four years following the original product
approval. Five-year and three-year exclusivity will not delay
the submission or approval of a full NDA; however, an applicant
submitting a full NDA would be required to conduct or obtain a
right of reference to all of the pre-clinical studies and
adequate and well-controlled clinical trials necessary to
demonstrate safety and effectiveness.
37
Additionally, in the event that the sponsor of the listed drug
has properly informed the FDA of patents covering its listed
drug, applicants submitting an ANDA or 505(b)(2) application
referencing the listed drug are required to make one of four
patent certifications, including certifying the applicants
belief that one or more listed patents are invalid,
unenforceable, or not infringed. If an applicant certifies
invalidity, unenforceability, or non-infringement, it is
required to provide notice of its filing to the NDA sponsor and
the patent holder within certain time limits. If the patent
holder then initiates a suit for patent infringement against the
ANDA or 505(b)(2) applicant within 45 days of receipt of
the notice, the FDA cannot grant effective approval of the ANDA
or 505(b)(2) application until either 30 months have passed
or there has been a court decision or settlement order holding
or stating that the patents in question are invalid,
unenforceable or not infringed. If the patent holder does not
initiate a suit for patent infringement within the 45 days,
the ANDA or 505(b)(2) application may be approved immediately
upon successful completion of FDA review, unless blocked by a
regulatory exclusivity period. If the ANDA or 505(b)(2)
applicant certifies that it does not intend to market its
generic product before some or all listed patents on the listed
drug expire, then the FDA cannot grant effective approval of the
ANDA or 505(b)(2) application until those patents expire. The
first of the ANDA applicants submitting substantially complete
applications certifying that one or more listed patents for a
particular product are invalid, unenforceable, or not infringed
may qualify for an exclusivity period of 180 days running
from when the generic product is first marketed, during which
subsequently submitted ANDAs containing similar certifications
cannot be granted effective approval. The
180-day
generic exclusivity can be forfeited in various ways, including
if the first applicant does not market its product within
specified statutory timelines. If more than one applicant files
a substantially complete ANDA on the same day, each such first
applicant will be entitled to share the
180-day
exclusivity period, but there will only be one such period,
beginning on the date of first marketing by any of the first
applicants.
Under the Orphan Drug Act, the FDA may grant orphan drug
designation to a drug 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 the cost of developing
and making available in the United States a drug for this type
of disease or condition will be recovered from sales in the
United States for that drug. Orphan drug designation must be
requested before submitting an NDA. After the FDA grants orphan
drug designation, the identity of the therapeutic agent and its
potential orphan use are disclosed publicly by the FDA.
If a product 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 product
exclusivity, which means that the FDA may not approve any other
applications, including a full BLA, to market the same drug for
the same indication, except in very limited circumstances, for
seven years. For purposes of small molecule drugs, the FDA
defines same drug as a drug that contains the same
active moiety and is intended for the same use as the previously
approved orphan drug. For purposes of large molecule drugs, the
FDA defines same drug as a drug that contains the
same principal molecular structural features, but not
necessarily all of the same structural features, and is intended
for the same use as the drug in question. Notwithstanding the
above definitions, a drug that is clinically superior to an
orphan drug will not be considered the same drug and
thus will not be blocked by orphan drug exclusivity.
A designated orphan drug may not receive orphan drug exclusivity
if it is approved for a use that is broader than the indication
for which it received orphan designation. In addition, orphan
drug exclusive marketing rights in the United States may be lost
if the FDA later determines that the request for designation was
materially defective or if the manufacturer is unable to assure
sufficient quantity of the drug to meet the needs of patients
with the rare disease or condition.
The FDA also administers a clinical research grants program,
whereby researchers may compete for funding to conduct clinical
trials to support the approval of drugs, biologics, medical
devices and medical foods for rare diseases and conditions. An
application for an orphan grant should propose one discrete
clinical study to facilitate FDA approval of the product for a
rare disease or condition. The study may address an unapproved
new product or an unapproved new use for a product already on
the market.
From time to time, legislation is drafted and introduced in
Congress that could significantly change the statutory
provisions governing the approval, manufacturing and marketing
of drug products. In addition, FDA regulations and guidance are
often revised or reinterpreted by the agency or reviewing courts
in ways that may
38
significantly affect our business and development of our product
candidates and any products that we may commercialize. It is
impossible to predict whether additional legislative changes
will be enacted, or FDA regulations, guidance or interpretations
changed, or what the impact of any such changes may be.
Foreign
Regulation of New Drug Compounds
In addition to regulations in the United States, we are subject
to a variety of regulations in other jurisdictions governing,
among other things, clinical trials and any commercial sales and
distribution of our products.
Whether or not we obtain FDA approval for a product, we must
obtain the requisite approvals from regulatory authorities in
all or most foreign countries prior to the commencement of
clinical trials or marketing of the product in those countries.
Certain countries outside of the United States have a similar
process that requires the submission of a clinical trial
application much like the IND prior to the commencement of human
clinical trials. In Europe, for example, a clinical trial
application, or CTA, must be submitted to each countrys
national health authority and an independent ethics committee,
much like the FDA and IRB, respectively. Once the CTA is
approved in accordance with a countrys requirements,
clinical trial development may proceed. Similarly, all clinical
trials in Australia require review and approval of clinical
trial proposals by an ethics committee, which provides a
combined ethical and scientific review process.
The requirements and process governing the conduct of clinical
trials, product licensing, pricing and reimbursement vary from
country to country. In all cases, the clinical trials must be
conducted in accordance with GCP, which have their origin in the
World Medical Associations Declaration of Helsinki, the
applicable regulatory requirements, and guidelines developed by
the International Conference on Harmonization, or ICH, for GCP
practices in clinical trials.
The approval procedure also varies among countries and can
involve requirements for additional testing. The time required
may differ from that required for FDA approval and may be longer
than that required to obtain FDA approval. Although there are
some procedures for unified filings in the EU, in general, each
country has its own procedures and requirements, many of which
are time consuming and expensive. Thus, there can be substantial
delays in obtaining required approvals from foreign regulatory
authorities after the relevant applications are filed.
In Europe, marketing authorizations may be submitted under a
centralized or decentralized procedure. The centralized
procedure is mandatory for the approval of biotechnology and
many pharmaceutical products and provides for the grant of a
single marketing authorization that is valid in all EU member
states. The decentralized procedure is a mutual recognition
procedure that is available at the request of the applicant for
medicinal products that are not subject to the centralized
procedure. We strive to choose the appropriate route of European
regulatory filing to accomplish the most rapid regulatory
approvals. However, our chosen regulatory strategy may not
secure regulatory approvals on a timely basis or at all.
If we fail to comply with applicable foreign regulatory
requirements, we may be subject to, among other things, fines,
suspension or withdrawal of regulatory approvals, product
recalls, seizure of products, operating restrictions and
criminal prosecution.
Pharmaceutical
Coverage, Pricing and Reimbursement
Significant uncertainty exists as to the coverage and
reimbursement status of any drug products for which we obtain
regulatory approval. In the United States and markets in other
countries, sales of any products for which we may receive
regulatory approval for commercial sale will depend in part on
the availability of reimbursement from third-party payors.
Third-party payors include government health administrative
authorities, managed care providers, private health insurers and
other organizations. The process for determining whether a payor
will provide coverage for a drug product may be separate from
the process for setting the price or reimbursement rate that the
payor will pay for the drug product. Third-party payors may
limit coverage to specific drug products on an approved list, or
formulary, which might not include all of the FDA-approved drugs
for a particular indication. These third-party payors are
increasingly challenging the price and examining the medical
necessity and cost-effectiveness of medical products and
services, in addition to their safety and efficacy. In addition,
significant uncertainty exists as to the reimbursement status of
newly approved healthcare product candidates. We may need to
conduct expensive pharmacoeconomic
39
studies in order to demonstrate the medical necessity and
cost-effectiveness of our products, in addition to the costs
required to obtain FDA approvals. Our product candidates may not
be considered medically necessary or cost-effective. A
payors decision to provide coverage for a drug product
does not imply that an adequate reimbursement rate will be
approved. Adequate third-party reimbursement may not be
available to enable us to maintain price levels sufficient to
realize an appropriate return on our investment in product
development.
Federal, state and local governments in the United States
continue to consider legislation to limit the growth of
healthcare costs, including the cost of prescription drugs.
Future legislation could limit payments for pharmaceuticals such
as the drug candidates that we are developing.
Different pricing and reimbursement schemes exist in other
countries. In the EU, governments influence the price of
pharmaceutical products through their pricing and reimbursement
rules and control of national health care systems that fund a
large part of the cost of those products to consumers. Some
jurisdictions operate systems under which products may be
marketed only after a reimbursement price has been agreed. To
obtain reimbursement or pricing approval, some of these
countries may require the completion of clinical trials that
compare the cost-effectiveness of a particular product candidate
to currently available therapies. Other member states allow
companies to fix their own prices for medicines, but monitor and
control company profits. The downward pressure on health care
costs in general, particularly prescription drugs, has become
very intense. As a result, increasingly high barriers are being
erected to the entry of new products. In addition, in some
countries, cross-border imports from low-priced markets exert
competitive pressure that may reduce pricing within a country.
The marketability of any products for which we receive
regulatory approval for commercial sale may suffer if the
government and third-party payors fail to provide adequate
coverage and reimbursement. In addition, an increasing emphasis
on managed care in the United States has increased and we expect
will continue to increase the pressure on pharmaceutical
pricing. Coverage policies, third-party reimbursement rates and
pharmaceutical pricing regulations may change at any time. In
particular, the Patient Protection and Affordable Care Act, or
PPACA, and a related reconciliation bill were enacted in the
United States in March 2010, and contain provisions that may
reduce the profitability of pharmaceutical products, including,
for example, increased rebates for drugs sold to Medicaid
programs, extension of Medicaid rebates to Medicaid managed care
plans, mandatory discounts for certain Medicare Part D
beneficiaries, and annual fees based on pharmaceutical
companies share of sales to federal health care programs.
Even if favorable coverage and reimbursement status is attained
for one or more products for which we receive regulatory
approval, less favorable coverage policies and reimbursement
rates may be implemented in the future.
Hazardous
Materials
Our research and development processes involve the controlled
use of hazardous materials, chemicals and radioactive materials
and produce waste products. We are subject to federal, state and
local laws and regulations governing the use, manufacture,
storage, handling and disposal of hazardous materials and waste
products. We do not expect the cost of complying with these laws
and regulations to be material.
Manufacturing
We have no commercial manufacturing capabilities. We have
manufactured only limited supplies of drug substance for use in
IND-enabling toxicology studies in animals at our own facility,
and we do not anticipate manufacturing the substantial portion
of such material or any drug substance or finished product for
human clinical use ourselves. We have contracted with several
third-party contract manufacturing organizations for the supply
of drug substance and finished product to meet our testing needs
for pre-clinical toxicology and clinical testing. Commercial
quantities of any drugs that we may seek to develop will have to
be manufactured in facilities, and by processes, that comply
with FDA regulations and other federal, state and local
regulations, as well as comparable foreign regulations. We plan
to rely on third parties to manufacture commercial quantities of
drug substance and finished product for any product candidate
that we successfully develop.
Under our agreements with Tekmira, we are obligated to utilize
Tekmira for the manufacture of all LNP-formulated product
candidates covered by Tekmiras intellectual property
beginning during pre-clinical development and continuing through
Phase II clinical trials. During 2009, we and Tekmira
entered into a manufacturing and supply agreement under which we
are committed to pay Tekmira a minimum of
40
CAD$11.2 million (representing U.S.$9.2 million at the
time of execution) through December 2011 for manufacturing
services. Tekmira is currently manufacturing the clinical drug
supply for our Phase I clinical trials of ALN-VSP and ALN-TTR01.
Both we and Tekmira have the right to terminate the
manufacturing and supply agreement for a material breach by the
other party of its obligations under this agreement. We also
have the right to terminate our obligation to use Tekmira for
manufacturing on a
product-by-product
basis for a failure by Tekmira to meet certain specific
requirements with respect to a product.
We believe we have sufficient manufacturing capacity through our
third-party contract manufacturers to meet our current research
and clinical needs. We believe that we have established, or will
be able to develop or acquire, sufficient supply capacity to
meet our anticipated needs. We also believe that with reasonably
anticipated benefits from increases in scale and improvements in
chemistry, we will be able to manufacture our product candidates
at commercially competitive prices.
Scientific
Advisors
We seek advice from our scientific advisory board, which
consists of a number of leading scientists and physicians, on
scientific and medical matters. Our scientific advisory board
meets regularly to assess:
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our research and development programs;
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the design and implementation of our clinical programs;
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our patent and publication strategies;
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new technologies relevant to our research and development
programs; and
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specific scientific and technical issues relevant to our
business.
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The current members of our scientific advisory board are:
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Name
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Position/Institutional Affiliation
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David P. Bartel, Ph.D.
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Member/Whitehead Institute for Biomedical Research;
Professor/Massachusetts Institute of Technology;
Investigator/Howard Hughes Medical Institute
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Fritz Eckstein, Ph.D.
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Professor/Max Planck Institute for Experimental Medicine
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Victor E. Kotelianski, Ph.D.
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Senior Vice President, Distinguished Alnylam Fellow/Alnylam
Pharmaceuticals, Inc.
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Robert S. Langer, Ph.D.
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Institute Professor/Massachusetts Institute of Technology
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Judy Lieberman, M.D., Ph.D.
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Senior Investigator/Immune Disease Institute Harvard
Medical School;
Professor/Harvard Medical School
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Stephen N. Oesterle, M.D.*
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Senior Vice President for Medicine and
Technology/Medtronic, Inc.
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Paul R. Schimmel, Ph.D.
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Ernest and Jean Hahn Professor/Skaggs Institute for Chemical
Biology, The Scripps Research Institute
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Phillip A. Sharp, Ph.D.
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Institute Professor/The Koch Institute for Integrative Cancer
Research, Massachusetts Institute of Technology
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Markus Stoffel, M.D., Ph.D.
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Professor/Institute of Molecular Systems Biology, Swiss Federal
Institute of Technology (ETH) Zurich
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Thomas H. Tuschl, Ph.D.
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Professor/Rockefeller University;
Investigator/Howard Hughes Medical Institute
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Phillip D. Zamore, Ph.D.
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Gretchen Stone Cook Professor/University of Massachusetts
Medical School;
Co-Director/RNAi Therapeutics Institute, University of
Massachusetts Medical School;
Investigator/Howard Hughes Medical Institute
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*
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Dr. Oesterle participates as an observer on our scientific
advisory board.
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41
Employees
At January 31, 2011, we had 172 employees, 142 of whom
were engaged in research and development. None of our employees
are represented by a labor union or covered by a collective
bargaining agreement, nor have we experienced work stoppages. We
believe that relations with our employees are good.
Financial
Information About Geographic Areas
See the section entitled Segment Information
appearing in Note 2 to our consolidated financial
statements for financial information about geographic areas. The
Notes to our consolidated financial statements are contained in
Part II, Item 8 of this annual report on
Form 10-K.
Corporate
Information
The company comprises four entities, Alnylam Pharmaceuticals,
Inc. and three wholly owned subsidiaries (Alnylam U.S., Inc.,
Alnylam Europe AG and Alnylam Securities Corporation). Alnylam
Pharmaceuticals, Inc. is a Delaware corporation that was formed
in May 2003. Alnylam U.S., Inc. is also a Delaware corporation
that was formed in June 2002. Alnylam Securities Corporation is
a Massachusetts corporation that was formed in December 2006.
Alnylam Europe AG, which was incorporated in Germany in June
2000 under the name Ribopharma AG, was acquired by Alnylam
Pharmaceuticals, Inc. in July 2003. Our principal executive
office is located at 300 Third Street, Cambridge, Massachusetts
02142, and our telephone number is
(617) 551-8200.
Investor
Information
We maintain an internet website at
http://www.alnylam.com.
The information on our website is not incorporated by reference
into this annual report on
Form 10-K
and should not be considered to be a part of this annual report
on
Form 10-K.
Our website address is included in this annual report on
Form 10-K
as an inactive technical reference only. Our reports filed or
furnished pursuant to Section 13(a) or 15(d) of the
Securities Exchange Act of 1934, including our annual reports on
Form 10-K,
our quarterly reports on
Form 10-Q
and our current reports on
Form 8-K,
and amendments to those reports, are accessible through our
website, free of charge, as soon as reasonably practicable after
these reports are filed electronically with, or otherwise
furnished to, the Securities and Exchange Commission, or SEC. We
also make available on our website the charters of our audit
committee, compensation committee and nominating and corporate
governance committee, our corporate governance guidelines and
our code of business conduct and ethics. In addition, we intend
to disclose on our web site any amendments to, or waivers from,
our code of business conduct and ethics that are required to be
disclosed pursuant to the SEC rules.
You may read and copy any materials we file with the SEC at the
SECs Public Reference Room at 100 F Street, NE,
Washington, DC 20549. You may obtain information on the
operation of the Public Reference Room by calling the SEC at
1-800-SEC-0330.
The SEC also maintains an Internet website that contains
reports, proxy and information statements, and other information
regarding Alnylam and other issuers that file electronically
with the SEC. The SECs Internet website address is
http://www.sec.gov.
Executive
Officers of the Registrant
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Name
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Age
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Position
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John M. Maraganore, Ph.D.
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Chief Executive Officer and Director
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Barry E. Greene
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President and Chief Operating Officer
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Kenneth S. Koblan, Ph.D.
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Chief Scientific Officer
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Laurence E. Reid, Ph.D.
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Senior Vice President and Chief Business Officer
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Akshay K. Vaishnaw, M.D., Ph.D.
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Senior Vice President, Clinical Research
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Patricia L. Allen
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Vice President of Finance and Treasurer
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John M. Maraganore, Ph.D.
has served as our Chief
Executive Officer and as a member of our board of directors
since December 2002. Dr. Maraganore also served as our
President from December 2002 to December 2007. From April 2000
to December 2002, Dr. Maraganore served as Senior Vice
President, Strategic Product Development at Millennium
Pharmaceuticals, Inc., a biopharmaceutical company.
Dr. Maraganore serves as a member of the board of directors
of the Biotechnology Industry Organization.
Barry E. Greene
has served as our President and Chief
Operating Officer since December 2007, as our Chief Operating
Officer since he joined us in October 2003, and from February
2004 through December 2005, as our Treasurer. From February 2001
to September 2003, Mr. Greene served as General Manager of
Oncology at Millennium Pharmaceuticals, Inc., a
biopharmaceutical company. Mr. Greene serves as a member of
the board of directors of Acorda Therapeutics, Inc., a
biotechnology company.
Kenneth S. Koblan, Ph.D.
has served as our Chief
Scientific Officer since September 2010, and served as our Vice
President, Distinguished Alnylam Fellow from April 2010 through
August 2010. From December 1991 through November 2009,
Dr. Koblan held various positions of increasing
responsibility at Merck Research Laboratories, the research
center of Merck & Co., Inc., a global pharmaceutical
company, including Vice President and site head of West Point
Human Health from March 2004 through February 2007, and
culminating in his role as Vice President and site head of
Rahway Basic Research from February 2007 through November 2009.
Laurence E. Reid, Ph.D.
has served as our Senior
Vice President and Chief Business Officer since he joined us in
June 2010. From January 2006 through May 2010, Dr. Reid
served as the Chief Business Officer at Ensemble Therapeutics, a
biotechnology company. Prior to joining Ensemble Therapeutics,
Dr. Reid worked as a founder of two
start-up
companies in the fields of stem cell therapeutics and
inflammation. Dr. Reid previously spent ten years at
Millennium Pharmaceuticals, Inc., a biopharmaceutical company,
from 1993 through 2003, where he served in a range of general
management and business development positions, including General
Manager of Millennium UK with responsibility for
Millenniums European operations, Vice President of
Business Development and Strategic Planning for the
companys predictive medicine efforts, as well as in
pharmaceutical business development and technology acquisition.
Akshay K. Vaishnaw, M.D., Ph.D.
has served as
our Senior Vice President, Clinical Research since December
2008, and prior to that served as our Vice President, Clinical
Research from the time he joined us in January 2006. From
December 1998 through December 2005, Dr. Vaishnaw held
various positions at Biogen Idec Inc. (formerly Biogen, Inc.), a
biopharmaceutical company, most recently as Senior Director,
Translational Medicine. Dr. Vaishnaw is a Member of the
Royal College of Physicians, United Kingdom.
Patricia L. Allen
has served as our Vice President of
Finance since she joined us in May 2004, and as our Treasurer
since January 2006. From March 1992 to May 2004, Ms. Allen
held various positions at Alkermes, Inc., a biopharmaceutical
company, most recently as Director of Finance. Ms. Allen is
a certified public accountant.
43
Our business is subject to numerous risks. We caution you
that the following important factors, among others, could cause
our actual results to differ materially from those expressed in
forward-looking statements made by us or on our behalf in
filings with the SEC, press releases, communications with
investors and oral statements. All statements other than
statements relating to historical matters should be considered
forward-looking statements. When used in this report, the words
believe, expect, anticipate,
may could
intend, will, plan,
target, goal and similar expressions are
intended to identify forward-looking statements, although not
all forward-looking statements contain these words. Any or all
of our forward-looking statements in this annual report on
Form 10-K
and in any other public statements we make may turn out to be
wrong. They can be affected by inaccurate assumptions we might
make or by known or unknown risks and uncertainties. Many
factors mentioned in the discussion below will be important in
determining future results. Consequently, no forward-looking
statement can be guaranteed. Actual future results may vary
materially from those anticipated in forward-looking statements.
We explicitly disclaim any obligation to update any
forward-looking statements to reflect events or circumstances
that arise after the date hereof. You are advised, however, to
consult any further disclosure we make in our reports filed with
the SEC.
Risks
Related to Our Business
Risks
Related to Being an Early Stage Company
Because
we have a short operating history, there is a limited amount of
information about us upon which you can evaluate our business
and prospects.
Our operations began in 2002 and we have only a limited
operating history upon which you can evaluate our business and
prospects. In addition, as an early-stage company, we have
limited experience and have not yet demonstrated an ability to
successfully overcome many of the risks and uncertainties
frequently encountered by companies in new and rapidly evolving
fields, particularly in the biopharmaceutical area. For example,
to execute our business plan, we will need to successfully:
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execute product development activities using unproven
technologies related to both RNAi and to the delivery of siRNAs
to the relevant tissues and cells;
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build and maintain a strong intellectual property portfolio;
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gain regulatory acceptance for the development of our product
candidates and market success for any products we commercialize;
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develop and maintain successful strategic alliances; and
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manage our spending as costs and expenses increase due to
clinical trials, regulatory approvals and commercialization.
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If we are unsuccessful in accomplishing these objectives, we may
not be able to develop product candidates, commercialize
products, raise capital, expand our business or continue our
operations.
The
approach we are taking to discover and develop novel RNAi
therapeutics is unproven and may never lead to marketable
products.
We have concentrated our efforts and therapeutic product
research on RNAi technology, and our future success depends on
the successful development of this technology and products based
on it. Neither we nor any other company has received regulatory
approval to market therapeutics utilizing siRNAs, the class of
molecule we are trying to develop into drugs. The scientific
discoveries that form the basis for our efforts to discover and
develop new drugs are relatively new. The scientific evidence to
support the feasibility of developing drugs based on these
discoveries is both preliminary and limited. Skepticism as to
the feasibility of developing RNAi therapeutics has been
expressed in scientific literature. For example, there are
potential challenges to achieving safe RNAi therapeutics based
on the so-called off-target effects and activation of the
interferon response. In addition,
44
decisions by other companies with respect to their RNAi
development efforts may increase skepticism in the marketplace
regarding the potential for RNAi therapeutics.
Relatively few product candidates based on these discoveries
have ever been tested in animals or humans. siRNAs may not
naturally possess the inherent properties typically required of
drugs, such as the ability to be stable in the body long enough
to reach the tissues in which their effects are required, nor
the ability to enter cells within these tissues in order to
exert their effects. We currently have only limited data, and no
conclusive evidence, to suggest that we can introduce these
drug-like properties into siRNAs. We may spend large amounts of
money trying to introduce these properties, and may never
succeed in doing so. In addition, these compounds may not
demonstrate in patients the chemical and pharmacological
properties ascribed to them in laboratory studies, and they may
interact with human biological systems in unforeseen,
ineffective or harmful ways. As a result, we may never succeed
in developing a marketable product, we may not become profitable
and the value of our common stock will decline.
Further, our focus solely on RNAi technology for developing
drugs, as opposed to multiple, more proven technologies for drug
development, increases the risks associated with the ownership
of our common stock. If we are not successful in developing a
product candidate using RNAi technology, we may be required to
change the scope and direction of our product development
activities. In that case, we may not be able to identify and
implement successfully an alternative product development
strategy.
Risks
Related to Our Financial Results and Need for
Financing
We
have a history of losses and may never become and remain
consistently profitable.
We have experienced significant operating losses since our
inception. At December 31, 2010, we had an accumulated
deficit of $343.3 million. To date, we have not developed
any products nor generated any revenues from the sale of
products. Further, we do not expect to generate any such
revenues in the foreseeable future. We expect to continue to
incur annual net operating losses over the next several years
and will require substantial resources over the next several
years as we expand our efforts to discover, develop and
commercialize RNAi therapeutics. We anticipate that the majority
of any revenue we generate over the next several years will be
from alliances with pharmaceutical and biotechnology companies
or funding from contracts with the government or foundations,
but cannot be certain that we will be able to secure or maintain
these alliances or contracts, or meet the obligations or achieve
any milestones that we may be required to meet or achieve to
receive payments. We anticipate that revenue derived from such
sources will not be sufficient to make us consistently
profitable.
We believe that to become and remain consistently profitable, we
must succeed in discovering, developing and commercializing
novel drugs with significant market potential. This will require
us to be successful in a range of challenging activities,
including pre-clinical testing and clinical trial stages of
development, obtaining regulatory approval for these novel drugs
and manufacturing, marketing and selling them. We may never
succeed in these activities, and may never generate revenues
that are significant enough to achieve profitability. Even if we
do achieve profitability, we may not be able to sustain or
increase profitability on a quarterly or annual basis. If we
cannot become and remain consistently profitable, the market
price of our common stock could decline. In addition, we may be
unable to raise capital, expand our business, diversify our
product offerings or continue our operations.
We
will require substantial additional funds to complete our
research and development activities and if additional funds are
not available, we may need to critically limit, significantly
scale back or cease our operations.
We have used substantial funds to develop our RNAi technologies
and will require substantial funds to conduct further research
and development, including pre-clinical testing and clinical
trials of any product candidates, and to manufacture and market
any products that are approved for commercial sale. Because the
successful development of our products is uncertain, we are
unable to estimate the actual funds we will require to develop
and commercialize them.
45
Our future capital requirements and the period for which we
expect our existing resources to support our operations may vary
from what we expect. We have based our expectations on a number
of factors, many of which are difficult to predict or are
outside of our control, including:
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our progress in demonstrating that siRNAs can be active as drugs;
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our ability to develop relatively standard procedures for
selecting and modifying siRNA product candidates;
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progress in our research and development programs, as well as
the magnitude of these programs;
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the timing, receipt and amount of milestone and other payments,
if any, from present and future collaborators, if any;
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the timing, receipt and amount of funding under current and
future government or foundation contracts, if any;
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our ability to maintain and establish additional collaborative
arrangements
and/or
new
business initiatives;
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the resources, time and costs required to initiate and complete
our pre-clinical and clinical trials, obtain regulatory
approvals, and obtain and maintain licenses to third-party
intellectual property;
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the resources, time and cost required for the preparation,
filing, prosecution, maintenance and enforcement of patent
claims;
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our ability to successfully manage the potential impact of our
corporate restructuring and workforce reduction on our culture,
collaborative relationships and business operations;
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the costs associated with legal activities arising in the course
of our business activities;
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progress in the research and development programs of
Regulus; and
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the timing, receipt and amount of sales and royalties, if any,
from our potential products.
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If our estimates and predictions relating to these factors are
incorrect, we may need to modify our operating plan.
Even if our estimates are correct, we will be required to seek
additional funding in the future and intend to do so through
either collaborative arrangements, public or private equity
offerings or debt financings, or a combination of one or more of
these funding sources. Additional funds may not be available to
us on acceptable terms or at all. In addition, the terms of any
financing may adversely affect the holdings or the rights of our
stockholders. For example, if we raise additional funds by
issuing equity securities, further dilution to our stockholders
will result. In addition, as a condition to providing additional
funds to us, future investors may demand, and may be granted,
rights superior to those of existing stockholders. In addition,
our investor rights agreement with Novartis provides Novartis
with the right generally to maintain its ownership percentage in
us and our common stock purchase agreement with Roche contains a
similar provision, subject to certain exceptions. These rights
continue until the earlier of any sale by Novartis or Roche of
shares of our common stock and the expiration or termination of
our license agreements with each of them, subject to certain
exceptions. Pursuant to the terms of its investor rights
agreement with us, Novartis purchased an aggregate of
335,033 shares of our common stock, resulting in aggregate
payments to us of $7.6 million. These purchases allowed
Novartis to maintain its ownership position of approximately
13.4% of our outstanding common stock. While the exercise of
these rights by Novartis has provided us with an aggregate of
$7.6 million in cash, and the exercise in the future by
Novartis or Roche may provide us with additional funding under
some circumstances, these exercises have caused, and any future
exercise of these rights by Novartis or Roche will also cause
further, dilution to our stockholders. Debt financing, if
available, may involve restrictive covenants that could limit
our flexibility in conducting future business activities and, in
the event of insolvency, would be paid before holders of equity
securities received any distribution of corporate assets. If we
are unable to obtain funding on a timely basis, we may be
required to significantly curtail one or more of our research or
development programs or undergo additional reductions in our
workforce or other corporate restructuring activities. We also
could be required to seek funds through arrangements with
collaborators or others that may require us to relinquish rights
to some of our technologies, product candidates or products that
we would otherwise pursue on our own.
46
If the
estimates we make, or the assumptions on which we rely, in
preparing our consolidated financial statements prove
inaccurate, our actual results may vary from those reflected in
our projections and accruals.
Our consolidated financial statements have been prepared in
accordance with accounting principles generally accepted in the
United States of America. The preparation of these consolidated
financial statements requires us to make estimates and judgments
that affect the reported amounts of our assets, liabilities,
revenues and expenses, the amounts of charges accrued by us and
related disclosure of contingent assets and liabilities. We base
our estimates on historical experience and on various other
assumptions that we believe to be reasonable under the
circumstances. We cannot assure you, however, that our
estimates, or the assumptions underlying them, will be correct.
The
investment of our cash, cash equivalents and marketable
securities is subject to risks which may cause losses and affect
the liquidity of these investments.
At December 31, 2010, we had $349.9 million in cash,
cash equivalents and marketable securities. We historically have
invested these amounts in corporate bonds, commercial paper,
securities issued by the U.S. government and municipal
obligations, certificates of deposit and money market funds
meeting the criteria of our investment policy, which is focused
on the preservation of our capital. These investments are
subject to general credit, liquidity, market and interest rate
risks, including the impact of
U.S. sub-prime
mortgage defaults that have affected various sectors of the
financial markets and caused credit and liquidity issues. We may
realize losses in the fair value of these investments or a
complete loss of these investments, which would have a negative
effect on our consolidated financial statements. In addition,
should our investments cease paying or reduce the amount of
interest paid to us, our interest income would suffer. For
example, due to market conditions, interest rates have fallen,
and accordingly, our interest income decreased to
$2.3 million for the year ended December 31, 2010,
from $5.4 million for the year ended December 31,
2009. These market risks associated with our investment
portfolio may have an adverse effect on our results of
operations, liquidity and financial condition.
Risks
Related to Our Dependence on Third Parties
Our
license and collaboration agreements with pharmaceutical
companies are important to our business. If these pharmaceutical
companies do not successfully develop drugs pursuant to these
agreements or we develop drugs targeting the same diseases as
our non-exclusive licensees, our business could be adversely
affected.
In July 2007, we entered into a license and collaboration
agreement with Roche. Under the license and collaboration
agreement we granted Roche a non-exclusive license to our
intellectual property to develop and commercialize therapeutic
products that function through RNAi, subject to our existing
contractual obligations to third parties. The license is limited
to the therapeutic areas of oncology, respiratory diseases,
metabolic diseases and certain liver diseases and may be
expanded to include up to 18 additional therapeutic areas,
comprising substantially all other fields of human disease, as
identified and agreed upon by the parties, upon payment to us by
Roche of an additional $50.0 million for each additional
therapeutic area, if any. In addition, in exchange for our
contributions under the collaboration agreement, for each RNAi
therapeutic product developed by Roche, its affiliates, or
sublicensees under the collaboration agreement, we are entitled
to receive milestone payments upon achievement of specified
development and sales events, totaling up to an aggregate of
$100.0 million per therapeutic target, together with
royalty payments based on worldwide annual net sales, if any. In
November 2010, Roche announced the discontinuation of certain
activities in research and early development, including their
RNAi research efforts. Our license and collaboration agreement
with Roche currently remains in effect. Roche may assign its
rights and obligations under the license and collaboration
agreement to a third party in connection with the sale or
transfer of its entire RNAi business.
In May 2008, we entered into a similar license and collaboration
agreement with Takeda, which is limited to the therapeutic areas
of oncology and metabolic diseases, and which may be expanded to
include up to 20 additional therapeutic areas, comprising
substantially all other fields of human disease, as identified
and agreed upon by the parties, upon payment to us by Takeda of
an additional $50.0 million for each additional therapeutic
area, if any. For each RNAi therapeutic product developed by
Takeda, its affiliates and sublicensees, we are entitled to
receive
47
specified development and commercialization milestones, totaling
up to $171.0 million per product, together with royalty
payments based on worldwide annual net sales, if any. In
addition, we agreed that for a period of five years, we will not
grant any other party rights to develop RNAi therapeutics in the
Asian territory.
In September 2010, Novartis exercised its right under our
collaboration and license agreement to select 31 designated gene
targets, for which Novartis has exclusive rights to discover,
develop and commercialize RNAi therapeutic products using our
intellectual property and technology. Under the terms of the
collaboration agreement, for any RNAi therapeutic products
Novartis develops against these targets, we are entitled to
receive milestone payments upon achievement of certain specified
development and annual net sales events, up to an aggregate of
$75.0 million per therapeutic product, as well as royalties
on annual net sales of any such product.
If Takeda, Novartis or, if Roche assigns our license,
Roches assignee, fails to successfully develop products
using our technology, we may not receive any milestone or
royalty payments under these agreements. In addition, even if
Takeda is not successful in its efforts, we are limited in our
ability to form alliances with other parties in the Asia
territory until 2013. We also have the option under the Takeda
agreement, exercisable until the start of Phase III
development, to opt-in under a
50-50
profit
sharing agreement to the development and commercialization in
the United States of up to four Takeda licensed products, and
would be entitled to opt-in rights for two additional products
for each additional field expansion, if any, elected by Takeda
under the collaboration agreement. If Takeda fails to
successfully develop products, we may not realize any economic
benefit from these opt-in rights.
Finally, either an assignee of Roche or Takeda could become a
competitor of ours in the development of RNAi-based drugs
targeting the same diseases that we choose to target. Takeda
has, and an assignee of Roche could have, significantly greater
financial resources than we do and far more experience in
developing and marketing drugs, which could put us at a
competitive disadvantage if we were to compete with them in the
development of RNAi-based drugs targeting the same disease.
We may
not be able to execute our business strategy if we are unable to
enter into alliances with other companies that can provide
business and scientific capabilities and funds for the
development and commercialization of our product candidates. If
we are unsuccessful in forming or maintaining these alliances on
favorable terms, our business may not succeed.
We do not have any capability for sales, marketing or
distribution and have limited capabilities for drug development.
In addition, we believe that other companies are expending
substantial resources in developing safe and effective means of
delivering siRNAs to relevant cell and tissue types.
Accordingly, we have entered into alliances with other companies
and collaborators that we believe can provide such capabilities,
and we intend to enter into additional alliances in the future.
For example, we intend to enter into (1) non-exclusive
platform
and/or
multi-target discovery alliances which will enable our
collaborators to develop RNAi therapeutics and will bring in
additional funding with which we can develop our RNAi
therapeutics, and (2) worldwide or specific geographic
partnerships on select RNAi therapeutic programs. In such
alliances, we may expect our collaborators to provide
substantial capabilities in delivery of RNAi therapeutics to the
relevant cell or tissue type, clinical development, regulatory
affairs,
and/or
marketing, sales and distribution. For example, under our
collaboration with Medtronic, we are jointly developing ALN-HTT,
an RNAi therapeutic for HD, which would be delivered using an
implanted infusion device developed by Medtronic. The success of
this collaboration will depend, in part, on Medtronics
expertise in the area of delivery of drugs by infusion device,
something that they have never done before with our product
candidates. In other alliances, we may expect our collaborators
to develop, market and sell certain of our product candidates.
We may have limited or no control over the development, sales,
marketing and distribution activities of these third parties.
Our future revenues may depend heavily on the success of the
efforts of these third parties. For example, we will rely
entirely on Kyowa Hakko Kirin for development and
commercialization of any RNAi products for the treatment of RSV
in Asia. If Kyowa Hakko Kirin is not successful in its
commercialization efforts, our future revenues from RNAi
therapeutics for the treatment of RSV may be adversely affected.
We may not be successful in entering into such alliances on
favorable terms due to various factors, including our ability to
successfully demonstrate proof of concept for our technology in
man, our ability to demonstrate the safety and efficacy of our
specific drug candidates, and the strength of our intellectual
property. Even if we do succeed in securing such product
alliances, we may not be able to maintain them if, for example,
development or
48
approval of a product candidate is delayed or sales of an
approved drug are disappointing. Furthermore, any delay in
entering into collaboration agreements could delay the
development and commercialization of our product candidates and
reduce their competitiveness even if they reach the market. Any
such delay related to our collaborations could adversely affect
our business.
For certain product candidates that we may develop, we have
formed collaborations to fund all or part of the costs of drug
development and commercialization, such as our collaborations
with Takeda, Cubist, Medtronic and NIAID. We may not, however,
be able to enter into additional collaborations, and the terms
of any collaboration agreement we do secure may not be favorable
to us. If we are not successful in our efforts to enter into
future collaboration arrangements with respect to a particular
product candidate, we may not have sufficient funds to develop
that or any other product candidate internally, or to bring any
product candidates to market. If we do not have sufficient funds
to develop and bring our product candidates to market, we will
not be able to generate sales revenues from these product
candidates, and this will substantially harm our business.
If any
collaborator terminates or fails to perform its obligations
under agreements with us, the development and commercialization
of our product candidates could be delayed or
terminated.
Our dependence on collaborators for capabilities and funding
means that our business could be adversely affected if any
collaborator terminates its collaboration agreement with us or
fails to perform its obligations under that agreement. Our
current or future collaborations, if any, may not be
scientifically or commercially successful. Disputes may arise in
the future with respect to the ownership of rights to technology
or products developed with collaborators, which could have an
adverse effect on our ability to develop and commercialize any
affected product candidate.
Our current collaborations allow, and we expect that any future
collaborations will allow, either party to terminate the
collaboration for a material breach by the other party. Our
agreement with Kyowa Hakko Kirin for the development and
commercialization of RSV therapeutics for the treatment of RSV
infection in Japan and other major markets in Asia may be
terminated by Kyowa Hakko Kirin without cause upon
180-days
prior written notice to us, subject to certain conditions, and
our agreement with Cubist relating to the development and
commercialization of certain RSV therapeutics in territories
outside of Asia may be terminated by Cubist at any time upon as
little as three months prior written notice, if such
notice is given prior to the acceptance for filing of the first
application for regulatory approval of a licensed product. If we
were to lose a commercialization collaborator, we would have to
attract a new collaborator or develop internal sales,
distribution and marketing capabilities, which would require us
to invest significant amounts of financial and management
resources.
In addition, if a collaborator terminates its collaboration with
us, for breach or otherwise, or determines not to pursue the
research and development of RNAi therapeutics, it would be
difficult for us to attract new collaborators and could
adversely affect how we are perceived in the business and
financial communities. A collaborator, or in the event of a
change in control of a collaborator or the assignment of a
collaboration agreement to a third party, the successor entity
or assignee, could determine that it is in its financial
interest to:
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pursue alternative technologies or develop alternative products,
either on its own or jointly with others, that may be
competitive with the products on which it is collaborating with
us or which could affect its commitment to the collaboration
with us;
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pursue higher-priority programs or change the focus of its
development programs, which could affect the collaborators
commitment to us; or
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if it has marketing rights, choose to devote fewer resources to
the marketing of our product candidates, if any are approved for
marketing, than it does for product candidates developed without
us.
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If any of these occur, the development and commercialization of
one or more product candidates could be delayed, curtailed or
terminated because we may not have sufficient financial
resources or capabilities to continue such development and
commercialization on our own.
49
Regulus
is important to our business. If Regulus does not successfully
develop drugs pursuant to our license and collaboration
agreement, our business could be adversely affected. In
addition, disagreements between us and Isis regarding the
development of microRNA technology may cause significant delays
and other impediments in the development of this technology,
which could negatively affect the value of the technology and
our investment in Regulus.
In September 2007, we and Isis formed Regulus, of which we owned
approximately 45% at December 31, 2010, to discover,
develop and commercialize microRNA therapeutics. Regulus is
exploring therapeutic opportunities that arise from
dysregulation of microRNAs. Neither Regulus nor any other
company has received regulatory approval to market therapeutics
utilizing microRNA technology. In connection with the
establishment of Regulus, we exclusively licensed to Regulus our
intellectual property rights covering microRNA technology.
Generally, we do not have rights to pursue microRNA therapeutics
independently of Regulus. If Regulus is unable to discover,
develop and commercialize microRNA therapeutics, our business
could be adversely affected.
Moreover, Regulus has formed a collaboration with GSK pursuant
to which GSK has provided Regulus with loans totaling
$10.0 million. These loans are guaranteed by us and Isis.
If Regulus is unable to repay GSK or convert the loans into
Regulus common stock, we could be liable for our share of these
obligations, and our business could be adversely affected.
In addition, Regulus operates as an independent company,
governed by a board of directors. We and Isis each can elect an
equal number of directors to serve on the Regulus board. Regulus
researches and develops microRNA projects and programs pursuant
to an operating plan that is approved by its board. Any
disagreements between Isis and us regarding a development
decision or any other decision submitted to Regulus board
may cause significant delays in the development and
commercialization of microRNA technology and could negatively
affect the value of our investment in Regulus.
We
rely on third parties to conduct our clinical trials, and if
they fail to fulfill their obligations, our development plans
may be adversely affected.
We rely on independent clinical investigators, contract research
organizations and other third-party service providers to assist
us in managing, monitoring and otherwise carrying out our
clinical trials. We have and we plan to continue to contract
with certain third-parties to provide certain services,
including site selection, enrollment, monitoring and data
management services. Although we depend heavily on these
parties, we do not control them and therefore, we cannot be
assured that these third-parties will adequately perform all of
their contractual obligations to us. If our third-party service
providers cannot adequately fulfill their obligations to us on a
timely and satisfactory basis or if the quality and accuracy of
our clinical trial data is compromised due to failure to adhere
to our protocols or regulatory requirements or if such
third-parties otherwise fail to meet deadlines, our development
plans may be delayed or terminated.
We
have very limited manufacturing experience or resources and we
must incur significant costs to develop this expertise or rely
on third parties to manufacture our products.
We have very limited manufacturing experience. Our internal
manufacturing capabilities are limited to small-scale production
of non-cGMP material for use in
in vitro
and
in
vivo
experiments. Some of our product candidates utilize
specialized formulations, such as liposomes or LNPs, whose
scale-up
and
manufacturing could be very difficult. We also have very limited
experience in such
scale-up
and
manufacturing, requiring us to depend on a limited number of
third parties, who might not be able to deliver in a timely
manner, or at all. In order to develop products, apply for
regulatory approvals and commercialize our products, we will
need to develop, contract for, or otherwise arrange for the
necessary manufacturing capabilities. We may manufacture
clinical trial materials ourselves or we may rely on others to
manufacture the materials we will require for any clinical
trials that we initiate. There are a limited number of
manufacturers that supply synthetic siRNAs. We currently rely on
several contract manufacturers for our supply of synthetic
siRNAs. There are risks inherent in pharmaceutical manufacturing
that could affect the ability of our contract manufacturers to
meet our delivery time requirements or provide adequate amounts
of material to meet our needs. Included in these risks are
synthesis and purification failures and contamination during the
manufacturing process, which could result in unusable product
and cause delays in our development process, as well as
additional expense to us. To fulfill our siRNA requirements, we
may also need to secure alternative suppliers of synthetic
siRNAs. In addition to the manufacture of the synthetic siRNAs,
we may have additional manufacturing requirements related to the
technology required to deliver the siRNA to the relevant
50
cell or tissue type. In some cases, the delivery technology we
utilize is highly specialized or proprietary, and for technical
and legal reasons, we may have access to only one or a limited
number of potential manufacturers for such delivery technology.
Failure by these manufacturers to properly formulate our siRNAs
for delivery could also result in unusable product and cause
delays in our discovery and development process, as well as
additional expense to us.
The manufacturing process for any products that we may develop
is subject to the FDA and foreign regulatory authority approval
process and we will need to contract with manufacturers who can
meet all applicable FDA and foreign regulatory authority
requirements on an ongoing basis. In addition, if we receive the
necessary regulatory approval for any product candidate, we also
expect to rely on third parties, including our commercial
collaborators, to produce materials required for commercial
supply. We may experience difficulty in obtaining adequate
manufacturing capacity for our needs. If we are unable to obtain
or maintain contract manufacturing for these product candidates,
or to do so on commercially reasonable terms, we may not be able
to successfully develop and commercialize our products.
To the extent that we enter into manufacturing arrangements with
third parties, we will depend on these third parties to perform
their obligations in a timely manner and consistent with
regulatory requirements, including those related to quality
control and quality assurance. The failure of a third-party
manufacturer to perform its obligations as expected could
adversely affect our business in a number of ways, including:
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we may not be able to initiate or continue clinical trials of
products that are under development;
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we may be delayed in submitting regulatory applications, or
receiving regulatory approvals, for our product candidates;
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we may lose the cooperation of our collaborators;
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our products could be the subject of inspections by regulatory
authorities;
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we may be required to cease distribution or recall some or all
batches of our products; and
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ultimately, we may not be able to meet commercial demands for
our products.
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If a third-party manufacturer with whom we contract fails to
perform its obligations, we may be forced to manufacture the
materials ourselves, for which we may not have the capabilities
or resources, or enter into an agreement with a different
third-party manufacturer, which we may not be able to do on
reasonable terms, if at all. In some cases, the technical skills
required to manufacture our product may be unique to the
original manufacturer and we may have difficulty transferring
such skills to a
back-up
or
alternate supplier, or we may be unable to transfer such skills
at all. In addition, if we are required to change manufacturers
for any reason, we will be required to verify that the new
manufacturer maintains facilities and procedures that comply
with quality standards and with all applicable regulations and
guidelines. The delays associated with the verification of a new
manufacturer could negatively affect our ability to develop
product candidates in a timely manner or within budget.
Furthermore, a manufacturer may possess technology related to
the manufacture of our product candidate that such manufacturer
owns independently. This would increase our reliance on such
manufacturer or require us to obtain a license from such
manufacturer in order to have another third party manufacture
our products.
We
have no sales, marketing or distribution experience and would
have to invest significant financial and management resources to
establish these capabilities.
We have no sales, marketing or distribution experience. We
currently expect to rely heavily on third parties to launch and
market certain of our product candidates, if approved. However,
if we elect to develop internal sales, distribution and
marketing capabilities as part of our core product strategy, we
will need to invest significant financial and management
resources. For core products where we decide to perform sales,
marketing and distribution functions ourselves, we could face a
number of additional risks, including:
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we may not be able to attract and build a significant marketing
or sales force;
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the cost of establishing a marketing or sales force may not be
justifiable in light of the revenues generated by any particular
product; and
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our direct sales and marketing efforts may not be successful.
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51
If we are unable to develop our own sales, marketing and
distribution capabilities, we will not be able to successfully
commercialize our core products without reliance on third
parties.
The
current credit and financial market conditions may exacerbate
certain risks affecting our business.
Due to the tightening of global credit, there may be a
disruption or delay in the performance of our third-party
contractors, suppliers or collaborators. We rely on third
parties for several important aspects of our business, including
significant portions of our manufacturing needs, development of
product candidates and conduct of clinical trials. If such third
parties are unable to satisfy their commitments to us, our
business could be adversely affected.
Risks
Related to Managing Our Operations
If we
are unable to attract and retain qualified key management and
scientists, staff, consultants and advisors, particularly given
our workforce reduction, our ability to implement our business
plan may be adversely affected.
We are highly dependent upon our senior management and
scientific staff. The loss of the service of any of the members
of our senior management, including Dr. John Maraganore,
our Chief Executive Officer, may significantly delay or prevent
the achievement of product development and other business
objectives. Our employment agreements with our key personnel are
terminable without notice. We do not carry key man life
insurance on any of our employees.
Although we have generally been successful in our recruiting
efforts, as well as our retention of employees, we face intense
competition for qualified individuals from numerous
pharmaceutical and biotechnology companies, universities,
governmental entities and other research institutions, many of
which have substantially greater resources with which to reward
qualified individuals than we do. In addition, as a result of
our September 2010 corporate restructuring and workforce
reduction, we may face additional challenges in retaining our
existing employees and recruiting new employees to join our
company as our business needs change. Our workforce reduction
could harm our reputation, yield unanticipated consequences,
such as attrition beyond planned reductions in workforce, or
increased difficulties in our
day-to-day
operations, and may adversely affect employee morale. We may be
unable to attract and retain suitably qualified individuals, and
our failure to do so could have an adverse effect on our ability
to implement our future business plan.
We may
have difficulty managing our growth and expanding our operations
successfully as we seek to evolve from a company primarily
involved in discovery and pre-clinical testing into one that
develops and commercializes drugs.
Since we commenced operations in 2002, we have grown
substantially. At December 31, 2010, we had
172 employees in our facility in Cambridge, Massachusetts.
Despite our September 2010 workforce reduction, we expect that
as we seek to increase the number of product candidates we are
developing we will need to expand our operations in the future.
This growth may place a strain on our administrative and
operational infrastructure. If product candidates we develop
enter and advance through clinical trials, we will need to
expand our development, regulatory, manufacturing, marketing and
sales capabilities or contract with other organizations to
provide these capabilities for us. As our operations expand due
to our development progress, we expect that we will need to
manage additional relationships with various collaborators,
suppliers and other organizations. Our ability to manage our
operations and future growth will require us to continue to
improve our operational, financial and management controls,
reporting systems and procedures. We may not be able to
implement improvements to our management information and control
systems in an efficient or timely manner and may discover
deficiencies in existing systems and controls.
Our
business and operations could suffer in the event of system
failures.
Despite the implementation of security measures, our internal
computer systems and those of our contractors and consultants
are vulnerable to damage from computer viruses, unauthorized
access, natural disasters, terrorism, war, and telecommunication
and electrical failures. Such events could cause interruption of
our operations. For example, the loss of pre-clinical trial data
or data from completed or ongoing clinical trials for our
product candidates could result in delays in our regulatory
filings and development efforts and significantly increase our
costs. To the extent that any disruption or
52
security breach were to result in a loss of or damage to our
data, or inappropriate disclosure of confidential or proprietary
information, we could incur liability and the development of our
product candidates could be delayed.
Risks
Related to Our Industry
Risks
Related to Development, Clinical Testing and Regulatory Approval
of Our Product Candidates
Any
product candidates we develop may fail in development or be
delayed to a point where they do not become commercially
viable.
Before obtaining regulatory approval for the commercial
distribution of our product candidates, we must conduct, at our
own expense, extensive pre-clinical tests and clinical trials to
demonstrate the safety and efficacy in humans of our product
candidates. Pre-clinical and clinical testing is expensive,
difficult to design and implement, can take many years to
complete and is uncertain as to outcome, and the historical
failure rate for product candidates is high. We currently have
several programs in clinical development. We are developing
ALN-RSV01 for the treatment of RSV infection. In January 2008,
we completed our GEMINI study, a Phase II clinical trial
designed to evaluate the safety, tolerability and anti-viral
activity of ALN-RSV01 in adult subjects experimentally infected
with RSV. During 2009, we completed a Phase IIa clinical trial
assessing the safety and tolerability of ALN-RSV01 in adult lung
transplant patients naturally infected with RSV. In February
2010, we initiated a Phase IIb clinical trial to evaluate the
clinical efficacy endpoints as well as safety of aerosolized
ALN-RSV01 in adult lung transplant patients naturally infected
with RSV. The objective of this Phase IIb clinical trial is to
repeat and extend the clinical results observed in the Phase IIa
clinical trial. In addition, in March 2009, we initiated a Phase
I clinical trial of ALN-VSP, our first systemically delivered
RNAi therapeutic. We are developing ALN-VSP for the treatment of
primary and secondary liver cancer. In July 2010, we also
initiated a Phase I clinical trial for ALN-TTR01, our second
systemically delivered RNAi therapeutic, which targets the TTR
gene for the treatment of ATTR. However, we may not be able to
further advance these or any other product candidate through
clinical trials.
If we enter into clinical trials, the results from pre-clinical
testing or early clinical trials of a product candidate may not
predict the results that will be obtained in subsequent human
clinical trials of that product candidate or any other product
candidate. For example, ALN-RSV01 may not demonstrate the same
results in the Phase IIb clinical trial as it did in our Phase
IIa clinical trial. In addition, ALN-VSP, ALN-TTR01, and our
other systemically delivered therapeutics, such as ALN-PCS,
employ novel delivery formulations that have yet to be
extensively evaluated in human clinical trials and proven safe
and effective. We, the FDA or other applicable regulatory
authorities, or an institutional review board, or IRB, or
similar foreign review board or committee, may suspend clinical
trials of a product candidate at any time for various reasons,
including if we or they believe the subjects or patients
participating in such trials are being exposed to unacceptable
health risks. Among other reasons, adverse side effects of a
product candidate on subjects or patients in a clinical trial
could result in the FDA or foreign regulatory authorities
suspending or terminating the trial and refusing to approve a
particular product candidate for any or all indications of use.
Clinical trials of a new product candidate require the
enrollment of a sufficient number of patients, including
patients who are suffering from the disease the product
candidate is intended to treat and who meet other eligibility
criteria. Rates of patient enrollment are affected by many
factors, including the size of the patient population, the age
and condition of the patients, the stage and severity of
disease, the nature of the protocol, the proximity of patients
to clinical sites, the availability of effective treatments for
the relevant disease, the seasonality of infections and the
eligibility criteria for the clinical trial. In our ALN-VSP
clinical trial, one patient with advanced pancreatic
neuroendocrine cancer with extensive involvement of the liver
developed hepatic failure five days following the second dose of
ALN-VSP and subsequently died; this was deemed possibly related
to the study drug. Six additional patients treated at the same
dose did not exhibit any evidence of hepatotoxicity. The trial
has not yet reached a maximum tolerated dose and is continuing
patient enrollment with dose escalation. Delays in patient
enrollment or difficulties retaining trial participants can
result in increased costs, longer development times or
termination of a clinical trial.
Clinical trials also require the review and oversight of IRBs,
which approve and continually review clinical investigations and
protect the rights and welfare of human subjects. Inability to
obtain or delay in obtaining IRB approval can prevent or delay
the initiation and completion of clinical trials, and the FDA or
foreign regulatory
53
authorities may decide not to consider any data or information
derived from a clinical investigation not subject to initial and
continuing IRB review and approval in support of a marketing
application.
Our product candidates that we develop may encounter problems
during clinical trials that will cause us, an IRB or regulatory
authorities to delay, suspend or terminate these trials, or that
will delay or confound the analysis of data from these trials.
If we experience any such problems, we may not have the
financial resources to continue development of the product
candidate that is affected, or development of any of our other
product candidates. We may also lose, or be unable to enter
into, collaborative arrangements for the affected product
candidate and for other product candidates we are developing.
A failure of one of more of our clinical trials can occur at any
stage of testing. We may experience numerous unforeseen events
during, or as a result of, pre-clinical testing and the clinical
trial process that could delay or prevent regulatory approval or
our ability to commercialize our product candidates, including:
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our pre-clinical tests or clinical trials may produce negative
or inconclusive results, and we may decide, or regulators may
require us, to conduct additional pre-clinical testing or
clinical trials, or we may abandon projects that we expect to be
promising;
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delays in filing INDs or comparable foreign applications or
delays or failure in obtaining the necessary approvals from
regulators or IRBs in order to commence a clinical trial at a
prospective trial site, or their suspension or termination of a
clinical trial once commenced;
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conditions imposed on us by the FDA or comparable foreign
authorities regarding the scope or design of our clinical trials;
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problems in engaging IRBs to oversee clinical trials or problems
in obtaining or maintaining IRB approval of trials;
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delays in enrolling patients and volunteers into clinical
trials, and variability in the number and types of patients and
volunteers available for clinical trials;
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high drop-out rates for patients and volunteers in clinical
trials;
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negative or inconclusive results from our clinical trials or the
clinical trials of others for product candidates similar to ours;
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inadequate supply or quality of product candidate materials or
other materials necessary for the conduct of our clinical trials;
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greater than anticipated clinical trial costs;
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serious and unexpected drug-related side effects experienced by
participants in our clinical trials or by individuals using
drugs similar to our product candidates;
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poor effectiveness of our product candidates during clinical
trials;
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unfavorable FDA or other regulatory agency inspection and review
of a clinical trial site or records of any clinical or
pre-clinical investigation;
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failure of our third-party contractors or investigators to
comply with regulatory requirements or otherwise meet their
contractual obligations in a timely manner, or at all;
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governmental or regulatory delays and changes in regulatory
requirements, policy and guidelines, including the imposition of
additional regulatory oversight around clinical testing
generally or with respect to our technology in
particular; or
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varying interpretations of data by the FDA and similar foreign
regulatory agencies.
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Even if we successfully complete clinical trials of our product
candidates, any given product candidate may not prove to be a
safe and effective treatment for the diseases for which it was
being tested.
54
The
regulatory approval process may be delayed for any products we
develop that require the use of specialized drug delivery
devices, which may require us to incur additional costs and
delay receipt of any potential product revenue.
Some product candidates that we develop may need to be
administered using specialized drug delivery devices that
deliver RNAi therapeutics directly to diseased parts of the
body. For example, we believe that product candidates we develop
for HD, Parkinsons disease or other central nervous system
diseases may need to be administered using such a device. For
neurodegenerative diseases, we have entered into a collaboration
agreement with Medtronic to pursue potential development of
drug-device combinations incorporating RNAi therapeutics. We may
not achieve successful development results under this
collaboration and may need to seek other collaborations to
develop alternative drug delivery systems, or utilize existing
drug delivery systems, for the direct delivery of RNAi
therapeutics for these diseases. While we expect to rely on drug
delivery systems that have been approved by the FDA or other
regulatory agencies to deliver drugs like ours to diseased parts
of the body, we, or our collaborator, may need to modify the
design or labeling of such delivery device for some products we
may develop. In such an event, the FDA may regulate the product
as a combination product or require additional approvals or
clearances for the modified delivery device. Further, to the
extent the specialized delivery device is owned by another
company, we would need that companys cooperation to
implement the necessary changes to the device, or its labeling,
and to obtain any additional approvals or clearances. In cases
where we do not have an ongoing collaboration with the company
that makes the device, obtaining such additional approvals or
clearances and the cooperation of such other company could
significantly delay and increase the cost of obtaining marketing
approval, which could reduce the commercial viability of our
product candidate. In addition, the use of a specialized
delivery system, even if previously approved, could complicate
the design or analysis of clinical trials for our RNAi
therapeutics. In summary, we may be unable to find, or
experience delays in finding, suitable drug delivery systems to
administer RNAi therapeutics directly to diseased parts of the
body, which could negatively affect our ability to successfully
commercialize these RNAi therapeutics.
We may
be unable to obtain United States or foreign regulatory approval
and, as a result, be unable to commercialize our product
candidates.
Our product candidates are subject to extensive governmental
regulations relating to, among other things, research, testing,
development, manufacturing, safety, efficacy, approval,
recordkeeping, reporting, labeling, storage, marketing and
distribution of drugs. Rigorous pre-clinical testing and
clinical trials and an extensive regulatory approval process are
required to be successfully completed in the United States and
in many foreign jurisdictions before a new drug can be marketed.
Satisfaction of these and other regulatory requirements is
costly, time consuming, uncertain and subject to unanticipated
delays. It is possible that none of the product candidates we
may develop will obtain the regulatory approvals necessary for
us or our collaborators to begin selling them.
We have very limited experience in conducting and managing the
clinical trials necessary to obtain regulatory approvals,
including approval by the FDA. The time required to obtain FDA
and other approvals is unpredictable but typically takes many
years following the commencement of clinical trials, depending
upon the type, complexity and novelty of the product candidate.
The standards that the FDA and its foreign counterparts use when
regulating us are not always applied predictably or uniformly
and can change. Any analysis we perform of data from
pre-clinical and clinical activities is subject to confirmation
and interpretation by regulatory authorities, which could delay,
limit or prevent regulatory approval. We may also encounter
unexpected delays or increased costs due to new government
regulations, for example, from future legislation or
administrative action, or from changes in FDA policy during the
period of product development, clinical trials and FDA
regulatory review. It is impossible to predict whether
legislative changes will be enacted, or whether FDA or foreign
regulations, guidance or interpretations will be changed, or
what the impact of such changes, if any, may be.
Because the drugs we are developing may represent a new class of
drug, the FDA and its foreign counterparts have not yet
established any definitive policies, practices or guidelines in
relation to these drugs. While we believe the product candidates
that we are currently developing are regulated as new drugs
under the Federal Food, Drug, and Cosmetic Act, the FDA could
decide to regulate them or other products we may develop as
biologics under the Public Health Service Act. The lack of
policies, practices or guidelines may hinder or slow review by
the FDA of any regulatory filings that we may submit. Moreover,
the FDA may respond to these submissions by defining
requirements we may not have anticipated. Such responses could
lead to significant delays in the clinical
55
development of our product candidates. In addition, because
there may be approved treatments for some of the diseases for
which we may seek approval, in order to receive regulatory
approval, we may need to demonstrate through clinical trials
that the product candidates we develop to treat these diseases,
if any, are not only safe and effective, but safer or more
effective than existing products. Furthermore, in recent years,
there has been increased public and political pressure on the
FDA with respect to the approval process for new drugs, and the
number of approvals to market new drugs has declined.
Any delay or failure in obtaining required approvals could have
a material adverse effect on our ability to generate revenues
from the particular product candidate for which we are seeking
approval. Furthermore, any regulatory approval to market a
product may be subject to limitations on the approved uses for
which we may market the product or the labeling or other
restrictions. In addition, the FDA has the authority to require
a REMS plan as part of an NDA or after approval, which may
impose further requirements or restrictions on the distribution
or use of an approved drug or biologic, such as limiting
prescribing to certain physicians or medical centers that have
undergone specialized training, limiting treatment to patients
who meet certain safe-use criteria and requiring treated
patients to enroll in a registry. These limitations and
restrictions may limit the size of the market for the product
and affect reimbursement by third-party payors.
We are also subject to numerous foreign regulatory requirements
governing, among other things, the conduct of clinical trials,
manufacturing and marketing authorization, pricing and
third-party reimbursement. The foreign regulatory approval
process varies among countries and includes all of the risks
associated with FDA approval described above as well as risks
attributable to the satisfaction of local regulations in foreign
jurisdictions. Approval by the FDA does not ensure approval by
regulatory authorities outside the United States and vice versa.
Even
if we obtain regulatory approvals, our marketed drugs will be
subject to ongoing regulatory review. If we fail to comply with
continuing U.S. and foreign requirements, our approvals could be
limited or withdrawn, we could be subject to other penalties,
and our business would be seriously harmed.
Following any initial regulatory approval of any drugs we may
develop, we will also be subject to continuing regulatory
review, including the review of adverse drug experiences and
clinical results that are reported after our drug products are
made commercially available. This would include results from any
post-marketing tests or surveillance to monitor the safety and
efficacy of the drug product required as a condition of approval
or agreed to by us. Any regulatory approvals that we receive for
our product candidates may also be subject to limitations on the
approved uses for which the product may be marketed. Other
ongoing regulatory requirements include, among other things,
submissions of safety and other post-marketing information and
reports, registration, as well as continued compliance with cGMP
requirements and good clinical practices for any clinical trials
that we conduct post-approval. In addition, we are conducting,
and intend to continue to conduct, clinical trials for our
product candidates, and we intend to seek approval to market our
product candidates, in jurisdictions outside of the United
States, and therefore will be subject to, and must comply with,
regulatory requirements in those jurisdictions.
The FDA has significant post-market authority, including, for
example, the authority to require labeling changes based on new
safety information and to require post-market studies or
clinical trials to evaluate serious safety risks related to the
use of a drug and to require withdrawal of the product from the
market. The FDA also has the authority to require a REMS plan
after approval, which may impose further requirements or
restrictions on the distribution or use of an approved drug.
The manufacturer and manufacturing facilities we use to make any
of our product candidates will also be subject to periodic
review and inspection by the FDA and other regulatory agencies.
The discovery of any new or previously unknown problems with our
third-party manufacturers, manufacturing processes or
facilities, may result in restrictions on the drug or
manufacturer or facility, including withdrawal of the drug from
the market. We do not have, and currently do not intend to
develop, the ability to manufacture material for our clinical
trials or on a commercial scale. We may manufacture clinical
trial materials or we may contract a third party to manufacture
these materials for us. Reliance on third-party manufacturers
entails risks to which we would not be subject if we
manufactured products ourselves, including reliance on the
third-party manufacturer for regulatory compliance. Our product
promotion and advertising is also subject to regulatory
requirements and continuing regulatory review.
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If we or our collaborators, manufacturers or service providers
fail to comply with applicable continuing regulatory
requirements in the United States or foreign jurisdictions in
which we may seek to market our products, we or they may be
subject to, among other things, fines, warning letters, holds on
clinical trials, refusal by the FDA to approve pending
applications or supplements to approved applications, suspension
or withdrawal of regulatory approval, product recalls and
seizures, refusal to permit the import or export of products,
operating restrictions, injunction, civil penalties and criminal
prosecution.
Even
if we receive regulatory approval to market our product
candidates, the market may not be receptive to our product
candidates upon their commercial introduction, which will
prevent us from becoming profitable.
The product candidates that we are developing are based upon new
technologies or therapeutic approaches. Key participants in
pharmaceutical marketplaces, such as physicians, third-party
payors and consumers, may not accept a product intended to
improve therapeutic results based on RNAi technology. As a
result, it may be more difficult for us to convince the medical
community and third-party payors to accept and use our product,
or to provide favorable reimbursement.
Other factors that we believe will materially affect market
acceptance of our product candidates include:
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the timing of our receipt of any marketing approvals, the terms
of any approvals and the countries in which approvals are
obtained;
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the safety and efficacy of our product candidates, as
demonstrated in clinical trials;
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relative convenience and ease of administration of our product
candidates;
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the willingness of patients to accept potentially new routes of
administration;
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the success of our physician education programs;
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the availability of adequate government and third-party payor
reimbursement;
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the pricing of our products, particularly as compared to
alternative treatments; and
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availability of alternative effective treatments for the
diseases that product candidates we develop are intended to
treat and the relative risks, benefits and costs of the
treatments.
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If we
or our collaborators, manufacturers or service providers fail to
comply with healthcare laws and regulations, we or they could be
subject to enforcement actions, which could affect our ability
to develop, market and sell our products and may harm our
reputation.
As a manufacturer of pharmaceuticals, we are subject to federal,
state, and foreign healthcare laws and regulations pertaining to
fraud and abuse and patients rights. These laws and
regulations include:
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the U.S. federal healthcare program anti-kickback law,
which prohibits, among other things, persons from soliciting,
receiving or providing remuneration, directly or indirectly, to
induce either the referral of an individual for a healthcare
item or service, or the purchasing or ordering of an item or
service, for which payment may be made under a federal
healthcare program such as Medicare or Medicaid;
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the U.S. federal false claims law, which prohibits, among
other things, individuals or entities from knowingly presenting
or causing to be presented, claims for payment by government
funded programs such as Medicare or Medicaid that are false or
fraudulent, and which may apply to us by virtue of statements
and representations made to customers or third parties;
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the U.S. federal Health Insurance Portability and
Accountability Act, or HIPAA, and Health Information Technology
for Economic and Clinical Health, or HITECH, Act, which prohibit
executing a scheme to defraud healthcare programs; impose
requirements relating to the privacy, security, and transmission
of individually identifiable health information; and require
notification to affected individuals and regulatory authorities
of certain breaches of security of individually identifiable
health information; and
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state laws comparable to each of the above federal laws, such
as, for example, anti-kickback and false claims laws applicable
to commercial insurers and other non-federal payors,
requirements for mandatory corporate regulatory compliance
programs, and laws relating to patient data privacy and security.
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If our operations are found to be in violation of any such
requirements, we may be subject to penalties, including civil or
criminal penalties, monetary damages, the curtailment or
restructuring of our operations, loss of eligibility to obtain
approvals from the FDA, or exclusion from participation in
government contracting or other government programs, including
Medicare and Medicaid, any of which could adversely our
financial results. Although effective compliance programs can
mitigate the risk of investigation and prosecution for
violations of these laws, these risks cannot be entirely
eliminated. Any action against us for an alleged or suspected
violation could cause us to incur significant legal expenses and
could divert our managements attention from the operation
of our business, even if our defense is successful. In addition,
achieving and sustaining compliance with applicable laws and
regulations may be costly to us in terms of money, time and
resources.
If we or our collaborators, manufacturers or service providers
fail to comply with applicable federal, state or foreign laws or
regulations, we could be subject to enforcement actions, which
could affect our ability to develop, market and sell our
products successfully and could harm our reputation and lead to
reduced acceptance of our products by the market. These
enforcement actions include, among others:
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adverse regulatory inspection findings;
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warning letters;
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voluntary or mandatory product recalls or public notification or
medical product safety alerts to healthcare professionals;
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restrictions on, or prohibitions against, marketing our products;
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restrictions on, or prohibitions against, importation or
exportation of our products;
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suspension of review or refusal to approve pending applications
or supplements to approved applications;
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exclusion from participation in government-funded healthcare
programs;
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exclusion from eligibility for the award of government contracts
for our products;
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suspension or withdrawal of product approvals;
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product seizures;
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injunctions; and
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civil and criminal penalties and fines.
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Any
drugs we develop may become subject to unfavorable pricing
regulations, third-party reimbursement practices or healthcare
reform initiatives, thereby harming our business.
The regulations that govern marketing approvals, pricing and
reimbursement for new drugs vary widely from country to country.
Some countries require approval of the sale price of a drug
before it can be marketed. In many countries, the pricing review
period begins after marketing or product licensing approval is
granted. In some foreign markets, prescription pharmaceutical
pricing remains subject to continuing governmental control even
after initial approval is granted. Although we intend to monitor
these regulations, our programs are currently in the early
stages of development and we will not be able to assess the
impact of price regulations for a number of years. As a result,
we might obtain regulatory approval for a product in a
particular country, but then be subject to price regulations
that delay our commercial launch of the product and negatively
impact the revenues we are able to generate from the sale of the
product in that country.
Our ability to commercialize any products successfully also will
depend in part on the extent to which reimbursement for these
products and related treatments will be available from
government health administration authorities, private health
insurers and other organizations. Even if we succeed in bringing
one or more products to the market, these products may not be
considered cost-effective, and the amount reimbursed for any
products may
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be insufficient to allow us to sell our products on a
competitive basis. Because our programs are in the early stages
of development, we are unable at this time to determine their
cost effectiveness or the likely level or method of
reimbursement. Increasingly, the third-party payors who
reimburse patients, such as government and private insurance
plans, are requiring that drug companies provide them with
predetermined discounts from list prices, and are seeking to
reduce the prices charged for pharmaceutical products. If the
price we are able to charge for any products we develop is
inadequate in light of our development and other costs, our
profitability could be adversely affected.
We currently expect that any drugs we develop may need to be
administered under the supervision of a physician. Under
currently applicable U.S. law, drugs that are not usually
self-administered may be eligible for coverage by the Medicare
program if:
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they are incident to a physicians services;
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they are reasonable and necessary for the diagnosis
or treatment of the illness or injury for which they are
administered according to accepted standards of medical practice;
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they are not excluded as immunizations; and
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they have been approved by the FDA.
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There may be significant delays in obtaining coverage for
newly-approved drugs, and coverage may be more limited than the
purposes for which the drug is approved by the FDA. Moreover,
eligibility for coverage does not imply that any drug will be
reimbursed in all cases or at a rate that covers our costs,
including research, development, manufacture, sale and
distribution. Interim payments for new drugs, if applicable, may
also not be sufficient to cover our costs and may not be made
permanent. Reimbursement may be based on payments allowed for
lower-cost drugs that are already reimbursed, may be
incorporated into existing payments for other services and may
reflect budgetary constraints or imperfections in Medicare data.
Net prices for drugs may be reduced by mandatory discounts or
rebates required by government healthcare programs or private
payors and by any future relaxation of laws that presently
restrict imports of drugs from countries where they may be sold
at lower prices than in the United States. Third-party payors
often rely upon Medicare coverage policy and payment limitations
in setting their own reimbursement rates. Our inability to
promptly obtain coverage and profitable reimbursement rates from
both government-funded and private payors for new drugs that we
develop and for which we obtain regulatory approval could have a
material adverse effect on our operating results, our ability to
raise capital needed to commercialize products, and our overall
financial condition.
We believe that the efforts of governments and third-party
payors to contain or reduce the cost of healthcare and
legislative and regulatory proposals to broaden the availability
of healthcare will continue to affect the business and financial
condition of pharmaceutical and biopharmaceutical companies. A
number of legislative and regulatory changes in the healthcare
system in the United States and other major healthcare markets
have been proposed in recent years, and such efforts have
expanded substantially in recent years. These developments have
included prescription drug benefit legislation that was enacted
and took effect in January 2006, healthcare reform legislation
recently enacted by certain states, and major healthcare reform
legislation that was passed by Congress and enacted into law in
the United States in 2010. These developments could, directly or
indirectly, affect our ability to sell our products, if
approved, at a favorable price.
In particular, in March 2010, the Patient Protection and
Affordable Care Act, or PPACA, and a related reconciliation bill
were signed into law. This new legislation changes the current
system of healthcare insurance and benefits intended to broaden
coverage and control costs. The new law also contains provisions
that will affect companies in the pharmaceutical industry and
other healthcare related industries by imposing additional costs
and changes to business practices. Provisions affecting
pharmaceutical companies include the following:
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Mandatory rebates for drugs sold into the Medicaid program have
been increased, and the rebate requirement has been extended to
drugs used in risk-based Medicaid managed care plans.
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The 340B Drug Pricing Program under the Public Health Services
Act has been extended to require mandatory discounts for drug
products sold to certain critical access hospitals, cancer
hospitals and other covered entities.
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Pharmaceutical companies are required to offer discounts on
brand-name drugs to patients who fall within the Medicare
Part D coverage gap, commonly referred to as the
Donut Hole.
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Pharmaceutical companies are required to pay an annual non-tax
deductible fee to the federal government based on each
companys market share of prior year total sales of branded
products to certain federal healthcare programs, such as
Medicare, Medicaid, Department of Veterans Affairs and
Department of Defense. The aggregated industry-wide fee is
expected to total $28 billion through 2019, of which
$2.5 billion will be payable in 2011. Since we expect our
branded pharmaceutical sales to constitute a small portion of
the total federal health program pharmaceutical market, we do
not expect this annual assessment to have a material impact on
our financial condition.
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The new law provides that biologic products may receive
12 years of market exclusivity, with a possible six-month
extension for pediatric products. After this exclusivity ends,
generic manufacturers will be permitted to enter the market,
which is likely to reduce the pricing for such products and
could affect the companys profitability. In addition,
generic manufacturers will be permitted to challenge one or more
of the patents for a branded drug after a product is marketed
for four years.
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The full effects of the U.S. healthcare reform legislation
cannot be known until the new law is implemented through
regulations or guidance issued by the Centers for
Medicare & Medicaid Services and other federal and
state healthcare agencies. The financial impact of the
U.S. healthcare reform legislation over the next few years
will depend on a number of factors, including but not limited,
to the policies reflected in implementing regulations and
guidance, and changes in sales volumes for products affected by
the new system of rebates, discounts and fees. The new
legislation may also have a positive impact on our future net
sales, if any, by increasing the aggregate number of persons
with healthcare coverage in the United States, but such
increases are unlikely to be realized until approximately 2014
at the earliest.
Moreover, we cannot predict what healthcare reform initiatives
may be adopted in the future. Further federal and state
legislative and regulatory developments are likely, and we
expect ongoing initiatives in the United States to increase
pressure on drug pricing. Such reforms could have an adverse
effect on anticipated revenues from product candidates that we
may successfully develop and for which we may obtain regulatory
approval and may affect our overall financial condition and
ability to develop drug candidates.
There
is a substantial risk of product liability claims in our
business. If we are unable to obtain sufficient insurance, a
product liability claim against us could adversely affect our
business.
Our business exposes us to significant potential product
liability risks that are inherent in the development, testing,
manufacturing and marketing of human therapeutic products.
Product liability claims could delay or prevent completion of
our clinical development programs. If we succeed in marketing
products, such claims could result in an FDA investigation of
the safety and effectiveness of our products, our manufacturing
processes and facilities or our marketing programs, and
potentially a recall of our products or more serious enforcement
action, limitations on the approved indications for which they
may be used, or suspension or withdrawal of approvals.
Regardless of the merits or eventual outcome, liability claims
may also result in injury to our reputation, costs to defend the
related litigation, a diversion of managements time and
our resources, and substantial monetary awards to trial
participants or patients. We currently have product liability
insurance that we believe is appropriate for our stage of
development and may need to obtain higher levels prior to
marketing any of our product candidates. Any insurance we have
or may obtain may not provide sufficient coverage against
potential liabilities. Furthermore, clinical trial and product
liability insurance is becoming increasingly expensive. As a
result, we may be unable to obtain sufficient insurance at a
reasonable cost to protect us against losses caused by product
liability claims that could have a material adverse effect on
our business.
If we
do not comply with laws regulating the protection of the
environment and health and human safety, our business could be
adversely affected.
Our research and development involves the use of hazardous
materials, chemicals and various radioactive compounds. We
maintain quantities of various flammable and toxic chemicals in
our facilities in Cambridge that are required for our research
and development activities. We are subject to federal, state and
local laws and
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regulations governing the use, manufacture, storage, handling
and disposal of these hazardous materials. We believe our
procedures for storing, handling and disposing these materials
in our Cambridge facility comply with the relevant guidelines of
the City of Cambridge and the Commonwealth of Massachusetts.
Although we believe that our safety procedures for handling and
disposing of these materials comply with the standards mandated
by applicable regulations, the risk of accidental contamination
or injury from these materials cannot be eliminated. If an
accident occurs, we could be held liable for resulting damages,
which could be substantial. We are also subject to numerous
environmental, health and workplace safety laws and regulations,
including those governing laboratory procedures, exposure to
blood-borne pathogens and the handling of biohazardous materials.
Although we maintain workers compensation insurance to
cover us for costs and expenses we may incur due to injuries to
our employees resulting from the use of these materials, this
insurance may not provide adequate coverage against potential
liabilities. We do not maintain insurance for environmental
liability or toxic tort claims that may be asserted against us
in connection with our storage or disposal of biological,
hazardous or radioactive materials. Additional federal, state
and local laws and regulations affecting our operations may be
adopted in the future. We may incur substantial costs to comply
with, and substantial fines or penalties if we violate, any of
these laws or regulations.
Risks
Related to Patents, Licenses and Trade Secrets
If we
are not able to obtain and enforce patent protection for our
discoveries, our ability to develop and commercialize our
product candidates will be harmed.
Our success depends, in part, on our ability to protect
proprietary methods and technologies that we develop under the
patent and other intellectual property laws of the United States
and other countries, so that we can prevent others from
unlawfully using our inventions and proprietary information.
However, we may not hold proprietary rights to some patents
required for us to commercialize our proposed products. Because
certain U.S. patent applications are confidential until the
patents issue, such as applications filed prior to
November 29, 2000, or applications filed after such date
which will not be filed in foreign countries, third parties may
have filed patent applications for technology covered by our
pending patent applications without our being aware of those
applications, and our patent applications may not have priority
over those applications. For this and other reasons, we may be
unable to secure desired patent rights, thereby losing desired
exclusivity. Further, we may be required to obtain licenses
under third-party patents to market our proposed products or
conduct our research and development or other activities. If
licenses are not available to us on acceptable terms, we will
not be able to market the affected products or conduct the
desired activities.
Our strategy depends on our ability to rapidly identify and seek
patent protection for our discoveries. In addition, we may rely
on third-party collaborators to file patent applications
relating to proprietary technology that we develop jointly
during certain collaborations. The process of obtaining patent
protection is expensive and time-consuming. If our present or
future collaborators fail to file and prosecute all necessary
and desirable patent applications at a reasonable cost and in a
timely manner, our business will be adversely affected. Despite
our efforts and the efforts of our collaborators to protect our
proprietary rights, unauthorized parties may be able to obtain
and use information that we regard as proprietary. While issued
patents are presumed valid, this does not guarantee that the
patent will survive a validity challenge or be held enforceable.
Any patents we have obtained, or obtain in the future, may be
challenged, invalidated, adjudged unenforceable or circumvented
by parties attempting to design around our intellectual
property. Moreover, third parties or the USPTO may commence
interference proceedings involving our patents or patent
applications. Any challenge to, finding of unenforceability or
invalidation or circumvention of, our patents or patent
applications would be costly, would require significant time and
attention of our management and could have a material adverse
effect on our business.
Our pending patent applications may not result in issued
patents. The patent position of pharmaceutical or biotechnology
companies, including ours, is generally uncertain and involves
complex legal and factual considerations. The standards that the
USPTO and its foreign counterparts use to grant patents are not
always applied predictably or uniformly and can change.
Similarly, the ultimate degree of protection that will be
afforded to biotechnology inventions, including ours, in the
United States and foreign countries, remains uncertain and is
dependent upon the scope of the protection decided upon by
patent offices, courts and lawmakers. Moreover, there
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are periodic discussions in the Congress of the United States
and in international jurisdictions about modifying various
aspects of patent law. If any such changes are enacted and do
not provide adequate protection for discoveries, including our
ability to pursue infringers of our patents for substantial
damages, our business could be adversely affected. There is also
no uniform, worldwide policy regarding the subject matter and
scope of claims granted or allowable in pharmaceutical or
biotechnology patents. Accordingly, we do not know the degree of
future protection for our proprietary rights or the breadth of
claims that will be allowed in any patents issued to us or to
others.
We also rely to a certain extent on trade secrets, know-how and
technology, which are not protected by patents, to maintain our
competitive position. If any trade secret, know-how or other
technology not protected by a patent were to be disclosed to or
independently developed by a competitor, our business and
financial condition could be materially adversely affected.
We
license patent rights from third-party owners. If such owners do
not properly or successfully obtain, maintain or enforce the
patents underlying such licenses, our competitive position and
business prospects will be harmed.
We are a party to a number of licenses that give us rights to
third-party intellectual property that is necessary or useful
for our business. In particular, we have obtained licenses from,
among others, CRT, Isis, MIT, Whitehead, Max Planck, Stanford,
Tekmira and UTSW. We also intend to enter into additional
licenses to third-party intellectual property in the future.
Our success will depend in part on the ability of our licensors
to obtain, maintain and enforce patent protection for our
licensed intellectual property, in particular, those patents to
which we have secured exclusive rights. Our licensors may not
successfully prosecute the patent applications to which we are
licensed. Even if patents issue in respect of these patent
applications, our licensors may fail to maintain these patents,
may determine not to pursue litigation against other companies
that are infringing these patents, or may pursue such litigation
less aggressively than we would. Without protection for the
intellectual property we license, other companies might be able
to offer substantially identical products for sale, which could
adversely affect our competitive business position and harm our
business prospects. In addition, we sublicense our rights under
various third-party licenses to our collaborators. Any
impairment of these sublicensed rights could result in reduced
revenues under our collaboration agreements or result in
termination of an agreement by one or more of our collaborators.
In June 2009, we joined with Max Planck in taking legal action
against Whitehead, MIT and UMass. The complaint, initially filed
in the Suffolk County Superior Court in Boston, Massachusetts
and subsequently removed to the U.S. District Court for the
District of Massachusetts, alleges, among other things, that the
defendants have improperly prosecuted the Tuschl I patent
applications and wrongfully incorporated inventions covered by
the Tuschl II patent applications into the Tuschl I patent
applications, thereby potentially damaging the value of
inventions reflected in the Tuschl I and Tuschl II patent
applications. In the field of RNAi therapeutics, we are the
exclusive licensee of the Tuschl I patent applications from Max
Planck, MIT and Whitehead, and of the Tuschl II patent
applications from Max Planck.
The complaint seeks, among other things, a declaratory judgment
regarding the prosecution of the Tuschl I patent family and
unspecified monetary damages. In August 2009, Whitehead and
UMass filed counterclaims against us and Max Planck, including
for breach of contract. In January 2010, we and Max Planck filed
an amended complaint expanding upon the allegations in the
original complaint. We currently expect a jury trial to start in
March 2011. In February 2010, we and Max Planck released MIT
from any claims seeking monetary damages, and MIT has stipulated
that it will be bound by any declaratory, injunctive, or
equitable relief that the court grants.
In addition, in September 2009, the USPTO granted Max
Plancks petition to revoke power of attorney in connection
with the prosecution of the Tuschl I patent application. This
action prevents the defendants from filing any papers with the
USPTO in connection with further prosecution of the Tuschl I
patent application without the agreement of Max Planck.
Whiteheads petition to overturn this ruling was denied.
Prosecution before the USPTO for both the Tuschl I and II
pending patent applications was suspended pursuant to a
standstill agreement. This agreement expired on
September 15, 2010, and Max Planck, MIT, Whitehead and
UMass filed several continuation applications in the Tuschl I
patent family to preserve their rights and maintain the status
quo for these applications
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pending the outcome of the litigation. Max Planck also filed a
continuation application in the Tuschl II patent family.
Although we, along with Max Planck, are vigorously asserting our
rights in this case, litigation is subject to inherent
uncertainty and a court could ultimately rule against us and Max
Planck. In addition, litigation is costly and may divert the
attention of our management and other resources that would
otherwise be engaged in running our business.
Other
companies or organizations may challenge our patent rights or
may assert patent rights that prevent us from developing and
commercializing our products.
RNAi is a relatively new scientific field, the commercial
exploitation of which has resulted in many different patents and
patent applications from organizations and individuals seeking
to obtain patent protection in the field. We have obtained
grants and issuances of RNAi patents and have licensed many of
these patents from third parties on an exclusive basis. The
issued patents and pending patent applications in the United
States and in key markets around the world that we own or
license claim many different methods, compositions and processes
relating to the discovery, development, manufacture and
commercialization of RNAi therapeutics.
Specifically, we have a portfolio of patents, patent
applications and other intellectual property covering:
fundamental aspects of the structure and uses of siRNAs,
including their manufacture and use as therapeutics, and
RNAi-related mechanisms; chemical modifications to siRNAs that
improve their suitability for therapeutic uses; siRNAs directed
to specific targets as treatments for particular diseases; and
delivery technologies, such as in the field of cationic
liposomes.
As the field of RNAi therapeutics is maturing, patent
applications are being fully processed by national patent
offices around the world. There is uncertainty about which
patents will issue, and, if they do, as to when, to whom, and
with what claims. It is likely that there will be significant
litigation and other proceedings, such as interference,
reexamination and opposition proceedings, in various patent
offices relating to patent rights in the RNAi field. For
example, various third parties have initiated oppositions to
patents in our Kreutzer-Limmer and Tuschl II series in the
EPO and in other jurisdictions. We expect that additional
oppositions will be filed in the EPO and elsewhere, and other
challenges will be raised relating to other patents and patent
applications in our portfolio. In many cases, the possibility of
appeal exists for either us or our opponents, and it may be
years before final, unappealable rulings are made with respect
to these patents in certain jurisdictions. The timing and
outcome of these and other proceedings is uncertain and may
adversely affect our business if we are not successful in
defending the patentability and scope of our pending and issued
patent claims. In addition, third parties may attempt to
invalidate our intellectual property rights. Even if our rights
are not directly challenged, disputes could lead to the
weakening of our intellectual property rights. Our defense
against any attempt by third parties to circumvent or invalidate
our intellectual property rights could be costly to us, could
require significant time and attention of our management and
could have a material adverse effect on our business and our
ability to successfully compete in the field of RNAi.
There are many issued and pending patents that claim aspects of
oligonucleotide chemistry that we may need to apply to our siRNA
therapeutic candidates. There are also many issued patents that
claim targeting genes or portions of genes that may be relevant
for siRNA drugs we wish to develop. Thus, it is possible that
one or more organizations will hold patent rights to which we
will need a license. If those organizations refuse to grant us a
license to such patent rights on reasonable terms, we may not be
able to market products or perform research and development or
other activities covered by these patents.
If we
become involved in patent litigation or other proceedings
related to a determination of rights, we could incur substantial
costs and expenses, substantial liability for damages or be
required to stop our product development and commercialization
efforts.
Third parties may sue us for infringing their patent rights.
Likewise, we may need to resort to litigation to enforce a
patent issued or licensed to us or to determine the scope and
validity of proprietary rights of others. In addition, a third
party may claim that we have improperly obtained or used its
confidential or proprietary information. Furthermore, in
connection with a license agreement, we agreed to indemnify the
licensor for costs incurred in connection with litigation
relating to intellectual property rights. The cost to us of any
litigation or other
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proceeding relating to intellectual property rights, even if
resolved in our favor, could be substantial, and the litigation
would divert our managements efforts. Some of our
competitors may be able to sustain the costs of complex patent
litigation more effectively than we can because they have
substantially greater resources. Uncertainties resulting from
the initiation and continuation of any litigation could limit
our ability to continue our operations.
If any parties successfully claim that our creation or use of
proprietary technologies infringes upon their intellectual
property rights, we might be forced to pay damages, potentially
including treble damages, if we are found to have willfully
infringed on such parties patent rights. In addition to
any damages we might have to pay, a court could require us to
stop the infringing activity or obtain a license. Any license
required under any patent may not be made available on
commercially acceptable terms, if at all. In addition, such
licenses are likely to be non-exclusive and, therefore, our
competitors may have access to the same technology licensed to
us. If we fail to obtain a required license and are unable to
design around a patent, we may be unable to effectively market
some of our technology and products, which could limit our
ability to generate revenues or achieve profitability and
possibly prevent us from generating revenue sufficient to
sustain our operations. Moreover, we expect that a number of our
collaborations will provide that royalties payable to us for
licenses to our intellectual property may be offset by amounts
paid by our collaborators to third parties who have competing or
superior intellectual property positions in the relevant fields,
which could result in significant reductions in our revenues
from products developed through collaborations.
If we
fail to comply with our obligations under any licenses or
related agreements, we could lose license rights that are
necessary for developing and protecting our RNAi technology and
any related product candidates that we develop, or we could lose
certain exclusive rights to grant sublicenses.
Our current licenses impose, and any future licenses we enter
into are likely to impose, various development,
commercialization, funding, royalty, diligence, sublicensing,
insurance and other obligations on us. If we breach any of these
obligations, the licensor may have the right to terminate the
license or render the license non-exclusive, which could result
in us being unable to develop, manufacture and sell products
that are covered by the licensed technology or enable a
competitor to gain access to the licensed technology. In
addition, while we cannot currently determine the amount of the
royalty obligations we will be required to pay on sales of
future products, if any, the amounts may be significant. The
amount of our future royalty obligations will depend on the
technology and intellectual property we use in products that we
successfully develop and commercialize, if any. Therefore, even
if we successfully develop and commercialize products, we may be
unable to achieve or maintain profitability.
Confidentiality
agreements with employees and others may not adequately prevent
disclosure of trade secrets and other proprietary
information.
In order to protect our proprietary technology and processes, we
rely in part on confidentiality agreements with our
collaborators, employees, consultants, outside scientific
collaborators and sponsored researchers, and other advisors.
These agreements may not effectively prevent disclosure of
confidential information and may not provide an adequate remedy
in the event of unauthorized disclosure of confidential
information. In addition, others may independently discover
trade secrets and proprietary information, and in such cases we
could not assert any trade secret rights against such party.
Costly and time-consuming litigation could be necessary to
enforce and determine the scope of our proprietary rights, and
failure to obtain or maintain trade secret protection could
adversely affect our competitive business position.
Risks
Related to Competition
The
pharmaceutical market is intensely competitive. If we are unable
to compete effectively with existing drugs, new treatment
methods and new technologies, we may be unable to commercialize
successfully any drugs that we develop.
The pharmaceutical market is intensely competitive and rapidly
changing. Many large pharmaceutical and biotechnology companies,
academic institutions, governmental agencies and other public
and private research
64
organizations are pursuing the development of novel drugs for
the same diseases that we are targeting or expect to target.
Many of our competitors have:
|
|
|
|
|
much greater financial, technical and human resources than we
have at every stage of the discovery, development, manufacture
and commercialization of products;
|
|
|
|
more extensive experience in pre-clinical testing, conducting
clinical trials, obtaining regulatory approvals, and in
manufacturing, marketing and selling pharmaceutical products;
|
|
|
|
product candidates that are based on previously tested or
accepted technologies;
|
|
|
|
products that have been approved or are in late stages of
development; and
|
|
|
|
collaborative arrangements in our target markets with leading
companies and research institutions.
|
We will face intense competition from drugs that have already
been approved and accepted by the medical community for the
treatment of the conditions for which we may develop drugs. We
also expect to face competition from new drugs that enter the
market. We believe a significant number of drugs are currently
under development, and may become commercially available in the
future, for the treatment of conditions for which we may try to
develop drugs. For instance, we are currently evaluating RNAi
therapeutics for ATTR, severe hypercholesterolemia, refractory
anemia, RSV, liver cancers and HD, and have a number of
additional discovery programs targeting other diseases. These
drugs may be more effective, safer, less expensive, or marketed
and sold more effectively, than any products we develop.
If we successfully develop product candidates, and obtain
approval for them, we will face competition based on many
different factors, including:
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|
|
the safety and effectiveness of our products;
|
|
|
|
the ease with which our products can be administered and the
extent to which patients accept relatively new routes of
administration;
|
|
|
|
the timing and scope of regulatory approvals for these products;
|
|
|
|
the availability and cost of manufacturing, marketing and sales
capabilities;
|
|
|
|
price;
|
|
|
|
reimbursement coverage; and
|
|
|
|
patent position.
|
Our competitors may develop or commercialize products with
significant advantages over any products we develop based on any
of the factors listed above or on other factors. Our competitors
may therefore be more successful in commercializing their
products than we are, which could adversely affect our
competitive position and business. Competitive products may make
any products we develop obsolete or noncompetitive before we can
recover the expenses of developing and commercializing our
product candidates. Such competitors could also recruit our
employees, which could negatively impact our level of expertise
and the ability to execute on our business plan. Furthermore, we
also face competition from existing and new treatment methods
that reduce or eliminate the need for drugs, such as the use of
advanced medical devices. The development of new medical devices
or other treatment methods for the diseases we are targeting
could make our product candidates noncompetitive, obsolete or
uneconomical.
We
face competition from other companies that are working to
develop novel drugs and technology platforms using technology
similar to ours. If these companies develop drugs more rapidly
than we do or their technologies, including delivery
technologies, are more effective, our ability to successfully
commercialize drugs may be adversely affected.
In addition to the competition we face from competing drugs in
general, we also face competition from other companies working
to develop novel drugs using technology that competes more
directly with our own. We are aware of multiple companies that
are working in the field of RNAi. In addition, we granted
licenses or options for
65
licenses to Isis, GeneCare, Benitec, Calando, Tekmira, Quark and
others under which these companies may independently develop
RNAi therapeutics against a limited number of targets. Any of
these companies may develop its RNAi technology more rapidly and
more effectively than us. Merck, was one of our collaborators
and a licensee under our intellectual property for specified
disease targets until September 2007, at which time we and Merck
agreed to terminate our collaboration. As a result of its
acquisition of Sirna in December 2006, and in light of the
mutual termination of our collaboration, Merck, which has
substantially more resources and experience in developing drugs
than we do, may become a direct competitor.
In addition, as a result of agreements that we have entered
into, Roche and Takeda have obtained non-exclusive licenses, and
Novartis has obtained specific exclusive licenses for 31 gene
targets, to certain aspects of our technology that give them the
right to compete with us in certain circumstances.
We also compete with companies working to develop
antisense-based drugs. Like RNAi therapeutics, antisense drugs
target messenger RNAs, or mRNAs, in order to suppress the
activity of specific genes. Isis is currently marketing an
antisense drug and has several antisense product candidates in
clinical trials. The development of antisense drugs is more
advanced than that of RNAi therapeutics, and antisense
technology may become the preferred technology for drugs that
target mRNAs to silence specific genes.
In addition to competition with respect to RNAi and with respect
to specific products, we face substantial competition to
discover and develop safe and effective means to deliver siRNAs
to the relevant cell and tissue types. Safe and effective means
to deliver siRNAs to the relevant cell and tissue types may be
developed by our competitors, and our ability to successfully
commercialize a competitive product would be adversely affected.
In addition, substantial resources are being expended by third
parties in the effort to discover and develop a safe and
effective means of delivering siRNAs into the relevant cell and
tissue types, both in academic laboratories and in the corporate
sector. Some of our competitors have substantially greater
resources than we do, and if our competitors are able to
negotiate exclusive access to those delivery solutions developed
by third parties, we may be unable to successfully commercialize
our product candidates.
Our Alnylam Biotherapeutics efforts will also face competition
from established companies developing and commercializing
technology applications to improve the manufacturing processes
for drugs. If these companies advance and market their
technologies more rapidly than Alnylam Biotherapeutics, we may
be unable to establish collaborations for Alnylam
Biotherapeutics with established biologic manufacturers, selling
licenses, products and services.
Risks
Related to Our Common Stock
If our
stock price fluctuates, purchasers of our common stock could
incur substantial losses.
The market price of our common stock has and may continue to
fluctuate significantly in response to factors that are beyond
our control. The stock market in general has recently
experienced extreme price and volume fluctuations. The market
prices of securities of pharmaceutical and biotechnology
companies have been extremely volatile, and have experienced
fluctuations that often have been unrelated or disproportionate
to the operating performance of these companies. These broad
market fluctuations could result in extreme fluctuations in the
price of our common stock, which could cause purchasers of our
common stock to incur substantial losses.
We may
incur significant costs from class action litigation due to our
expected stock volatility.
Our stock price may fluctuate for many reasons, including as a
result of public announcements regarding the progress of our
development efforts or the development efforts of our
collaborators
and/or
competitors, the addition or departure of our key personnel,
variations in our quarterly operating results and changes in
market valuations of pharmaceutical and biotechnology companies.
When the market price of a stock has been volatile as our stock
price may be, holders of that stock have occasionally brought
securities class action litigation against the company that
issued the stock. If any of our stockholders were to bring a
lawsuit of this type against us, even if the lawsuit is without
merit, we could incur substantial costs defending the lawsuit.
The lawsuit could also divert the time and attention of our
management.
66
Novartis
ownership of our common stock could delay or prevent a change in
corporate control or cause a decline in our common stock should
Novartis decide to sell all or a portion of its
shares.
At December 31, 2010, Novartis held 13.2% of our
outstanding common stock and has the right to maintain its
ownership percentage through the expiration or termination of
our license agreement, subject to certain exceptions. This
concentration of ownership may harm the market price of our
common stock by:
|
|
|
|
|
delaying, deferring or preventing a change in control of our
company;
|
|
|
|
impeding a merger, consolidation, takeover or other business
combination involving our company; or
|
|
|
|
discouraging a potential acquirer from making a tender offer or
otherwise attempting to obtain control of our company.
|
In addition, if Novartis decides to sell all or a portion of its
shares in a rapid or disorderly manner, our stock price could be
negatively impacted.
Anti-takeover
provisions in our charter documents and under Delaware law and
our stockholder rights plan could make an acquisition of us,
which may be beneficial to our stockholders, more difficult and
may prevent attempts by our stockholders to replace or remove
our current management.
Provisions in our certificate of incorporation and our bylaws
may delay or prevent an acquisition of us or a change in our
management. In addition, these provisions may frustrate or
prevent any attempts by our stockholders to replace or remove
our current management by making it more difficult for
stockholders to replace members of our board of directors.
Because our board of directors is responsible for appointing the
members of our management team, these provisions could in turn
affect any attempt by our stockholders to replace current
members of our management team. These provisions include:
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|
|
|
|
a classified board of directors;
|
|
|
|
a prohibition on actions by our stockholders by written consent;
|
|
|
|
limitations on the removal of directors; and
|
|
|
|
advance notice requirements for election to our board of
directors and for proposing matters that can be acted upon at
stockholder meetings.
|
In addition, our board of directors has adopted a stockholder
rights plan, the provisions of which could make it difficult for
a potential acquirer of Alnylam to consummate an acquisition
transaction.
Moreover, because we are incorporated in Delaware, we are
governed by the provisions of Section 203 of the Delaware
General Corporation Law, which prohibits a person who owns in
excess of 15% of our outstanding voting stock from merging or
combining with us for a period of three years after the date of
the transaction in which the person acquired in excess of 15% of
our outstanding voting stock, unless the merger or combination
is approved in a prescribed manner. These provisions would apply
even if the proposed merger or acquisition could be considered
beneficial by some stockholders.
67
|
|
ITEM 1B.
|
UNRESOLVED
STAFF COMMENTS
|
Not applicable.
Our operations are based primarily in Cambridge, Massachusetts.
As of January 31, 2011, we lease approximately
129,000 square feet of office and laboratory space in
Cambridge, Massachusetts, of which approximately
34,000 square feet is under sublease to a third party
through December 2011. The lease for this property expires in
September 2016, and we have the option to extend the lease for
two successive five-year periods. We believe that the total
space available to us under our current lease will meet our
needs for the foreseeable future and that additional space would
be available to us on commercially reasonable terms if required.
|
|
ITEM 3.
|
LEGAL
PROCEEDINGS
|
In June 2009, we joined with Max Planck in taking legal action
against Whitehead, MIT and UMass. The complaint, initially filed
in the Suffolk County Superior Court in Boston, Massachusetts
and subsequently removed to the U.S. District Court for the
District of Massachusetts, alleges, among other things, that the
defendants have improperly prosecuted the Tuschl I patent
applications and wrongfully incorporated inventions covered by
the Tuschl II patent applications into the Tuschl I patent
applications, thereby potentially damaging the value of
inventions reflected in the Tuschl I and Tuschl II patent
applications. In the field of RNAi therapeutics, we are the
exclusive licensee of the Tuschl I patent applications from Max
Planck, MIT and Whitehead, and of the Tuschl II patent
applications from Max Planck.
The complaint seeks, among other things, a declaratory judgment
regarding the prosecution of the Tuschl I patent family and
unspecified monetary damages. In August 2009, Whitehead and
UMass filed counterclaims against us and Max Planck, including
for breach of contract. In January 2010, we and Max Planck filed
an amended complaint expanding upon the allegations in the
original complaint. We currently expect a jury trial to start in
March 2011. In February 2010, we and Max Planck released MIT
from any claims seeking monetary damages, and MIT has stipulated
that it will be bound by any declaratory, injunctive, or
equitable relief granted by the court.
In addition, in September 2009, the USPTO granted Max
Plancks petition to revoke power of attorney in connection
with the prosecution of the Tuschl I patent application. This
action prevents the defendants from filing any papers with the
USPTO in connection with further prosecution of the Tuschl I
patent application without the agreement of Max Planck.
Whiteheads petition to overturn this ruling was denied.
Prosecution before the USPTO for both the Tuschl I and II
pending patent applications was suspended pursuant to a
standstill agreement. This agreement expired on
September 15, 2010, and Max Planck, MIT, Whitehead and
UMass filed several continuation applications in the Tuschl I
patent family to preserve their rights and maintain the status
quo for these applications pending the outcome of the
litigation. Max Planck also filed a continuation application in
the Tuschl II patent family.
Although we, along with Max Planck, are vigorously asserting our
rights in this case, litigation is subject to inherent
uncertainty and a court could ultimately rule against us and Max
Planck. In addition, litigation is costly and may divert the
attention of our management and other resources that would
otherwise be engaged in running our business.
|
|
ITEM 4.
|
(Removed
and Reserved)
|
68
PART II
|
|
ITEM 5.
|
MARKET
FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS
AND ISSUER PURCHASES OF EQUITY SECURITIES
|
Market
Information
Our common stock began trading on The NASDAQ Global Market on
May 28, 2004 under the symbol ALNY. Prior to
that time, there was no established public trading market for
our common stock. The following table sets forth the high and
low sale prices per share for our common stock on The NASDAQ
Global Market for the periods indicated:
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2009:
|
|
High
|
|
|
Low
|
|
|
First Quarter
|
|
$
|
26.36
|
|
|
$
|
14.82
|
|
Second Quarter
|
|
$
|
23.10
|
|
|
$
|
16.29
|
|
Third Quarter
|
|
$
|
24.75
|
|
|
$
|
19.00
|
|
Fourth Quarter
|
|
$
|
22.87
|
|
|
$
|
15.45
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2010:
|
|
High
|
|
|
Low
|
|
|
First Quarter
|
|
$
|
19.29
|
|
|
$
|
16.41
|
|
Second Quarter
|
|
$
|
17.59
|
|
|
$
|
14.88
|
|
Third Quarter
|
|
$
|
16.36
|
|
|
$
|
12.24
|
|
Fourth Quarter
|
|
$
|
13.98
|
|
|
$
|
8.79
|
|
Holders
of record
At January 31, 2011, there were approximately 45 holders of
record of our common stock. Because many of our shares are held
by brokers and other institutions on behalf of stockholders, we
are unable to estimate the total number of individual
stockholders represented by these record holders.
Dividends
We have never paid or declared any cash dividends on our common
stock. We currently intend to retain any earnings for future
growth and, therefore, do not expect to pay cash dividends in
the foreseeable future.
Securities
Authorized for Issuance Under Equity Compensation
Plans
We intend to file with the SEC a definitive Proxy Statement,
which we refer to herein as the Proxy Statement, not later than
120 days after the close of the fiscal year ended
December 31, 2010. The information required by this item
relating to our equity compensation plans is incorporated herein
by reference to the information contained under the section
captioned Equity Compensation Plan Information of
the Proxy Statement.
69
Stock
Performance Graph
The following performance graph and related information shall
not be deemed soliciting material or to be
filed with the SEC, nor shall such information be
incorporated by reference into any future filing under the
Securities Act of 1933 or Securities Exchange Act of 1934, each
as amended, except to the extent that we specifically
incorporate it by reference into such filing.
The comparative stock performance graph below compares the
five-year cumulative total stockholder return (assuming
reinvestment of dividends, if any) from investing $100 on
December 31, 2005, to the close of the last trading day of
2010, in each of (i) our common stock, (ii) the NASDAQ
Stock Market (U.S.) Index and (iii) the NASDAQ
Pharmaceutical Index. The stock price performance reflected in
the graph below is not necessarily indicative of future price
performance.
Comparison
of Five-Year Cumulative Total Return
Among Alnylam Pharmaceuticals, Inc.,
NASDAQ Stock Market (U.S.) Index and NASDAQ Pharmaceuticals
Index
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12/31/2005
|
|
|
|
12/29/2006
|
|
|
|
12/31/2007
|
|
|
|
12/31/2008
|
|
|
|
12/31/2009
|
|
|
|
12/31/2010
|
|
Alnylam Pharmaceuticals, Inc.
|
|
|
$
|
100.00
|
|
|
|
$
|
160.18
|
|
|
|
$
|
217.66
|
|
|
|
$
|
185.10
|
|
|
|
$
|
131.89
|
|
|
|
$
|
73.80
|
|
NASDAQ Stock Market (U.S.) Index
|
|
|
$
|
100.00
|
|
|
|
$
|
109.84
|
|
|
|
$
|
119.14
|
|
|
|
$
|
57.41
|
|
|
|
$
|
82.52
|
|
|
|
$
|
97.96
|
|
NASDAQ Pharmaceutical Index
|
|
|
$
|
100.00
|
|
|
|
$
|
97.88
|
|
|
|
$
|
102.94
|
|
|
|
$
|
95.78
|
|
|
|
$
|
107.63
|
|
|
|
$
|
116.66
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
70
|
|
ITEM 6.
|
SELECTED
CONSOLIDATED FINANCIAL DATA
|
The following selected consolidated financial data for each of
the five years in the period ended December 31, 2010 are
derived from our audited consolidated financial statements. The
selected consolidated financial data set forth below should be
read in conjunction with Managements Discussion and
Analysis of Financial Condition and Results of Operations
and the financial statements, and the related Notes, included
elsewhere in this annual report on
Form 10-K.
Historical results are not necessarily indicative of future
results.
Selected
Consolidated Financial Data
(In thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
Statement of Operations Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues from research collaborators
|
|
$
|
100,041
|
|
|
$
|
100,533
|
|
|
$
|
96,163
|
|
|
$
|
50,897
|
|
|
$
|
26,930
|
|
Operating expenses(1)
|
|
|
144,111
|
|
|
|
148,644
|
|
|
|
123,998
|
|
|
|
144,074
|
|
|
|
66,431
|
|
Loss from operations
|
|
|
(44,070
|
)
|
|
|
(48,111
|
)
|
|
|
(27,835
|
)
|
|
|
(93,177
|
)
|
|
|
(39,501
|
)
|
Net loss
|
|
|
(43,515
|
)
|
|
|
(47,590
|
)
|
|
|
(26,249
|
)
|
|
|
(85,466
|
)
|
|
|
(34,608
|
)
|
Net loss per common share basic and diluted
|
|
$
|
(1.04
|
)
|
|
$
|
(1.14
|
)
|
|
$
|
(0.64
|
)
|
|
$
|
(2.21
|
)
|
|
$
|
(1.09
|
)
|
Weighted average common shares outstanding basic and
diluted
|
|
|
42,040
|
|
|
|
41,633
|
|
|
|
41,077
|
|
|
|
38,657
|
|
|
|
31,890
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Non-cash stock-based compensation expenses included in
operating expenses
|
|
$
|
19,118
|
|
|
$
|
19,727
|
|
|
$
|
16,382
|
|
|
$
|
14,472
|
|
|
$
|
8,304
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash, cash equivalents and marketable securities
|
|
$
|
349,904
|
|
|
$
|
435,316
|
|
|
$
|
512,709
|
|
|
$
|
455,602
|
|
|
$
|
217,260
|
|
Working capital
|
|
|
152,093
|
|
|
|
182,801
|
|
|
|
343,672
|
|
|
|
314,427
|
|
|
|
199,859
|
|
Total assets
|
|
|
393,265
|
|
|
|
481,385
|
|
|
|
554,676
|
|
|
|
493,791
|
|
|
|
240,006
|
|
Notes payable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,758
|
|
|
|
9,136
|
|
Total stockholders equity
|
|
|
158,233
|
|
|
|
177,965
|
|
|
|
202,125
|
|
|
|
199,168
|
|
|
|
201,174
|
|
71
|
|
ITEM 7.
|
MANAGEMENTS
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
|
Overview
We are a biopharmaceutical company developing novel therapeutics
based on RNAi. RNAi is a naturally occurring biological pathway
within cells for selectively silencing and regulating the
expression of specific genes. Since many diseases are caused by
the inappropriate activity of specific genes, the ability to
silence genes selectively through RNAi could provide a new way
to treat a wide range of human diseases. We believe that drugs
that work through RNAi have the potential to become a broad new
class of drugs, like small molecule, protein and antibody drugs.
Using our intellectual property and the expertise we have built
in RNAi, we are developing a set of biological and chemical
methods and know-how that we apply in a systematic way to
develop RNAi therapeutics for a variety of diseases.
Our core product strategy, which we refer to as Alnylam
5x15, is focused on the development and commercialization
of innovative RNAi therapeutics for the treatment of genetically
defined diseases. Under our core product strategy, we expect to
progress five RNAi therapeutic programs into advanced stages of
clinical development by the end of 2015. As part of this
strategy, our goal is to develop product candidates with the
following shared characteristics: a genetically defined target
and disease; the potential to have a significant impact in high
unmet need patient populations; the ability to leverage our
existing RNAi delivery platform; the opportunity to monitor an
early biomarker in Phase I clinical trials for human proof of
concept; and the existence of clinically relevant endpoints for
the filing of an NDA, with a focused patient database and
possible accelerated paths for commercialization. We intend to
commercialize products arising from this core product strategy
on our own in the United States and potentially certain other
countries, and we intend to enter into alliances to develop and
commercialize any such products in other global territories. We
are currently advancing three core programs in clinical or
pre-clinical development: ALN-TTR for the treatment of ATTR;
ALN-PCS for the treatment of severe hypercholesterolemia; and
ALN-HPN for the treatment of refractory anemia. As part of our
core product strategy, we also expect to designate and start
pre-clinical development of two additional RNAi therapeutic
candidates targeting genetically defined diseases by the end of
2011.
While focusing our efforts on our core product strategy, we also
intend to continue to advance additional development programs
through existing or future alliances. We have three
partner-based programs in clinical or pre-clinical development,
including ALN-RSV01 for the treatment of RSV, ALN-VSP for the
treatment of liver cancers and ALN-HTT for the treatment of HD.
We also continue to work internally and with third-party
collaborators to develop new technologies to deliver our RNAi
therapeutics both directly to specific sites of disease, and
systemically by intravenous or subcutaneous administration. We
have numerous RNAi therapeutic delivery collaborations and
intend to continue to collaborate with government, academic and
corporate third parties to evaluate different delivery options.
In addition, our expertise in RNAi therapeutics and broad
intellectual property estate have allowed us to form alliances
with leading companies, including Isis, Medtronic, Novartis,
Biogen Idec, Roche, Takeda, Kyowa Hakko Kirin and Cubist. We
have also entered into contracts with government agencies,
including the NIAID, a component of the NIH. We have established
collaborations with and, in some instances, received funding
from major medical and disease associations, including CHDI.
Finally, to further enable the field and monetize our
intellectual property rights, we also grant licenses to
biotechnology companies for the development and
commercialization of RNAi therapeutics for specified targets in
which we have no direct strategic interest under our InterfeRx
program, and to research companies that commercialize RNAi
reagents or services under our research product licenses.
In September 2010, as a result of the planned completion of the
fifth and final year of the research program under our
collaboration and license agreement with Novartis and our
reduced need for service-based collaboration resources, we
undertook a corporate restructuring to focus our resources on
our most promising programs and significantly reduce our cost
structure. The corporate restructuring included a reduction of
our overall workforce by approximately 25%. We expect this
reduction in personnel costs, along with other external costs,
could result in a savings of approximately $25.0 million in
previously planned 2011 operating expenses. During the year
ended December 31, 2010, we recorded $2.2 million in
operating expenses under the restructuring, including employee
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severance, benefits and related costs. We expect to have paid
substantially all of these expenses by the end of the first half
of 2011.
Alnylam commenced operations in June 2002. We have focused our
efforts since inception primarily on business planning, research
and development, acquiring, filing and expanding intellectual
property rights, recruiting management and technical staff, and
raising capital. Since our inception, we have generated
significant losses. At December 31, 2010, we had an
accumulated deficit of $343.3 million. Through
December 31, 2010, we have funded our operations primarily
through the net proceeds from the sale of equity securities, as
well as payments we have received under strategic alliances.
Through December 31, 2010, a substantial portion of our
total net revenues have been collaboration revenues derived from
our strategic alliances with Roche, Takeda and Novartis, and
from the United States government in connection with our
development of treatments for hemorrhagic fever viruses,
including Ebola. We expect our revenues to continue to be
derived primarily from new and existing strategic alliances,
government and foundation funding, and license fee revenues.
We currently have programs focused in a number of therapeutic
areas. However, we are unable to predict when, if ever, we will
successfully develop or be able to commence sales of any
product. We have never achieved profitability on an annual basis
and we expect to incur additional losses over the next several
years. We expect our net losses to continue due primarily to
research and development activities relating to our drug
development programs, collaborations and other general corporate
activities. We anticipate that our operating results will
fluctuate for the foreseeable future. Therefore,
period-to-period
comparisons should not be relied upon as predictive of the
results in future periods. Our sources of potential funding for
the next several years are expected to be derived primarily from
payments under new and existing strategic alliances, which may
include license and other fees, funded research and development
payments and milestone payments, government and foundation
funding, and proceeds from the sale of equity or debt.
Research
and Development
Since our inception, we have focused on drug discovery and
development programs. Research and development expenses
represent a substantial percentage of our total operating
expenses. Under our core product strategy, we expect to progress
five RNAi therapeutic programs into advanced stages of clinical
development by the end of 2015. While focusing our efforts on
our core product strategy, we also intend to continue to advance
additional partner-based development programs through existing
or future alliances.
In addition, we continue to work internally and with third-party
collaborators to develop new technologies to deliver our RNAi
therapeutics both directly to specific sites of disease, and
systemically by intravenous or subcutaneous administration.
There is a risk that any drug discovery or development program
may not produce revenue for a variety of reasons, including the
possibility that we will not be able to adequately demonstrate
the safety and efficacy of the product candidate. Moreover,
there are uncertainties specific to any new field of drug
discovery, including RNAi. The successful development of any
product candidate we develop is highly uncertain. Due to the
numerous risks associated with developing drugs, we cannot
reasonably estimate or know the nature, timing and estimated
costs of the efforts necessary to complete the development of,
or the period, if any, in which material net cash inflows will
commence from, any potential product candidate. These risks
include the uncertainty of:
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our ability to discover new product candidates;
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our ability to progress product candidates into pre-clinical and
clinical trials;
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the scope, rate of progress and cost of our pre-clinical trials
and other research and development activities, including those
related to developing safe and effective ways of delivering
siRNAs into cells and tissues;
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the scope, rate of progress and cost of any clinical trials we
commence;
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clinical trial results;
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the cost of filing, prosecuting, defending and enforcing any
patent claims and other intellectual property rights;
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the terms, timing and success of any collaboration, licensing
and other arrangements that we may establish;
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the cost, timing and success of regulatory filings and approvals
or potential changes in regulations that govern our industry or
the way in which they are interpreted or enforced;
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the cost and timing of establishing sufficient sales, marketing
and distribution capabilities;
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the cost and timing of establishing sufficient clinical and
commercial supplies for any product candidates and products that
we may develop; and
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the effect of competing technological and market developments.
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Any failure to complete any stage of the development of any
potential products in a timely manner could have a material
adverse effect on our operations, financial position and
liquidity. A discussion of some of the risks and uncertainties
associated with completing our projects on schedule, or at all,
and the potential consequences of failing to do so, are set
forth in Part I, Item 1A of this annual report on
Form 10-K
under the heading Risk Factors.
Strategic
Alliances
A significant component of our business plan is to enter into
strategic alliances and collaborations with pharmaceutical and
biotechnology companies, academic institutions, research
foundations and others, as appropriate, to gain access to
funding, capabilities, technical resources and intellectual
property to further our development efforts and to generate
revenues. Our collaboration strategy is to form
(1) non-exclusive platform
and/or
multi-target discovery alliances where our collaborators obtain
access to our capabilities and intellectual property to develop
their own RNAi therapeutic products; and (2) worldwide or
specific geographic partnerships on select RNAi therapeutic
programs. For example, we have entered into a broad,
non-exclusive platform license agreement with Takeda, under
which we are also collaborating with Takeda on RNAi drug
discovery for one or more disease targets. We have also
established product alliances with Cubist and Medtronic for the
development and commercialization of ALN-RSV and ALN-HTT,
respectively. In addition, we have entered into a product
alliance with Kyowa Hakko Kirin for the development and
commercialization of ALN-RSV in territories not covered by the
Cubist agreement, which include Japan and other markets in Asia.
We also have discovery and development alliances with Isis and
Biogen Idec.
We also seek to form or advance new ventures and opportunities
in areas outside our primary focus on RNAi therapeutics. For
example, during 2009, we established Alnylam Biotherapeutics, an
internal effort regarding the application of RNAi technologies
to improve the manufacturing processes for biologics, an
approach that has the potential to create new business
opportunities. This effort is focused on applying RNAi
technologies to the biologics marketplace, which includes
recombinant proteins and monoclonal antibodies. In addition,
during 2007, we and Isis formed Regulus to capitalize on our
technology and intellectual property in the field of microRNA
therapeutics. Regulus has formed collaborations with GSK and
sanofi-aventis to advance its efforts. Given the broad
applications for RNAi technology, in addition to our efforts on
Alnylam Biotherapeutics and Regulus, we believe new ventures and
opportunities will be available to us.
To generate revenues from our intellectual property rights, we
also grant licenses to biotechnology companies under our
InterfeRx program for the development and commercialization of
RNAi therapeutics for specified targets in which we have no
direct strategic interest. We also license key aspects of our
intellectual property to companies active in the research
products and services market, which includes the manufacture and
sale of reagents. Our InterfeRx and research product licenses
aim to generate modest near-term revenues that we can re-invest
in the development of our proprietary RNAi therapeutics
pipeline. As of January 31, 2011, we had granted such
licenses, on both an exclusive and non-exclusive basis, to
approximately 20 companies.
Since delivery of RNAi therapeutics remains a major objective of
our research activities, we also look to form collaboration and
licensing arrangements with other companies and academic
institutions to gain access to delivery technologies. For
example, we have entered into agreements with Tekmira, MIT, UBC
and AlCana, among others, to focus on various delivery
strategies. We have also entered into license agreements with
Isis, Max Planck Innovation, Tekmira, MIT, CRT, Whitehead,
Stanford and UTSW, as well as a number of other entities, to
obtain rights to intellectual property in the field of RNAi.
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Finally, we seek funding for the development of our proprietary
RNAi therapeutics pipeline from the government and foundations.
For example, in 2006, the NIAID awarded us a contract to advance
the development of a broad spectrum RNAi anti-viral therapeutic
against hemorrhagic fever virus, including the Ebola virus.
Critical
Accounting Policies and Estimates
Our discussion and analysis of our financial condition and
results of operations is based on our consolidated financial
statements, which have been prepared in accordance with
accounting principles generally accepted in the United States of
America, or GAAP. The preparation of our consolidated financial
statements requires us to make estimates and judgments that
affect the reported amounts of assets, liabilities, revenues and
expenses and disclosure of contingent liabilities in our
consolidated financial statements. Actual results may differ
from these estimates under different assumptions or conditions
and could have a material impact on our reported results. While
our significant accounting policies are more fully described in
the Notes to our consolidated financial statements included
elsewhere in this annual report on
Form 10-K,
we believe the following accounting policies to be the most
critical in understanding the judgments and estimates we use in
preparing our consolidated financial statements:
Revenue
Recognition
Our business strategy includes entering into collaborative
license and development agreements with biotechnology and
pharmaceutical companies for the development and
commercialization of our product candidates. The terms of the
agreements typically include non-refundable license fees,
funding of research and development, payments based upon
achievement of clinical and pre-clinical development milestones,
manufacturing services and royalties on product sales.
Non-refundable license fees are recognized as revenue upon
delivery of the license only if we have a contractual right to
receive such payment, the contract price is fixed or
determinable, the collection of the resulting receivable is
reasonably assured and we have no further performance
obligations under the license agreement. Multiple element
arrangements, such as license and development arrangements, are
analyzed to determine whether the deliverables, which often
include a license and performance obligations such as research
and steering committee services, can be separated or whether
they must be accounted for as a single unit of accounting. We
recognize upfront license payments as revenue upon delivery of
the license only if the license has stand-alone value and the
fair value of the undelivered performance obligations, typically
including research
and/or
steering committee services, can be determined. If the fair
value of the undelivered performance obligations can be
determined, such obligations would then be accounted for
separately as performed. If the license is considered to either
not have stand-alone value or have stand-alone value but the
fair value of any of the undelivered performance obligations
cannot be determined, the arrangement would then be accounted
for as a single unit of accounting and the license payments and
payments for performance obligations are recognized as revenue
over the estimated period of when the performance obligations
are performed.
Whenever we determine that an arrangement should be accounted
for as a single unit of accounting, we must determine the period
over which the performance obligations will be performed and
revenue will be recognized. We recognize revenue using either a
proportional performance or straight-line method. We recognize
revenue using the proportional performance method when we can
reasonably estimate the level of effort required to complete our
performance obligations under an arrangement and such
performance obligations are provided on a best-efforts basis.
Direct labor hours or full-time equivalents are typically used
as the measure of performance. The amount of revenue recognized
under the proportional performance method is determined by
multiplying the total payments under the contract, excluding
royalties and payments contingent upon achievement of
substantive milestones, by the ratio of level of effort incurred
to date to estimated total level of effort required to complete
our performance obligations under the arrangement. Revenue is
limited to the lesser of the cumulative amount of payments
received or the cumulative amount of revenue earned, as
determined using the proportional performance method, as of the
period ending date.
If we cannot reasonably estimate the level of effort required to
complete our performance obligations under an arrangement, we
recognize revenue under the arrangement on a straight-line basis
over the period we expect to
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complete our performance obligations. Revenue is limited to the
lesser of the cumulative amount of payments received or the
cumulative amount of revenue earned, as determined using the
straight-line method, as of the period ending date.
Significant management judgment is required in determining the
level of effort required under an arrangement and the period
over which we are expected to complete our performance
obligations under an arrangement. Steering committee services
that are not inconsequential or perfunctory and that are
determined to be performance obligations are combined with other
research services or performance obligations required under an
arrangement, if any, in determining the level of effort required
in an arrangement and the period over which we expect to
complete our aggregate performance obligations.
Many of our collaboration agreements entitle us to additional
payments upon the achievement of performance-based milestones.
If the achievement of a milestone is considered probable at the
inception of the collaboration, the related milestone payment is
included with other collaboration consideration, such as upfront
fees and research funding, in our revenue model. Milestones that
involve substantial effort on our part and the achievement of
which are not considered probable at the inception of the
collaboration are considered substantive milestones.
Substantive milestones are included in our revenue model when
achievement of the milestone is considered probable. As future
substantive milestones are achieved, a portion of the milestone
payment, equal to the percentage of the performance period
completed when the milestone is achieved, multiplied by the
amount of the milestone payment, will be recognized as revenue
upon achievement of such milestone. The remaining portion of the
milestone will be recognized over the remaining performance
period using the proportional performance or straight-line
method. Milestones that are tied to regulatory approval are not
considered probable of being achieved until such approval is
received. Milestones tied to counter-party performance are not
included in our revenue model until the performance conditions
are met.
For revenue generating arrangements where we, as a vendor,
provide consideration to a licensor or collaborator, as a
customer, we apply the accounting standard that governs such
transactions. This standard addresses the accounting for revenue
arrangements where both the vendor and the customer make cash
payments to each other for services
and/or
products. A payment to a customer is presumed to be a reduction
of the selling price unless we receive an identifiable benefit
for the payment and we can reasonably estimate the fair value of
the benefit received. Payments to a customer that are deemed a
reduction of selling price are recorded first as a reduction of
revenue, to the extent of both cumulative revenue recorded to
date and probable future revenues, which include any unamortized
deferred revenue balances, under all arrangements with such
customer, and then as an expense. Payments that are not deemed
to be a reduction of selling price are recorded as an expense.
We evaluate our collaborative agreements for proper
classification in our consolidated statements of operations
based on the nature of the underlying activity. Transactions
between collaborators recorded in our consolidated statements of
operations are recorded on either a gross or net basis,
depending on the characteristics of the collaborative
relationship. We generally reflect amounts due under our
collaborative agreements related to cost-sharing of development
activities as a reduction of research and development expense.
Amounts received prior to satisfying the above revenue
recognition criteria are recorded as deferred revenue in the
accompanying consolidated balance sheets. Although we follow
detailed guidelines in measuring revenue, certain judgments
affect the application of our revenue policy. For example, in
connection with our existing collaboration agreements, we have
recorded on our balance sheet short-term and long-term deferred
revenue based on our best estimate of when such revenue will be
recognized. Short-term deferred revenue consists of amounts that
are expected to be recognized as revenue in the next
12 months. Amounts that we expect will not be recognized
prior to the next 12 months are classified as long-term
deferred revenue. However, this estimate is based on our current
operating plan and, if our operating plan should change in the
future, we may recognize a different amount of deferred revenue
over the next
12-month
period.
The estimate of deferred revenue also reflects managements
estimate of the periods of our involvement in certain of our
collaborations. Our performance obligations under these
collaborations consist of participation on steering committees
and the performance of other research and development services.
In certain instances, the timing of satisfying these obligations
can be difficult to estimate. Accordingly, our estimates may
change in the future. Such changes to estimates would result in
a change in revenue recognition amounts. If these estimates and
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judgments change over the course of these agreements, it may
affect the timing and amount of revenue that we recognize and
record in future periods. At December 31, 2010, we had
short-term and long-term deferred revenue of $81.1 million
and $130.0 million, respectively, related to our
collaborations.
Effective beginning in January 2011, significant changes to
these contracts in the future would trigger reassessment of the
timing of revenue recognition under the new revenue recognition
accounting standard.
We recognize revenue under government cost reimbursement
contracts as we perform the underlying research and development
activities.
Novartis.
In consideration for rights granted
to Novartis under the collaboration and license agreement,
Novartis made an upfront payment of $10.0 million to us in
October 2005 to partly reimburse costs previously incurred by us
to develop
in vivo
RNAi technology. The collaboration and
license agreement included terms under which Novartis provided
us with research funding. In addition, for RNAi therapeutic
products developed under the agreement, if any, we are entitled
to receive milestone payments upon achievement of certain
specified development and annual net sales events, up to an
aggregate of $75.0 million per therapeutic product, as well
as royalties on annual net sales of any such product. We
initially recorded as deferred revenue the non-refundable
$10.0 million upfront payment and the $6.4 million
premium that represented the difference between the purchase
price and the closing price of our common stock on the date of
the stock purchase from Novartis. These payments, in addition to
research funding and certain milestone payments, together total
approximately $65.0 million, and are being amortized into
revenue using the proportional performance method over ten
years. Under this method, we estimate the level of effort to be
expended over the term of the agreement and recognize revenue
based on the lesser of the amount calculated based on the
proportional performance of total expected revenue or the amount
of non-refundable payments earned.
As future substantive milestones are achieved, and to the extent
they are within the period of performance, milestone payments
will be recognized as revenue on a proportional performance
basis over the contracts entire performance period,
starting with the contracts commencement. A portion of the
milestone payment, equal to the percentage of total performance
completed when the milestone is achieved, multiplied by the
milestone payment, will be recognized as revenue upon
achievement of the milestone. The remaining portion of the
milestone will be recognized over the remaining performance
period under the proportional performance method.
We believe our estimated period of performance under the
Novartis collaboration and license agreement is ten years, which
includes the three-year initial term of the agreement, the two
one-year extensions elected by Novartis and limited support as
part of a technology transfer until 2015, the fifth anniversary
of the completion of the research term under the collaboration
and license agreement. We continue to use an expected term of
ten years in our proportional performance model. We reevaluate
the expected term when new information is known that could
affect our estimate. In the event our period of performance is
different than we estimated, we will adjust the amount of
revenue recognized on a prospective basis. At December 31,
2010, deferred revenue under the Novartis collaboration and
license agreement was $0.4 million.
Roche.
We received aggregate proceeds from
Roche of $331.0 million in August 2007, of which
$278.2 million was recorded as deferred revenue in
connection with this alliance. In exchange for our contributions
under the collaboration agreement, for each RNAi therapeutic
product developed by Roche, its affiliates or sublicensees under
the collaboration agreement, we are entitled to receive
milestone payments upon achievement of specified development and
sales events, totaling up to an aggregate of $100.0 million
per therapeutic target, together with royalty payments based on
worldwide annual net sales, if any. In addition, we and Roche
established a discovery collaboration in October 2009, pursuant
to the terms of the Roche license and collaboration agreement
and subject to our existing contractual obligations to third
parties.
We have determined that the deliverables under our agreements
with Roche include the license, the Alnylam Europe assets and
employees, the steering committees (joint steering committee and
future technology committee) and the services under the
discovery collaboration. We have determined that, pursuant to
the accounting guidance governing revenue recognition on
multiple element arrangements, the license and assets of Alnylam
Europe are not separable from the undelivered services (i.e.,
the steering committees and discovery collaboration) and,
accordingly, the license and the services are being treated as a
single unit of accounting. When multiple
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deliverables are accounted for as a single unit of accounting,
we base our revenue recognition pattern on the final
deliverable. Under the Roche alliance, the steering committee
services and the discovery collaboration services are the final
deliverables and all such services will end, contractually, five
years from the effective date of the license and collaboration
agreement. We are recognizing the Roche-related revenue on a
straight-line basis over five years because we cannot reasonably
estimate the total level of effort required to complete our
service obligations under the license and collaboration
agreement and therefore, cannot utilize a proportional
performance model. As future substantive milestones are
achieved, we will recognize as revenue a portion of the
milestone payment, equal to the percentage of the performance
period completed when the milestone is achieved, multiplied by
the amount of the milestone payment. We will recognize the
remaining portion of the milestone over the remaining
performance period on a straight-line basis.
In November 2010, Roche announced the discontinuation of certain
activities in research and early development, including their
RNAi research efforts. The remaining deliverables under our
license and collaboration agreement currently remain in effect.
Roche may assign its rights and obligations under the license
and collaboration agreement to a third party in connection with
the sale or transfer of its entire RNAi business. We will
continue to recognize the Roche-related revenue on a
straight-line basis over five years. If Roche terminates the
license and collaboration agreement or assigns its rights and
obligations thereunder to a third party, at such time, we will
reassess our deliverables and the period over which we will
complete our performance obligations under the license and
collaboration agreement.
Takeda.
In consideration for the rights
granted to Takeda under the Takeda agreement, Takeda paid us an
upfront payment of $100.0 million in June 2008 and agreed
to pay us an additional $50.0 million upon achievement of
specified technology transfer milestones. Of this
$50.0 million, $20.0 million was paid in October 2008,
$20.0 million was paid in March 2010 and $10.0 million
is due upon achievement of the last specified technology
transfer activities, but no later than the second quarter of
2011. If Takeda elects to expand its license to additional
therapeutic areas, Takeda will be required to pay us
$50.0 million for each of up to approximately 20 total
additional fields selected, if any, comprising substantially all
other fields of human disease, as identified and agreed upon by
the parties. In addition, for each RNAi therapeutic product
developed by Takeda, its affiliates and sublicensees, we are
entitled to receive specified development and commercialization
milestones, totaling up to $171.0 million per product,
together with royalty payments based on worldwide annual net
sales, if any.
Pursuant to the Takeda agreement, we and Takeda have also agreed
to collaborate on the research of RNAi therapeutics directed to
one or two disease targets agreed to by the parties, subject to
our existing contractual obligations with third parties. Takeda
also has the option, subject to certain conditions, to
collaborate with us on the research and development of RNAi drug
delivery technology for targets agreed to by the parties. In
addition, Takeda has a right of first negotiation for the
development and commercialization of our RNAi therapeutic
products in the Asian territory, excluding our ALN-RSV program.
We have a similar right of first negotiation to participate with
Takeda in the development and commercialization in the United
States of licensed products. The collaboration is governed by a
JTTC, a JRCC and a JDCC, each of which is comprised of an equal
number of representatives from each party.
We have determined that the deliverables under the Takeda
agreement include the license, the joint committees (the JTTC,
JRCC and JDCC), the technology transfer activities and the
services that we will be obligated to perform under the research
collaboration with Takeda. We have determined that, pursuant to
the accounting guidance governing revenue recognition on
multiple element arrangements, the license and undelivered
services (i.e., the joint committees and the research
collaboration) are not separable and, accordingly, the license
and services are being treated as a single unit of accounting.
Under the Takeda agreement, the last elements to be delivered
are the JDCC and JTTC services, each of which has a life of no
more than seven years. We are recognizing the upfront payment of
$100.0 million and the $50.0 million of technology
transfer milestones, the receipt of which we believed was
probable at the commencement of the collaboration, on a
straight-line basis over seven years because we are unable to
reasonably estimate the level of effort to fulfill these
obligations, primarily because the effort required under the
research collaboration is largely unknown, and therefore, cannot
utilize a proportional performance model. As future substantive
milestones are achieved, we will recognize as revenue a portion
of the milestone payment, equal to the percentage of the
performance period completed when the milestone is achieved,
multiplied
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by the amount of the milestone payment. We will recognize the
remaining portion of the milestone over the remaining
performance period on a straight-line basis.
Kyowa Hakko Kirin.
Under the terms of the
Kyowa Hakko Kirin agreement, in June 2008, Kyowa Hakko Kirin
paid us an upfront cash payment of $15.0 million. In
addition, Kyowa Hakko Kirin is required to make payments to us
upon achievement of specified development and sales milestones
totaling up to $78.0 million, and royalty payments based on
annual net sales, if any, of RNAi therapeutics for the treatment
of RSV by Kyowa Hakko Kirin, its affiliates and sublicenses in
the licensed territory.
Our collaboration with Kyowa Hakko Kirin is governed by a joint
steering committee that is comprised of an equal number of
representatives from each party. Kyowa Hakko Kirin is
responsible, at its expense, for all development activities
under the development plan that are reasonably necessary for the
regulatory approval and commercialization of an RNAi therapeutic
for the treatment of RSV in Japan and the rest of the licensed
territory. We are responsible for supply of the product to Kyowa
Hakko Kirin under a supply agreement unless Kyowa Hakko Kirin
elects, prior to the first commercial sale of the product in the
licensed territory, to manufacture the product itself or arrange
for a third party to manufacture the product.
We have determined that the deliverables under the Kyowa Hakko
Kirin agreement include the license, the joint steering
committee, the manufacturing services and any additional
RSV-specific RNAi therapeutic compounds that comprise the
ALN-RSV program. We have determined that, pursuant to the
accounting guidance governing revenue recognition on multiple
element arrangements, the individual deliverables are not
separable and, accordingly, must be accounted for as a single
unit of accounting. We are currently unable to reasonably
estimate our period of performance under the Kyowa Hakko Kirin
agreement, as we are unable to estimate the timeline of our
deliverables related to the fixed-price option granted to Kyowa
Hakko Kirin for any additional compounds. We are deferring all
revenue under the Kyowa Hakko Kirin agreement until we are able
to reasonably estimate our period of performance. We will
continue to reassess whether we can reasonably estimate the
period of performance to fulfill our obligations under the Kyowa
Hakko Kirin agreement.
Cubist.
Under the terms of the Cubist
agreement, we and Cubist share responsibility for developing
licensed products in North America and each bears one-half of
the related development costs, subject to the terms of the
November 2009 amendment. Our collaboration with Cubist for the
development of licensed products in North America is governed by
a joint steering committee comprised of an equal number of
representatives from each party. Cubist will have the sole right
to commercialize licensed products in North America with costs
associated with such activities and any resulting profits or
losses to be split equally between us and Cubist. Throughout the
rest of the world, referred to as the Royalty Territory,
excluding Asia, where we have previously partnered our ALN-RSV
program with Kyowa Hakko Kirin, Cubist has an exclusive,
royalty-bearing license to develop and commercialize licensed
products.
In consideration for the rights granted to Cubist under the
agreement, in January 2009, Cubist paid us an upfront cash
payment of $20.0 million. Cubist also has an obligation
under the agreement to pay us milestone payments, totaling up to
an aggregate of $82.5 million, upon the achievement of
specified development and sales events in the Royalty Territory.
In addition, if licensed products are successfully developed,
Cubist will be required to pay us double digit royalties on net
sales of licensed products in the Royalty Territory, if any,
subject to offsets under certain circumstances. Upon achievement
of certain development milestones, we will have the right to
convert the North American co-development and profit sharing
arrangement into a royalty-bearing license and, in addition to
royalties on net sales in North America, if any, will be
entitled to receive additional milestone payments totaling up to
an aggregate of $130.0 million upon achievement of
specified development and sales events in North America, subject
to the timing of the conversion by us and the regulatory status
of a licensed product at the time of conversion. If we make the
conversion to a royalty-bearing license with respect to North
America, then North America becomes part of the Royalty
Territory.
We have determined that the deliverables under the Cubist
agreement include the licenses, technology transfer related to
the ALN-RSV program, the joint steering committee and the
development and manufacturing services that we are obligated to
perform during the development period. We have determined that,
pursuant to the accounting guidance governing revenue
recognition on multiple element arrangements, the licenses and
undelivered services are not separable and, accordingly, the
licenses and services are being treated as a single
79
unit of accounting. Under the Cubist agreement, the last element
to be delivered is the development and manufacturing services,
which have an expected life of approximately eight years. We are
recognizing the upfront payment of $20.0 million on a
straight-line basis over approximately eight years because we
are unable to reasonably estimate the level of effort to fulfill
our performance obligations and therefore, cannot utilize a
proportional performance model. As future substantive milestones
are achieved, we will recognize as revenue a portion of the
milestone payment, equal to the percentage of the performance
period completed when the milestone is achieved, multiplied by
the amount of the milestone payment. We will recognize the
remaining portion of the milestone over the remaining
performance period on a straight-line basis.
Under the terms of the Cubist agreement, we and Cubist share
responsibility for developing licensed products in North America
and each bears one-half of the related development costs,
provided that under the terms of the November 2009 amendment, we
are funding the advancement of ALN-RSV01 for adult lung
transplant patients and Cubist retains an opt-in right. In
December 2010, we and Cubist jointly made a portfolio decision
to put the development of ALN-RSV02 on hold.
For revenue generating arrangements that involve cost sharing
between both parties, we present the results of activities for
which we act as the principal on a gross basis and report any
payments received from, or made to, other collaborators based on
other applicable GAAP, or, in the absence of other applicable
GAAP, analogy to authoritative accounting literature or a
reasonable, rational and consistently applied accounting policy
election. As we are not considered the principal under the
Cubist agreement, we record any amounts due from Cubist as a
reduction of research and development expense.
Government Contracts.
We recognize revenue
under government cost reimbursement contracts as we perform the
underlying research and development activities.
Accounting
for Income Taxes
We recognize the tax benefit from an uncertain tax position only
if it is more likely than not that the tax position will be
sustained upon examination by the taxing authorities, based on
the technical merits of the tax position. The tax benefits
recognized in our financial statements from such a position are
measured based on the largest benefit that has a greater than
50% likelihood of being realized upon ultimate resolution.
We operate in the United States and Germany where our income tax
returns are subject to audit and adjustment by local tax
authorities. The nature of the uncertain tax positions is often
very complex and subject to change, and the amounts at issue can
be substantial. We develop our cumulative probability assessment
of the measurement of uncertain tax positions using internal
experience, judgment and assistance from professional advisors.
We refine estimates as we become aware of additional
information. Any outcome upon settlement that differs from our
current estimate may result in additional tax expense in future
periods. At December 31, 2010, we had $0.4 million of
total gross unrecognized tax benefits that, if recognized, would
favorably impact our effective income tax rate in future periods.
We recognize income taxes when transactions are recorded in our
consolidated statements of operations, with deferred taxes
provided for items that are recognized in different periods for
financial statement and tax reporting purposes. We record a
valuation allowance to reduce the deferred tax assets to the
amount that is more likely than not to be realized. In addition,
we estimate our exposures relating to uncertain tax positions
and establish reserves for such exposures when they become
probable and reasonably estimable.
For the years ended December 31, 2010, 2009 and 2008, we
recorded a provision for income taxes of $0.5 million,
$0.6 million and $0.7 million, respectively. We
generated U.S. taxable income during 2009 and 2008 due to
the recognition of certain proceeds received from the Roche and
Takeda alliances. During 2010, we generated sufficient net
operating losses to carry back to 2008 and 2009 to obtain a
refund of taxes paid in those years, resulting in a realization
of our net deferred tax asset. As a result, during 2010, we
reclassified $10.7 million of our deferred tax asset to
income taxes receivable. We expect to receive this income tax
refund in 2011. We were subject to federal alternative minimum
tax and state income taxes in 2009 and 2008.
At December 31, 2010, we had a valuation allowance against
our net deferred tax assets to the extent it is more likely than
not that the assets will not be realized. At December 31,
2010, we had federal and state net operating loss
80
carryforwards of $27.5 million and $101.6 million,
respectively, to reduce future taxable income that will expire
at various dates through 2030. At December 31, 2010, we had
federal and state research and development credit carryforwards
of $9.0 million and $3.4 million, respectively,
available to reduce future tax liabilities that expire at
various dates through 2030. At December 31, 2010, we had
foreign tax credit carryforwards of $3.1 million available
to reduce future tax liabilities that expire in 2017. At
December 31, 2010, we had alternative minimum tax credits
of $0.8 million available to reduce future regular tax
liabilities to the extent such regular tax less other
non-refundable credits exceeds the tentative minimum tax. We
have a valuation allowance against the net operating loss and
credit deferred tax assets as it is unlikely that we will
realize these assets. Ownership changes, as defined in the
Internal Revenue Code, including those resulting from the
issuance of common stock in connection with our public
offerings, may limit the amount of net operating loss and tax
credit carryforwards that can be utilized to offset future
taxable income or tax liability. The amount of the limitation is
determined in accordance with Section 382 of the Internal
Revenue Code. We have determined that there is no limitation on
the utilization of net operating loss and tax credit
carryforwards in accordance with Section 382 of the
Internal Revenue Code in 2010.
Accounting
for Stock-Based Compensation
We account for all stock-based awards granted to non-employees
at their fair value and generally recognize compensation expense
over the vesting period of the award. Determining the amount of
stock-based compensation to be recorded requires us to develop
estimates of fair values of stock options as of the grant date.
We calculate the grant date fair values using the Black-Scholes
valuation model. Our expected stock price volatility assumption
is based on a combination of the historical and implied
volatility of our publicly traded stock. For stock option awards
granted during the year ended December 31, 2010, we used a
weighted-average expected stock-price volatility assumption of
55%. Our expected life assumption is based on the equal
weighting of our historical data and the historical data of our
pharmaceutical and biotechnology peers. Our weighted average
expected term was 6.0 years for the year ended
December 31, 2010. We utilize a dividend yield of zero
based on the fact that we have never paid cash dividends and
currently have no intention to pay cash dividends. The risk-free
interest rate used for each grant is based on the
U.S. Treasury yield curve in effect at the time of grant
for instruments with a similar expected life.
At December 31, 2010, the estimated fair value of unvested
employee awards was $30.6 million, net of estimated
forfeitures. We will recognize this amount over the weighted
average remaining vesting period of approximately 2.8 years
for these awards. Stock-based employee compensation expense was
$18.7 million for the year ended December 31, 2010.
However, we cannot currently predict the total amount of
stock-based compensation expense to be recognized in any future
period because such amounts will depend on levels of stock-based
payments granted in the future as well as the portion of the
awards that actually vest. The stock compensation accounting
standard requires forfeitures to be estimated at the time of
grant and revised, if necessary, in subsequent periods if actual
forfeitures differ from those estimates. The term
forfeitures is distinct from
cancellations or expirations and
represents only the unvested portion of the surrendered stock
option. We currently expect, based on an analysis of our
historical forfeitures, excluding the impact of our corporate
restructuring, that approximately 76% of our stock options will
actually vest, and therefore have applied an annual forfeiture
rate of 6.5% to all unvested stock options at December 31,
2010. Ultimately, the actual expense recognized over the vesting
period will only be for those shares that vest.
Accounting
for Joint Venture
We account for our interest in Regulus using the equity method
of accounting. We reviewed the consolidation guidance that
defines a variable interest entity, or VIE, and concluded that
Regulus currently qualifies as a VIE. We record any gain or loss
recognized from the issuance of stock by our equity method
investee as other income (expense) in our consolidated
statements of operations. We do not consolidate Regulus
financial results as we lack the power to direct the activities
that could significantly impact the economic success of Regulus.
Estimated
Liability for Development Costs
We record accrued liabilities related to expenses for which
service providers have not yet billed us with respect to
products or services that we have received, specifically related
to ongoing pre-clinical studies and clinical trials. These costs
primarily relate to third-party clinical management costs,
laboratory and analysis costs, toxicology
81
studies and investigator fees. We have multiple product
candidates in concurrent pre-clinical studies and clinical
trials at multiple clinical sites throughout the world. In order
to ensure that we have adequately provided for ongoing
pre-clinical and clinical development costs during the period in
which we incur such costs, we maintain an accrual to cover these
expenses. We update our estimate for this accrual on at least a
quarterly basis. The assessment of these costs is a subjective
process that requires judgment. Upon settlement, these costs may
differ materially from the amounts accrued in our consolidated
financial statements. Our historical accrual estimates have not
been materially different from our actual amounts.
Results
of Operations
The following data summarizes the results of our operations for
the periods indicated, in thousands:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
2010
|
|
2009
|
|
2008
|
|
Net revenues from research collaborators
|
|
$
|
100,041
|
|
|
$
|
100,533
|
|
|
$
|
96,163
|
|
Operating expenses
|
|
|
144,111
|
|
|
|
148,644
|
|
|
|
123,998
|
|
Loss from operations
|
|
|
(44,070
|
)
|
|
|
(48,111
|
)
|
|
|
(27,835
|
)
|
Net loss
|
|
$
|
(43,515
|
)
|
|
$
|
(47,590
|
)
|
|
$
|
(26,249
|
)
|
Discussion
of Results of Operations for 2010 and 2009
Net
Revenues from Research Collaborators
We generate revenues through research collaborations. The
following table summarizes our total consolidated net revenues
from research collaborators, for the periods indicated, in
thousands:
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
|
December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
Roche
|
|
$
|
55,978
|
|
|
$
|
56,884
|
|
Takeda
|
|
|
22,250
|
|
|
|
21,732
|
|
Novartis
|
|
|
9,313
|
|
|
|
9,811
|
|
Government contract
|
|
|
4,335
|
|
|
|
7,471
|
|
Other research collaborator
|
|
|
5,159
|
|
|
|
3,593
|
|
InterfeRx program, research reagent license and other
|
|
|
3,006
|
|
|
|
1,042
|
|
|
|
|
|
|
|
|
|
|
Total net revenues from research collaborators
|
|
$
|
100,041
|
|
|
$
|
100,533
|
|
|
|
|
|
|
|
|
|
|
Revenues remained relatively consistent for the year ended
December 31, 2010 as compared to the year ended
December 31, 2009. Under the Roche alliance, we are
recognizing revenue on a straight-line basis over five years,
which equates to approximately $14.0 million per quarter.
Revenues under the Roche alliance in 2009 also included the
achievement of a development milestone. Under the Takeda
alliance, we are recognizing revenue on a straight-line basis
over seven years, which equates to approximately
$5.4 million per quarter.
In September 2010, Novartis exercised its right under the
collaboration and license agreement to select 31 designated gene
targets, for which Novartis has exclusive rights to discover,
develop and commercialize RNAi therapeutic products using our
intellectual property and technology. Novartis declined to
exercise its non-exclusive option to integrate into its
operations our fundamental and chemistry intellectual property
under the terms of the collaboration and license agreement,
known as the integration option. If Novartis had elected to
exercise the integration option, Novartis would have been
required to make additional payments to us totaling
$100.0 million. In October 2010, the fifth and final year
of the research program was substantially completed under the
Novartis collaboration and license agreement, and consequently,
we currently do not expect to have any significant revenues from
Novartis in 2011. At December 31, 2010, deferred revenue
under the Novartis collaboration and license agreement was
$0.4 million.
82
For the year ended December 31, 2010 as compared to the
year ended December 31, 2009, government contract revenues
decreased primarily as a result of a decrease in the research
and development activities related to our contract with the
NIAID. This contract was originally expected to be completed in
September 2010. We and the NIAID agreed to a no-cost extension
of the contract through December 2010 during which time we
utilized the funds remaining under the contract. We currently do
not expect to have any significant government contract revenues
in 2011.
Other research collaborator revenues increased in the year ended
December 31, 2010 as compared to the year ended
December 31, 2009 primarily as a result of the
$1.9 million sublicense fee recognized in connection with
Regulus June 2010 alliance with sanofi-aventis,
representing 7.5% of the $25.0 million upfront payment from
sanofi-aventis to Regulus.
The increase in InterfeRx program, research reagent license and
other revenues for the year ended December 31, 2010 as
compared to the year ended December 31, 2009 was primarily
a result of progress and milestones achieved related to our
InterfeRx and other programs.
We also had $211.1 million of deferred revenue at
December 31, 2010, which consists of payments we have
received from collaborators, primarily Roche, Takeda, Kyowa
Hakko Kirin and Cubist, but have not yet recognized pursuant to
our revenue recognition policies.
For the foreseeable future, we expect our revenues to continue
to be derived primarily from our alliances with Roche, Takeda
and Cubist, as well as other strategic alliances,
collaborations, foundation funding, government contracts and
licensing activities.
Operating
Expenses
The following table summarizes our operating expenses for the
periods indicated, in thousands and as a percentage of total
operating expenses, together with the changes, in thousands and
percentages:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% of
|
|
|
|
|
|
% of
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
|
|
|
|
|
|
Operating
|
|
|
Decrease
|
|
|
|
2010
|
|
|
Expenses
|
|
|
2009
|
|
|
Expenses
|
|
|
$
|
|
|
%
|
|
|
Research and development
|
|
$
|
106,384
|
|
|
|
74
|
%
|
|
$
|
108,730
|
|
|
|
73
|
%
|
|
$
|
(2,346
|
)
|
|
|
(2
|
)%
|
General and administrative
|
|
|
37,727
|
|
|
|
26
|
%
|
|
|
39,914
|
|
|
|
27
|
%
|
|
|
(2,187
|
)
|
|
|
(5
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
$
|
144,111
|
|
|
|
100
|
%
|
|
$
|
148,644
|
|
|
|
100
|
%
|
|
$
|
(4,533
|
)
|
|
|
(3
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development.
The following table
summarizes the components of our research and development
expenses for the periods indicated, in thousands and as a
percentage of total research and development expenses, together
with the changes, in thousands and percentages:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% of
|
|
|
|
|
|
% of
|
|
|
Increase
|
|
|
|
|
|
|
Expense
|
|
|
|
|
|
Expense
|
|
|
(Decrease)
|
|
|
|
2010
|
|
|
Category
|
|
|
2009
|
|
|
Category
|
|
|
$
|
|
|
%
|
|
|
Research and development
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation and related
|
|
$
|
24,053
|
|
|
|
23
|
%
|
|
$
|
21,632
|
|
|
|
20
|
%
|
|
$
|
2,421
|
|
|
|
11
|
%
|
External services
|
|
|
22,471
|
|
|
|
21
|
%
|
|
|
20,642
|
|
|
|
19
|
%
|
|
|
1,829
|
|
|
|
9
|
%
|
Clinical trial and manufacturing
|
|
|
20,607
|
|
|
|
20
|
%
|
|
|
18,880
|
|
|
|
17
|
%
|
|
|
1,727
|
|
|
|
9
|
%
|
Facilities-related
|
|
|
12,051
|
|
|
|
11
|
%
|
|
|
11,612
|
|
|
|
11
|
%
|
|
|
439
|
|
|
|
4
|
%
|
Non-cash stock-based compensation
|
|
|
11,689
|
|
|
|
11
|
%
|
|
|
11,415
|
|
|
|
10
|
%
|
|
|
274
|
|
|
|
2
|
%
|
Lab supplies and materials
|
|
|
7,775
|
|
|
|
7
|
%
|
|
|
8,106
|
|
|
|
7
|
%
|
|
|
(331
|
)
|
|
|
(4
|
)%
|
License fees
|
|
|
2,407
|
|
|
|
2
|
%
|
|
|
13,632
|
|
|
|
13
|
%
|
|
|
(11,225
|
)
|
|
|
(82
|
)%
|
Restructuring
|
|
|
1,863
|
|
|
|
2
|
%
|
|
|
|
|
|
|
|
|
|
|
1,863
|
|
|
|
100
|
%
|
Other
|
|
|
3,468
|
|
|
|
3
|
%
|
|
|
2,811
|
|
|
|
3
|
%
|
|
|
657
|
|
|
|
23
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total research and development expenses
|
|
$
|
106,384
|
|
|
|
100
|
%
|
|
$
|
108,730
|
|
|
|
100
|
%
|
|
$
|
(2,346
|
)
|
|
|
(2
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
83
Research and development expenses decreased slightly during the
year ended December 31, 2010 as compared to the year ended
December 31, 2009 due primarily to license fees paid to
Isis in April 2009 in connection with the ssRNAi collaborative
effort with Isis, which we terminated in November 2010. This
decrease was partially offset by restructuring expenses related
to employee severance, benefits and related costs incurred in
connection with our corporate restructuring, which was
implemented at the end of September 2010 and included an
approximate 25% workforce reduction. In addition, prior to our
corporate restructuring, there were higher compensation and
related expenses during 2010 as compared to 2009 due to higher
average research and development headcount to support our
technology platform and expanding product pipeline.
We expect to continue to devote a substantial portion of our
resources to research and development expenses as we continue
development of our and our collaborators product
candidates and focus on continuing to develop drug
delivery-related technologies, however we expect that research
and development expenses will decrease in 2011 primarily as a
result of our corporate restructuring.
A significant portion of our research and development costs are
not tracked by project as they benefit multiple projects or our
technology platform and because our most-advanced programs are
in the early stages of clinical development. However, our
collaboration agreements contain cost-sharing arrangements
pursuant to which certain costs incurred under the project are
reimbursed. Costs reimbursed under the agreements typically
include certain direct external costs and a negotiated full-time
equivalent labor rate for the actual time worked on the project.
In addition, we are reimbursed under our government contracts
for certain allowable costs including direct internal and
external costs. As a result, although a significant portion of
our research and development expenses are not tracked on a
project-by-project
basis, we do track direct external costs attributable to, and
the actual time our employees worked on, our collaborations and
government contracts.
General and administrative.
The following
table summarizes the components of our general and
administrative expenses for the periods indicated, in thousands
and as a percentage of total general and administrative
expenses, together with the changes, in thousands and
percentages:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% of
|
|
|
|
|
|
% of
|
|
|
Increase
|
|
|
|
|
|
|
Expense
|
|
|
|
|
|
Expense
|
|
|
(Decrease)
|
|
|
|
2010
|
|
|
Category
|
|
|
2009
|
|
|
Category
|
|
|
$
|
|
|
%
|
|
|
General and administrative
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consulting and professional services
|
|
$
|
18,753
|
|
|
|
50
|
%
|
|
$
|
19,903
|
|
|
|
50
|
%
|
|
$
|
(1,150
|
)
|
|
|
(6
|
)%
|
Non-cash stock-based compensation
|
|
|
7,429
|
|
|
|
20
|
%
|
|
|
8,312
|
|
|
|
21
|
%
|
|
|
(883
|
)
|
|
|
(11
|
)%
|
Compensation and related
|
|
|
6,202
|
|
|
|
16
|
%
|
|
|
6,383
|
|
|
|
16
|
%
|
|
|
(181
|
)
|
|
|
(3
|
)%
|
Facilities-related
|
|
|
2,379
|
|
|
|
6
|
%
|
|
|
2,634
|
|
|
|
7
|
%
|
|
|
(255
|
)
|
|
|
(10
|
)%
|
Insurance
|
|
|
759
|
|
|
|
2
|
%
|
|
|
747
|
|
|
|
2
|
%
|
|
|
12
|
|
|
|
2
|
%
|
Restructuring
|
|
|
330
|
|
|
|
1
|
%
|
|
|
|
|
|
|
|
|
|
|
330
|
|
|
|
100
|
%
|
Other
|
|
|
1,875
|
|
|
|
5
|
%
|
|
|
1,935
|
|
|
|
4
|
%
|
|
|
(60
|
)
|
|
|
(3
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total general and administrative expenses
|
|
$
|
37,727
|
|
|
|
100
|
%
|
|
$
|
39,914
|
|
|
|
100
|
%
|
|
$
|
(2,187
|
)
|
|
|
(5
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The decrease in general and administrative expenses during the
year ended December 31, 2010 as compared to the year ended
December 31, 2009 was due primarily to lower consulting and
professional services expenses related to business activities,
primarily legal activities, a description of which is set forth
in Part I, Item 3 of this annual report on
Form 10-K.
We expect that general and administrative expenses, excluding
expenses associated with legal activities, will decrease
slightly in 2011.
Other
income (expense)
We incurred $7.6 million equity in loss of joint venture
(Regulus Therapeutics Inc.) for the year ended December 31,
2010 as compared to $4.9 million for the year ended
December 31, 2009 related to our share of the net losses
incurred by Regulus. The increase in equity in loss of joint
venture (Regulus Therapeutics Inc.) for the year ended
December 31, 2010 was due primarily to our 49% share of
$3.8 million of sublicense fees paid to Isis and us
84
in connection with the strategic alliance formed by Regulus and
sanofi-aventis in June 2010. Beginning in January 2009, in
connection with the conversion of Regulus to a C corporation, we
were recognizing approximately 49% of the income and losses of
Regulus. The carrying value of our investment in joint venture
(Regulus Therapeutics Inc.) immediately prior to the conversion
to a C corporation exceeded 49% of the net assets of Regulus by
approximately $0.8 million. Upon conversion, this amount
was allocated to the intellectual property of Regulus and,
because the intellectual property was determined to be
in-process research and development, the $0.8 million was
recorded as a charge to expense. This charge is included in
equity in loss of joint venture (Regulus Therapeutics Inc.) in
the consolidated statements of operations for the year ended
December 31, 2009. In October 2010, in connection with its
strategic alliance with Regulus, sanofi-aventis made a
$10.0 million equity investment in Regulus, resulting in
sanofi-aventis owning approximately 9% of Regulus. Following
this investment, we and Isis own approximately 45% and 46%,
respectively, of Regulus. Separate financial information for
Regulus is included in Exhibit 99.1 to this annual report
on
Form 10-K.
Interest income was $2.3 million in 2010 as compared to
$5.4 million in 2009. The decrease in 2010 was due
primarily to lower average interest rates as well as lower
average cash, cash equivalent and marketable securities balances.
Other income was $6.4 million in 2010 as compared to
$0.6 million in 2009. Other income in 2010 consisted of a
$4.4 million gain on the issuance of stock of Regulus, an
equity-method investee, due to the increase in valuation of
Regulus as a result of the $10.0 million equity investment
sanofi-aventis made in Regulus. In addition, in 2010, we
received $2.0 million in connection with awards under the
federal governments Qualifying Therapeutic Discovery
Project Program. Other income in 2009 consisted primarily of
realized gains on sales of marketable securities.
Discussion
of Results of Operations for 2009 and 2008
Net
Revenues from Research Collaborators
We generate revenues through research collaborations. The
following table summarizes our total consolidated net revenues
from research collaborators, for the periods indicated, in
thousands:
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
|
December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
Roche
|
|
$
|
56,884
|
|
|
$
|
54,427
|
|
Takeda
|
|
|
21,732
|
|
|
|
12,794
|
|
Novartis
|
|
|
9,811
|
|
|
|
11,635
|
|
Government contract
|
|
|
7,471
|
|
|
|
14,172
|
|
Other research collaborator
|
|
|
3,593
|
|
|
|
928
|
|
InterfeRx program, research reagent license and other
|
|
|
1,042
|
|
|
|
2,207
|
|
|
|
|
|
|
|
|
|
|
Total net revenues from research collaborators
|
|
$
|
100,533
|
|
|
$
|
96,163
|
|
|
|
|
|
|
|
|
|
|
Revenues increased for the year ended December 31, 2009 as
compared to the year ended December 31, 2008 primarily as a
result of a full year of revenues from our May 2008 alliance
with Takeda. We are recognizing as revenue the
$150.0 million in upfront and technology transfer milestone
payments made or due to us under the Takeda alliance on a
straight-line basis over seven years, which equates to
approximately $5.4 million per quarter. Also contributing
to the increase in 2009 were higher revenues under the Roche
alliance related primarily to a development milestone achieved
in 2009. Under the Roche alliance, we are recognizing revenue on
a straight-line basis over five years, which equates to
approximately $14.0 million per quarter.
The decrease in Novartis revenues during the year ended
December 31, 2009 as compared to the year ended
December 31, 2008 was due in part to a reduction in the
number of resources allocated to the broad Novartis alliance.
For the year ended December 31, 2009 as compared to the
year ended December 31, 2008, government contract revenues
decreased primarily as a result of the wind down of our
collaboration with DTRA. Following a program review, in February
2009, we and DTRA determined not to continue this program and,
accordingly, the remaining funds were not accessed.
85
Other research collaborator revenues increased in the year ended
December 31, 2009 as compared to the year ended
December 31, 2008 due primarily to our alliance with
Cubist. In consideration for the rights granted to Cubist under
the agreement, in January 2009, Cubist paid us an upfront cash
payment of $20.0 million. We are recognizing this
$20.0 million payment as revenue on a straight-line basis
over approximately eight years.
The decrease in InterfeRx program, research reagent license and
other revenues for the year ended December 31, 2009
compared to the prior year was due to milestone payments from
certain InterfeRx licensees received in 2008.
We also had $271.8 million of deferred revenue at
December 31, 2009, which consisted of payments received
from collaborators, primarily Roche, Takeda, Kyowa Hakko Kirin
and Cubist, that we had yet to recognize pursuant to our revenue
recognition policies.
Operating
Expenses
The following table summarizes our operating expenses for the
periods indicated, in thousands and as a percentage of total
operating expenses, together with the changes, in thousands and
percentages:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% of
|
|
|
|
|
|
% of
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
|
|
|
|
|
|
Operating
|
|
|
Increase
|
|
|
|
2009
|
|
|
Expenses
|
|
|
2008
|
|
|
Expenses
|
|
|
$
|
|
|
%
|
|
|
Research and development
|
|
$
|
108,730
|
|
|
|
73
|
%
|
|
$
|
96,883
|
|
|
|
78
|
%
|
|
$
|
11,847
|
|
|
|
12
|
%
|
General and administrative
|
|
|
39,914
|
|
|
|
27
|
%
|
|
|
27,115
|
|
|
|
22
|
%
|
|
|
12,799
|
|
|
|
47
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
$
|
148,644
|
|
|
|
100
|
%
|
|
$
|
123,998
|
|
|
|
100
|
%
|
|
$
|
24,646
|
|
|
|
20
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development.
The following table
summarizes the components of our research and development
expenses for the periods indicated, in thousands and as a
percentage of total research and development expenses, together
with the changes, in thousands and percentages:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% of
|
|
|
|
|
|
% of
|
|
|
Increase
|
|
|
|
|
|
|
Expense
|
|
|
|
|
|
Expense
|
|
|
(Decrease)
|
|
|
|
2009
|
|
|
Category
|
|
|
2008
|
|
|
Category
|
|
|
$
|
|
|
%
|
|
|
Research and development
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation and related
|
|
$
|
21,632
|
|
|
|
20
|
%
|
|
$
|
17,664
|
|
|
|
18
|
%
|
|
$
|
3,968
|
|
|
|
22
|
%
|
External services
|
|
|
20,642
|
|
|
|
19
|
%
|
|
|
22,852
|
|
|
|
24
|
%
|
|
|
(2,210
|
)
|
|
|
(10
|
)%
|
Clinical trial and manufacturing
|
|
|
18,880
|
|
|
|
17
|
%
|
|
|
13,342
|
|
|
|
14
|
%
|
|
|
5,538
|
|
|
|
42
|
%
|
License fees
|
|
|
13,632
|
|
|
|
13
|
%
|
|
|
12,624
|
|
|
|
13
|
%
|
|
|
1,008
|
|
|
|
8
|
%
|
Facilities-related
|
|
|
11,612
|
|
|
|
11
|
%
|
|
|
10,439
|
|
|
|
11
|
%
|
|
|
1,173
|
|
|
|
11
|
%
|
Non-cash stock-based compensation
|
|
|
11,415
|
|
|
|
10
|
%
|
|
|
9,575
|
|
|
|
10
|
%
|
|
|
1,840
|
|
|
|
19
|
%
|
Lab supplies and materials
|
|
|
8,106
|
|
|
|
7
|
%
|
|
|
8,095
|
|
|
|
8
|
%
|
|
|
11
|
|
|
|
|
*
|
Other
|
|
|
2,811
|
|
|
|
3
|
%
|
|
|
2,292
|
|
|
|
2
|
%
|
|
|
519
|
|
|
|
23
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total research and development expenses
|
|
$
|
108,730
|
|
|
|
100
|
%
|
|
$
|
96,883
|
|
|
|
100
|
%
|
|
$
|
11,847
|
|
|
|
12
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development expenses increased during the year
ended December 31, 2009 as compared to the year ended
December 31, 2008 due primarily to increased clinical
program and manufacturing expenses associated with our ALN-TTR
pre-clinical program and our ALN-VSP clinical trial. Also
contributing to the increase in research and development
expenses for the year ended December 31, 2009 was an
increase in compensation and related, non-cash stock-based
compensation and facilities-related expenses due primarily to
additional research and development headcount to support our
alliances and expanding product pipeline. Partially offsetting
these increases, external services expenses decreased during the
year ended December 31, 2009 as a result of lower
pre-clinical activities due primarily to the wind down of our
collaboration with DTRA. In addition, under the terms
86
of our January 2009 agreement with Cubist, we and Cubist each
were responsible for one-half of the development costs for our
ALN-RSV program through November 2009. For the year ended
December 31, 2009, we recorded amounts due from Cubist of
$5.3 million as a reduction to research and development
expenses.
General and administrative.
The following
table summarizes the components of our general and
administrative expenses for the periods indicated, in thousands
and as a percentage of total general and administrative
expenses, together with the changes, in thousands and
percentages:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% of
|
|
|
|
|
|
% of
|
|
|
Increase
|
|
|
|
|
|
|
Expense
|
|
|
|
|
|
Expense
|
|
|
(Decrease)
|
|
|
|
2009
|
|
|
Category
|
|
|
2008
|
|
|
Category
|
|
|
$
|
|
|
%
|
|
|
General and administrative
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consulting and professional services
|
|
$
|
19,903
|
|
|
|
50
|
%
|
|
$
|
9,281
|
|
|
|
34
|
%
|
|
$
|
10,622
|
|
|
|
114
|
%
|
Non-cash stock-based compensation
|
|
|
8,312
|
|
|
|
21
|
%
|
|
|
6,807
|
|
|
|
25
|
%
|
|
|
1,505
|
|
|
|
22
|
%
|
Compensation and related
|
|
|
6,383
|
|
|
|
16
|
%
|
|
|
5,763
|
|
|
|
21
|
%
|
|
|
620
|
|
|
|
11
|
%
|
Facilities-related
|
|
|
2,634
|
|
|
|
7
|
%
|
|
|
2,401
|
|
|
|
9
|
%
|
|
|
233
|
|
|
|
10
|
%
|
Insurance
|
|
|
747
|
|
|
|
2
|
%
|
|
|
682
|
|
|
|
3
|
%
|
|
|
65
|
|
|
|
10
|
%
|
Other
|
|
|
1,935
|
|
|
|
4
|
%
|
|
|
2,181
|
|
|
|
8
|
%
|
|
|
(246
|
)
|
|
|
(11
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total general and administrative expenses
|
|
$
|
39,914
|
|
|
|
100
|
%
|
|
$
|
27,115
|
|
|
|
100
|
%
|
|
$
|
12,799
|
|
|
|
47
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The increase in general and administrative expenses during the
year ended December 31, 2009 as compared to the year ended
December 31, 2008 was due primarily to higher consulting
and professional services expenses related to business
activities, primarily legal activities, a description of which
is set forth in Part I, Item 3 of this annual report
on
Form 10-K.
Also contributing to the increase were higher non-cash
stock-based compensation and compensation and related expenses
due to a modest increase in general and administrative headcount
in 2009 to support our growth.
Other
income (expense)
We incurred $4.9 million equity in loss of joint venture
(Regulus Therapeutics Inc.) for the year ended December 31,
2009 as compared to $9.3 million for the year ended
December 31, 2008 related to our share of the net losses
incurred by Regulus. Through December 31, 2008, we were
recognizing the first $10.0 million of losses of Regulus as
equity in loss of joint venture (Regulus Therapeutics Inc.) in
our consolidated statements of operations because we were
responsible for funding those losses through our initial
$10.0 million cash contribution. Beginning in January 2009,
in connection with the conversion of Regulus to a C corporation,
we were recognizing approximately 49% of the income and losses
of Regulus. The carrying value of our investment in joint
venture (Regulus Therapeutics Inc.) immediately prior to the
conversion to a C corporation exceeded 49% of the net assets of
Regulus by approximately $0.8 million. Upon conversion,
this amount was allocated to the intellectual property of
Regulus and, because the intellectual property was determined to
be in-process research and development, the $0.8 million
was recorded as a charge to expense. This charge is included in
equity in loss of joint venture (Regulus Therapeutics Inc.) in
the consolidated statements of operations for the year ended
December 31, 2009.
Interest income was $5.4 million in 2009 as compared to
$14.4 million in 2008. The decrease in 2009 was due
primarily to significantly lower average interest rates.
Interest expense was zero in 2009 as compared to
$0.9 million in 2008. Interest expense in 2008 was related
to borrowings under our lines of credit used to finance capital
equipment purchases. In December 2008, we repaid the aggregate
outstanding balance under these credit lines.
Other income was $0.6 million in 2009 as compared to other
expense of $1.9 million in 2008. Other income in 2009
consisted primarily of realized gains on sales of marketable
securities. Included in other expense in 2008 was an impairment
charge of $1.6 million related to our May 2008 investment
in Tekmira, as the decrease in the fair value of this investment
was deemed to be other than temporary.
87
Income taxes, primarily as a result of our alliances with Roche
and Takeda, were a provision for income taxes of
$0.6 million and $0.7 million for the years ended
December 31, 2009 and 2008, respectively.
Liquidity
and Capital Resources
The following table summarizes our cash flow activities for the
periods indicated, in thousands:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Net loss
|
|
$
|
(43,515
|
)
|
|
$
|
(47,590
|
)
|
|
$
|
(26,249
|
)
|
Adjustments to reconcile net loss to net cash provided by (used
in) operating activities
|
|
|
38,734
|
|
|
|
25,857
|
|
|
|
27,840
|
|
Changes in operating assets and liabilities
|
|
|
(79,560
|
)
|
|
|
(50,412
|
)
|
|
|
63,900
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by operating activities
|
|
|
(84,341
|
)
|
|
|
(72,145
|
)
|
|
|
65,491
|
|
Net cash provided by investing activities
|
|
|
17,838
|
|
|
|
14,433
|
|
|
|
17,936
|
|
Net cash provided by financing activities
|
|
|
3,663
|
|
|
|
3,509
|
|
|
|
3,155
|
|
Effect of exchange rate on cash
|
|
|
(29
|
)
|
|
|
(121
|
)
|
|
|
53
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (decrease) increase in cash and cash equivalents
|
|
|
(62,869
|
)
|
|
|
(54,324
|
)
|
|
|
86,635
|
|
Cash and cash equivalents, beginning of period
|
|
|
137,468
|
|
|
|
191,792
|
|
|
|
105,157
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of period
|
|
$
|
74,599
|
|
|
$
|
137,468
|
|
|
$
|
191,792
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Since we commenced operations in 2002, we have generated
significant losses. As of December 31, 2010, we had an
accumulated deficit of $343.3 million. At December 31,
2010, we had cash, cash equivalents and marketable securities of
$349.9 million, compared to cash, cash equivalents and
marketable securities of $435.3 million at
December 31, 2009. We invest primarily in cash equivalents,
U.S. government and municipal obligations, high-grade
corporate notes and commercial paper. Our investment objectives
are, primarily, to assure liquidity and preservation of capital
and, secondarily, to obtain investment income. All of our
investments in debt securities are recorded at fair value and
are
available-for-sale.
Fair value is determined based on quoted market prices and
models using observable data inputs. We have not recorded any
impairment charges to our fixed income marketable securities at
December 31, 2010.
Operating
activities
We have required significant amounts of cash to fund our
operating activities as a result of net losses since our
inception. The decrease in net cash provided by operating
activities for the year ended December 31, 2010 compared to
the year ended December 31, 2009 was due primarily to our
net loss and other changes in our working capital, as well as a
decrease in deferred revenue of $60.7 million. We had a
decrease in deferred revenue of $58.2 million for year
ended December 31, 2009, partially offset by an increase in
accounts payable of $9.9 million. We had an increase in
deferred revenue of $66.7 million for the year ended
December 31, 2008 due primarily to the proceeds received
from our Takeda and Kyowa Hakko Kirin alliances. Cash used in
operating activities is adjusted for non-cash items to reconcile
net loss to net cash provided by or used in operating
activities. These non-cash adjustments consist primarily of
stock-based compensation, equity in loss of joint venture
(Regulus Therapeutics Inc.) and depreciation and amortization.
We expect that we will require significant amounts of cash to
fund our operating activities for the foreseeable future as we
continue to develop and advance our research and development
initiatives. The actual amount of overall expenditures will
depend on numerous factors, including the timing of expenses,
the timing and terms of collaboration agreements or other
strategic transactions, if any, and the timing and progress of
our research and development efforts.
88
Investing
activities
For the year ended December 31, 2010, net cash provided by
investing activities of $17.8 million resulted primarily
from net sales and maturities of marketable securities of
$22.5 million, offset by purchases of property and
equipment of $4.7 million. For the year ended
December 31, 2009, net cash provided by investing
activities of $14.4 million resulted primarily from net
sales and maturities of marketable securities of
$23.2 million and a decrease in restricted cash of
$6.2 million resulting from the release of letters of
credit in connection with the amendment of our facility lease
and the termination of our sublease agreement. Offsetting these
amounts was a $10.0 million investment in Regulus and
purchases of property and equipment of $4.9 million. For
the year ended December 31, 2008, net cash provided by
investing activities of $17.9 million resulted primarily
from net sales and maturities of marketable securities of
$28.8 million, offset by purchases of property and
equipment of $10.8 million.
Financing
activities
For the year ended December 31, 2010, net cash provided by
financing activities of $3.7 million was due to proceeds of
$1.0 million from our issuance of common stock to Novartis
in April 2010, as well as proceeds of $2.7 million from the
issuance of common stock in connection with stock option
exercises. For the year ended December 31, 2009, net cash
provided by financing activities of $3.5 million was due to
proceeds of $1.2 million from our issuance of common stock
to Novartis in May 2009, as well as proceeds of
$2.4 million from the issuance of common stock in
connection with stock option exercises. For the year ended
December 31, 2008, net cash provided by financing
activities was $3.2 million due to proceeds of
$5.4 million from our issuance of common stock to Novartis
in May 2008, as well as proceeds of $4.5 million from the
issuance of common stock in connection with stock option
exercises, offset by $6.8 million for repayments of notes
payable.
During the current downturn in global financial markets, some
companies have experienced difficulties accessing their cash
equivalents and investment securities and raising capital
generally, which have had a material adverse impact on their
liquidity. In addition, the current economic downturn has
diminished the availability of capital and may limit our ability
to access these markets to obtain financing in the future. Based
on our current operating plan, we believe that our existing
cash, cash equivalents and fixed income marketable securities,
for which we have not recognized any impairment charges,
together with the cash we expect to generate under our current
alliances, will be sufficient to fund our planned operations for
at least the next several years, during which time we expect to
further the development of our product candidates, conduct
clinical trials, extend the capabilities of our technology
platform, including through new business initiatives, and
continue to prosecute patent applications and otherwise build
and maintain our patent portfolio. However, we may require
significant additional funds earlier than we currently expect in
order to develop, conduct clinical trials for and commercialize
any product candidates.
In the longer term, we may seek additional funding through
additional collaborative arrangements and public or private
financings. Additional funding may not be available to us on
acceptable terms or at all. In addition, the terms of any
financing may adversely affect the holdings or the rights of our
stockholders. For example, if we raise additional funds by
issuing equity securities, further dilution to our existing
stockholders may result. In addition, as a condition to
providing additional funds to us, future investors may demand,
and may be granted, rights superior to those of existing
stockholders. If we are unable to obtain funding on a timely
basis, we may be required to significantly curtail one or more
of our research or development programs. We also could be
required to seek funds through arrangements with collaborators
or others that may require us to relinquish rights to some of
our technologies or product candidates that we would otherwise
pursue.
Even if we are able to raise additional funds in a timely
manner, our future capital requirements may vary from what we
expect and will depend on many factors, including:
|
|
|
|
|
our progress in demonstrating that siRNAs can be active as drugs;
|
|
|
|
our ability to develop relatively standard procedures for
selecting and modifying siRNA product candidates;
|
|
|
|
progress in our research and development programs, as well as
the magnitude of these programs;
|
89
|
|
|
|
|
the timing, receipt and amount of milestone and other payments,
if any, from present and future collaborators, if any;
|
|
|
|
the timing, receipt and amount of funding under current and
future government or foundation contracts, if any;
|
|
|
|
our ability to maintain and establish additional collaborative
arrangements
and/or
new
business initiatives;
|
|
|
|
the resources, time and costs required to successfully initiate
and complete our pre-clinical and clinical trials, obtain
regulatory approvals, and obtain and maintain licenses to
third-party intellectual property;
|
|
|
|
the resources, time and cost required for the preparation,
filing, prosecution, maintenance and enforcement of patent
claims;
|
|
|
|
our ability to successfully manage the potential impact of our
corporate restructuring and workforce reduction on our culture,
collaborative relationships and business operations;
|
|
|
|
the costs associated with legal activities arising in the course
of our business activities;
|
|
|
|
progress in the research and development programs of
Regulus; and
|
|
|
|
the timing, receipt and amount of sales and royalties, if any,
from our potential products.
|
Off-Balance
Sheet Arrangements
In connection with our license agreements with Max Planck
Gesellschaft Zur Forderung Der Wissenschaften E.V. and Max
Planck Innovation, collectively, Max Planck, relating to the
Tuschl I and II patent applications, we are required to
indemnify Max Planck for certain damages arising in connection
with the intellectual property rights licensed under the
agreements. Under this indemnification agreement with Max
Planck, we are responsible for paying the costs of any
litigation relating to the license agreements or the underlying
intellectual property rights. These amounts are charged to
general and administrative expense. In addition, we are a party
to a number of agreements entered into in the ordinary course of
business, which contain typical provisions that obligate us to
indemnify the other parties to such agreements upon the
occurrence of certain events. These indemnification obligations
are considered off-balance sheet arrangements in accordance with
GAAP. To date, other than the costs associated with the
litigation described in Part I, Item 3 of this annual
report on
Form 10-K,
which we are responsible for under our indemnification agreement
with Max Planck, we have not encountered material costs as a
result of such obligations and have not accrued any liabilities
related to such obligations in our consolidated financial
statements. See Note 7 to our consolidated financial
statements included in this annual report on
Form 10-K
for further discussion of these indemnification agreements.
Contractual
Obligations
In the table below, we set forth our enforceable and legally
binding obligations and future commitments at December 31,
2010, as well as obligations related to contracts that we are
likely to continue, regardless of the fact that they were
cancelable at December 31, 2010. Some of the figures that
we include in this table are based on managements
estimates and assumptions about these obligations, including
their duration, the possibility of renewal, anticipated actions
by third parties, and other factors. Because these estimates and
assumptions are necessarily subjective, the obligations we will
actually pay in future periods may vary from those reflected in
the table.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments Due by Period
|
|
|
|
|
|
|
2012 and
|
|
|
2014 and
|
|
|
|
|
|
|
|
Contractual Obligations
|
|
2011
|
|
|
2013
|
|
|
2015
|
|
|
After 2015
|
|
|
Total
|
|
|
Operating lease obligations(1)
|
|
$
|
5,118
|
|
|
$
|
10,936
|
|
|
$
|
11,829
|
|
|
$
|
4,657
|
|
|
$
|
32,540
|
|
Purchase commitments(2)
|
|
|
18,350
|
|
|
|
3,868
|
|
|
|
|
|
|
|
|
|
|
|
22,218
|
|
Technology-related commitments(3)
|
|
|
5,915
|
|
|
|
2,638
|
|
|
|
1,406
|
|
|
|
9,692
|
|
|
|
19,651
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total contractual cash obligations
|
|
$
|
29,383
|
|
|
$
|
17,442
|
|
|
$
|
13,235
|
|
|
$
|
14,349
|
|
|
$
|
74,409
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
90
|
|
|
(1)
|
|
Relates to our Cambridge, Massachusetts non-cancelable operating
lease agreement.
|
|
(2)
|
|
Includes commitments related to purchase orders, clinical and
pre-clinical agreements, and other purchase commitments for
goods or services.
|
|
(3)
|
|
Relates to our fixed payment obligations under license
agreements, as well as other payments related to technology
research and development.
|
We in-license technology from a number of sources. Pursuant to
these in-license agreements, we will be required to make
additional payments if and when we achieve specified development
and regulatory milestones. To the extent we are unable to
reasonably predict the likelihood, timing or amount of such
payments, we have excluded them from the table above.
Recent
Accounting Pronouncements
In April 2010, the Financial Accounting Standards Board, or
FASB, issued a new accounting standard, which provides guidance
in applying the milestone method of revenue recognition to
research or development arrangements. Under this guidance
management may recognize revenue contingent upon the achievement
of a milestone in the period in which the milestone is achieved
only if the milestone meets all the criteria within the guidance
to be considered substantive. This standard is effective on a
prospective basis for research and development milestones
achieved in fiscal years beginning on or after June 15,
2010. We are currently evaluating the potential impact of this
accounting standard on our consolidated financial statements,
however we do not believe it will have a significant impact.
In October 2009, the FASB issued a new accounting standard,
which amends existing revenue recognition accounting
pronouncements and provides accounting principles and
application guidance on whether multiple deliverables exist, how
the arrangement should be separated and the consideration
allocated. This standard eliminates the requirement to establish
the fair value of undelivered products and services and instead
provides for separate revenue recognition based upon
managements estimate of the selling price for an
undelivered item when there is no other means to determine the
fair value of that undelivered item. Previously, accounting
principles required that the fair value of the undelivered item
be the price of the item either sold in a separate transaction
between unrelated third parties or the price charged for each
item when the item is sold separately by the vendor. Determining
the fair value using these methods was difficult when the
product was not individually sold because of its unique
features. If the fair value of all of the elements in the
arrangement was not determinable, then revenue was deferred
until all of the items were delivered or fair value was
determined. This new approach is effective prospectively for
revenue arrangements entered into or materially modified in
fiscal years beginning on or after June 15, 2010. This new
accounting standard will not affect our existing collaborations
but will affect how we recognize revenue for future
collaborations.
In June 2009, the FASB issued a new accounting standard, which
amends previously issued accounting guidance for the
consolidation of a VIE to require an enterprise to determine
whether its variable interest or interests give it a controlling
financial interest in a VIE. This amended consolidation guidance
for VIEs also replaces the existing quantitative approach for
identifying which enterprise should consolidate a VIE, which was
based on which enterprise was exposed to a majority of the risks
and rewards, with a qualitative approach, based on which
enterprise has both (1) the power to direct the
economically significant activities of the entity and
(2) the obligation to absorb losses of the entity that
could potentially be significant to the VIE or the right to
receive benefits from the entity that could potentially be
significant to the VIE. This new accounting standard has broad
implications and may affect how we account for the consolidation
of common structures, such as joint ventures, equity method
investments, collaboration and other agreements, and purchase
arrangements. Under this revised consolidation guidance, more
entities may meet the definition of a VIE, and the determination
about who should consolidate a VIE is required to be evaluated
continuously. We adopted this standard effective January 1,
2010 and have determined that the adoption did not have an
impact on our consolidated financial statements.
91
|
|
ITEM 7A.
|
QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
As part of our investment portfolio, we own financial
instruments that are sensitive to market risks. The investment
portfolio is used to preserve our capital until it is required
to fund operations, including our research and development
activities. Our marketable securities consist of
U.S. government and municipal obligations, high-grade
corporate notes and commercial paper. All of our investments in
debt securities are classified as
available-for-sale
and are recorded at fair value. Our
available-for-sale
investments in debt securities are sensitive to changes in
interest rates and changes in the credit ratings of the issuers.
Interest rate changes would result in a change in the net fair
value of these financial instruments due to the difference
between the market interest rate and the market interest rate at
the date of purchase of the financial instrument. If market
interest rates were to increase immediately and uniformly by
50 basis points, or one-half of a percentage point, from
levels at December 31, 2010, the net fair value of our
interest-sensitive financial instruments would have resulted in
a hypothetical decline of $1.3 million. A downgrade in the
credit rating of an issuer of a debt security or further
deterioration of the credit markets could result in a decline in
the fair value of the debt instruments. Our investment
guidelines prohibit investment in auction rate securities and we
do not believe we have any direct exposure to losses relating
from mortgage-based securities or derivatives related thereto
such as credit-default swaps. We did not record any impairment
charges during the year ended December 31, 2010.
92
|
|
ITEM 8.
|
FINANCIAL
STATEMENTS AND SUPPLEMENTARY DATA
|
INDEX TO
CONSOLIDATED FINANCIAL STATEMENTS
|
|
|
|
|
|
|
Page
|
|
|
|
|
94
|
|
|
|
|
95
|
|
|
|
|
96
|
|
|
|
|
97
|
|
|
|
|
98
|
|
|
|
|
99
|
|
|
|
|
100
|
|
93
Managements
Annual Report on Internal Control Over Financial
Reporting
The management of the Company is responsible for establishing
and maintaining adequate internal control over financial
reporting. Internal control over financial reporting is defined
in
Rule 13a-15(f)
or
15d-15(f)
promulgated under the Securities Exchange Act of 1934 as a
process designed by, or under the supervision of, the
companys principal executive and principal financial
officers and effected by the companys board of directors,
management and other personnel, 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 and
includes those policies and procedures that:
|
|
|
|
|
Pertain to the maintenance of records that in reasonable detail
accurately and fairly reflect the transactions and dispositions
of the assets of the Company;
|
|
|
|
Provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and
that receipts and expenditures of the Company are being made
only in accordance with authorizations of management and
directors of the Company; and
|
|
|
|
Provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use or disposition of the
Companys assets that could have a material effect on the
financial statements.
|
Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements.
Projections of any evaluation of effectiveness to future periods
are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.
The Companys management assessed the effectiveness of the
Companys internal control over financial reporting as of
December 31, 2010. In making this assessment, the
Companys management used the criteria set forth by the
Committee of Sponsoring Organizations of the Treadway Commission
(COSO) in Internal Control-Integrated Framework.
Based on our assessment, management concluded that, as of
December 31, 2010, the Companys internal control over
financial reporting is effective based on those criteria.
The effectiveness of the Companys internal control over
financial reporting as of December 31, 2010 has been
audited by PricewaterhouseCoopers LLP, an independent registered
public accounting firm, as stated in their report. This report
appears on page 95.
94
Report of
Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of Alnylam
Pharmaceuticals, Inc.:
In our opinion, based on our audits and the report of other
auditors, the accompanying consolidated balance sheets and the
related consolidated statements of operations and comprehensive
loss, stockholders equity and cash flows present fairly,
in all material respects, the financial position of Alnylam
Pharmaceuticals, Inc. and its subsidiaries at December 31,
2010 and 2009, and the results of their operations and their
cash flows for each of the three years in the period ended
December 31, 2010 in conformity with accounting principles
generally accepted in the United States of America. Also in our
opinion, the Company maintained, in all material respects,
effective internal control over financial reporting as of
December 31, 2010, based on criteria established in
Internal Control Integrated Framework
issued
by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO). The Companys management is responsible
for these financial statements, for maintaining effective
internal control over financial reporting and for its assessment
of the effectiveness of internal control over financial
reporting, included in Managements Annual Report on
Internal Control over Financial Reporting. Our responsibility is
to express opinions on these financial statements and on the
Companys internal control over financial reporting based
on our integrated audits. We did not audit the financial
statements of Regulus Therapeutics Inc., an approximate
45 percent-owned equity investment, which were audited by
other auditors whose report thereon has been furnished to us.
Our opinion expressed herein, insofar as it relates to the
Companys net investment in (approximately
$3.6 million and $6.4 million at December 31,
2010 and 2009, respectively) and equity in the net loss
(approximately $7.6 million, $4.9 million and
$9.3 million for the years ended December 31, 2010,
2009 and 2008, respectively) of Regulus Therapeutics Inc., is
based solely on the report of the other auditors. We conducted
our audits in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are
free of material misstatement and whether effective internal
control over financial reporting was maintained in all material
respects. Our audits of the financial statements included
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by
management, and evaluating the overall financial statement
presentation. Our audit of internal control over financial
reporting included obtaining an understanding of internal
control over financial reporting, assessing the risk that a
material weakness exists, and testing and evaluating the design
and operating effectiveness of internal control based on the
assessed risk. Our audits also included performing such other
procedures as we considered necessary in the circumstances. We
believe that our audits and the report of other auditors provide
a reasonable basis for our opinions.
A companys internal control over financial reporting is a
process designed 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. A companys
internal control over financial reporting includes those
policies and procedures that (i) pertain to the maintenance
of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the
company; (ii) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of
financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the
company are being made only in accordance with authorizations of
management and directors of the company; and (iii) provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of the
companys assets that could have a material effect on the
financial statements.
Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.
/s/ PricewaterhouseCoopers LLP
Boston, Massachusetts
February 18, 2011
95
ALNYLAM
PHARMACEUTICALS, INC.
CONSOLIDATED
BALANCE SHEETS
(In thousands, except share and per share
amounts)
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
ASSETS
|
Current assets:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
74,599
|
|
|
$
|
137,468
|
|
Marketable securities
|
|
|
158,532
|
|
|
|
143,934
|
|
Collaboration receivables
|
|
|
3,450
|
|
|
|
6,044
|
|
Income taxes receivable
|
|
|
10,669
|
|
|
|
|
|
Prepaid expenses and other current assets
|
|
|
6,889
|
|
|
|
4,151
|
|
Deferred tax assets
|
|
|
|
|
|
|
1,937
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
254,139
|
|
|
|
293,534
|
|
Marketable securities
|
|
|
116,773
|
|
|
|
153,914
|
|
Property and equipment, net
|
|
|
18,289
|
|
|
|
18,324
|
|
Deferred tax assets, net of current portion
|
|
|
|
|
|
|
8,556
|
|
Investment in joint venture (Regulus Therapeutics Inc.)
|
|
|
3,616
|
|
|
|
6,435
|
|
Intangible assets, net
|
|
|
448
|
|
|
|
622
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
393,265
|
|
|
$
|
481,385
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
9,312
|
|
|
$
|
12,489
|
|
Accrued expenses
|
|
|
11,116
|
|
|
|
9,961
|
|
Income taxes payable
|
|
|
|
|
|
|
5,516
|
|
Deferred rent
|
|
|
484
|
|
|
|
838
|
|
Deferred revenue
|
|
|
81,134
|
|
|
|
81,929
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
102,046
|
|
|
|
110,733
|
|
Deferred rent, net of current portion
|
|
|
2,869
|
|
|
|
2,609
|
|
Deferred revenue, net of current portion
|
|
|
129,974
|
|
|
|
189,884
|
|
Other long-term liabilities
|
|
|
143
|
|
|
|
194
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
235,032
|
|
|
|
303,420
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies (Notes 6, 7, 10 and 12)
|
|
|
|
|
|
|
|
|
Stockholders equity:
|
|
|
|
|
|
|
|
|
Preferred stock, $0.01 par value per share,
5,000,000 shares authorized and no shares issued and
outstanding at December 31, 2010 and 2009
|
|
|
|
|
|
|
|
|
Common stock, $0.01 par value per share,
125,000,000 shares authorized; 42,343,423 shares
issued and outstanding at December 31, 2010;
41,837,427 shares issued and outstanding at
December 31, 2009
|
|
|
423
|
|
|
|
418
|
|
Additional paid-in capital
|
|
|
500,443
|
|
|
|
476,663
|
|
Accumulated other comprehensive income
|
|
|
714
|
|
|
|
716
|
|
Accumulated deficit
|
|
|
(343,347
|
)
|
|
|
(299,832
|
)
|
|
|
|
|
|
|
|
|
|
Total stockholders equity
|
|
|
158,233
|
|
|
|
177,965
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity
|
|
$
|
393,265
|
|
|
$
|
481,385
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these
consolidated financial statements.
96
ALNYLAM
PHARMACEUTICALS, INC.
CONSOLIDATED
STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(In thousands, except per share
amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Net revenues from research collaborators
|
|
$
|
100,041
|
|
|
$
|
100,533
|
|
|
$
|
96,163
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development(1)
|
|
|
106,384
|
|
|
|
108,730
|
|
|
|
96,883
|
|
General and administrative(1)
|
|
|
37,727
|
|
|
|
39,914
|
|
|
|
27,115
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
144,111
|
|
|
|
148,644
|
|
|
|
123,998
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
|
(44,070
|
)
|
|
|
(48,111
|
)
|
|
|
(27,835
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity in loss of joint venture (Regulus Therapeutics Inc.)
|
|
|
(7,639
|
)
|
|
|
(4,910
|
)
|
|
|
(9,290
|
)
|
Interest income
|
|
|
2,305
|
|
|
|
5,385
|
|
|
|
14,414
|
|
Interest expense
|
|
|
|
|
|
|
|
|
|
|
(872
|
)
|
Other income (expense)
|
|
|
6,403
|
|
|
|
628
|
|
|
|
(1,947
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other income (expense)
|
|
|
1,069
|
|
|
|
1,103
|
|
|
|
2,305
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before income taxes
|
|
|
(43,001
|
)
|
|
|
(47,008
|
)
|
|
|
(25,530
|
)
|
Provision for income taxes
|
|
|
(514
|
)
|
|
|
(582
|
)
|
|
|
(719
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(43,515
|
)
|
|
$
|
(47,590
|
)
|
|
$
|
(26,249
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per common share basic and diluted
|
|
$
|
(1.04
|
)
|
|
$
|
(1.14
|
)
|
|
$
|
(0.64
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares used to compute basic and diluted
net loss per common share
|
|
|
42,040
|
|
|
|
41,633
|
|
|
|
41,077
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(43,515
|
)
|
|
$
|
(47,590
|
)
|
|
$
|
(26,249
|
)
|
Foreign currency translation
|
|
|
(29
|
)
|
|
|
(121
|
)
|
|
|
53
|
|
Unrealized gain (loss) on marketable securities
|
|
|
27
|
|
|
|
(349
|
)
|
|
|
833
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive loss
|
|
$
|
(43,517
|
)
|
|
$
|
(48,060
|
)
|
|
$
|
(25,363
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Non-cash stock-based compensation expenses included in operating
expenses are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
$
|
11,689
|
|
|
$
|
11,415
|
|
|
$
|
9,575
|
|
General and administrative
|
|
|
7,429
|
|
|
|
8,312
|
|
|
|
6,807
|
|
The accompanying notes are an integral part of these
consolidated financial statements.
97
ALNYLAM
PHARMACEUTICALS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
(In thousands, except share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
Other
|
|
|
|
|
|
Total
|
|
|
|
Common Stock
|
|
|
Paid-in
|
|
|
Comprehensive
|
|
|
Accumulated
|
|
|
Stockholders
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Income
|
|
|
Deficit
|
|
|
Equity
|
|
|
Balance at December 31, 2007
|
|
|
40,772,967
|
|
|
$
|
408
|
|
|
$
|
424,453
|
|
|
$
|
300
|
|
|
$
|
(225,993
|
)
|
|
$
|
199,168
|
|
Exercise of common stock options
|
|
|
377,228
|
|
|
|
4
|
|
|
|
3,782
|
|
|
|
|
|
|
|
|
|
|
|
3,786
|
|
Issuance of common stock
|
|
|
263,633
|
|
|
|
2
|
|
|
|
6,507
|
|
|
|
|
|
|
|
|
|
|
|
6,509
|
|
Stock-based compensation expense
|
|
|
|
|
|
|
|
|
|
|
16,381
|
|
|
|
|
|
|
|
|
|
|
|
16,381
|
|
Foreign currency translation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
53
|
|
|
|
|
|
|
|
53
|
|
Joint venture stock-based compensation
(Regulus Therapeutics Inc.)
|
|
|
|
|
|
|
|
|
|
|
1,644
|
|
|
|
|
|
|
|
|
|
|
|
1,644
|
|
Unrealized gain on marketable securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
833
|
|
|
|
|
|
|
|
833
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(26,249
|
)
|
|
|
(26,249
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2008
|
|
|
41,413,828
|
|
|
|
414
|
|
|
|
452,767
|
|
|
|
1,186
|
|
|
|
(252,242
|
)
|
|
|
202,125
|
|
Exercise of common stock options
|
|
|
275,908
|
|
|
|
3
|
|
|
|
1,459
|
|
|
|
|
|
|
|
|
|
|
|
1,462
|
|
Issuance of common stock
|
|
|
147,691
|
|
|
|
1
|
|
|
|
2,507
|
|
|
|
|
|
|
|
|
|
|
|
2,508
|
|
Stock-based compensation expense
|
|
|
|
|
|
|
|
|
|
|
19,727
|
|
|
|
|
|
|
|
|
|
|
|
19,727
|
|
Foreign currency translation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(121
|
)
|
|
|
|
|
|
|
(121
|
)
|
Joint venture stock-based compensation
(Regulus Therapeutics Inc.)
|
|
|
|
|
|
|
|
|
|
|
(238
|
)
|
|
|
|
|
|
|
|
|
|
|
(238
|
)
|
Tax benefit from stock-based compensation
|
|
|
|
|
|
|
|
|
|
|
441
|
|
|
|
|
|
|
|
|
|
|
|
441
|
|
Unrealized loss on marketable securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(349
|
)
|
|
|
|
|
|
|
(349
|
)
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(47,590
|
)
|
|
|
(47,590
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2009
|
|
|
41,837,427
|
|
|
|
418
|
|
|
|
476,663
|
|
|
|
716
|
|
|
|
(299,832
|
)
|
|
|
177,965
|
|
Exercise of common stock options
|
|
|
227,970
|
|
|
|
2
|
|
|
|
1,731
|
|
|
|
|
|
|
|
|
|
|
|
1,733
|
|
Issuance of common stock
|
|
|
164,656
|
|
|
|
2
|
|
|
|
2,423
|
|
|
|
|
|
|
|
|
|
|
|
2,425
|
|
Issuance of restricted stock
|
|
|
113,370
|
|
|
|
1
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation expense
|
|
|
|
|
|
|
|
|
|
|
19,118
|
|
|
|
|
|
|
|
|
|
|
|
19,118
|
|
Foreign currency translation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(29
|
)
|
|
|
|
|
|
|
(29
|
)
|
Joint venture stock-based compensation
(Regulus Therapeutics Inc.)
|
|
|
|
|
|
|
|
|
|
|
289
|
|
|
|
|
|
|
|
|
|
|
|
289
|
|
Tax benefit from stock-based compensation
|
|
|
|
|
|
|
|
|
|
|
220
|
|
|
|
|
|
|
|
|
|
|
|
220
|
|
Unrealized gain on marketable securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
27
|
|
|
|
|
|
|
|
27
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(43,515
|
)
|
|
|
(43,515
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2010
|
|
|
42,343,423
|
|
|
$
|
423
|
|
|
$
|
500,443
|
|
|
$
|
714
|
|
|
$
|
(343,347
|
)
|
|
$
|
158,233
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these
consolidated financial statements.
98
ALNYLAM
PHARMACEUTICALS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(43,515
|
)
|
|
$
|
(47,590
|
)
|
|
$
|
(26,249
|
)
|
Adjustments to reconcile net loss to net cash provided by (used
in) operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
4,941
|
|
|
|
5,992
|
|
|
|
5,726
|
|
Deferred income taxes
|
|
|
10,742
|
|
|
|
(5,163
|
)
|
|
|
(5,501
|
)
|
Non-cash stock-based compensation
|
|
|
19,118
|
|
|
|
19,727
|
|
|
|
18,026
|
|
Charge for 401(k) company stock match
|
|
|
495
|
|
|
|
461
|
|
|
|
382
|
|
Equity in loss of joint venture (Regulus Therapeutics Inc.)
|
|
|
7,639
|
|
|
|
4,910
|
|
|
|
7,646
|
|
Tax benefit from stock-based compensation
|
|
|
220
|
|
|
|
441
|
|
|
|
|
|
Impairment on equity investment
|
|
|
|
|
|
|
|
|
|
|
1,561
|
|
Realized gain on sale of marketable securities
|
|
|
|
|
|
|
(511
|
)
|
|
|
|
|
Gain on issuance of stock by joint venture
|
|
|
(4,421
|
)
|
|
|
|
|
|
|
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from landlord tenant improvements
|
|
|
|
|
|
|
|
|
|
|
581
|
|
Collaboration receivables
|
|
|
2,594
|
|
|
|
(1,856
|
)
|
|
|
843
|
|
Income taxes receivable
|
|
|
(10,669
|
)
|
|
|
|
|
|
|
|
|
Prepaid expenses and other assets
|
|
|
(2,738
|
)
|
|
|
523
|
|
|
|
(1,748
|
)
|
Accounts payable
|
|
|
(3,177
|
)
|
|
|
9,901
|
|
|
|
(1,238
|
)
|
Income taxes payable
|
|
|
(5,516
|
)
|
|
|
(467
|
)
|
|
|
2,614
|
|
Accrued expenses and other
|
|
|
651
|
|
|
|
(341
|
)
|
|
|
(3,821
|
)
|
Deferred revenue
|
|
|
(60,705
|
)
|
|
|
(58,172
|
)
|
|
|
66,669
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by operating activities
|
|
|
(84,341
|
)
|
|
|
(72,145
|
)
|
|
|
65,491
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of property and equipment
|
|
|
(4,732
|
)
|
|
|
(4,949
|
)
|
|
|
(10,764
|
)
|
Decrease in restricted cash
|
|
|
|
|
|
|
6,151
|
|
|
|
|
|
Purchases of marketable securities
|
|
|
(390,473
|
)
|
|
|
(481,339
|
)
|
|
|
(482,244
|
)
|
Sales and maturities of marketable securities
|
|
|
413,043
|
|
|
|
504,570
|
|
|
|
511,044
|
|
Investment in joint venture (Regulus Therapeutics Inc.)
|
|
|
|
|
|
|
(10,000
|
)
|
|
|
(100
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by investing activities
|
|
|
17,838
|
|
|
|
14,433
|
|
|
|
17,936
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from issuance of common stock
|
|
|
2,670
|
|
|
|
2,355
|
|
|
|
4,505
|
|
Proceeds from issuance of shares to Novartis
|
|
|
993
|
|
|
|
1,154
|
|
|
|
5,408
|
|
Repayments of notes payable
|
|
|
|
|
|
|
|
|
|
|
(6,758
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities
|
|
|
3,663
|
|
|
|
3,509
|
|
|
|
3,155
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate on cash
|
|
|
(29
|
)
|
|
|
(121
|
)
|
|
|
53
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (decrease) increase in cash and cash equivalents
|
|
|
(62,869
|
)
|
|
|
(54,324
|
)
|
|
|
86,635
|
|
Cash and cash equivalents, beginning of period
|
|
|
137,468
|
|
|
|
191,792
|
|
|
|
105,157
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of period
|
|
$
|
74,599
|
|
|
$
|
137,468
|
|
|
$
|
191,792
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of cash flows
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid for interest
|
|
$
|
|
|
|
$
|
|
|
|
$
|
1,499
|
|
Cash paid for income taxes
|
|
$
|
5,767
|
|
|
$
|
5,836
|
|
|
$
|
2,671
|
|
The accompanying notes are an integral part of these
consolidated financial statements.
99
ALNYLAM
PHARMACEUTICALS, INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
Alnylam Pharmaceuticals, Inc. (the Company or
Alnylam) commenced operations on June 14, 2002
as a biopharmaceutical company seeking to develop and
commercialize novel therapeutics based on RNA interference
(RNAi). Alnylam is focused on discovering,
developing and commercializing RNAi therapeutics by establishing
strategic alliances with leading pharmaceutical and
biotechnology companies, establishing and maintaining a strong
intellectual property position in the RNAi field, generating
revenues through licensing agreements and ultimately developing
and commercializing RNAi therapeutics for its own account. The
Company has devoted substantially all of its efforts to business
planning, research and development, acquiring, filing and
expanding intellectual property rights, recruiting management
and technical staff, and raising capital.
|
|
2.
|
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
|
Basis
of Presentation and Principles of Consolidation
The Company comprises four entities, Alnylam Pharmaceuticals,
Inc. (the parent company) and three wholly-owned subsidiaries
(Alnylam U.S., Inc., Alnylam Europe AG (Alnylam
Europe) and Alnylam Securities Corporation). Alnylam
Pharmaceuticals, Inc. is a Delaware corporation that was formed
on May 8, 2003. Alnylam U.S., Inc. is also a Delaware
corporation that was formed on June 14, 2002. Alnylam
Securities Corporation is a Massachusetts corporation that was
formed on December 19, 2006. Alnylam Europe was
incorporated in Germany in June 2000 under the name Ribopharma
AG. The Company acquired Alnylam Europe in July 2003.
The accompanying consolidated financial statements reflect the
operations of the Company and its wholly-owned subsidiaries. All
significant intercompany accounts and transactions have been
eliminated. The Company uses the equity method of accounting to
account for its investment in Regulus Therapeutics Inc.,
formerly Regulus Therapeutics LLC (Regulus).
Reclassifications
Certain reclassifications have been made to prior years
consolidated financial statements to conform to the 2010
presentation.
Use of
Estimates
The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of
America (GAAP) requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and
liabilities at the date of the consolidated financial statements
and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those
estimates.
Concentrations
of Credit Risk and Significant Customers
Financial instruments that potentially expose the Company to
concentrations of credit risk consist primarily of cash, cash
equivalents and marketable securities. At December 31, 2010
and 2009, substantially all of the Companys cash, cash
equivalents and marketable securities were invested in money
market mutual funds, commercial paper, corporate notes, and
U.S. government and municipal securities through highly
rated financial institutions. Investments are restricted, in
accordance with the Companys investment policy, to a
concentration limit per issuer.
To date, the Companys revenues from collaborations have
been generated from primarily F. Hoffmann-La Roche Ltd and
certain of its affiliates (collectively, Roche),
Takeda Pharmaceutical Company Limited (Takeda), and
Novartis Pharma AG and one of its affiliates (collectively,
Novartis). Novartis owned
100
ALNYLAM
PHARMACEUTICALS, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
approximately 13.2% of the Companys outstanding common
stock at December 31, 2010. The Company has also generated
revenues from the National Institute of Allergy and Infectious
Diseases (NIAID), a component of the National
Institutes of Health (NIH), and Cubist
Pharmaceuticals, Inc. (Cubist). In addition, the
Company and Medtronic, Inc. (Medtronic) have formed
a collaboration with CHDI Foundation, Inc. (CHDI) to
advance ALN-HTT, a novel drug-device combination for the
treatment of Huntingtons disease. Under this
collaboration, CHDI has agreed to initially fund approximately
50% of the costs of this program up to the point at which an
investigational new drug application can be filed with the
United States Food and Drug Administration or a comparable
foreign regulatory filing can be made. The Company is recording
this funding as a reduction to research and development expense.
The following table summarizes customers that represent greater
than 10% of the Companys net revenues from research
collaborators, for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
December 31,
|
|
|
2010
|
|
2009
|
|
2008
|
|
Roche
|
|
|
56
|
%
|
|
|
57
|
%
|
|
|
57
|
%
|
Takeda
|
|
|
22
|
%
|
|
|
22
|
%
|
|
|
13
|
%
|
Novartis
|
|
|
|
*
|
|
|
|
*
|
|
|
12
|
%
|
The following table summarizes customers with amounts due that
represent greater than 10% of the Companys collaboration
receivables balance:
|
|
|
|
|
|
|
|
|
|
|
At December 31,
|
|
|
2010
|
|
2009
|
|
CHDI
|
|
|
44
|
%
|
|
|
|
*
|
Takeda
|
|
|
27
|
%
|
|
|
|
*
|
Novartis
|
|
|
|
*
|
|
|
40
|
%
|
Roche
|
|
|
|
*
|
|
|
27
|
%
|
NIAID
|
|
|
|
*
|
|
|
14
|
%
|
Cubist
|
|
|
|
*
|
|
|
11
|
%
|
Fair
Value Measurements
The following tables present information about the
Companys assets that are measured at fair value on a
recurring basis at December 31, 2010 and 2009, and indicate
the fair value hierarchy of the valuation techniques the Company
utilized to determine such fair value. In general, fair values
determined by Level 1 inputs utilize quoted prices
(unadjusted) in active markets for identical assets or
liabilities. Fair values determined by Level 2 inputs
utilize data points that are observable, such as quoted prices
(adjusted), interest rates and yield curves. Fair values
determined by Level 3 inputs utilize unobservable data
points for the asset or liability, and include situations where
101
ALNYLAM
PHARMACEUTICALS, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
there is little, if any, market activity for the asset or
liability. Financial assets and liabilities measured at fair
value on a recurring basis are summarized as follows, in
thousands:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quoted
|
|
|
|
|
|
|
|
|
|
|
|
|
Prices in
|
|
|
Significant
|
|
|
Significant
|
|
|
|
At
|
|
|
Active
|
|
|
Observable
|
|
|
Unobservable
|
|
|
|
December 31,
|
|
|
Markets
|
|
|
Inputs
|
|
|
Inputs
|
|
Description
|
|
2010
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
|
Cash equivalents
|
|
$
|
59,702
|
|
|
$
|
40,686
|
|
|
$
|
19,016
|
|
|
$
|
|
|
Marketable securities (fixed income):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate notes
|
|
|
133,341
|
|
|
|
|
|
|
|
133,341
|
|
|
|
|
|
U.S. Government obligations
|
|
|
122,273
|
|
|
|
|
|
|
|
122,273
|
|
|
|
|
|
Commercial paper
|
|
|
17,733
|
|
|
|
|
|
|
|
17,733
|
|
|
|
|
|
Marketable securities (equity holdings)
|
|
|
1,958
|
|
|
|
|
|
|
|
1,958
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
335,007
|
|
|
$
|
40,686
|
|
|
$
|
294,321
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quoted
|
|
|
|
|
|
|
|
|
|
|
|
|
Prices in
|
|
|
Significant
|
|
|
Significant
|
|
|
|
At
|
|
|
Active
|
|
|
Observable
|
|
|
Unobservable
|
|
|
|
December 31,
|
|
|
Markets
|
|
|
Inputs
|
|
|
Inputs
|
|
Description
|
|
2009
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
|
Cash equivalents
|
|
$
|
129,113
|
|
|
$
|
129,113
|
|
|
$
|
|
|
|
$
|
|
|
Marketable securities (fixed income):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Government obligations
|
|
|
185,087
|
|
|
|
|
|
|
|
185,087
|
|
|
|
|
|
Corporate notes
|
|
|
89,220
|
|
|
|
|
|
|
|
89,220
|
|
|
|
|
|
Commercial paper
|
|
|
12,994
|
|
|
|
|
|
|
|
12,994
|
|
|
|
|
|
Municipal notes
|
|
|
8,700
|
|
|
|
|
|
|
|
8,700
|
|
|
|
|
|
Marketable securities (equity holdings)
|
|
|
1,847
|
|
|
|
|
|
|
|
1,847
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
426,961
|
|
|
$
|
129,113
|
|
|
$
|
297,848
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The carrying amounts reflected in the Companys
consolidated balance sheets for cash, collaboration receivables,
other current assets, accounts payable and accrued expenses
approximate fair value due to their short-term maturities.
Investments
in Marketable Securities
The Company invests its excess cash balances in short-term and
long-term marketable debt and equity securities. The Company
classifies its investments in marketable debt securities as
either
held-to-maturity
or
available-for-sale
based on facts and circumstances present at the time it
purchased the securities. At each balance sheet date presented,
the Company classified all of its investments in debt and equity
securities as
available-for-sale.
The Company reports
available-for-sale
investments at fair value at each balance sheet date and
includes any unrealized holding gains and losses (the adjustment
to fair value) in stockholders equity. Realized gains and
losses are determined using the specific identification method
and are included in other income. If any adjustment to fair
value reflects a decline in the value of the investment, the
Company considers all available evidence to evaluate the extent
to which the decline is other than temporary and, if
so, marks the investment to market through a charge to its
consolidated statements of operations. The Company did not
record any impairment charges related to its fixed income
marketable securities during the years ended December 31,
2010, 2009 or 2008. During 2008, the Company recorded an
impairment charge of $1.6 million related to its equity
investment in Tekmira Pharmaceuticals Corporation
(Tekmira), as the decrease in the fair value of this
investment was deemed to be other than temporary. The
Companys marketable securities are classified as cash
equivalents if the original maturity, from the date of
102
ALNYLAM
PHARMACEUTICALS, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
purchase, is 90 days or less, and as marketable securities
if the original maturity, from the date of purchase, is in
excess of 90 days.
The following tables summarize the Companys marketable
securities at December 31, 2010 and 2009, in thousands:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2010
|
|
|
|
|
|
|
Gross
|
|
|
Gross
|
|
|
|
|
|
|
Amortized
|
|
|
Unrealized
|
|
|
Unrealized
|
|
|
|
|
|
|
Cost
|
|
|
Gains
|
|
|
Losses
|
|
|
Fair Value
|
|
|
Commercial paper (Due within 1 year)
|
|
$
|
17,734
|
|
|
$
|
2
|
|
|
$
|
(3
|
)
|
|
$
|
17,733
|
|
Corporate notes (Due within 1 year)
|
|
|
116,385
|
|
|
|
204
|
|
|
|
(23
|
)
|
|
|
116,566
|
|
Corporate notes (Due after 1 year through 2 years)
|
|
|
16,767
|
|
|
|
33
|
|
|
|
(25
|
)
|
|
|
16,775
|
|
U.S. Government obligations (Due within 1 year)
|
|
|
24,246
|
|
|
|
1
|
|
|
|
(14
|
)
|
|
|
24,233
|
|
U.S. Government obligations (Due after 1 year through
2 years)
|
|
|
98,111
|
|
|
|
22
|
|
|
|
(93
|
)
|
|
|
98,040
|
|
Equity securities
|
|
|
1,345
|
|
|
|
613
|
|
|
|
|
|
|
|
1,958
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
274,588
|
|
|
$
|
875
|
|
|
$
|
(158
|
)
|
|
$
|
275,305
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2009
|
|
|
|
|
|
|
Gross
|
|
|
Gross
|
|
|
|
|
|
|
Amortized
|
|
|
Unrealized
|
|
|
Unrealized
|
|
|
|
|
|
|
Cost
|
|
|
Gains
|
|
|
Losses
|
|
|
Fair Value
|
|
|
Municipal notes (Due within 1 year)
|
|
$
|
8,698
|
|
|
$
|
2
|
|
|
$
|
|
|
|
$
|
8,700
|
|
Commercial paper (Due within 1 year)
|
|
|
12,991
|
|
|
|
3
|
|
|
|
|
|
|
|
12,994
|
|
Corporate notes (Due within 1 year)
|
|
|
36,976
|
|
|
|
52
|
|
|
|
(24
|
)
|
|
|
37,004
|
|
Corporate notes (Due after 1 year through 2 years)
|
|
|
52,085
|
|
|
|
169
|
|
|
|
(38
|
)
|
|
|
52,216
|
|
U.S. Government obligations (Due within 1 year)
|
|
|
85,061
|
|
|
|
205
|
|
|
|
(30
|
)
|
|
|
85,236
|
|
U.S. Government obligations (Due after 1 year through
2 years)
|
|
|
100,005
|
|
|
|
96
|
|
|
|
(250
|
)
|
|
|
99,851
|
|
Equity securities
|
|
|
1,345
|
|
|
|
502
|
|
|
|
|
|
|
|
1,847
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
297,161
|
|
|
$
|
1,029
|
|
|
$
|
(342
|
)
|
|
$
|
297,848
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated
Liability for Development Costs
The Company records accrued liabilities related to expenses for
which service providers have not yet billed the Company with
respect to products or services that the Company has received,
specifically related to ongoing pre-clinical studies and
clinical trials. These costs primarily relate to third-party
clinical management costs, laboratory and analysis costs,
toxicology studies and investigator fees. The Company has
multiple product candidates in concurrent pre-clinical studies
and clinical trials at multiple clinical sites throughout the
world. In order to ensure that the Company has adequately
provided for ongoing pre-clinical and clinical development costs
during the period in which the Company incurs such costs, the
Company maintains an accrual to cover these expenses. The
Company updates the estimate for this accrual on at least a
quarterly basis. The assessment of these costs is a subjective
process that requires judgment. Upon settlement, these costs may
differ materially from the amounts accrued in the Companys
consolidated financial statements. The Companys historical
accrual estimates have not been materially different from the
Companys actual amounts.
103
ALNYLAM
PHARMACEUTICALS, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Revenue
Recognition
The Company has entered into collaboration agreements with
biotechnology and pharmaceutical companies, including Novartis,
Biogen Idec Inc. (Biogen Idec), Roche, Takeda, Kyowa
Hakko Kirin Co., Ltd. (Kyowa Hakko Kirin) and
Cubist. The terms of the Companys collaboration agreements
typically include non-refundable license fees, funding of
research and development, payments based upon achievement of
clinical and pre-clinical development milestones, manufacturing
services and royalties on product sales.
Non-refundable license fees are recognized as revenue upon
delivery of the license only if the Company has a contractual
right to receive such payment, the contract price is fixed or
determinable, the collection of the resulting receivable is
reasonably assured and the Company has no further performance
obligations under the license agreement. Multiple element
arrangements, such as license and development arrangements, are
analyzed to determine whether the deliverables, which often
include a license and performance obligations such as research
and steering committee services, can be separated or whether
they must be accounted for as a single unit of accounting. The
Company recognizes upfront license payments as revenue upon
delivery of the license only if the license has stand-alone
value and the fair value of the undelivered performance
obligations, typically including research
and/or
steering committee services, can be determined. If the fair
value of the undelivered performance obligations can be
determined, such obligations are accounted for separately as
such obligations are fulfilled. If the license is considered to
either not have stand-alone value or have stand-alone value but
the fair value of any of the undelivered performance obligations
cannot be determined, the arrangement would then be accounted
for as a single unit of accounting and the license payments and
payments for performance obligations are recognized as revenue
over the estimated period of when the performance obligations
are performed.
Whenever the Company determines that an arrangement should be
accounted for as a single unit of accounting, the Company
determines the period over which the performance obligations
will be performed and revenue will be recognized. Revenue will
be recognized using either a proportional performance or
straight-line method. The Company recognizes revenue using the
proportional performance method when the level of effort
required to complete its performance obligations under an
arrangement can be reasonably estimated and such performance
obligations are provided on a best-efforts basis. Direct labor
hours or full-time equivalents are typically used as the measure
of performance. The amount of revenue recognized under the
proportional performance method is determined by multiplying the
total payments under the contract, excluding royalties and
payments contingent upon achievement of substantive milestones,
by the ratio of level of effort incurred to date to estimated
total level of effort required to complete the Companys
performance obligations under the arrangement. Revenue is
limited to the lesser of the cumulative amount of payments
received or the cumulative amount of revenue earned, as
determined using the proportional performance method, as of the
period ending date.
If the Company cannot reasonably estimate the level of effort to
complete its performance obligations under an arrangement, the
Company recognizes revenue under the arrangement on a
straight-line basis over the period the Company is expected to
complete its performance obligations. Revenue is limited to the
lesser of the cumulative amount of payments received or the
cumulative amount of revenue earned, as determined using the
straight-line method, as of the period ending date.
Significant management judgment is required in determining the
level of effort required under an arrangement and the period
over which the Company is expected to complete its performance
obligations under an arrangement. Steering committee services
that are not inconsequential or perfunctory and that are
determined to be performance obligations are combined with other
research services or performance obligations required under an
arrangement, if any, in determining the level of effort required
in an arrangement and the period over which the Company expects
to complete its aggregate performance obligations.
Many of the Companys collaboration agreements entitle it
to additional payments upon the achievement of performance-based
milestones. If the achievement of a milestone is considered
probable at the inception of the collaboration, the related
milestone payment is included with other collaboration
consideration, such as upfront fees
104
ALNYLAM
PHARMACEUTICALS, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
and research funding, in the Companys revenue model.
Milestones that involve substantial effort on the Companys
part and the achievement of which are not considered probable at
the inception of the collaboration are considered
substantive milestones. Substantive milestones are
included in the Companys revenue model when achievement of
the milestone is considered probable. As future substantive
milestones are achieved, a portion of the milestone payment,
equal to the percentage of the performance period completed when
the milestone is achieved, multiplied by the amount of the
milestone payment, will be recognized as revenue upon
achievement of such milestone. The remaining portion of the
milestone will be recognized over the remaining performance
period using the proportional performance or straight-line
method. Milestones that are tied to regulatory approval are not
considered probable of being achieved until such approval is
received. Milestones tied to counter-party performance are not
included in the Companys revenue model until the
performance conditions are met.
For revenue generating arrangements where the Company, as a
vendor, provides consideration to a licensor or collaborator, as
a customer, the Company applies the accounting standard that
governs such transactions. This standard addresses the
accounting for revenue arrangements where both the vendor and
the customer make cash payments to each other for services
and/or
products. A payment to a customer is presumed to be a reduction
of the selling price unless the Company receives an identifiable
benefit for the payment and it can reasonably estimate the fair
value of the benefit received. Payments to a customer that are
deemed a reduction of selling price are recorded first as a
reduction of revenue, to the extent of both cumulative revenue
recorded to date and probable future revenues, which include any
unamortized deferred revenue balances, under all arrangements
with such customer, and then as an expense. Payments that are
not deemed to be a reduction of selling price are recorded as an
expense.
The Company evaluates its collaborative agreements for proper
classification in its consolidated statements of operations
based on the nature of the underlying activity. Transactions
between collaborators recorded in the Companys
consolidated statements of operations are recorded on either a
gross or net basis, depending on the characteristics of the
collaborative relationship. The Company generally reflects
amounts due under its collaborative agreements related to
cost-sharing of development activities as a reduction of
research and development expense.
Amounts received prior to satisfying the above revenue
recognition criteria are recorded as deferred revenue in the
accompanying consolidated balance sheets. Although the Company
follows detailed guidelines in measuring revenue, certain
judgments affect the application of its revenue policy. For
example, in connection with the Companys existing
collaboration agreements, the Company has recorded on its
balance sheet short-term and long-term deferred revenue based on
its best estimate of when such revenue will be recognized.
Short-term deferred revenue consists of amounts that are
expected to be recognized as revenue in the next 12 months.
Amounts that the Company expects will not be recognized prior to
the next 12 months are classified as long-term deferred
revenue. However, this estimate is based on the Companys
current operating plan and, if its operating plan should change
in the future, the Company may recognize a different amount of
deferred revenue over the next
12-month
period.
The estimate of deferred revenue also reflects managements
estimate of the periods of the Companys involvement in
certain of its collaborations. The Companys performance
obligations under these collaborations consist of participation
on steering committees and the performance of other research and
development services. In certain instances, the timing of
satisfying these obligations can be difficult to estimate.
Accordingly, the Companys estimates may change in the
future. Such changes to estimates would result in a change in
revenue recognition amounts. If these estimates and judgments
change over the course of these agreements, it may affect the
timing and amount of revenue that the Company recognizes and
records in future periods. At December 31, 2010, the
Company had short-term and long-term deferred revenue of
$81.1 million and $130.0 million, respectively,
related to its collaborations.
Effective beginning in January 2011, significant changes to
these contracts in the future would trigger reassessment of the
timing of revenue recognition under the new revenue recognition
accounting standard.
105
ALNYLAM
PHARMACEUTICALS, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The Company recognizes revenue under government cost
reimbursement contracts as the Company performs the underlying
research and development activities.
Income
Taxes
The Company uses the asset and liability method of accounting
for income taxes. Under the asset and liability method, deferred
tax assets and liabilities reflect the impact of temporary
differences between amounts of assets and liabilities for
financial reporting purposes and such amounts as measured under
enacted tax laws. A valuation allowance is required to offset
any net deferred tax assets if, based upon the available
evidence, it is more likely than not that some or all of the
deferred tax asset will not be realized.
The Company accounts for uncertain tax positions using a
more-likely-than-not threshold for recognizing and
resolving uncertain tax positions. The evaluation of uncertain
tax positions is based on factors that include, but are not
limited to, changes in tax law, the measurement of tax positions
taken or expected to be taken in tax returns, the effective
settlement of matters subject to audit, new audit activity and
changes in facts or circumstances related to a tax position.
Research
and Development Costs
The Company expenses research and development costs as incurred.
Included in research and development costs are wages, benefits
and other operating costs, facilities, supplies, external
services, clinical trial and manufacturing costs and overhead
directly related to the Companys research and development
operations as well as costs to acquire technology licenses.
The Company has entered into several license agreements for
rights to utilize certain technologies. The terms of the
licenses may provide for upfront payments, annual maintenance
payments, milestone payments based upon certain specified events
being achieved and royalties on product sales. The Company
charges costs to acquire and maintain licensed technology that
has not reached technological feasibility and does not have
alternative future use to research and development expense as
incurred. During the years ended December 31, 2010, 2009
and 2008, the Company charged to research and development
expense costs associated with license fees of $2.4 million,
$13.6 million and $12.6 million, respectively.
Accounting
for Stock-Based Compensation
Effective January 1, 2006, the Company adopted an
accounting standard addressing recognition and disclosure of
stock compensation. The Company adopted the fair value
recognition provisions of this standard using the
modified-prospective-transition method. The Company has stock
incentive plans and an employee stock purchase plan under which
it grants equity instruments that are required to be evaluated
under this standard. For stock options granted to non-employees,
the Company generally recognizes compensation expense over the
vesting period of the award, which is generally the period
during which services are rendered by such non-employees. At the
end of each financial reporting period prior to vesting, the
Company re-measures the value of these options (as calculated
using the Black-Scholes option-pricing model) using the
then-current fair value of the Companys common stock.
Stock options granted by the Company to non-employees, other
than members of the Companys Board of Directors and
Scientific Advisory Board members, generally vest over a
four-year service period.
Accounting
for Joint Venture
The Company accounts for its interest in Regulus using the
equity method of accounting. The Company reviewed the
consolidation guidance that defines a variable interest entity
(VIE) and concluded that Regulus currently qualifies
as a VIE. The Company records any gain or loss recognized from
the issuance of stock by its equity method investee as other
income (expense) in its consolidated statements of operations.
The Company does
106
ALNYLAM
PHARMACEUTICALS, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
not consolidate Regulus financial results as the Company
lacks the power to direct the activities that could
significantly impact the economic success of Regulus.
Comprehensive
Loss
Comprehensive loss is comprised of net loss and certain changes
in stockholders equity that are excluded from net loss.
The Company includes foreign currency translation adjustments in
other comprehensive loss for Alnylam Europe as the functional
currency is not the United States dollar. The Company also
includes unrealized gains and losses on certain marketable
securities in other comprehensive loss.
Net
Loss Per Common Share
The Company computes basic net loss per common share by dividing
net loss attributable to common stockholders by the weighted
average number of common shares outstanding. The Company
computes diluted net loss per common share by dividing net loss
attributable to common stockholders by the weighted average
number of common shares and dilutive potential common share
equivalents then outstanding. Potential common shares consist of
shares issuable upon the exercise of stock options (using the
treasury stock method), and unvested restricted stock awards.
Because the inclusion of potential common shares would be
anti-dilutive for all periods presented, diluted net loss per
common share is the same as basic net loss per common share.
The following table sets forth for the periods presented the
potential common shares (prior to consideration of the treasury
stock method) excluded from the calculation of net loss per
common share because their inclusion would be anti-dilutive, in
thousands:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Options to purchase common stock
|
|
|
8,975
|
|
|
|
7,927
|
|
|
|
7,037
|
|
Unvested restricted common stock
|
|
|
113
|
|
|
|
|
|
|
|
29
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,088
|
|
|
|
7,927
|
|
|
|
7,066
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment
Information
The Company operates in a single reporting segment, the
discovery, development and commercialization of RNAi
therapeutics.
Subsequent
Events
The Company evaluated all events or transactions that occurred
after December 31, 2010 up through the date these
consolidated financial statements were issued. During this
period, the Company did not have any material recognizable or
unrecognizable subsequent events.
Recent
Accounting Pronouncements
In April 2010, the Financial Accounting Standards Board
(FASB) issued a new accounting standard, which
provides guidance in applying the milestone method of revenue
recognition to research or development arrangements. Under this
guidance, management may recognize revenue contingent upon the
achievement of a milestone in the period in which the milestone
is achieved only if the milestone meets all the criteria within
the guidance to be considered substantive. This standard is
effective on a prospective basis for research and development
milestones achieved in fiscal years beginning on or after
June 15, 2010. The Company is currently evaluating the
potential impact of this accounting standard on its consolidated
financial statements, however the Company does not believe it
will have a significant impact.
107
ALNYLAM
PHARMACEUTICALS, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
In October 2009, the FASB issued a new accounting standard,
which amends existing revenue recognition accounting
pronouncements and provides accounting principles and
application guidance on whether multiple deliverables exist, how
the arrangement should be separated, and the consideration
allocated. This standard eliminates the requirement to establish
the fair value of undelivered products and services and instead
provides for separate revenue recognition based upon
managements estimate of the selling price for an
undelivered item when there is no other means to determine the
fair value of that undelivered item. Previously, accounting
principles required that the fair value of the undelivered item
be the price of the item either sold in a separate transaction
between unrelated third parties or the price charged for each
item when the item is sold separately by the vendor. Determining
the fair value using these methods was difficult when the
product was not individually sold because of its unique
features. If the fair value of all of the elements in the
arrangement was not determinable, then revenue was deferred
until all of the items were delivered or fair value was
determined. This new approach is effective prospectively for
revenue arrangements entered into or materially modified in
fiscal years beginning on or after June 15, 2010. This new
accounting standard will not affect the Companys existing
collaborations but will affect how the Company recognizes
revenue for future collaborations.
In June 2009, the FASB issued a new accounting standard, which
amends previously issued accounting guidance for the
consolidation of a VIE to require an enterprise to determine
whether its variable interest or interests give it a controlling
financial interest in a VIE. This amended consolidation guidance
for VIEs also replaces the existing quantitative approach for
identifying which enterprise should consolidate a VIE, which was
based on which enterprise was exposed to a majority of the risks
and rewards, with a qualitative approach, based on which
enterprise has both (1) the power to direct the
economically significant activities of the entity and
(2) the obligation to absorb losses of the entity that
could potentially be significant to the VIE or the right to
receive benefits from the entity that could potentially be
significant to the VIE. This new accounting standard has broad
implications and may affect how the Company accounts for the
consolidation of common structures, such as joint ventures,
equity method investments, collaboration and other agreements,
and purchase arrangements. Under this revised consolidation
guidance, more entities may meet the definition of a VIE, and
the determination about which entity should consolidate a VIE is
required to be evaluated continuously. The Company adopted this
standard effective January 1, 2010 and has determined that
the adoption did not have an impact on its consolidated
financial statements.
|
|
3.
|
SIGNIFICANT
AGREEMENTS
|
The following table summarizes the Companys total
consolidated net revenues from research collaborators, for the
periods indicated, in thousands:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Roche
|
|
$
|
55,978
|
|
|
$
|
56,884
|
|
|
$
|
54,427
|
|
Takeda
|
|
|
22,250
|
|
|
|
21,732
|
|
|
|
12,794
|
|
Novartis
|
|
|
9,313
|
|
|
|
9,811
|
|
|
|
11,635
|
|
Government contract
|
|
|
4,335
|
|
|
|
7,471
|
|
|
|
14,172
|
|
Cubist
|
|
|
2,363
|
|
|
|
2,672
|
|
|
|
|
|
Regulus
|
|
|
1,875
|
|
|
|
|
|
|
|
|
|
Biogen Idec
|
|
|
921
|
|
|
|
921
|
|
|
|
928
|
|
Other
|
|
|
3,006
|
|
|
|
1,042
|
|
|
|
2,207
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net revenues from research collaborators
|
|
$
|
100,041
|
|
|
$
|
100,533
|
|
|
$
|
96,163
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
108
ALNYLAM
PHARMACEUTICALS, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Platform
Alliances
Roche
Alliance
In July 2007, the Company and, for limited purposes, Alnylam
Europe, entered into a license and collaboration agreement (the
LCA) with Roche. Under the LCA, which became
effective in August 2007, the Company granted Roche a
non-exclusive license to the Companys intellectual
property to develop and commercialize therapeutic products that
function through RNAi, subject to the Companys existing
contractual obligations to third parties. The license is
initially limited to the therapeutic areas of oncology,
respiratory diseases, metabolic diseases and certain liver
diseases, and may be expanded to include up to 18 additional
therapeutic areas, comprising substantially all other fields of
human disease, as identified and agreed upon by the parties,
upon payment to the Company by Roche of an additional
$50.0 million for each additional therapeutic area, if any.
In consideration for the rights granted to Roche under the LCA,
Roche paid the Company $273.5 million in upfront cash
payments. In addition, in exchange for the Companys
contributions under the LCA, for each RNAi therapeutic product
developed by Roche, its affiliates or sublicensees under the
LCA, the Company is entitled to receive milestone payments upon
achievement of specified development and sales events, totaling
up to an aggregate of $100.0 million per therapeutic
target, together with royalty payments based on worldwide annual
net sales, if any. Under the LCA, the Company and Roche also
established a discovery collaboration in October 2009
(Discovery Collaboration), subject to the
Companys existing contractual obligations to third parties.
The term of the LCA generally ends upon the later of ten years
from the first commercial sale of a licensed product and the
expiration of the
last-to-expire
patent covering a licensed product. Roche may terminate the LCA,
on a licensed
product-by-licensed
product, licensed
patent-by-licensed
patent, and
country-by-country
basis, upon
180-days
prior written notice, but is required to continue to make
milestone and royalty payments to the Company if any royalties
were payable on net sales of a terminated licensed product
during the previous 12 months. The LCA may also be
terminated by either party in the event the other party fails to
cure a material breach under the LCA.
In July 2007, the Company executed a common stock purchase
agreement (the Common Stock Purchase Agreement) with
Roche Finance Ltd, an affiliate of Roche (Roche
Finance). Under the terms of the Common Stock Purchase
Agreement, on August 9, 2007, Roche Finance purchased
1,975,000 shares of the Companys common stock at
$21.50 per share, for an aggregate purchase price of
$42.5 million. Based on the closing price of the
Companys common stock on the date of issuance, the fair
value of the shares issued was $51.3 million, which was
$8.8 million in excess of the proceeds received from Roche
for the issuance of the Companys common stock. As a
result, the Company allocated $8.8 million of the upfront
payment from the LCA to the common stock issuance.
Under the terms of the Common Stock Purchase Agreement, in the
event the Company proposes to sell or issue any of its equity
securities, subject to specified exceptions, it has agreed to
grant to Roche Finance the right to acquire, at fair value,
additional securities, such that Roche Finance would be able to
maintain its ownership percentage in the Company. This right
continues until the earlier of any sale by Roche Finance of
shares of the Companys common stock and the expiration or
termination of the LCA, subject to certain exceptions.
In connection with the execution of the LCA and the Common Stock
Purchase Agreement, the Company also executed a share purchase
agreement (the Alnylam Europe Purchase Agreement)
with Alnylam Europe and Roche Beteiligungs GmbH, an affiliate of
Roche (Roche Germany). Under the terms of the
Alnylam Europe Purchase Agreement, which became effective in
August 2007, the Company created a new, wholly-owned German
limited liability company (Roche Kulmbach) into
which substantially all of the non-intellectual property assets
of Alnylam Europe were transferred, and Roche Germany purchased
from the Company all of the issued and outstanding shares of
Roche Kulmbach for an aggregate purchase price of
$15.0 million.
In summary, the Company received upfront payments totaling
$331.0 million under the Roche alliance, which include an
upfront payment under the LCA of $273.5 million,
$42.5 million under the Common Stock Purchase Agreement and
$15.0 million for the Roche Kulmbach shares under the
Alnylam Europe Purchase Agreement. The
109
ALNYLAM
PHARMACEUTICALS, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Company initially recorded $278.2 million of these proceeds
as deferred revenue in connection with the Roche alliance.
The Company has determined that the deliverables under its
agreements with Roche include the license, the Alnylam Europe
assets and employees, the steering committees (joint steering
committee and future technology committee) and the services
under the Discovery Collaboration. The Company has determined
that, pursuant to the accounting guidance governing revenue
recognition on multiple element arrangements, the license and
assets of Alnylam Europe are not separable from the undelivered
services (i.e., the steering committees and Discovery
Collaboration) and, accordingly the license and the services are
being treated as a single unit of accounting. When multiple
deliverables are accounted for as a single unit of accounting,
the Company bases its revenue recognition pattern on the final
deliverable. Under the Roche alliance, the steering committee
services and the Discovery Collaboration services are the final
deliverables and all such services will end, contractually, five
years from the effective date of the LCA.
In November 2010, Roche announced the discontinuation of certain
activities in research and early development, including their
RNAi research efforts. The remaining deliverables under the LCA
currently remain in effect. Roche may assign its rights and
obligations under the LCA to a third party in connection with
the sale or transfer of its entire RNAi business.
The Company is recognizing the Roche-related revenue on a
straight-line basis over five years because the Company cannot
reasonably estimate the total level of effort required to
complete its service obligations under the LCA, and therefore,
cannot utilize a proportional performance model. As future
substantive milestones are achieved, the Company will recognize
as revenue a portion of the milestone payment, equal to the
percentage of the performance period completed when the
milestone is achieved, multiplied by the amount of the milestone
payment. The Company will recognize the remaining portion of the
milestone over the remaining performance period on a
straight-line basis. The Company will continue to recognize the
Roche-related revenue on a straight-line basis over five years.
If Roche terminates the LCA or assigns its rights and
obligations thereunder to a third party, at such time, the
Company will reassess its deliverables and the period over which
it will complete its performance obligations under the LCA.
Takeda
Alliance
In May 2008, the Company entered into a license and
collaboration agreement (the Takeda Collaboration
Agreement) with Takeda to pursue the development and
commercialization of RNAi therapeutics. Under the Takeda
Collaboration Agreement, the Company granted to Takeda a
non-exclusive, worldwide, royalty-bearing license to the
Companys intellectual property to develop, manufacture,
use and commercialize RNAi therapeutics, subject to the
Companys existing contractual obligations to third
parties. The license initially is limited to the fields of
oncology and metabolic disease and may be expanded at
Takedas option to include other therapeutic areas, subject
to specified conditions. Under the Takeda Collaboration
Agreement, Takeda is the Companys exclusive platform
partner in the Asian territory, as defined in the Takeda
Collaboration Agreement, through May 2013.
In consideration for the rights granted to Takeda under the
Takeda Collaboration Agreement, Takeda agreed to pay the Company
$150.0 million in upfront and near-term technology transfer
payments. In addition, the Company has the option, exercisable
until the start of Phase III development, to opt-in under a
50-50
profit
sharing agreement to the development and commercialization in
the United States of up to four Takeda licensed products, and
would be entitled to opt-in rights for two additional products
for each additional field expansion, if any, elected by Takeda
under the Takeda Collaboration Agreement. In June 2008, Takeda
paid the Company an upfront payment of $100.0 million and
agreed pay an additional $50.0 million to the Company upon
achievement of specified technology transfer milestones. Of this
$50.0 million, $20.0 million was paid to the Company
in October 2008, $20.0 million was paid to the Company in
March 2010, and $10.0 million is due upon achievement of
the last specified technology transfer activities, but no later
than the second quarter of 2011 (collectively, the
Technology Transfer Milestones). If Takeda elects to
expand its license to additional therapeutic areas, Takeda will
be required
110
ALNYLAM
PHARMACEUTICALS, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
to pay the Company $50.0 million for each of up to
approximately 20 total additional fields selected, if any,
comprising substantially all other fields of human disease, as
identified and agreed upon by the parties. In addition, for each
RNAi therapeutic product developed by Takeda, its affiliates and
sublicensees, the Company is entitled to receive specified
development and commercialization milestones, totaling up to
$171.0 million per product, together with royalty payments
based on worldwide annual net sales, if any.
Pursuant to the Takeda Collaboration Agreement, the Company and
Takeda are also collaborating on the research of RNAi
therapeutics directed to one or two disease targets agreed to by
the parties (the Research Collaboration), subject to
the Companys existing contractual obligations with third
parties. Takeda also has the option, subject to certain
conditions, to collaborate with the Company on the research and
development of RNAi drug delivery technology for targets agreed
to by the parties. In addition, Takeda has a right of first
negotiation for the development and commercialization of the
Companys RNAi therapeutic products in the Asian territory,
excluding the Companys ALN-RSV program. In addition to the
50-50
profit
sharing option, the Company has a similar right of first
negotiation to participate with Takeda in the development and
commercialization in the United States of licensed products. The
collaboration is governed by a joint technology transfer
committee (the JTTC), a joint research collaboration
committee (the JRCC) and a joint delivery
collaboration committee (the JDCC), each of which is
comprised of an equal number of representatives from each party.
The term of the Takeda Collaboration Agreement generally ends
upon the later of (1) the expiration of the Companys
last-to-expire
patent covering a licensed product and (2) the
last-to-expire
term of a profit sharing agreement in the event the Company
elects to enter into such an agreement. The Takeda Collaboration
Agreement may be terminated by either party in the event the
other party fails to cure a material breach under the agreement.
In addition, Takeda may terminate the agreement on a licensed
product-by-licensed
product or
country-by-country
basis upon
180-days
prior written notice to the Company, provided, however, that
Takeda is required to continue to make royalty payments to the
Company for the duration of the royalty term with respect to a
licensed product.
The Company has determined that the deliverables under the
Takeda agreement include the license, the joint committees (the
JTTC, JRCC and JDCC), the technology transfer activities and the
services that the Company will be obligated to perform under the
Research Collaboration. The Company has determined that,
pursuant to the accounting guidance governing revenue
recognition on multiple element arrangements, the license and
undelivered services (i.e., the joint committees and the
Research Collaboration) are not separable and, accordingly, the
license and services are being treated as a single unit of
accounting. When multiple deliverables are accounted for as a
single unit of accounting, the Company bases its revenue
recognition pattern on the final deliverable. Under the Takeda
Collaboration Agreement, the last elements to be delivered are
the JDCC and JTTC services, each of which has a life of no more
than seven years.
The Company is recognizing the upfront payment of
$100.0 million and the $50.0 million of Technology
Transfer Milestones, the receipt of which the Company believed
was probable at the commencement of the collaboration, on a
straight-line basis over seven years because the Company is
unable to reasonably estimate the level of effort to fulfill
these obligations, primarily because the effort required under
the Research Collaboration is largely unknown, and therefore,
cannot utilize a proportional performance model. As future
substantive milestones are achieved, the Company will recognize
as revenue a portion of the milestone payment, equal to the
percentage of the performance period completed when the
milestone is achieved, multiplied by the amount of the milestone
payment. The Company will recognize the remaining portion of the
milestone over the remaining performance period on a
straight-line basis.
In connection with the Takeda Collaboration Agreement, during
2008, the Company paid $5.0 million of license fees to the
Companys licensors, primarily Isis, in accordance with the
applicable license agreements with those parties. These fees
were charged to research and development expense.
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ALNYLAM
PHARMACEUTICALS, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Discovery
and Development Alliances
Isis
Collaboration and License Agreement
In April 2009, the Company and Isis amended and restated their
existing strategic collaboration and license agreement (as
amended and restated, the Amended and Restated Isis
Agreement), originally entered into in March 2004, to
extend the broad cross-licensing arrangement regarding
double-stranded RNAi that was established in 2004, pursuant to
which Isis granted the Company licenses to its current and
future patents and patent applications relating to chemistry and
to RNA-targeting mechanisms for the research, development and
commercialization of double-stranded RNA (dsRNA)
products. The Company has the right to use Isis technologies in
its development programs or in collaborations and Isis agreed
not to grant licenses under these patents to any other
organization for the discovery, development and
commercialization of dsRNA products designed to work through an
RNAi mechanism, except in the context of a collaboration in
which Isis plays an active role. The Company granted Isis
non-exclusive licenses to its current and future patents and
patent applications relating to RNA-targeting mechanisms and to
chemistry for research use. The Company also granted Isis the
non-exclusive right to develop and commercialize dsRNA products
developed using RNAi technology against a limited number of
targets. In addition, the Company granted Isis non-exclusive
rights to research, develop and commercialize single-stranded
RNA products.
In 2004, under the terms of the original Isis agreement, the
Company paid Isis an upfront license fee of $5.0 million.
The Company also agreed to pay Isis milestone payments, totaling
up to approximately $3.4 million, upon the occurrence of
specified development and regulatory events, and royalties on
sales, if any, for each product that the Company or a
collaborator develops using Isis intellectual property. In
addition, the Company agreed to pay to Isis a percentage of
specified fees from strategic collaborations the Company may
enter into that include access to Isis intellectual
property.
Isis agreed to pay the Company, per therapeutic target, a
license fee of $0.5 million, and milestone payments
totaling approximately $3.4 million, payable upon the
occurrence of specified development and regulatory events, and
royalties on sales, if any, for each product developed by Isis
or a collaborator that utilizes the Companys intellectual
property. Isis has the right to elect up to ten non-exclusive
target licenses under the agreement and has the right to
purchase one additional non-exclusive target per year during the
term of the collaboration.
As part of the Amended and Restated Isis Agreement, the Company
and Isis established a collaborative effort focused on
single-stranded RNAi (ssRNAi) technology and the
Company obtained from Isis a co-exclusive, worldwide license to
research, develop and commercialize ssRNAi products. The Company
paid Isis $11.0 million in license fees upon signing the
agreement in connection with the ssRNAi research program. In
addition, the Company was obligated to fund research activities
conducted by both the Company and Isis at a minimum of
$3.0 million a year for three years. In November 2010, the
Company exercised its right to terminate the ssRNAi
collaborative effort, and all licenses to ssRNAi products
granted by Isis to the Company, and any obligation thereunder
requiring the Company to provide further research funding or pay
additional license fees, milestone payments, royalties or
sublicense payments to Isis for such ssRNAi products, also
terminated. The termination of this collaborative effort did not
affect the remainder of the Amended and Restated Isis Agreement,
including the Companys licenses to Isis current and
future patents and patent applications relating to
double-stranded RNAs, which remains in effect.
The term of the Amended and Restated Isis Agreement generally
ends upon the expiration of the
last-to-expire
patent licensed thereunder, whether such patent is a patent
licensed by the Company to Isis, or vice versa. As the license
will include additional patents, if any, filed to cover future
inventions, if any, the date of expiration cannot be determined
at this time.
During 2009, as a result of certain payments received by the
Company in connection with the Cubist alliance, the Company paid
$1.0 million to Isis. During 2008, as a result of certain
payments received by the Company in connection with the Takeda
alliance, the Company paid $4.6 million to Isis. These
license fees were charged to research and development expense in
the respective periods.
112
ALNYLAM
PHARMACEUTICALS, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Novartis
Broad Alliance
In September 2005, the Company and Novartis executed a stock
purchase agreement (the Stock Purchase Agreement)
and an investor rights agreement (the Investor Rights
Agreement). In October 2005, in connection with the
closing of the transactions contemplated by the Stock Purchase
Agreement, the Investor Rights Agreement became effective and
the Company and Novartis executed a research collaboration and
license agreement (the Collaboration and License
Agreement) (collectively the Novartis
Agreements). The Collaboration and License Agreement had
an initial research term of three years, with an option for two
additional one-year extensions at the election of Novartis.
Novartis elected to extend the term through October 2010, the
fifth and final planned year. In October 2010, the research
program under the collaboration and license agreement was
substantially completed in accordance with the terms of the
collaboration and license agreement, subject to certain
surviving rights and obligations of the parties.
Under the terms of the Stock Purchase Agreement, in October
2005, Novartis purchased 5,267,865 shares of the
Companys common stock at a purchase price of $11.11 per
share for an aggregate purchase price of $58.5 million,
which, after such issuance, represented 19.9% of the
Companys outstanding common stock as of the date of
issuance. In addition, under the Investor Rights Agreement, the
Company granted Novartis the right to acquire additional equity
securities in the event that the Company proposes to sell or
issue any equity securities, subject to specified exceptions,
such that Novartis would be able to maintain its then-current
ownership percentage in the Companys outstanding common
stock. This right continues until the earlier of any sale by
Novartis of shares of the Companys common stock and the
expiration or termination of the Collaboration and License
Agreement, subject to certain exceptions. Pursuant to the terms
of the Investor Rights Agreement, Novartis purchased an
aggregate of 335,033 shares of the Companys common
stock, resulting in aggregate payments to the Company of
$7.6 million. These purchases allowed Novartis to maintain
its ownership position of approximately 13.4% of the
Companys outstanding common stock. The exercises of this
right did not result in any changes to existing rights or any
additional rights to Novartis. At December 31, 2010,
Novartis owned 13.2% of the Companys outstanding common
stock.
In consideration for the rights granted to Novartis under the
Collaboration and License Agreement, Novartis made an upfront
payment of $10.0 million to the Company in October 2005,
partly to reimburse prior costs incurred by the Company to
develop
in vivo
RNAi technology. The Company also
received research funding and development milestone payments
from Novartis.
In September 2010, Novartis exercised its right under the
Collaboration and License Agreement to select 31 designated gene
targets, for which Novartis has exclusive rights to discover,
develop and commercialize RNAi therapeutic products using the
Companys intellectual property and technology. Under the
terms of the Collaboration and License Agreement, for any RNAi
therapeutic products Novartis develops against these targets,
the Company is entitled to receive milestone payments upon
achievement of certain specified development and annual net
sales events, up to an aggregate of $75.0 million per
therapeutic product, as well as royalties on annual net sales of
any such product. In September 2010, Novartis declined to
exercise its non-exclusive option to integrate into its
operations the Companys fundamental and chemistry
intellectual property under the terms of the Collaboration and
License Agreement. If Novartis had elected to exercise the
integration option, Novartis would have been required to make
additional payments to the Company totaling $100.0 million.
Novartis may terminate the Collaboration and License Agreement
in the event that the Company materially breaches its
obligations. The Company may terminate the Collaboration and
License Agreement with respect to particular programs, products
and/or
countries in the event of specified material breaches by
Novartis of its obligations, or in its entirety under specified
circumstances for multiple such breaches.
The Company initially deferred the non-refundable
$10.0 million upfront payment and the $6.4 million
premium received that represented the difference between the
purchase price and the closing price of the common stock of the
Company on the date of the stock purchase from Novartis. These
payments, in addition to research
113
ALNYLAM
PHARMACEUTICALS, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
funding and certain milestone payments, together total
approximately $65.0 million, and are being amortized into
revenue using the proportional performance method over the
estimated duration of the Collaboration and License Agreement or
ten years. Under this method, the Company estimates the level of
effort to be expended over the term of the agreement and
recognizes revenue based on the lesser of the amount calculated
based on proportional performance of total expected revenue or
the amount of non-refundable payments earned.
As future substantive milestones are achieved, and to the extent
they are within the period of performance, milestone payments
will be recognized as revenue on a proportional performance
basis over the contracts entire performance period,
starting with the contracts commencement. A portion of the
milestone payment, equal to the percentage of total performance
completed when the milestone is achieved, multiplied by the
milestone payment, will be recognized as revenue upon
achievement of the milestone. The remaining portion of the
milestone will be recognized over the remaining performance
period under the proportional performance method.
The Company believes the estimated period of performance under
the Collaboration and License Agreement is ten years, which
includes the three-year initial term of the agreement, two
one-year extensions elected by Novartis and limited support as
part of a technology transfer until 2015, the fifth anniversary
of the completion of the research term under the Collaboration
and License Agreement. The Company continues to use an expected
term of ten years in its proportional performance model. The
Company reevaluates the expected term when new information is
known that could affect the Companys estimate. In the
event the Companys period of performance is different than
estimated, the Company will adjust the amount of revenue
recognized on a prospective basis. At December 31, 2010,
deferred revenue under the Novartis Collaboration and License
Agreement was $0.4 million.
Biogen
Idec Collaboration Agreement
In September 2006, the Company entered into a collaboration and
license agreement (the Biogen Idec Collaboration
Agreement) with Biogen Idec focused on the discovery and
development of therapeutics based on RNAi for the potential
treatment of progressive multifocal leukoencephalopathy
(PML). Under the terms of the Biogen Idec
Collaboration Agreement, the Company granted Biogen Idec an
exclusive license to distribute, market and sell certain RNAi
therapeutics to treat PML and Biogen Idec has agreed to fund all
related research and development activities. The Company
received an upfront $5.0 million payment from Biogen Idec.
In addition, upon the successful development and utilization of
a product resulting from the collaboration, if any, Biogen Idec
would be required to pay the Company milestone payments,
totaling $51.0 million, and royalty payments on sales, if
any.
The Company is recognizing revenue under the Biogen Idec
collaboration on a straight-line basis over five years because
the Company cannot reasonably estimate the total level of effort
required to fulfill its obligations under this collaboration.
The pace and scope of future development of this program is the
responsibility of Biogen Idec.
Unless earlier terminated, the Biogen Idec Collaboration
Agreement will remain in effect until the expiration of all
payment obligations under the agreement. Either the Company or
Biogen Idec may terminate the agreement in the event that the
other party breaches its obligations thereunder. Biogen Idec may
also terminate the agreement, on a
country-by-country
basis, without cause upon
90-days
prior written notice.
Product
Alliances
Kyowa
Hakko Kirin Alliance
In June 2008, the Company entered into a license and
collaboration agreement (the Kyowa Hakko Kirin
Agreement) with Kyowa Hakko Kirin. Under the Kyowa Hakko
Kirin Agreement, the Company granted Kyowa Hakko Kirin an
exclusive license to its intellectual property in Japan and
other markets in Asia (the Licensed Territory) for
the development and commercialization of an RNAi therapeutic for
the treatment of respiratory
114
ALNYLAM
PHARMACEUTICALS, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
syncytial virus (RSV) infection. The Kyowa Hakko
Kirin Agreement covers ALN-RSV01, as well as additional
RSV-specific RNAi therapeutic compounds that comprise the
ALN-RSV program (Additional Compounds). The Company
retains all development and commercialization rights worldwide
outside of the Licensed Territory, subject to its agreement with
Cubist, described below.
Under the terms of the Kyowa Hakko Kirin Agreement, in June
2008, Kyowa Hakko Kirin paid the Company an upfront cash payment
of $15.0 million. In addition, Kyowa Hakko Kirin is
required to make payments to the Company upon achievement of
specified development and sales milestones totaling up to
$78.0 million, and royalty payments based on annual net
sales, if any, of RNAi therapeutics for the treatment of RSV by
Kyowa Hakko Kirin, its affiliates and sublicensees in the
licensed territory.
The collaboration between Kyowa Hakko Kirin and the Company is
governed by a joint steering committee that is comprised of an
equal number of representatives from each party. Under the
agreement, Kyowa Hakko Kirin is establishing a development plan
for the ALN-RSV program relating to the development activities
to be undertaken in the Licensed Territory, with the initial
focus on Japan. Kyowa Hakko Kirin is responsible, at its
expense, for all development activities under the development
plan that are reasonably necessary for the regulatory approval
and commercialization of an RNAi therapeutic for the treatment
of RSV in Japan and the rest of the Licensed Territory. The
Company is responsible for supply of the product to Kyowa Hakko
Kirin under a supply agreement unless Kyowa Hakko Kirin elects,
prior to the first commercial sale of the product in the
Licensed Territory, to manufacture the product itself or arrange
for a third party to manufacture the product.
The term of the Kyowa Hakko Kirin agreement generally ends on a
country-by-country
basis upon the later of (1) the expiration of the
Companys
last-to-expire
patent covering a licensed product and (2) the tenth
anniversary of the first commercial sale in the country of sale.
Additional patent filings relating to the collaboration may be
made in the future. The Kyowa Hakko Kirin agreement may be
terminated by either party in the event the other party fails to
cure a material breach under the agreement. In addition, Kyowa
Hakko Kirin may terminate the agreement without cause upon
180-days
prior written notice to the Company, subject to certain
conditions.
The Company has determined that the deliverables under the Kyowa
Hakko Kirin Agreement include the license, the joint steering
committee, the manufacturing services and any Additional
Compounds. The Company has determined that, pursuant to the
accounting guidance governing revenue recognition on multiple
element arrangements, the individual deliverables are not
separable and, accordingly, must be accounted for as a single
unit of accounting. When multiple deliverables are accounted for
as a single unit of accounting, the Company bases its revenue
recognition pattern on the final deliverable.
The Company is currently unable to reasonably estimate its
period of performance under the Kyowa Hakko Kirin Agreement, as
it is unable to estimate the timeline of its deliverables
related to the fixed-price option granted to Kyowa Hakko Kirin
for any Additional Compounds. The Company is deferring all
revenue under the Kyowa Hakko Kirin Agreement until it is able
to reasonably estimate its period of performance. The Company
will continue to reassess whether it can reasonably estimate the
period of performance to fulfill its obligations under the Kyowa
Hakko Kirin Agreement.
Cubist
Alliance
In January 2009, the Company entered into a license and
collaboration agreement with Cubist (the Cubist
Agreement) to develop and commercialize therapeutic
products (Licensed Products) based on certain of the
Companys RNAi technology for the treatment of RSV
infection. Licensed Products initially included ALN-RSV01, as
well as several other second-generation RNAi-based RSV
inhibitors. In November 2009, the Company and Cubist entered
into an amendment to the Cubist Agreement (the
Amendment), which provides that the Company and
Cubist would focus their collaboration and joint development
efforts on ALN-RSV02, a second-generation compound, intended for
use in pediatric patients. Consistent with the original Cubist
Agreement, the Company and Cubist were each responsible for
one-half of the related development costs for ALN-RSV02.
115
ALNYLAM
PHARMACEUTICALS, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Pursuant to the terms of the Amendment, the Company is
continuing to develop ALN-RSV01 for adult transplant patients at
its sole discretion and expense. Cubist has the right to opt
into collaborating with the Company on ALN-RSV01 in the future,
which right may be exercised for a specified period of time
following the completion of the Companys Phase IIb trial
of ALN-RSV01, subject to the payment by Cubist of an opt-in fee
representing reimbursement of an agreed upon percentage of
certain of the Companys development expenses for
ALN-RSV01. In December 2010, the Company and Cubist jointly made
a portfolio decision to put the development of ALN-RSV02 on hold.
Under the terms of the Cubist Agreement, the Company and Cubist
share responsibility for developing Licensed Products in North
America and each bears one-half of the related development
costs, subject to the terms of the Amendment. The Companys
collaboration with Cubist for the development of Licensed
Products in North America is governed by a joint steering
committee comprised of an equal number of representatives from
each party. Cubist will have the sole right to commercialize
Licensed Products in North America with costs associated with
such activities and any resulting profits or losses to be split
equally between the Company and Cubist. Throughout the rest of
the world (the Royalty Territory), excluding Asia,
where the Company has previously partnered its ALN-RSV program
with Kyowa Hakko Kirin, Cubist has an exclusive, royalty-bearing
license to develop and commercialize Licensed Products.
In consideration for the rights granted to Cubist under the
Cubist Agreement, in January 2009, Cubist paid the Company an
upfront cash payment of $20.0 million. Cubist is also
obligated under the Cubist Agreement to pay the Company
milestone payments, totaling up to an aggregate of
$82.5 million, upon the achievement of specified
development and sales events in the Royalty Territory. In
addition, if Licensed Products are successfully developed,
Cubist will be required to pay to the Company royalties on net
sales of Licensed Products in the Royalty Territory, if any,
subject to offsets under certain circumstances. Upon achievement
of certain development milestones, the Company will have the
right to convert the North American co-development and profit
sharing arrangement into a royalty-bearing license and, in
addition to royalties on net sales in North America, will be
entitled to receive additional milestone payments totaling up to
an aggregate of $130.0 million upon achievement of
specified development and sales events in North America, subject
to the timing of the conversion by the Company and the
regulatory status of Licensed Products at the time of
conversion. If the Company makes the conversion to a
royalty-bearing license with respect to North America, then
North America becomes part of the Royalty Territory.
During the term of the Cubist Agreement, neither party nor its
affiliates may develop, manufacture or commercialize anywhere in
the world, outside of Asia, a therapeutic or prophylactic
product that specifically targets RSV, except for Licensed
Products developed, manufactured or commercialized pursuant to
the Cubist Agreement.
Unless terminated earlier in accordance with the agreement, the
agreement expires on a
country-by-country
and licensed
product-by-licensed
product basis, (a) with respect to the Royalty Territory,
upon the latest to occur of (1) the expiration of the
last-to-expire
Company patent covering a Licensed Product, (2) the
expiration of the Regulatory-Based Exclusivity Period (as
defined in the Cubist Agreement) and (3) ten years from
first commercial sale in such country of such licensed product
by Cubist or its affiliates or sublicensees, and (b) with
respect to North America, if the Company has not converted North
America into the Royalty Territory, upon the termination of the
agreement by Cubist upon specified prior written notice. Cubist
has the right to terminate the Cubist Agreement at any time
(1) upon three months prior written notice if such
notice is given prior to the acceptance for filing of the first
application for regulatory approval of a Licensed Product or
(2) upon nine months prior written notice if such notice is
given after the acceptance for filing of the first application
for regulatory approval. Either party may terminate the Cubist
Agreement in the event the other party fails to cure a material
breach or upon patent-related challenges by the other party.
The Company has determined that the deliverables under the
Cubist Agreement include the licenses, technology transfer
related to the ALN-RSV program, the joint steering committee and
the development and manufacturing services that the Company is
obligated to perform during the development period. The Company
has determined that, pursuant to the accounting guidance
governing revenue recognition on multiple element
116
ALNYLAM
PHARMACEUTICALS, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
arrangements, the licenses and undelivered services are not
separable and, accordingly, the licenses and services are being
treated as a single unit of accounting. When multiple
deliverables are accounted for as a single unit of accounting,
the Company bases its revenue recognition pattern on the final
deliverable. Under the Cubist Agreement, the last element to be
delivered is the development and manufacturing services, which
have an expected life of approximately eight years.
The Company is recognizing the upfront payment of
$20.0 million on a straight-line basis over approximately
eight years because the Company is unable to reasonably estimate
the level of effort to fulfill its performance obligations, and
therefore, cannot utilize a proportional performance model. As
future substantive milestones are achieved, the Company will
recognize as revenue a portion of the milestone payment, equal
to the percentage of the performance period completed when the
milestone is achieved, multiplied by the amount of the milestone
payment. The Company will recognize the remaining portion of the
milestone over the remaining performance period on a
straight-line basis.
Under the terms of the Cubist Agreement, the Company and Cubist
share responsibility for developing Licensed Products in North
America and each bears one-half of the related development
costs, provided that under the terms of the Amendment, the
Company is funding the advancement of ALN-RSV01 for adult lung
transplant patients and Cubist retains an opt-in right. For
revenue generating arrangements that involve cost sharing
between the parties, the Company presents the results of
activities for which it acts as the principal on a gross basis
and reports any payments received from, or made to, other
collaborators based on other applicable GAAP or, in the absence
of other applicable GAAP, analogy to authoritative accounting
literature or a reasonable, rational and consistently applied
accounting policy election. As the Company is not considered the
principal under the Cubist Agreement, the Company records any
amounts due from Cubist as a reduction of research and
development expense. For the years ended December 31, 2010
and 2009, the Company and Cubist incurred costs of
$2.0 million and $11.4 million, respectively, under
the Cubist Agreement, of which $1.6 million and
$11.0 million, respectively, was incurred by the Company.
During the years ended December 31, 2010 and 2009, amounts
due from Cubist of $0.6 million and $5.3 million,
respectively, were recorded as a reduction to research and
development expense. As such, the Company recorded net research
and development expenses of $1.0 million and
$5.7 million in its consolidated statements of operations
for the years ended December 31, 2010 and 2009,
respectively.
In connection with the Cubist Agreement, during 2009, the
Company paid $1.0 million of license fees to the
Companys licensors, primarily Isis, in accordance with the
applicable license agreements with those parties. These fees
were charged to research and development expense.
Government
Funding
NIH
Contract
In September 2006, NIAID awarded the Company a contract for up
to $23.0 million over four years to advance the development
of a broad spectrum RNAi anti-viral therapeutic for hemorrhagic
fever virus, including the Ebola virus. As a result of the
continued progress of this program, the NIAID appropriated the
entire $23.0 million over the four-year term of the
contract, which was originally expected to be completed in
September 2010. The Company and the NIAID agreed to a no-cost
extension of the contract through December 2010, during which
time the Company utilized the remaining available funds under
the contract. The Company recognizes revenue under government
cost reimbursement contracts as it performs the underlying
research and development activities.
Department
of Defense Contract
In August 2007, the Defense Threat Reduction Agency
(DTRA), an agency of the United States Department of
Defense, awarded the Company a contract to advance the
development of a broad spectrum RNAi anti-viral therapeutic for
hemorrhagic fever virus. The government initially committed to
pay the Company up to $10.9 million through February 2009,
which included a six-month extension granted by DTRA in July
2008.
117
ALNYLAM
PHARMACEUTICALS, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Following a program review in early 2009, the Company and DTRA
determined not to continue this program and accordingly, the
remaining funds of up to $27.7 million were not accessed.
The Company recognizes revenue under government cost
reimbursement contracts as it performs the underlying research
and development activities.
Qualifying
Therapeutic Discovery Project Program
In 2010, the Company received $2.0 million in connection
with awards under the federal governments Qualifying
Therapeutic Discovery Project Program. The Company recorded this
amount as other income in its consolidated statements of
operations for the year ended December 31, 2010.
Delivery
Technology
The Company is working internally and with third-party
collaborators to develop new technologies to achieve efficacious
and safe delivery of RNAi therapeutics to a broad spectrum of
organ and tissue types. In connection with these efforts, the
Company has entered into a number of agreements to evaluate and
gain access to certain delivery technologies. In some instances,
the Company is also providing funding to support the advancement
of these delivery technologies.
In January 2007, the Company obtained an exclusive worldwide
license to the liposomal delivery formulation technology of
Tekmira for the discovery, development and commercialization of
lipid nanoparticle formulations for the delivery of RNAi
therapeutics. In connection with its original agreement with
Tekmira, the Company issued to Tekmira 361,990 shares of
common stock. These shares had a value of $7.9 million at
the time of issuance, which amount was expensed during the first
quarter of 2007. In May 2008, Tekmira acquired Protiva
Biotherapeutics Inc. (Protiva). In connection with
this acquisition, the Company entered into new agreements with
Tekmira and Protiva, which provide the Company with access to
key existing and future technology and intellectual property for
the systemic delivery of RNAi therapeutics with liposomal
delivery technologies. In addition, the Company made an equity
investment of $5.0 million in Tekmira, purchasing
2,083,333 shares of Tekmira common stock at a price of
$2.40 per share, which represented a premium of $1.00 per share,
or an aggregate of $2.1 million. This premium was
calculated as the difference between the purchase price and the
closing price of Tekmiras common stock on the effective
date of the acquisition. The Company allocated this
$2.1 million premium to the expansion of the Companys
access to key technology and intellectual property rights and,
accordingly, recorded a charge to research and development
expense during the year ended December 31, 2008. The
Company recorded this investment as an
available-for-sale
security in marketable securities on its consolidated balance
sheets. In November 2010, Tekmira effected a
one-for-five
reverse stock split after which the Company owns
416,666 shares of Tekmira common stock.
Intangible assets at December 31, 2010 and 2009 are as
follows, in thousands:
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
Core technology
|
|
$
|
2,410
|
|
|
$
|
2,410
|
|
Less: accumulated amortization
|
|
|
(1,962
|
)
|
|
|
(1,788
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
448
|
|
|
$
|
622
|
|
|
|
|
|
|
|
|
|
|
During each of the years ended December 31, 2010, 2009 and
2008, the Company recorded $0.2 million of amortization
expense related to core technology acquired from its acquisition
of Ribopharma AG in 2003, of which the entire amount is included
in research and development expenses. Core technology is being
amortized over its estimated useful life of ten years through
2013. The Company expects annual amortization expense related to
the core technology intangible asset to be $0.2 million
through 2012 and $0.1 million in 2013.
118
ALNYLAM
PHARMACEUTICALS, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
5.
|
PROPERTY
AND EQUIPMENT
|
Property and equipment consist of the following at
December 31, 2010 and 2009, in thousands:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
Useful Life
|
|
|
2010
|
|
|
2009
|
|
|
Laboratory equipment
|
|
|
5 years
|
|
|
$
|
19,396
|
|
|
$
|
16,126
|
|
Computer equipment and software
|
|
|
3 years
|
|
|
|
3,801
|
|
|
|
3,193
|
|
Furniture and fixtures
|
|
|
5 years
|
|
|
|
1,784
|
|
|
|
1,730
|
|
Leasehold improvements
|
|
|
*
|
|
|
|
19,651
|
|
|
|
18,851
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
44,632
|
|
|
|
39,900
|
|
Less: accumulated depreciation
|
|
|
|
|
|
|
(26,343
|
)
|
|
|
(21,576
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
18,289
|
|
|
$
|
18,324
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*
|
|
Shorter of asset life or lease term
|
During the years ended December 31, 2010, 2009 and 2008,
the Company recorded $4.8 million, $5.8 million and
$5.4 million, respectively, of depreciation expense related
to its property and equipment.
In September 2010, as a result of the planned completion of the
fifth and final year of the research program under the Novartis
Collaboration and License Agreement and the Companys
reduced need for service-based collaboration resources, the
Companys Board of Directors approved and the Company
effected a corporate restructuring to focus the Companys
resources on its most promising programs and significantly
reduce its cost structure. The corporate restructuring included
implementing a reduction of the Companys overall workforce
by approximately 25%.
During the year ended December 31, 2010, the Company
recorded $2.2 million of restructuring related costs in
operating expenses, including employee severance, benefits and
related costs. The Company expects to have paid substantially
all of these expenses by the end of the first half of 2011.
The following table outlines the components of the
Companys restructuring expenses recorded in operating
expenses and in current liabilities for the year ended
December 31, 2010, in thousands:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Original
|
|
|
|
|
|
Amounts Paid
|
|
|
Amounts
|
|
|
|
Charges
|
|
|
(Reversals) or
|
|
|
Through
|
|
|
Accrued at
|
|
|
|
and Amounts
|
|
|
Adjustments to
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
Accrued
|
|
|
Charges
|
|
|
2010
|
|
|
2010
|
|
|
Employee severance, benefits and related costs
|
|
$
|
2,193
|
|
|
$
|
(20
|
)
|
|
$
|
1,196
|
|
|
$
|
977
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
2,193
|
|
|
$
|
(20
|
)
|
|
$
|
1,196
|
|
|
$
|
977
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7.
|
COMMITMENTS
AND CONTINGENCIES
|
Manufacturing
Commitment
In January 2009, the Company and Tekmira entered into a
manufacturing and supply agreement (the Tekmira Supply
Agreement) under which the Company committed to pay
Tekmira a minimum of CAD$11.2 million (representing
U.S.$9.2 million at the time of execution) through December
2011 for manufacturing services. At December 31, 2010,
there was CAD$2.8 million (representing
U.S.$2.8 million at December 31, 2010) of
outstanding obligations under the Tekmira Supply Agreement, all
of which the Company will pay in 2011.
119
ALNYLAM
PHARMACEUTICALS, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Tekmira is currently manufacturing the clinical drug supply for
the Companys Phase I clinical trials of ALN-VSP and
ALN-TTR01. Both the Company and Tekmira have the right to
terminate the Tekmira Supply Agreement for a material breach by
the other party of its obligations under this agreement. The
Company also has the right to terminate its obligation to use
Tekmira for manufacturing on a
product-by-product
basis for a failure by Tekmira to meet certain specific
requirements with respect to a product.
Purchase
Commitments
The Company has future purchase commitments totaling
$19.4 million at December 31, 2010, of which
$15.5 million and $3.9 million are expected to be
incurred in 2011 and 2012, respectively. These commitments are
related to purchase orders, clinical and pre-clinical
agreements, and other purchase commitments for goods or services.
Technology
License Commitments
The Company has licensed from third parties the rights to use
certain technologies in its research process as well as in any
products the Company may develop including these licensed
technologies. In accordance with the related license agreements,
the Company is required to make certain fixed payments to the
licensor or a designee of the licensor over various agreement
terms. Many of these agreement terms are consistent with the
remaining lives of the underlying intellectual property that the
Company has licensed. At December 31, 2010, the Company was
committed to make the following fixed, cancellable payments
under existing license agreements, in thousands:
|
|
|
|
|
Year Ending December 31,
|
|
|
|
|
2011
|
|
$
|
5,915
|
|
2012
|
|
|
2,010
|
|
2013
|
|
|
628
|
|
2014
|
|
|
703
|
|
2015
|
|
|
703
|
|
Thereafter
|
|
|
9,692
|
|
|
|
|
|
|
Total
|
|
$
|
19,651
|
|
|
|
|
|
|
Operating
Lease
The Company leases office and laboratory space in Cambridge,
Massachusetts for its corporate headquarters under a
non-cancelable operating lease agreement. In 2003, the Company
entered into an operating lease with ARE-MA Region No. 28
LLC (the Landlord), to rent laboratory and office
space located at 300 Third Street, Cambridge, Massachusetts (the
Premises) through September 2011 (the Original
Lease). In March 2006, the Company amended the Original
Lease to rent additional space at the Premises (the First
Amendment). In June 2009, the Company entered into an
agreement with the Landlord further amending provisions of the
Original Lease (the Second Amendment). The Second
Amendment provided for the lease of the entire second floor of
the Premises.
In May 2010, the Company entered into a third amendment to the
Original Lease, pursuant to which the Company rented
approximately 34,000 square feet of additional laboratory
and office space located at the Premises (the Third
Amendment), effective as of October 1, 2010. Pursuant
to the Original Lease, as amended by the First, Second and Third
Amendments (as so amended, the Amended Lease), the
Company leases a total of approximately 129,000 square feet
of office and laboratory space at the Premises. The term of the
Amended Lease expires in September 2016. The Company has the
option to extend the Amended Lease for two successive five-year
extensions. The Company has separately agreed to sublease the
first floor of the Premises through the end of 2011. As a result
of the Third Amendment, the Companys operating lease
obligations through 2016 increased by
120
ALNYLAM
PHARMACEUTICALS, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
an aggregate of $8.9 million, partially offset by future
sublease payments to the Company of $1.7 million, resulting
in a net increase of $7.2 million.
The Company received $7.3 million in leasehold improvement
incentives from its landlords in connection with its leases.
These leasehold improvement incentives are being accounted for
as a reduction in rent expense ratably over the lease term. The
balance from these leasehold improvement incentives is included
in current portion of deferred rent and deferred rent, net of
current portion in the consolidated balance sheets at
December 31, 2010 and 2009.
Total rent expense, including operating expenses, under these
operating leases was $6.4 million, $5.1 million and
$4.6 million for the years ended December 31, 2010,
2009 and 2008, respectively.
Future minimum payments under this non-cancelable lease are
approximately as follows, in thousands:
|
|
|
|
|
Year Ending December 31,
|
|
|
|
|
2011
|
|
$
|
5,118
|
|
2012
|
|
|
5,361
|
|
2013
|
|
|
5,575
|
|
2014
|
|
|
5,799
|
|
2015
|
|
|
6,030
|
|
Thereafter
|
|
|
4,657
|
|
|
|
|
|
|
Total
|
|
$
|
32,540
|
|
|
|
|
|
|
Litigation
In June 2009, the Company joined with Max Planck Gesellschaft
Zur Forderung Der Wissenschaften E.V. and Max Planck Innovation
GmbH (collectively, Max Planck) in taking legal
action against the Whitehead Institute for Biomedical Research
(Whitehead), the Massachusetts Institute of
Technology (MIT) and the Board of Trustees of the
University of Massachusetts (UMass). The complaint,
initially filed in the Suffolk County Superior Court in Boston,
Massachusetts and subsequently removed to the U.S. District
Court for the District of Massachusetts, alleges, among other
things, that the defendants have improperly prosecuted the
Tuschl I patent applications and wrongfully incorporated
inventions covered by the Tuschl II patent applications
into the Tuschl I patent applications, thereby potentially
damaging the value of inventions reflected in the Tuschl I and
Tuschl II patent applications. In the field of RNAi
therapeutics, the Company is the exclusive licensee of the
Tuschl I patent applications from Max Planck, MIT and Whitehead,
and of the Tuschl II patent applications from Max Planck.
The complaint seeks, among other things, a declaratory judgment
regarding the prosecution of the Tuschl I patent family and
unspecified monetary damages. In August 2009, Whitehead and
UMass filed counterclaims against the Company and Max Planck,
including for breach of contract. In January 2010, the Company
and Max Planck filed an amended complaint expanding upon the
allegations in the original complaint. The Company currently
expects a jury trial to start in March 2011. In February 2010,
the Company and Max Planck released MIT from any claims seeking
monetary damages, and MIT has stipulated that it will be bound
by any declaratory, injunctive, or equitable relief granted by
the court.
In addition, in September 2009, the U.S. Patent and
Trademark Office (USPTO) granted Max Plancks
petition to revoke power of attorney in connection with the
prosecution of the Tuschl I patent application. This action
prevents the defendants from filing any papers with the USPTO in
connection with further prosecution of the Tuschl I patent
application without the agreement of Max Planck.
Whiteheads petition to overturn this ruling was denied.
Prosecution before the USPTO for both the Tuschl I and II
pending patent applications was suspended pursuant to a
standstill agreement. This agreement expired on
September 15, 2010, and Max Planck, MIT, Whitehead and
UMass filed several continuation applications in the Tuschl I
patent family to preserve their rights
121
ALNYLAM
PHARMACEUTICALS, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
and maintain the status quo for these applications pending the
outcome of the litigation. Max Planck also filed a continuation
application in the Tuschl II patent family.
Although the Company, along with Max Planck, are vigorously
asserting their rights in this case, litigation is subject to
inherent uncertainty and a court could ultimately rule against
the Company and Max Planck. In addition, litigation is costly
and may divert the attention of the Companys management
and other resources that would otherwise be engaged in running
the Companys business. The Company has not recorded an
estimated liability associated with the legal proceedings
described above due to the uncertainties related to both the
likelihood and the amount of any potential loss.
Indemnifications
Licensor indemnification
In connection with
the Companys license agreements with Max Planck relating
to the Tuschl I and Tuschl II patent applications, the
Company is required to indemnify Max Planck for certain damages
arising in connection with the intellectual property rights
licensed under the agreements. Under the Max Planck
indemnification agreement, the Company is responsible for paying
the costs of any litigation relating to the license agreements
or the underlying intellectual property rights, including the
costs associated with the litigation described above. These
costs are charged to general and administrative expense. The
Company believes that the probability of receiving a claim for
damages is remote and, as such, no amounts have been accrued
related to this indemnification at December 31, 2010 and
2009.
The Company is also a party to a number of agreements entered
into in the ordinary course of business, which contain typical
provisions that obligate the Company to indemnify the other
parties to such agreements upon the occurrence of certain
events. Such indemnification obligations are usually in effect
from the date of execution of the applicable agreement for a
period equal to the applicable statute of limitations.
The maximum potential future liability of the Company under any
such indemnification provisions is uncertain. The Company has
determined that the estimated aggregate fair value of its
potential liabilities under all such indemnification provisions
is minimal and has not recorded any liability related to such
indemnification provisions at December 31, 2010 or 2009.
Preferred
Stock
The Company has authorized up to 5,000,000 shares of
preferred stock, $0.01 par value per share, for issuance.
The preferred stock will have such rights, preferences,
privileges and restrictions, including voting rights, dividend
rights, conversion rights, redemption privileges and liquidation
preferences, as shall be determined by the Companys Board
of Directors upon its issuance. At December 31, 2010 and
2009, there were no shares of preferred stock outstanding.
Stockholder
Rights Agreement
On July 13, 2005, the Board of Directors of the Company
declared a dividend of one right (collectively, the
Rights) to buy one one-thousandth of a share of
newly designated Series A Junior Participating Preferred
Stock (Series A Junior Preferred Stock) for
each outstanding share of the Companys common stock to
stockholders of record at the close of business on July 26,
2005. Initially, the Rights are not exercisable and will be
attached to all certificates representing outstanding shares of
common stock. The Rights will expire at the close of business on
July 13, 2015 unless earlier redeemed or exchanged. Until a
Right is exercised, the holder thereof will have no rights as a
stockholder of the Company, including the right to vote or to
receive dividends. Subject to the terms and conditions of the
rights agreement (the Rights Agreement), the Rights
will become exercisable upon the earlier of (1) ten
business days following the later of (a) the first date of
a public announcement that a person or group (an Acquiring
Person) acquires, or obtained the right to acquire,
beneficial ownership of 20% or more of the
122
ALNYLAM
PHARMACEUTICALS, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
outstanding shares of common stock of the Company or
(b) the first date on which an executive officer of the
Company has actual knowledge that an Acquiring Person has become
such or (2) ten business days following the commencement of
a tender offer or exchange offer that would result in a person
or group beneficially owning more than 20% of the outstanding
shares of common stock of the Company. Each Right entitles the
holder to purchase one one-thousandth of a share of
Series A Junior Preferred Stock at an initial purchase
price of $80.00 in cash, subject to adjustment. In the event
that any person or group becomes an Acquiring Person, unless the
event causing the 20% threshold to be crossed is a Permitted
Offer (as defined in the Rights Agreement), each Right not owned
by the Acquiring Person will entitle its holder to receive, upon
exercise, that number of shares of common stock of the Company
(or in certain circumstances, cash, property or other securities
of the Company) which equals the exercise price of the Right
divided by 50% of the current market price (as defined in the
Rights Agreement) per share of such common stock at the date of
the occurrence of the event. In the event that, at any time
after any person or group becomes an Acquiring Person,
(i) the Company is consolidated with, or merged with and
into, another entity and the Company is not the surviving entity
of such consolidation or merger (other than a consolidation or
merger which follows a Permitted Offer) or if the Company is the
surviving entity, but shares of its outstanding common stock are
changed or exchanged for stock or securities (of any other
person) or cash or any other property, or (ii) more than
50% of the Companys assets or earning power is sold or
transferred, each holder of a Right (except Rights which
previously have been voided as set forth in the Rights
Agreement) shall thereafter have the right to receive, upon
exercise, that number of shares of common stock of the acquiring
company which equals the exercise price of the Right divided by
50% of the current market price of such common stock at the date
of the occurrence of the event.
Stock
Plans
In June 2009, the Companys stockholders approved an
amendment and restatement of the Companys 2004 Stock
Incentive Plan (the Amended and Restated 2004 Plan),
which replaced the Companys 2004 Stock Incentive Plan, as
amended (the 2004 Plan). At December 31, 2010,
the Amended and Restated 2004 Plan provides for the granting of
stock options to purchase up to 12,366,485 shares of common
stock. Prior to the adoption of the Amended and Restated 2004
Plan, the Company was authorized to grant both options and
restricted stock awards under the 2004 Plan. As of the effective
date of the Amended and Restated 2004 Plan, the Company may only
grant options under the Amended and Restated 2004 Plan, provided
that the terms and conditions of any restricted stock awards
outstanding under the 2004 Plan will continue to be governed by
the Amended and Restated 2004 Plan.
In June 2009, the Companys stockholders also approved the
Companys 2009 Stock Incentive Plan (the 2009
Plan). The 2009 Plan provides for the granting of stock
options, restricted stock awards and units, stock appreciation
rights and other stock-based awards to purchase up to
2,200,000 shares of common stock. The 2009 Plan has a
fungible share pool. Any award that is not a full value award
shall be counted against the authorized share limits specified
in the 2009 Plan as one share for each share of common stock
subject to award, and all full value awards, defined in the 2009
Plan as restricted stock awards or other stock-based awards,
shall be counted as one and a half shares for each one share of
common stock subject to such full value award. In addition, the
2009 Plan includes a non-employee director stock option program
under which each eligible non-employee director is entitled to
(1) a grant of an option to purchase 30,000 shares of
common stock upon his or her initial appointment to the Board of
Directors, or such other amount as the Board of Directors deems
appropriate, and (2) a subsequent annual grant of an option
to purchase 15,000 shares of common stock based on
continued service, made on the date of each annual meeting of
stockholders, provided the non-employee director has served as a
director for at least six months and is serving as a director
immediately prior to and following such annual meeting. The
chairman of the audit committee will receive an additional
annual grant of an option to purchase 10,000 shares of
common stock based on continued service. Stock options granted
by the Company to non-employee directors upon their appointment
to the Board of Directors vest as to one-third of such shares on
each of the first, second and third anniversaries of the date
123
ALNYLAM
PHARMACEUTICALS, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
of grant, and at each years annual meeting at which they
serve as a director vest in full on the first anniversary of the
date of grant.
At December 31, 2010, an aggregate of
11,157,055 shares of common stock were reserved for
issuance under the Companys stock plans, including
outstanding options to purchase 9,088,674 shares of common
stock and 2,068,381 shares available for future grant under
the Companys stock plans. Each option shall expire within
ten years of issuance. Stock options granted by the Company to
employees generally vest as to 25% of the shares on the first
anniversary of the grant date and 6.25% of the shares at the end
of each successive three-month period until fully vested.
Stock-Based
Compensation
The Company recorded $18.7 million, $18.9 million and
$14.3 million of stock-based compensation expense for the
years ended December 31, 2010, 2009 and 2008, respectively,
related to employee stock options and the employee stock
purchase plan.
The Company accounts for non-employee grants as an expense over
the vesting period of the underlying stock options. At the end
of each financial reporting period prior to vesting, the Company
re-measures the value of these stock options (as calculated
using the Black-Scholes option-pricing model) using the
then-current fair value of the Companys common stock. The
Company recognized $0.3 million, $0.8 million and
$2.1 million of non-employee stock-based compensation
expense for the years ended December 31, 2010, 2009 and
2008, respectively.
The Company has granted stock options to the members of
Regulus scientific advisory board and board of directors
and certain Regulus employees. In addition to the total
stock-based compensation expense stated above, the Company
recorded $0.3 million, ($0.2) million and
$1.6 million of stock-based compensation expense related to
these stock option grants in equity in loss of joint venture
(Regulus Therapeutics Inc.) in its consolidated statements of
operations for the years ended December 31, 2010, 2009 and
2008, respectively.
In October 2010, the Company granted 113,370 shares of
restricted stock of the Company to certain employees. The
Company recorded $0.1 million of stock-based compensation
expense related to these restricted stock awards.
Total compensation cost for all stock-based awards for the years
ended December 31, 2010, 2009 and 2008 was
$19.4 million, $19.5 million and $18.0 million,
respectively. No amounts relating to the stock-based
compensation have been capitalized.
Valuation
Assumptions for Stock Options
The fair value of stock options at date of grant, based on the
following assumptions, was estimated using the Black-Scholes
option-pricing model. The Companys expected stock-price
volatility assumption for 2010, 2009 and 2008 is based on a
combination of implied volatilities of its publicly traded stock
option prices as well as the historical volatility of the
Companys publicly traded stock. The expected life
assumption for 2010, 2009 and 2008 is based on the equal
weighting of the Companys historical data and the
historical data of the Companys pharmaceutical and
biotechnology peers. The dividend yield assumption is based on
the fact that the Company has never paid cash dividends and has
no present intention to pay cash dividends. The risk-free
interest rate used for each grant is equal to the zero coupon
rate for instruments with a similar expected life. The Company
currently expects, based on an analysis of its historical
forfeitures, excluding the impact of its corporate
restructuring, that
124
ALNYLAM
PHARMACEUTICALS, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
approximately 76% of its stock options will actually vest, and
therefore has applied an annual forfeiture rate of 6.5% to all
unvested stock options at December 31, 2010. The Company
will record additional expense if the actual forfeitures are
lower than estimated and will record a recovery of prior expense
if the actual forfeitures are higher than estimated.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Risk-free interest rate
|
|
|
1.6-2.9%
|
|
|
|
2.0-3.0%
|
|
|
|
1.5-3.5%
|
|
Expected dividend yield
|
|
|
|
|
|
|
|
|
|
|
|
|
Expected option life
|
|
|
5.9-6.1 years
|
|
|
|
6.1-6.3 years
|
|
|
|
5.7-6.3 years
|
|
Expected volatility
|
|
|
53-55%
|
|
|
|
53-66%
|
|
|
|
66-67%
|
|
At December 31, 2010, there remained $30.6 million of
unearned compensation expense related to unvested employee stock
options to be recognized as expense over a weighted-average
period of approximately 2.8 years.
Stock
Option Activity
The following table summarizes the activity of the
Companys stock option plans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
Average
|
|
|
|
Number of
|
|
|
Exercise
|
|
|
|
Options
|
|
|
Price
|
|
|
Outstanding, December 31, 2009
|
|
|
7,926,653
|
|
|
$
|
19.44
|
|
Granted
|
|
|
2,387,720
|
|
|
$
|
11.56
|
|
Exercised
|
|
|
(227,970
|
)
|
|
$
|
7.60
|
|
Cancelled
|
|
|
(997,729
|
)
|
|
$
|
23.62
|
|
|
|
|
|
|
|
|
|
|
Outstanding, December 31, 2010
|
|
|
9,088,674
|
|
|
$
|
17.21
|
|
|
|
|
|
|
|
|
|
|
Exercisable at December 31, 2008
|
|
|
2,903,479
|
|
|
$
|
12.87
|
|
Exercisable at December 31, 2009
|
|
|
4,113,776
|
|
|
$
|
17.14
|
|
Exercisable at December 31, 2010
|
|
|
4,983,088
|
|
|
$
|
18.60
|
|
The weighted average remaining contractual life for stock
options outstanding and stock options exercisable at
December 31, 2010 was 7.5 years and 6.0 years,
respectively.
The aggregate intrinsic value of stock options outstanding at
December 31, 2010 was $6.3 million, of which
$5.2 million related to exercisable options. The intrinsic
value of stock options exercised was $1.8 million,
$4.3 million and $8.2 million for the years ended
December 31, 2010, 2009 and 2008, respectively. The
weighted average fair value of stock options granted was $5.98,
$9.84 and $15.02 per share for the years ended December 31,
2010, 2009 and 2008, respectively.
The aggregate intrinsic value of stock options expected to vest
at December 31, 2010 and 2009 was $1.0 million and
$1.6 million, respectively. The weighted average fair value
of stock options expected to vest was $8.29 and $12.56 per share
at December 31, 2010 and 2009, respectively. The weighted
average remaining contractual life for stock options expected to
vest at December 31, 2010 and 2009 was 8.2 years and
8.3 years, respectively, and the weighted average exercise
price for these stock options was $15.52 and $21.92 per share on
December 31, 2010 and 2009, respectively.
125
ALNYLAM
PHARMACEUTICALS, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Restricted
Stock Awards
The following table summarizes the activity of the
Companys restricted stock awards:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
Average
|
|
|
|
Number of
|
|
|
Grant Date
|
|
|
|
Awards
|
|
|
Fair Value
|
|
|
Unvested at December 31, 2009
|
|
|
|
|
|
$
|
|
|
Granted
|
|
|
113,370
|
|
|
$
|
12.34
|
|
Vested
|
|
|
|
|
|
$
|
|
|
Forfeited
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
Unvested at December 31, 2010
|
|
|
113,370
|
|
|
$
|
12.34
|
|
|
|
|
|
|
|
|
|
|
The total fair value of restricted stock awards that vested
during the years ended December 31, 2010, 2009 and 2008 was
zero, $0.7 million and $0.7 million, respectively. At
December 31, 2010, there remained $1.1 million of
unearned compensation expense related to unvested restricted
stock awards to be recognized as expense over a weighted-average
period of approximately 3.0 years.
Employee
Stock Purchase Plan
In 2004, the Company adopted the 2004 Employee Stock Purchase
Plan (the 2004 Purchase Plan) with
315,789 shares authorized for issuance. In June 2010, the
Companys stockholders approved an amendment to the 2004
Purchase Plan, which increased the shares authorized for
issuance from 315,789 shares to 715,789 shares. Under
the 2004 Purchase Plan, each offering period is six months, at
the end of which employees may purchase shares of common stock
through payroll deductions made over the term of the offering.
The per-share purchase price at the end of each offering period
is equal to the lesser of 85% of the closing price of the common
stock at the beginning or end of the offering period. The
Company issued 72,674, 59,267 and 35,065 shares during the
years ended December 31, 2010, 2009 and 2008, respectively,
and at December 31, 2010, 426,738 shares were
available for issuance under the 2004 Purchase Plan.
The weighted average fair value of stock purchase rights granted
as part of the 2004 Purchase Plan was $5.12, $7.20 and $9.51 per
share for the years ended December 31, 2010, 2009 and 2008,
respectively. The fair value was estimated using the
Black-Scholes option-pricing model. The Company used a
weighted-average stock-price volatility of 53%, expected option
life assumption of six months and a risk-free interest rate of
0.2%. The Company recorded $0.3 million, $0.4 million
and $0.3 million of stock-based compensation expense for
the years ended December 31, 2010, 2009 and 2008,
respectively, related to the 2004 Purchase Plan.
126
ALNYLAM
PHARMACEUTICALS, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Deferred income taxes reflect the tax effects of temporary
differences between the carrying amounts of assets and
liabilities for financial reporting and income tax purposes. The
Company establishes a valuation allowance when uncertainty
exists as to whether all or a portion of the net deferred tax
assets will be realized. Components of the net deferred tax
(liability) asset at December 31, 2010 and 2009 are as
follows, in thousands:
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
Net operating loss carryforwards
|
|
$
|
5,764
|
|
|
$
|
496
|
|
Research and development credits
|
|
|
9,541
|
|
|
|
|
|
AMT credits
|
|
|
788
|
|
|
|
|
|
Foreign tax credits
|
|
|
3,196
|
|
|
|
|
|
Capitalized research and development and
start-up
costs
|
|
|
5,760
|
|
|
|
7,729
|
|
Deferred revenue
|
|
|
78,690
|
|
|
|
92,811
|
|
Deferred compensation
|
|
|
17,466
|
|
|
|
12,433
|
|
Intangible assets
|
|
|
4,632
|
|
|
|
9,551
|
|
Partnership interest
|
|
|
3,928
|
|
|
|
2,666
|
|
Other
|
|
|
1,702
|
|
|
|
1,037
|
|
|
|
|
|
|
|
|
|
|
Total deferred tax assets
|
|
|
131,467
|
|
|
|
126,723
|
|
Deferred tax liabilities:
|
|
|
|
|
|
|
|
|
Intangible assets
|
|
|
(143
|
)
|
|
|
(194
|
)
|
Deferred tax asset valuation allowance
|
|
|
(131,467
|
)
|
|
|
(116,230
|
)
|
|
|
|
|
|
|
|
|
|
Net deferred tax (liability) asset
|
|
$
|
(143
|
)
|
|
$
|
10,299
|
|
|
|
|
|
|
|
|
|
|
The provision for income taxes for the years ended
December 31, 2010, 2009 and 2008 are as follows, in
thousands:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
U.S.:
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
$
|
(9,928
|
)
|
|
$
|
5,987
|
|
|
$
|
5,978
|
|
Deferred
|
|
|
10,494
|
|
|
|
(5,111
|
)
|
|
|
(5,382
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total U.S.
|
|
|
566
|
|
|
|
876
|
|
|
|
596
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign:
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
|
|
|
|
|
(242
|
)
|
|
|
242
|
|
Deferred
|
|
|
(52
|
)
|
|
|
(52
|
)
|
|
|
(119
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Foreign
|
|
|
(52
|
)
|
|
|
(294
|
)
|
|
|
123
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for income taxes
|
|
$
|
514
|
|
|
$
|
582
|
|
|
$
|
719
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
127
ALNYLAM
PHARMACEUTICALS, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The Companys effective income tax rate differs from the
statutory federal income tax rate as follows for the years ended
December 31, 2010, 2009 and 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
At U.S. federal statutory rate
|
|
|
35.0
|
%
|
|
|
35.0
|
%
|
|
|
35.0
|
%
|
State taxes, net of federal effect
|
|
|
4.2
|
|
|
|
(0.6
|
)
|
|
|
(0.5
|
)
|
Stock compensation
|
|
|
(5.0
|
)
|
|
|
(4.2
|
)
|
|
|
(6.0
|
)
|
Other
|
|
|
|
|
|
|
(0.3
|
)
|
|
|
(0.3
|
)
|
Other permanent items
|
|
|
1.3
|
|
|
|
0.1
|
|
|
|
(0.3
|
)
|
Valuation allowance
|
|
|
(36.7
|
)
|
|
|
(31.3
|
)
|
|
|
(30.7
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective income tax rate
|
|
|
(1.2
|
)%
|
|
|
(1.3
|
)%
|
|
|
(2.8
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company has evaluated the positive and negative evidence
bearing upon the realizability of its deferred tax assets. The
Company has concluded, in accordance with the applicable
accounting standards, that it is more likely than not that the
Company may not realize the benefit of all of its deferred tax
assets. Accordingly, the Company has recorded a valuation
allowance against the deferred tax assets that management
believes will not be realized. The Company reevaluates the
positive and negative evidence on a quarterly basis. The
valuation allowance increased by $15.2 million and
$21.2 million for the years ended December 31, 2010
and 2009, respectively, due primarily to an increase in tax
credit carryforwards and operating losses.
During 2009 and 2008, the Company utilized certain tax
attributes, including net operating loss and tax credit
carryforwards as a result of the recognition of revenue for
certain proceeds received from strategic alliances. However, the
Company also generated a deferred tax asset related to the
recognition of this revenue for tax purposes and recorded a net
deferred tax asset to the extent it was more likely than not
that the asset would be realized. During 2010, the Company
generated sufficient net operating losses to carry back to 2009
and 2008 to obtain a refund of taxes paid in those years,
resulting in a realization of its net deferred tax asset. As a
result, during 2010 the Company reclassified $10.7 million
of its deferred tax asset to income taxes receivable. The
Company expects to receive this income tax refund in 2011. At
December 31, 2010, the Companys net deferred tax
assets are subject to a full valuation allowance as it is more
likely than not that those assets will not be realized.
The deferred tax assets above exclude $9.2 million of net
operating losses and $2.4 million of federal and state
research and development credits related to tax deductions from
the exercise of stock options subsequent to the adoption of the
2006 accounting standard on stock-based compensation. This
amount represents an excess tax benefit and has not been
included in the gross deferred tax assets.
At December 31, 2010, the Company had federal and state net
operating loss carryforwards of $27.5 million and
$101.6 million, respectively, to reduce future taxable
income that will expire at various dates through 2030. At
December 31, 2010, federal and state research and
development credit carryforwards were $9.0 million and
$3.4 million, respectively, available to reduce future tax
liabilities that expire at various dates through 2030. At
December 31, 2010, foreign tax credit carryforwards were
$3.1 million available to reduce future tax liabilities
that expire in 2017. At December 31, 2010, alternative
minimum tax credits of $0.8 million are available to reduce
future regular tax liabilities to the extent such regular tax
less other non-refundable credits exceeds the tentative minimum
tax. Ownership changes, as defined in the Internal Revenue Code,
including those resulting from the issuance of common stock in
connection with the Companys public offerings, may limit
the amount of net operating loss that can be utilized to offset
future taxable income or tax liability. The Company has
determined that there is no limitation on the utilization of net
operating loss carryforward in accordance with Section 382
of the Internal Revenue Code in 2010.
128
ALNYLAM
PHARMACEUTICALS, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
At December 31, 2010, the Company had $0.4 million of
total gross unrecognized tax benefits that, if recognized, would
favorably impact the Companys effective income tax rate in
future periods. A reconciliation of the beginning and ending
amount of unrecognized tax benefits is as follows, in thousands:
|
|
|
|
|
Balance at December 31, 2009
|
|
$
|
128
|
|
Additions to tax provision related to the prior years
|
|
|
300
|
|
|
|
|
|
|
Balance at December 31, 2010
|
|
$
|
428
|
|
|
|
|
|
|
The tax years 2003 through 2010 remain open to examination by
major taxing jurisdictions to which the Company is subject,
which are primarily in the United States, as carryforward
attributes generated in years past may still be adjusted upon
examination by the Internal Revenue Service or state tax
authorities if they have or will be used in a future period. The
Company is currently under audit by the Internal Revenue Service
for the 2008 tax year. The Company believes that it has provided
sufficiently for all significant audit exposures. There is a
possibility that the Company may not prevail in defending all of
its assertions with the Internal Revenue Service. If these
matters are resolved unfavorably in the future, the resolution
could have a material adverse impact on the Companys
future effective tax rate and its results of operations. The
Company recognizes both accrued interest and penalties related
to unrecognized benefits in income tax expense. The Company has
not recorded any interest and penalties on any unrecognized tax
benefits since its inception.
The Company sponsors a savings plan for its employees in the
United States, who meet certain eligibility requirements, which
is designed to be a qualified plan under section 401(k) of
the Internal Revenue Code (the 401(k) Plan).
Participants may contribute up to 60% of their annual base
salary to the 401(k) Plan, subject to certain limitations.
Beginning in April 2006, the Company began matching in its
common stock up to 3% of a participants base salary.
Employer common stock matches vest anywhere from immediately to
two years, depending on years of service with the Company. The
Company issued 36,759, 22,502 and 14,679 shares of common
stock during the years ended December 31, 2010, 2009 and
2008, respectively, in connection with matching contributions
under the 401(k) Plan.
In September 2007, the Company and Isis established Regulus, a
company focused on the discovery, development and
commercialization of microRNA therapeutics, a potential new
class of drugs to treat the pathways of human disease. Regulus,
which initially was established as a limited liability company,
converted to a C corporation in January 2009 and changed its
name to Regulus Therapeutics Inc.
In consideration for the Companys and Isis initial
interests in Regulus, each party granted Regulus exclusive
licenses to its intellectual property for certain microRNA
therapeutic applications as well as certain patents in the
microRNA field. In addition, the Company made an initial cash
contribution to Regulus of $10.0 million, resulting in the
Company and Isis making approximately equal aggregate initial
capital contributions to Regulus. In March 2009, the Company and
Isis each purchased $10.0 million of Series A
preferred stock of Regulus. In October 2010, in connection with
its strategic alliance with Regulus formed in June 2010,
sanofi-aventis made a $10.0 million equity investment in
Regulus. At December 31, 2010, the Company, Isis and
sanofi-aventis owned approximately 45%, 46% and 9%,
respectively, of Regulus. Regulus continues to operate as an
independent company with a separate board of directors,
scientific advisory board and management team, some of whom have
options to purchase common stock of Regulus. Members of the
board of directors of Regulus who are the Companys
employees or Isis employees are not eligible to receive
options to purchase Regulus common stock.
The Company, Isis and Regulus also entered into a license and
collaboration agreement (the Regulus Collaboration
Agreement) to pursue the discovery, development and
commercialization of therapeutic products
129
ALNYLAM
PHARMACEUTICALS, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
directed to microRNAs. Under the terms of the Regulus
Collaboration Agreement, the Company and Isis each assigned to
Regulus specified patents and contracts covering
microRNA-specific technology. In addition, each of the Company
and Isis granted to Regulus an exclusive, worldwide license
under its rights to other microRNA-related patents and know-how
to develop and commercialize therapeutic products containing
compounds that are designed to interfere with or inhibit a
particular microRNA, subject to the Companys and
Isis existing contractual obligations to third parties.
Regulus was also granted the right to request a license from the
Company and Isis to develop and commercialize therapeutic
products directed to other microRNA compounds, which such
license is subject to the Companys and Isis approval
and to each partys existing contractual obligations to
third parties. Regulus also granted to the Company and Isis an
exclusive license to technology developed or acquired by Regulus
for use solely within the Companys and Isis
respective fields (as defined in the Regulus Collaboration
Agreement), but specifically excluding the right to develop,
manufacture or commercialize the therapeutic products for which
the Company and Isis granted rights to Regulus.
The Regulus Collaboration Agreement ends if, prior to first
commercial sale of any product, all development activities cease
under the collaboration. The Regulus Collaboration Agreement
otherwise expires, on a
product-by-product
and
country-by-country
basis, upon the later of expiration of marketing exclusivity for
such product or a specified number of years from first
commercial sale. If Regulus, the Company or Isis commits an
uncured material breach of the Regulus Collaboration Agreement,
the Regulus Collaboration Agreement may be terminated with
respect to the breaching party or a buy-out may be initiated,
depending on the nature of the breach.
In April 2008, Regulus entered into a worldwide strategic
alliance with GlaxoSmithKline (GSK) to discover,
develop and commercialize up to four novel microRNA-targeted
therapeutics to treat inflammatory diseases such as rheumatoid
arthritis and inflammatory bowel disease. In connection with
this alliance, Regulus received $20.0 million in upfront
payments from GSK, including a $15.0 million option fee and
a loan of $5.0 million (guaranteed by Isis and the Company)
that will convert into Regulus common stock under certain
specified circumstances. Regulus is eligible to receive
development, regulatory and sales milestone payments for each of
the microRNA-targeted therapeutics discovered and developed as
part of the alliance. Regulus would also receive royalty
payments on worldwide sales of products resulting from the
alliance, if any.
In February 2010, Regulus and GSK established a new
collaboration to develop and commercialize microRNA therapeutics
targeting miR-122 in all fields, with the treatment of
hepatitis C virus infection as the lead indication. Under
the terms of this collaboration, Regulus received
$8.0 million in upfront payments from GSK, including a
$3.0 million license fee and a loan of $5.0 million
(guaranteed by Isis and the Company) that will convert into
Regulus common stock under certain specified circumstances.
Consistent with the original GSK alliance, Regulus is eligible
to receive development, regulatory and sales milestone payments,
as well as royalty payments on worldwide sales of products
resulting from the alliance, if any, as Regulus and GSK advance
microRNA therapeutics targeting miR-122.
In June 2010, Regulus entered into a global, strategic alliance
with sanofi-aventis to discover, develop and commercialize
microRNA therapeutics on up to four microRNA targets. Under the
terms of this alliance, Regulus received $25.0 million in
upfront fees and is entitled to annual research support for
three years with the option to extend research support for two
additional years. In addition, Regulus is eligible to receive
royalties on microRNA therapeutic products commercialized by
sanofi-aventis, if any. The Company and Isis are each eligible
to receive 7.5% of all potential upfront and milestone payments,
in addition to single-digit royalties on product sales, if any.
During the year ended December 31, 2010, the Company
recognized $1.9 million in related-party revenues in
connection with this alliance in its consolidated statements of
operations, representing 7.5% of the $25.0 million upfront
payment from sanofi-aventis to Regulus.
The Company has reviewed the consolidation guidance that defines
a VIE and concluded that Regulus currently qualifies as a VIE.
The Company does not consolidate Regulus as the Company lacks
the power to direct the activities that could significantly
impact the economic success of this entity. At December 31,
2010, the total
130
ALNYLAM
PHARMACEUTICALS, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
carrying value of the Companys investment in joint venture
(Regulus Therapeutics Inc.) in its consolidated balance sheets
is $3.6 million under the equity method. The Companys
maximum exposure to loss related to this VIE is limited to the
carrying value of the Companys investment, as well as the
portion of Regulus debt, including accrued interest,
guaranteed by the Company which was $5.3 million at
December 31, 2010.
The Company accounts for its investment in Regulus using the
equity method of accounting. Through December 31, 2008, the
Company was recognizing the first $10.0 million of losses
of Regulus as equity in loss of joint venture (Regulus
Therapeutics Inc.) in its consolidated statements of operations
because the Company was responsible for funding those losses
through its initial $10.0 million cash contribution. As a
result of the $10.0 million equity investment made by
sanofi-aventis, the Company recognized a gain of
$4.4 million due to the increase in valuation of Regulus.
This amount was recorded as other income in the Companys
consolidated statements of operations for the year ended
December 31, 2010. Beginning in January 2009, in connection
with the conversion of Regulus to a C corporation, through
September 30, 2010, the Company was recognizing
approximately 49% of the losses of Regulus. The carrying value
of the Companys investment in joint venture (Regulus
Therapeutics Inc.) immediately prior to the conversion to a C
corporation exceeded 49% of the net assets of Regulus by
approximately $0.8 million. Upon conversion, this amount
was allocated to the intellectual property of Regulus and,
because the intellectual property was determined to be
in-process research and development, the $0.8 million was
recorded as a charge to expense. This charge is included in
equity in loss of joint venture (Regulus Therapeutics Inc.) in
the consolidated statements of operations for the year ended
December 31, 2009. In October 2010, sanofi-aventis
made a $10.0 million equity investment in Regulus,
resulting in sanofi-aventis owning approximately 9% of Regulus.
Following this investment, the Company and Isis own
approximately 45% and 46%, respectively, of Regulus. Under the
equity method, the reimbursement of expenses to the Company is
recorded as a reduction to research and development expenses.
Summary results of Regulus operations for the years ended
December 31, 2010, 2009 and 2008 and balance sheets at
December 31, 2010 and 2009 are presented in the tables
below, in thousands:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Statement of Operations Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues
|
|
$
|
8,601
|
|
|
$
|
3,013
|
|
|
$
|
2,111
|
|
Operating expenses(1)
|
|
|
24,099
|
|
|
|
11,789
|
|
|
|
12,029
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
|
(15,498
|
)
|
|
|
(8,776
|
)
|
|
|
(9,918
|
)
|
Other (expense) income
|
|
|
(91
|
)
|
|
|
13
|
|
|
|
256
|
|
Income tax benefit (expense)
|
|
|
30
|
|
|
|
(141
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(15,559
|
)
|
|
$
|
(8,904
|
)
|
|
$
|
(9,662
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Non-cash stock-based compensation expenses included in
operating expenses
|
|
$
|
603
|
|
|
$
|
98
|
|
|
$
|
2,017
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
Balance Sheet Data:
|
|
|
|
|
|
|
|
|
Cash, cash equivalents and marketable securities
|
|
$
|
54,789
|
|
|
$
|
30,708
|
|
Working capital
|
|
|
40,446
|
|
|
|
25,114
|
|
Total assets
|
|
|
59,703
|
|
|
|
32,930
|
|
Notes payable
|
|
|
11,270
|
|
|
|
6,291
|
|
Total stockholders equity
|
|
|
7,996
|
|
|
|
12,939
|
|
Separate financial information for Regulus is included in
Exhibit 99.1 to this annual report on
Form 10-K.
131
ALNYLAM
PHARMACEUTICALS, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
13.
|
QUARTERLY
FINANCIAL DATA (UNAUDITED)
|
The following information has been derived from unaudited
consolidated financial statements that, in the opinion of
management, include all recurring adjustments necessary for a
fair presentation of such information.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
March 31,
|
|
|
June 30,
|
|
|
September 30,
|
|
|
December 31,
|
|
|
|
2010
|
|
|
2010
|
|
|
2010
|
|
|
2010
|
|
|
|
(In thousands, except per share data)
|
|
|
Revenues
|
|
|
$ 24,564
|
|
|
|
$26,617
|
|
|
$
|
27,668
|
|
|
$
|
21,192
|
|
Operating expenses
|
|
|
35,870
|
|
|
|
38,243
|
|
|
|
36,396
|
|
|
|
33,602
|
|
Net loss
|
|
|
(12,323
|
)
|
|
|
(14,632
|
)
|
|
|
(9,630
|
)
|
|
|
(6,930
|
)
|
Net loss per common share basic and diluted
|
|
|
$ (0.29
|
)
|
|
|
$ (0.35
|
)
|
|
$
|
(0.23
|
)
|
|
$
|
(0.16
|
)
|
Weighted average common shares basic and diluted
|
|
|
41,870
|
|
|
|
41,991
|
|
|
|
42,123
|
|
|
|
42,193
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
March 31,
|
|
|
June 30,
|
|
|
September 30,
|
|
|
December 31,
|
|
|
|
2009
|
|
|
2009
|
|
|
2009
|
|
|
2009
|
|
|
|
(In thousands, except per share data)
|
|
|
Revenues
|
|
$
|
25,057
|
|
|
|
$24,601
|
|
|
$
|
24,249
|
|
|
$
|
26,626
|
|
Operating expenses
|
|
|
33,037
|
|
|
|
47,013
|
|
|
|
33,899
|
|
|
|
34,695
|
|
Net loss
|
|
|
(7,889
|
)
|
|
|
(22,702
|
)
|
|
|
(9,208
|
)
|
|
|
(7,791
|
)
|
Net loss per common share basic and diluted
|
|
$
|
(0.19
|
)
|
|
|
$ (0.55
|
)
|
|
$
|
(0.22
|
)
|
|
$
|
(0.19
|
)
|
Weighted average common shares basic and diluted
|
|
|
41,399
|
|
|
|
41,520
|
|
|
|
41,708
|
|
|
|
41,812
|
|
132
|
|
ITEM 9.
|
CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
|
None.
|
|
ITEM 9A.
|
CONTROLS
AND PROCEDURES
|
Our management, with the participation of our chief executive
officer and vice president of finance and treasurer, evaluated
the effectiveness of our disclosure controls and procedures as
of December 31, 2010. The term disclosure controls
and procedures, as defined in
Rules 13a-15(e)
and
15d-15(e)
under the Exchange Act, means controls and other procedures of a
company that are designed to ensure that information required to
be disclosed by a company in the reports that it files or
submits under the Exchange Act is recorded, processed,
summarized and reported, within the time periods specified in
the SECs rules and forms. Disclosure controls and
procedures include, without limitation, controls and procedures
designed to ensure that information required to be disclosed by
a company in the reports that it files or submits under the
Exchange Act is accumulated and communicated to the
companys management, including its principal executive and
principal financial officers, as appropriate to allow timely
decisions regarding required disclosure. Management recognizes
that any controls and procedures, no matter how well designed
and operated, can provide only reasonable assurance of achieving
their objectives and management necessarily applies its judgment
in evaluating the cost-benefit relationship of possible controls
and procedures. Based on the evaluation of our disclosure
controls and procedures as of December 31, 2010, the
Companys chief executive officer and vice president of
finance and treasurer concluded that, as of such date, our
disclosure controls and procedures were effective at the
reasonable assurance level.
Managements report on our internal control over financial
reporting (as defined in
Rules 13a-15(f)
and
15d-15(f)
under the Exchange Act) and the independent registered public
accounting firms report on the effectiveness of our
internal control over financial reporting are included in
Item 8 of this annual report on
Form 10-K
and are incorporated herein by reference.
No change in our internal control over financial reporting
occurred during the fiscal quarter ended December 31, 2010
that has materially affected, or is reasonably likely to
materially affect, our internal control over financial reporting.
|
|
ITEM 9B.
|
OTHER
INFORMATION
|
None.
PART III
|
|
ITEM 10.
|
DIRECTORS,
EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
|
The information required by this item is incorporated herein by
reference to the information contained under the sections
captioned Proposal One Election of
Class I Directors, Section 16(a)
Beneficial Ownership Reporting Compliance and
Corporate Governance of the Proxy Statement. The
information required by this item relating to executive officers
is included in Part I, Item 1
Business- Executive Officers of the Registrant
of this annual report on
Form 10-K.
|
|
ITEM 11.
|
EXECUTIVE
COMPENSATION
|
The information required by this item is incorporated herein by
reference to the information contained under the sections
captioned Information about Executive Officer and Director
Compensation, Compensation Committee Interlocks and
Insider Participation, Employment Arrangements
and Compensation Committee Report of the Proxy
Statement.
133
|
|
ITEM 12.
|
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
|
The information required by this item is incorporated herein by
reference to the information contained under the sections
captioned Security Ownership of Certain Beneficial Owners
and Management Information about Executive Officer
and Director Compensation and Securities Authorized
for Issuance Under Equity Compensation Plans of the Proxy
Statement.
|
|
ITEM 13.
|
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
|
The information required by this item is incorporated herein by
reference to the information contained under the sections
captioned Corporate Governance, Employment
Arrangements and Certain Relationships and Related
Transactions of the Proxy Statement.
|
|
ITEM 14.
|
PRINCIPAL
ACCOUNTANT FEES AND SERVICES
|
The information required by this item is incorporated herein by
reference to the information contained under the sections
captioned Corporate Governance, Principal
Accountant Fees and Services and Pre-Approval
Policies and Procedures of the Proxy Statement.
PART IV
|
|
ITEM 15.
|
EXHIBITS AND
FINANCIAL STATEMENT SCHEDULES
|
(a) (1) Financial Statements
The following consolidated financial statements are filed as
part of this report under Item 8
Financial Statements and Supplementary Data:
|
|
|
|
|
|
|
Page
|
|
|
|
|
94
|
|
|
|
|
95
|
|
|
|
|
96
|
|
|
|
|
97
|
|
|
|
|
98
|
|
|
|
|
99
|
|
|
|
|
100
|
|
(a) (2) List of Schedules
All schedules to the consolidated financial statements are
omitted as the required information is either inapplicable or
presented in the consolidated financial statements.
(a) (3) List of Exhibits
The exhibits which are filed with this report or which are
incorporated herein by reference are set forth in the
Exhibit Index hereto.
134
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused
this Report to be signed on its behalf by the undersigned,
thereunto duly authorized, on February 18, 2011.
ALNYLAM PHARMACEUTICALS, INC.
|
|
|
|
By:
|
/s/ John
M. Maraganore, Ph.D.
|
John M. Maraganore, Ph.D.
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of
1934, the Report has been signed below by the following persons
on behalf of the Registrant and in the capacities indicated as
of February 18, 2011.
|
|
|
|
|
Name
|
|
Title
|
|
|
|
|
/s/ John
M. Maraganore, Ph.D.
John
M. Maraganore, Ph.D.
|
|
Director and Chief Executive Officer
(Principal Executive Officer)
|
|
|
|
/s/ Patricia
L. Allen
Patricia
L. Allen
|
|
Vice President of Finance and Treasurer
(Principal Financial and Accounting Officer)
|
|
|
|
/s/ John
K. Clarke
John
K. Clarke
|
|
Director
|
|
|
|
/s/ Victor
J. Dzau, M.D.
Victor
J. Dzau, M.D.
|
|
Director
|
|
|
|
/s/ Marsha
H. Fanucci
Marsha
H. Fanucci
|
|
Director
|
|
|
|
/s/ Steven
M. Paul, M.D.
Steven
M. Paul, M.D.
|
|
Director
|
|
|
|
/s/ Vicki
L. Sato, Ph.D.
Vicki
L. Sato, Ph.D.
|
|
Director
|
|
|
|
/s/ Paul
R. Schimmel, Ph.D.
Paul
R. Schimmel, Ph.D.
|
|
Director
|
|
|
|
/s/ Phillip
A. Sharp, Ph.D.
Phillip
A. Sharp, Ph.D.
|
|
Director
|
|
|
|
/s/ Kevin
P. Starr
Kevin
P. Starr
|
|
Director
|
135
EXHIBIT INDEX
|
|
|
|
|
Exhibit No.
|
|
Exhibit
|
|
|
3
|
.1
|
|
Restated Certificate of Incorporation of the Registrant (filed
as Exhibit 3.1 to the Registrants Quarterly Report on
Form 10-Q
filed on August 11, 2005 (File
No. 000-50743)
for the quarterly period ended June 30, 2005 and
incorporated herein by reference)
|
|
3
|
.2
|
|
Amended and Restated Bylaws of the Registrant (filed as
Exhibit 3.4 to the Registrants Registration Statement
on
Form S-1
(File
No. 333-113162)
and incorporated herein by reference)
|
|
4
|
.1
|
|
Specimen certificate evidencing shares of common stock (filed as
Exhibit 4.1 to the Registrants Registration Statement
on
Form S-1
(File
No. 333-113162)
and incorporated herein by reference)
|
|
4
|
.2
|
|
Rights Agreement dated as of July 13, 2005 between the
Registrant and EquiServe Trust Company, N.A., as Rights
Agent, which includes as Exhibit A the Form of Certificate
of Designations of Series A Junior Participating Preferred
Stock, as Exhibit B the Form of Rights Certificate and as
Exhibit C the Summary of Rights to Purchase Preferred Stock
(filed as Exhibit 4.1 to the Registrants Current
Report on
Form 8-K
filed on July 14, 2005 (File
No. 000-50743)
and incorporated herein by reference)
|
|
10
|
.1*
|
|
2002 Employee, Director and Consultant Stock Plan, as amended,
together with forms of Incentive Stock Option Agreement,
Non-qualified Stock Option Agreement and Restricted Stock
Agreement (filed as Exhibit 10.1 to the Registrants
Registration Statement on
Form S-1
(File
No. 333-113162)
and incorporated herein by reference)
|
|
10
|
.2*
|
|
2003 Employee, Director and Consultant Stock Plan, as amended,
together with forms of Incentive Stock Option Agreement,
Non-qualified Stock Option Agreement and Restricted Stock
Agreement (filed as Exhibit 10.2 to the Registrants
Registration Statement on
Form S-1
(File
No. 333-113162)
and incorporated herein by reference)
|
|
10
|
.3*
|
|
Amended and Restated 2004 Stock Incentive Plan (filed as
Exhibit 10.1 to the Registrants Quarterly Report on
Form 10-Q
filed on August 7, 2009 (File
No. 000-50743)
for the quarterly period ended June 30, 2009 and
incorporated herein by reference)
|
|
10
|
.4*
|
|
Forms of Incentive Stock Option Agreement and Nonstatutory Stock
Option Agreement under 2004 Stock Incentive Plan, as amended
(filed as Exhibit 10.3 to the Registrants Quarterly
Report on
Form 10-Q
filed on August 11, 2005 (File
No. 000-50743)
for the quarterly period ended June 30, 2005 and
incorporated herein by reference)
|
|
10
|
.5*
|
|
Form of Nonstatutory Stock Option Agreement under 2004 Stock
Incentive Plan granted to John M. Maraganore, Ph.D., on
December 21, 2004 (filed as Exhibit 10.1 to the
Registrants Current Report on
Form 8-K
filed on December 28, 2004 (File
No. 000-50743)
and incorporated herein by reference)
|
|
10
|
.6*
|
|
Form of Nonstatutory Stock Option Agreement under 2004 Stock
Incentive Plan granted to James L. Vincent on July 12, 2005
(filed as Exhibit 10.1 to the Registrants Current
Report on
Form 8-K
filed on July 13, 2005 (File
No. 000-50743)
and incorporated herein by reference)
|
|
10
|
.7*
|
|
Form of Restricted Stock Agreement under 2004 Stock Incentive
Plan issued to James L. Vincent on July 12, 2005 (filed as
Exhibit 10.2 to the Registrants Current Report on
Form 8-K
filed on July 13, 2005 (File
No. 000-50743)
and incorporated herein by reference)
|
|
10
|
.8*
|
|
2009 Stock Incentive Plan (filed as Exhibit 10.2 to the
Registrants Quarterly Report on
Form 10-Q
filed on August 7, 2009 (File
No. 000-50743)
for the quarterly period ended June 30, 2009 and
incorporated herein by reference)
|
|
10
|
.9*
|
|
Forms of Incentive Stock Option Agreement and Nonstatutory Stock
Option Agreement under 2009 Stock Incentive Plan (filed as
Exhibit 10.9 to the Registrants Annual Report on
Form 10-K
filed on February 26, 2010 (File
No. 000-50743)
for the year ended December 31, 2009 and incorporated
herein by reference)
|
|
10
|
.10*#
|
|
Form of Restricted Stock Agreement under 2009 Stock Incentive
Plan
|
|
10
|
.11*
|
|
2004 Employee Stock Purchase Plan, as amended (filed as
Appendix A to the Registrants Definitive Proxy
Statement on Schedule 14A filed on April 20, 2010
(File
No. 000-50743)
and incorporated herein by reference)
|
|
10
|
.12
|
|
Investor Rights Agreement entered into as of March 11, 2004
by and between the Registrant and Isis Pharmaceuticals, Inc.
(filed as Exhibit 10.25 to the Registrants
Registration Statement on
Form S-1
(File
No. 333-113162)
and incorporated herein by reference)
|
136
|
|
|
|
|
Exhibit No.
|
|
Exhibit
|
|
|
10
|
.13
|
|
Stock Purchase Agreement, dated as of September 6, 2005, by
and between the Registrant and Novartis Pharma AG (filed as
Exhibit 10.1 to the Registrants Current Report on
Form 8-K
filed on September 12, 2005 (File
No. 000-50743)
and incorporated herein by reference)
|
|
10
|
.14
|
|
Investor Rights Agreement, dated as of September 6, 2005,
by and between the Registrant. and Novartis Pharma AG (filed as
Exhibit 10.2 to the Registrants Current Report on
Form 8-K
filed on September 12, 2005 (File
No. 000-50743)
and incorporated herein by reference)
|
|
10
|
.15*
|
|
Letter Agreement between the Registrant and John M.
Maraganore, Ph.D. dated October 30, 2002 (filed as
Exhibit 10.7 to the Registrants Registration
Statement on
Form S-1
(File
No. 333-113162)
and incorporated herein by reference)
|
|
10
|
.16*
|
|
Letter Agreement between the Registrant and Barry E. Greene
dated September 29, 2003 (filed as Exhibit 10.10 to
the Registrants Registration Statement on
Form S-1
(File
No. 333-113162)
and incorporated herein by reference)
|
|
10
|
.17*#
|
|
2011 Annual Incentive Program
|
|
10
|
.18
|
|
Lease, dated as of September 26, 2003 by and between the
Registrant and Three Hundred Third Street LLC (filed as
Exhibit 10.15 to the Registrants Registration
Statement on
Form S-1
(File
No. 333-113162)
and incorporated herein by reference)
|
|
10
|
.19
|
|
First Amendment to Lease, dated March 16, 2006, by and
between the Registrant and ARE-MA Region No. 28, LLC (filed
as Exhibit 10.1 to the Registrants Current Report on
Form 8-K
filed on March 17, 2006 (File
No. 000-50743)
and incorporated herein by reference)
|
|
10
|
.20
|
|
Second Amendment to Lease, dated June 26, 2009, by and
between the Registrant and ARE-MA Region No. 28, LLC (filed
as Exhibit 10.4 to the Registrants Quarterly Report
on
Form 10-Q
filed on August 7, 2009 (File
No. 000-50743)
for the quarterly period ended June 30, 2009 and
incorporated herein by reference)
|
|
10
|
.21
|
|
Third Amendment to Lease, dated May 11, 2010, by and
between the Registrant and ARE-MA Region No. 28, LLC (filed
as Exhibit 10.2 to the Registrants Quarterly Report
on
Form 10-Q
filed on August 5, 2010 (File
No. 000-50743)
for the quarterly period ended June 30, 2010 and
incorporated herein by reference)
|
|
10
|
.22
|
|
Co-exclusive License Agreement between Garching Innovation GmbH
(now known as Max Planck Innovation GmbH) and Alnylam U.S., Inc.
dated December 20, 2002, as amended by Amendment dated
July 8, 2003 together with Indemnification Agreement by and
between Garching Innovation GmbH (now known as Max Planck
Innovation GmbH) and Alnylam Pharmaceuticals, Inc. effective
April 1, 2004 (filed as Exhibit 10.19 to the
Registrants Registration Statement on
Form S-1
(File
No. 333-113162)
and incorporated herein by reference)
|
|
10
|
.23
|
|
Co-exclusive License Agreement between Garching Innovation GmbH
(now known as Max Planck Innovation GmbH) and Alnylam Europe, AG
dated July 30, 2003 (filed as Exhibit 10.20 to the
Registrants Registration Statement on
Form S-1
(File
No. 333-113162)
and incorporated herein by reference)
|
|
10
|
.24
|
|
Agreement between the Registrant, Garching Innovation GmbH (now
known as Max Planck Innovation GmbH), Alnylam U.S., Inc. and
Alnylam Europe AG dated June 14, 2005 (filed as
Exhibit 10.8 to the Registrants Quarterly Report on
Form 10-Q
filed on August 11, 2005 (File
No. 000-50743)
for the quarterly period ended June 30, 2005 and
incorporated herein by reference)
|
|
10
|
.25
|
|
Research Collaboration and License Agreement effective as of
October 12, 2005 by and between the Registrant and Novartis
Institutes for BioMedical Research, Inc. (filed as
Exhibit 10.23 to the Registrants Annual Report on
Form 10-K
filed on March 2, 2009 (File
No. 000-50743)
for the quarterly and annual period ended December 31, 2008
and incorporated herein by reference)
|
|
10
|
.26
|
|
Collaboration and License Agreement dated September 20,
2006, by and between the Registrant and Biogen Idec Inc. (filed
as Exhibit 10.1 to the Registrants Quarterly Report
on
Form 10-Q
filed on November 9, 2006 (File
No. 000-50743)
for the quarterly period ended September 30, 2006 and
incorporated herein by reference)
|
137
|
|
|
|
|
Exhibit No.
|
|
Exhibit
|
|
|
10
|
.27
|
|
License and Collaboration Agreement, entered into as of
July 8, 2007, by and among F. Hoffmann-La Roche, Ltd,
Hoffmann-La Roche Inc., the Registrant and, for limited
purposes, Alnylam Europe AG (filed as Exhibit 10.26 to the
Registrants Annual Report on
Form 10-K
filed on March 2, 2009 (File
No. 000-50743)
for the quarterly and annual period ended December 31, 2008
and incorporated herein by reference)
|
|
10
|
.28
|
|
Common Stock Purchase Agreement dated as of July 8, 2007
between the Registrant and Roche Finance Ltd (filed as
Exhibit 10.2 to the Registrants Quarterly Report on
Form 10-Q
filed on November 8, 2007 (File
No. 000-50743)
for the quarterly period ended September 30, 2007 and
incorporated herein by reference)
|
|
10
|
.29
|
|
Share Purchase Agreement, dated as of July 8, 2007, among
Alnylam Europe AG, the Registrant and Roche Pharmaceuticals GmbH
(filed as Exhibit 10.3 to the Registrants Quarterly
Report on
Form 10-Q
filed on November 8, 2007 (File
No. 000-50743)
for the quarterly period ended September 30, 2007 and
incorporated herein by reference)
|
|
10
|
.30
|
|
Amended and Restated Collaboration Agreement, entered into as of
July 27, 2007, by and between the Registrant and Medtronic,
Inc. (filed as Exhibit 10.4 to the Registrants
Quarterly Report on
Form 10-Q
filed on November 8, 2007 (File
No. 000-50743)
for the quarterly period ended September 30, 2007 and
incorporated herein by reference)
|
|
10
|
.31
|
|
Termination Agreement, dated as of September 18, 2007, by
and between Merck & Co., Inc. and the Registrant
(filed as Exhibit 10.7 to the Registrants Quarterly
Report on
Form 10-Q
filed on November 8, 2007 (File
No. 000-50743)
for the quarterly period ended September 30, 2007 and
incorporated herein by reference)
|
|
10
|
.32
|
|
License and Collaboration Agreement entered into as of
May 27, 2008 by and among Takeda Pharmaceutical Company
Limited and the Registrant (filed as Exhibit 10.1 to the
Registrants Quarterly Report on
Form 10-Q
filed on August 8, 2008 (File
No. 000-50743)
for the quarterly period ended June 30, 2008 and
incorporated herein by reference)
|
|
10
|
.33
|
|
License and Collaboration Agreement entered into as of
January 9, 2009 by and between the Registrant and Cubist
Pharmaceuticals, Inc. (filed as Exhibit 10.2 to the
Registrants Quarterly Report on
Form 10-Q
filed on May 8, 2009 (File
No. 000-50743)
for the quarterly period ended March 31, 2009 and
incorporated herein by reference)
|
|
10
|
.34
|
|
Amended and Restated License and Collaboration Agreement,
entered into as of January 1, 2009, by and among the
Registrant, Isis Pharmaceuticals, Inc. and Regulus Therapeutics
Inc. (filed as Exhibit 10.3 to the Registrants
Quarterly Report on
Form 10-Q
filed on May 8, 2009 (File
No. 000-50743)
for the quarterly period ended March 31, 2009 and
incorporated herein by reference)
|
|
10
|
.35
|
|
Founding Investor Rights Agreement entered into as of
January 1, 2009, by and among Regulus Therapeutics Inc.,
Isis Pharmaceuticals, Inc. and the Registrant (filed as
Exhibit 10.4 to the Registrants Quarterly Report on
Form 10-Q
filed on May 8, 2009 (File
No. 000-50743)
for the quarterly period ended March 31, 2009 and
incorporated herein by reference)
|
|
10
|
.36
|
|
Amended and Restated Strategic Collaboration and License
Agreement effective as of April 28, 2009 between Isis
Pharmaceuticals, Inc. and the Registrant (filed as
Exhibit 10.3 to the Registrants Quarterly Report on
Form 10-Q
filed on August 7, 2009 (File
No. 000-50743)
for the quarterly period ended June 30, 2009 and
incorporated herein by reference)
|
|
10
|
.37
|
|
First Amendment to License and Collaboration Agreement entered
into as of November 2, 2009 by and between the Registrant
and Cubist Pharmaceuticals, Inc. (filed as Exhibit 10.40 to
the Registrants Annual Report on
Form 10-K
filed on February 26, 2010 (File
No. 000-50743)
for the year ended December 31, 2009 and incorporated
herein by reference)
|
|
10
|
.38#
|
|
Sublicense Agreement dated effective January 8, 2007 among
the Registrant and INEX Pharmaceuticals Corporation (now Tekmira
Pharmaceuticals Corporation, as successor in interest)
|
|
10
|
.39#
|
|
Amended and Restated License and Collaboration Agreement
effective as of May 30, 2008 by and between the Registrant
and Tekmira Pharmaceuticals Corporation (as successor in
interest to INEX Pharmaceuticals Corporation)
|
|
10
|
.40#
|
|
Amended and Restated Cross-License Agreement entered into as of
May 30, 2008 by and between the Registrant and Protiva
Biotherapeutics Inc.
|
138
|
|
|
|
|
Exhibit No.
|
|
Exhibit
|
|
|
10
|
.41#
|
|
Development, Manufacturing and Supply Agreement entered into as
of January 2, 2009 by and between the Registrant and
Tekmira Pharmaceuticals Corporation
|
|
10
|
.42#
|
|
License and Collaboration Agreement effective as of
June 19, 2008 by and between the Registrant and Kyowa Hakko
Kirin Co., Ltd. (formerly Kyowa Hakko Kogyo Co., Ltd.), as
amended as of February 1, 2010 and June 3, 2010
|
|
21
|
.1#
|
|
Subsidiaries of the Registrant
|
|
23
|
.1#
|
|
Consent of PricewaterhouseCoopers LLP, Independent Registered
Public Accounting Firm
|
|
23
|
.2#
|
|
Consent of Ernst & Young LLP, Independent Auditors of
Regulus Therapeutics Inc.
|
|
31
|
.1#
|
|
Certification pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002,
Rule 13(a)-
14(a)/15d-14(a), by Chief Executive Officer
|
|
31
|
.2#
|
|
Certification pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002,
Rule 13(a)-
14(a)/15d-14(a), by Vice President of Finance and Treasurer
|
|
32
|
.1#
|
|
Certification pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002, by Chief Executive Officer
|
|
32
|
.2#
|
|
Certification pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002, by Vice President of Finance and Treasurer
|
|
99
|
.1#
|
|
Regulus Therapeutics Inc.s Financial Statements
|
|
101
|
+
|
|
The following materials from Registrants Annual Report on
Form 10-K
for the year ended December 31, 2010, formatted in XBRL
(Extensible Business Reporting Language): (i) the
Consolidated Balance Sheets, (ii) the Consolidated
Statements of Operations and Comprehensive Loss, (iii) the
Consolidated Statements of Stockholders Equity,
(iv) the Consolidated Statements of Cash Flows, and
(v) Notes to Consolidated Financial Statements, tagged as
blocks of text.
|
|
|
|
*
|
|
Management contracts or compensatory plans or arrangements
required to be filed as an exhibit hereto pursuant to
Item 15(a) of
Form 10-K.
|
|
|
|
Indicates confidential treatment requested as to certain
portions, which portions were omitted and filed separately with
the Securities and Exchange Commission pursuant to a
Confidential Treatment Request.
|
|
#
|
|
Filed herewith.
|
|
+
|
|
Furnished herewith.
|
139
Exhibit 10.39
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
EXECUTION COPY
AMENDED AND RESTATED
LICENSE AND COLLABORATION AGREEMENT
by and between
TEKMIRA PHARMACEUTICALS CORPORATION
and
ALNYLAM PHARMACEUTICALS, INC.
Confidential
AMENDED AND RESTATED
LICENSE AND COLLABORATION AGREEMENT
This
AMENDED AND RESTATED LICENSE AND COLLABORATION AGREEMENT
, effective as of May 30, 2008,
is made by and between Tekmira Pharmaceuticals Corporation (as successor in interest to INEX
Pharmaceuticals Corporation (
INEX
)), a corporation organized and existing under the laws
of British Columbia, Canada (
Tekmira
), and Alnylam Pharmaceuticals, Inc., a corporation
organized and existing under the laws of Delaware, U.S.A (
Alnylam
).
RECITALS:
WHEREAS
, Alnylam owns or controls certain intellectual property covering fundamental aspects
of the structure and uses of therapeutic products that (a) function through RNA interference
(
RNAi
), including but not limited to compositions and methods of use of Small Interfering
RNAs (siRNAs) (defined below), (b) are, or function through the modulation of, micro RNA
transcripts (
miRNA
) or (c) are Immunostimulatory Oligonucleotide Compositions or IOCs
(defined below); and Alnylam is developing capabilities to develop and commercialize such
therapeutic products;
WHEREAS
, Tekmira owns or controls certain intellectual property covering certain targeted
nucleic acid delivery technology, and is also engaged in the business of discovering, developing,
manufacturing and commercializing human therapeutic products, including those mediated by IOCs;
WHEREAS
, Alnylam and Tekmira (as successor in interest to INEX) are parties to a License and
Collaboration Agreement (the
Original Agreement
) dated as of January 8, 2007 (the
Original Effective Date
), under which:
(a) Tekmira granted Alnylam an exclusive license under and to Tekmiras delivery technology
for the research, development, manufacture and commercialization of RNAi and miRNA products
formulated with Tekmiras technology for the treatment of diseases in humans;
(b) Alnylam granted Tekmira a license under and to (i) Alnylams core RNAi patent rights for
the research, development, manufacture and commercialization of RNAi products directed to up to
three Targets (defined below) for the treatment of diseases in humans, and (ii) Alnylams IOC
patent rights for the research, development, manufacture and commercialization of IOC products for
the treatment of diseases in humans; and
(c) Alnylam and Tekmira agreed to collaborate on the research and development of liposomal
formulations for therapeutic products;
WHEREAS
, on March 28, 2008, Tekmira, Protiva Biotherapeutics Inc. (
Protiva
) and all
holders of securities of Protiva entered into a Share Purchase Agreement (the
Purchase
Agreement
) pursuant to which, upon the completion of the transactions contemplated therein
(the
Closing
), Tekmira will purchase all of the outstanding shares of capital stock of
Protiva and Protiva will become a wholly-owned subsidiary of Tekmira;
WHEREAS
, following the execution and delivery of the Purchase Agreement, and as a condition to
Closing thereunder, Tekmira entered into a subscription agreement with Alnylam (the
Confidential
2
Alnylam Subscription Agreement
) and a subscription agreement with F. Hoffmann-La
Roche Ltd (
Roche
) (the
Roche Subscription Agreement
), pursuant to which Alnylam
and Roche have each, separately, agreed to purchase certain shares of Tekmiras common stock upon
the Closing if certain conditions are met;
WHEREAS
, as partial consideration for Alnylams agreement to enter into the Alnylam
Subscription Agreement, concurrently with the Alnylam Subscription Agreement, Alnylam and Tekmira
entered into the First Amendment and Partial Termination of Loan and Security Agreement, which
terminates the Loan and Security Agreement between Alnylam and Tekmira dated as of the Original
Effective Date in part, and terminates the Negative Pledge Agreement executed in conjunction with
such Loan and Security Agreement in its entirety;
WHEREAS
, Alnylam and Protiva are parties to a Cross-License Agreement dated as of August
14, 2007 (
Original Protiva License Agreement
), which as a condition to Alnylams
agreement to enter into this Agreement, is being amended and restated concurrently with this
Agreement (as so amended and restated, the
Protiva License Agreement
);
WHEREAS
, following the execution of the Original Protiva License Agreement, Protiva entered
into a [**] (the [**]) with [**] and its affiliated companies (including without limitation [**]
(collectively, the [**]) effective as of [**], under which, among other things, Protiva granted
to the Merck Entities a non-exclusive license to certain intellectual property of Protiva;
WHEREAS
, as a condition to the effectiveness of the Alnylam Subscription Agreement, Alnylam
has agreed to enter into this Amended and Restated License and Collaboration Agreement on the terms
and conditions contained herein, including but not limited to, the parties agreement to harmonize
the license grants from Tekmira to Alnylam with respect to certain Tekmira intellectual property
that is obtained or developed after the expiration of the Restriction Period (defined below) with
the license grants from Protiva to Alnylam contained in the Protiva License Agreement; and the
parties agreement to harmonize the royalty and milestone payment obligations of the Parties with
the obligations of Protiva and Alnylam contained in the Protiva License Agreement; and
WHEREAS
, concurrent with the execution of this Agreement, the parties have entered into an
escrow agreement (the Escrow Agreement) pursuant to which the original signature pages to this
Agreement and the fully-executed Protiva License Agreement, among other agreements, shall be placed
into escrow and shall be either (i) released from escrow and delivered to the appropriate parties
pursuant to the terms of the Escrow Agreement and, thereafter, this Agreement shall become
effective, or (ii) each Partys original signature pages shall be returned to it pursuant to the
terms of the Escrow Agreement and this Agreement will never become fully executed, delivered or
effective.
NOW, THEREFORE
, in consideration of the mutual covenants contained herein, and other good and
valuable consideration, the receipt of which is hereby acknowledged, Alnylam and Tekmira agree to
this Amended and Restated License and Collaboration Agreement effective as of the Effective Date
(subject to the terms of Section 11.1):
Confidential
3
1. DEFINITIONS
Unless specifically set forth to the contrary herein, the following terms, whether used in the
singular or plural, shall have the respective meanings set forth below:
1.1 Active Internal Development Program
with respect to a particular RNAi Product or miRNA
Product, means that the following criteria have been satisfied, as of the relevant time under this
Agreement: (a) an active program of Research, Development, Manufacture or Commercialization with
respect to such RNAi Product or miRNA Product has been commenced and remains in effect internally
at Alnylam or its Affiliates; and (b) if such program has not previously established preclinical
proof-of-principle for such RNAi Product or miRNA Product, Alnylam or its Affiliates have committed
to conduct such program at least through the completion of significant preclinical
proof-of-principle testing of a specific Formulation for such RNAi Product or miRNA Product.
1.2 Affiliate
means, with respect to a Party, (a) any corporation or business entity of
which fifty percent (50%) or more of the securities or other ownership interests representing the
equity, the voting stock or general partnership interest are owned, controlled or held, directly or
indirectly, by such Party; (b) any corporation or business entity, which, directly or indirectly,
owns, controls or holds fifty percent (50%) (or the maximum ownership interest permitted by law) or
more of the securities or other ownership interests representing the equity, the voting stock or,
if applicable, the general partnership interest, of such Party; or (c) any corporation or business
entity, fifty percent (50%) or more of the securities or other ownership interests representing the
equity of which is directly or indirectly owned, controlled or held by the same corporation,
business entity or security holders, or holders of ownership interests, that own, control or hold
fifty percent (50%) or more of the securities or other ownership interests representing the equity
or the voting stock of such Party. Notwithstanding the foregoing, for purposes of the definitions
of Control, Controls, Controlled by, Tekmira Collaboration IP, Tekmira In-Licenses, Tekmira IOC
Technology, Tekmira Know-How, Tekmira Patent Rights, Tekmira Technology and Joint Collaboration IP,
Protiva shall not be deemed an Affiliate of Tekmira.
1.3 Alnylam Collaboration IP
means (a) any improvement, invention, discovery, Know-How or
other Intellectual Property Right, patentable or otherwise, first identified, invented, discovered
or developed by employees of Alnylam or its Affiliates or other persons not employed by Tekmira
acting on behalf of Alnylam, in the performance of the Collaboration, the Manufacturing Activities,
and/or Alnylams obligations under the Original INEX Agreements, and (b) any Patent Rights in the
Territory which claim, cover or relate to such improvements, discoveries or Know-How. Alnylam
Collaboration IP excludes Alnylams interest in Joint Collaboration IP.
1.4 Alnylam Core Patent Rights
means those Patent Rights Controlled by Alnylam that are set
forth in Schedule 1.4 of this Agreement, as such Schedule is supplemented from time to time
pursuant to Section 6.5.1.
1.5 Alnylam Field
means the treatment, prophylaxis and diagnosis of diseases in humans using
an RNAi Product or miRNA Product.
1.6 Alnylam IOC Technology
means (a) Know-How that (i) is useful or necessary to Research,
Develop, Commercialize and/or Manufacture an IOC Product in the Tekmira IOC Field in the Territory
and (ii) is Controlled by Alnylam on the Original Effective Date (excluding any Alnylam
Confidential
4
Collaboration IP and Alnylams interest in Joint Collaboration IP) and (b) those Patent Rights
Controlled by Alnylam that are set forth in Schedule 1.6 of this Agreement.
1.7 Alnylam Lipidoid Patent Rights
means those Patent Rights Controlled by Alnylam under a
license from the Massachusetts Institute of Technology pursuant to the MIT License Agreement and
that are set forth in Schedule 1.7 of this Agreement.
1.8
Alnylam Materials
means animal models, cell lines, tissue samples, genes, plasmids,
siRNAs, miRNA constructs, vectors, receptors and other proteins, peptides, and other biological
materials related to the Alnylam Royalty Products, that in each case are provided by Alnylam to
Tekmira for use in the performance of the Collaboration, including without limitation, the siRNA or
miRNA composition comprising an Alnylam Royalty Product.
1.9 Alnylam Partnered Product
means an RNAi Product or miRNA Product that is at the relevant
time being Researched, Developed, Manufactured and/or Commercialized by Alnylam or its Affiliates
with the participation or sponsorship of one or more Third Parties or, prior to the end of the
Restriction Period, Protiva. For clarity, it is understood and agreed that no RNAi Product or
miRNA Product developed or to be developed in a project or arrangement in which all or
substantially all of Alnylams or its Affiliates contributions or anticipated contributions are or
will be in the form of the grant by Alnylam or its Affiliates of licenses or sublicenses to one or
more Intellectual Property Rights, will be considered an Alnylam Partnered Product.
1.10 Alnylam RNAi Know-How
means Know-How that (a) Alnylam determines in its reasonable
judgment to be useful or necessary to Research, Develop, Commercialize and/or Manufacture an
Alnylam Royalty Product in the Alnylam Field in the Territory and (b) is either (i) Controlled by
Alnylam on the Original Effective Date, or (ii) comes within Alnylams Control during the
Collaboration Term or the Manufacturing Term (excluding any Alnylam Collaboration IP and Alnylams
interest in Joint Collaboration IP).
1.11
Alnylam RNAi Patent Rights
means Patent Rights that (a) claim (i) Alnylam RNAi
Know-How, or (ii) the identification, characterization, optimization, construction, expression,
formulation, use or production of an Alnylam Royalty Product, as the case may be, and which Alnylam
determines in its reasonable judgment to be useful or necessary to Research, Develop, Commercialize
and/or Manufacture an Alnylam Royalty Product in the Alnylam Field in the Territory, and (b) are
Controlled by Alnylam at any time during the Collaboration Term or the Manufacturing Term
(including, without limitation, the Alnylam Core Patent Rights and the Alnylam Lipidoid Patent
Rights, but specifically excluding Alnylam IOC Technology and any Patent Rights included in Alnylam
Collaboration IP or Alnylams interest in Joint Collaboration IP).
1.12 Alnylam RNAi Technology
means, collectively, Alnylam RNAi Know-How and Alnylam RNAi
Patent Rights.
1.13 Alnylam Royalty Product
means any RNAi Product or a miRNA Product that, but for the
licenses granted hereunder, would be Covered by one or more Valid Claims of the Tekmira Patent
Rights
1.14 Alnylam Target
means any Target that is not a Tekmira Development Target, the PLK
Target, nor a Protiva Development Target (as defined in the Protiva License Agreement);
Confidential
5
provided
,
however
, that the exclusion of the PLK Target will not apply if
Protiva provides notice to Alnylam under the Protiva License Agreement that Protiva is terminating
its license rights under the Protiva License Agreement with respect to RNAi Products or miRNA
Products for the PLK Target.
1.15 Biodefense Target
means (a) a Target within the genome of one or more Category A, B and
C pathogens, as defined by the National Institute of Allergy and Infectious Diseases, including
without limitation, pathogens listed on Schedule 1.15, but specifically excluding influenza virus,
or (b) an endogenous cellular Target against which Alnylam Researches, Develops and/or
Commercializes an Alnylam Royalty Product for commercial supply to one or more Funding Authorities.
1.16 Bona Fide Collaboration
means a collaboration between Alnylam and/or its Affiliates and
one or more Third Parties involving the Research, Development, Manufacture and/or Commercialization
of one or more RNAi Products and/or miRNA Products and established under a written agreement in
which (a) the scope of the licenses granted, and financial or other commitments of value, are of
material value to Alnylam and/or its Affiliates, and (b) Alnylam and/or its Affiliates undertakes
and performs substantial, mutual research activity with the Third Party. For purposes of clarity,
it is understood and agreed that no collaboration in which all or substantially all of Alnylams or
its Affiliates contributions or anticipated contributions are or will be solely in the form of the
grant by Alnylam or its Affiliates of licenses or sublicenses to one or more Intellectual Property
Rights, will be considered a Bona Fide Collaboration.
1.17 Business Day
means a day on which banking institutions in Boston, Massachusetts and
Vancouver, British Columbia, Canada are open for business.
1.18 Calendar Quarter
means the respective periods of three (3) consecutive calendar months
ending on March 31, June 30, September 30 and December 31.
1.19 Calendar Year
means each successive period of twelve (12) months commencing on January
1 and ending on December 31.
1.20 cGMP
means current good manufacturing practices regulations applicable to the
Manufacture of a Royalty Product that are promulgated by any Regulatory Authority.
1.21 Change of Control
means a Change of Control under and as defined in the Protiva License
Agreement without cross-reference to this Agreement, or any other transaction, or series of related
transactions, whereby: (a) Tekmira merges, reorganizes, amalgamates or consolidates with another
entity, and the shareholders of Tekmira owning at least fifty percent (50%) of the outstanding
voting securities of Tekmira immediately prior to such transaction(s) own less than fifty percent
(50%) of the outstanding voting securities of Tekmira or the surviving entity as a result of such
transaction(s), unless such transaction(s) are a Permitted Financing Merger of Tekmira; (b) Tekmira
sells, transfers or otherwise disposes of all or substantially all of its assets to which this
Agreement relates; or (c) acquisition by a Significant Pharmaceutical Company of control of the
management and policies of Tekmira;
provided,
that a Change of Control shall not include
(i) the merger, reorganization, amalgamation or consolidation of Protiva with Tekmira after the end
of the Restriction Period, or (ii) the sale or transfer of all or substantially all of the assets
of Protiva to which the Protiva License Agreement relates to Tekmira after the end of the
Restriction Period.
Confidential
6
1.22 Class 1 Non-Exclusively Licensed Tekmira IP
means all of the following to the extent
they comprise Non-Exclusively Licensed Tekmira IP: (a) Generic Claims included in Tekmira Patent
Rights, (b) all Know-How, and all Generic Claims included in the Patent Rights, that comprise
Tekmira Collaboration IP, (c) Tekmiras interest in Joint Collaboration IP, and (d) Tekmira
Know-How. For clarity, Class 1 Non-Exclusively Licensed IP does
not
include any Tekmira
Technology Controlled by Tekmira prior to the end of the Restriction Period or any Tekmira
Collaboration IP or Tekmiras interest in and Joint Collaboration IP that is first identified,
invented discovered or developed prior to the end of the Restriction Period.
1.23 Class 2 Non-Exclusively Licensed Tekmira IP
means all of the following to the extent
they comprise Non-Exclusively Licensed Tekmira IP: (a) all claims other than Generic Claims and
Target-Specific Claims included in Tekmira Patent Rights and (b) all claims other than Generic
Claims included in the Patent Rights that comprise Tekmira Collaboration IP. For clarity, Class 2
Non-Exclusively Licensed IP does
not
include any Tekmira Technology Controlled by Tekmira
prior to the end of the Restriction Period or any Tekmira Collaboration IP or Tekmiras interest in
and Joint Collaboration IP that is first identified, invented discovered or developed prior to the
end of the Restriction Period.
1.24 Collaboration IP
means the collective reference to Alnylam Collaboration IP, Tekmira
Collaboration IP and Joint Collaboration IP.
1.25
Collaboration Term
means the period commencing on [**]. The Collaboration Term may be
extended upon the mutual written agreement of the Parties.
1.26 Combination Product
means a Royalty Product combined with any other clinically active
therapeutic, prophylactic or diagnostic ingredient. All references to Royalty Product in this
Agreement shall be deemed to include Combination Product, to the extent applicable.
1.27 Commercialization
or
Commercialize
means any and all activities directed to
marketing, promoting, distributing, importing and selling a Royalty Product and activities directed
to obtaining pricing and reimbursement approvals, as applicable.
1.28
Commercially Reasonable Efforts
means the carrying out of obligations in a diligent and
sustained manner using such effort and employing such resources as would normally be exerted or
employed by a similarly situated biopharmaceutical company for a product resulting from its own
research efforts of similar market potential, profit potential or strategic value at a similar
stage of its product life.
1.29 Confidential Information
means any and all information and data, including without
limitation Alnylam RNAi Technology, Alnylam IOC Technology, Tekmira Technology and Tekmira IOC
Technology, and all other scientific, pre-clinical, clinical, regulatory, manufacturing, marketing,
financial and commercial information or data, whether communicated in writing or orally or by any
other method, which is provided by one Party to the other Party in connection with this Agreement
(or under the Original INEX Agreements). Alnylam RNAi Technology, Alnylam IOC Technology and
Alnylam Collaboration IP are Confidential Information of Alnylam. Tekmira IOC Technology, Tekmira
Collaboration IP, and Tekmira Technology are Confidential Information of Tekmira. Joint
Collaboration IP is the Confidential Information of the Parties.
Confidential
7
1.30 Contract Year
means the twelve (12) month period beginning on the Original Effective
Date and each succeeding twelve (12) month period thereafter during the Agreement Term;
provided
, that the first and second Contract Years of the Collaboration Term shall be
deemed to have begun on [**], respectively. Each Contract Year shall be divided into four (4)
Contract Quarters
comprised of successive three (3) month periods.
1.31 Control, Controls or Controlled by
means, with respect to any (a) material,
know-how or other information or (b) Intellectual Property Right, the possession of (whether by
ownership or license, other than pursuant to this Agreement), or the ability of a Party or its
Affiliates to grant access to, or a license or sublicense of, such item or right as provided for
herein without violating the terms of any agreement or other arrangement with any Third Party
existing at the time such Party would be required hereunder to grant the other Party such access or
license or sublicense. For clarity, the Parties acknowledge that no conceptions, developments,
techniques, data, inventions, improvements, technical information, or works of authorship that
were, are, or that hereafter may be in whole or in part conceived, reduced to practice, discovered,
created, authored or otherwise made or obtained by or for Protiva or its contractors at any time
since January 18, 2001, will be considered to be Controlled by Tekmira by virtue of any agreement,
right, or claim existing or arguably existing prior to the Effective Date.
1.32 Cover, Covering, Covers
or
Covered
means, with respect to a Royalty Product, that
in the absence of an assignment of rights to, or a license granted under, a Valid Claim, the
Research, Development, Manufacture or Commercialization of such Royalty Product would infringe such
Valid Claim.
1.33 Development, Developing
or
Develop
means, with respect to a Royalty Product, the
research and development activities related to (a) the generation, characterization, optimization,
construction, expression, formulation, use and production of a Royalty Product, and (b) any other
research and development activities related to the clinical testing and qualification of such
Royalty Product for clinical testing, and such other tests, studies and activities as may be
required or recommended to obtain Regulatory Approval of such Royalty Product, including toxicology
studies, statistical analysis and report writing, pre-clinical testing, clinical studies and
regulatory affairs, product approval and registration activities.
1.34 Exclusively Licensed Tekmira IP
means any (a) Tekmira Technology that is either (i)
Controlled by Tekmira or its Affiliates on the Original Effective Date, or (ii) first discovered or
created by Tekmira or its Affiliates during the Agreement Term but prior to the end of the
Restriction Period or otherwise comes within the Control of Tekmira or its Affiliates prior to the
Effective Date, and (b) Tekmira Collaboration IP and Tekmiras interest in Joint Collaboration IP
that are first identified, invented, discovered or developed prior to the end of the Restriction
Period.
1.35
Existing Alnylam In-Licenses
means the Third Party agreements listed on Schedule 1.35.
1.36
Existing Tekmira In-Licenses
means the Third Party agreements listed on Schedule 1.36.
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1.37
FDA
means the United States Food and Drug Administration and any successor governmental
authority having substantially the same function.
1.38 First Commercial Sale
means, with respect to a Royalty Product, the first sale for end
use or consumption of such Royalty Product in a country in the Territory after all required
Regulatory Approvals have been granted by the Regulatory Authority of such country. For the
avoidance of doubt, sales for clinical study purposes or compassionate, named patient or similar
use, shall not constitute a First Commercial Sale, and sales to a Funding Authority shall
constitute a First Commercial Sale.
1.39 Formulation
means a particular RNAi Product or miRNA Product delivery formulation,
characterized by its components and its unique ratios among components.
1.40 FTE or Full-Time Equivalent
means with respect to Tekmira, the equivalent of the work
of one (1) scientist, full time for one (1) year, for or on behalf of Tekmira, which equates to a
total of [**] per year of scientific work performed directly in the Collaboration, and the direct
scientific management thereof. In no event shall the work of one individual person account for
more than one (1) FTE year.
1.41 FTE Rate
means an amount per FTE of work actually performed in the Collaboration under
the Research Plan or in Manufacturing Activities under the Manufacturing Plan that is equal to
[**];
provided
,
however
, that during each Contract Year of the Collaboration Term
such rate shall apply only to any FTEs engaged in the Collaboration over and above the initial [**]
FTEs in such Contract Year. Commencing with the second Contract Year, the then-current FTE Rate
shall be adjusted by the percent change year to year in the Consumer Price Index (All Items) for
the Province of British Columbia, Canada as published by Statistics Canada for the period of each
applicable Contract Year.
1.42
Funding Authorities
means the United States Department of Health and Human Services or
other United States or foreign government or international agencies responsible for requesting,
approving and/or funding the development and manufacture of products for biodefense purposes.
1.43 Generic Claim
means a claim of a Patent Right that (a) recites a nucleic acid-lipid
particle comprising: an siRNA or miRNA, at least one cationic lipid, at least one non-cationic
lipid, and a conjugated lipid that inhibits aggregation of particles, and/or methods or uses of
such particle in the delivery of siRNA or miRNA; and (b) does not recite any Particular Moiety, or
any particular or specific cationic lipid, non-cationic lipid, or conjugated lipid.
1.44 IND
means an Investigational New Drug application, Clinical Study Application, Clinical
Trial Exemption, or similar application or submission for approval to conduct human clinical
investigations of Royalty Product filed with or submitted to a Regulatory Authority in conformance
with the requirements of such Regulatory Authority.
1.45 Initiate
,
Initiated
or
Initiation
means, with respect to a Phase I Study or a Phase
II Study, the administration of the first dose to a subject in such study.
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1.46 In-Licenses
means collectively, the Existing Alnylam In-Licenses and the Tekmira
In-Licenses, but excludes the Tekmira-UBC License Agreement.
1.47
Intellectual Property Rights
means all intellectual property rights subject to
protection by intellectual property laws in any country of the world, arising under statutory or
common law, contract or otherwise, and whether or not perfected, including without limitation, all
(a) Patent Rights; (b) Collaboration IP; (c) rights associated with works of authorship, including
without limitation copyrights, moral rights, copyright applications, copyright registrations; (d)
rights associated with trademarks, service marks, trade names, logos, trade dress, goodwill and the
applications for registration and registrations thereof; (e) rights relating to the protection of
trade secrets and confidential information; (f) rights analogous to those set forth in this Section
and any and all other proprietary rights relating to intangible property now existing, hereafter
filed, issued or acquired.
1.48 InterfeRx License Transaction
means a transaction in which Alnylam (a) grants a
sublicense under Tekmira Technology and a Target-specific license under Alnylam Core Patent Rights
to a Third Party, but (b) does not have the right to collaborate with such Third Party to develop
RNAi Products against such Target or Targets.
1.49
IOC
or
Immunostimulatory Oligonucleotide Composition
means a single-stranded or
double-stranded ribonucleic acid (RNA) composition, or derivative thereof, that has activity
solely through an immunostimulatory mechanism and has no RNAi activity against a human gene
transcript or viral genomic sequence.
1.50 IOC Product
means a product containing, comprised of or based on IOCs or IOC
derivatives.
1.51 ISIS License Agreement
means the Strategic Collaboration & License Agreement between
Isis Pharmaceuticals, Inc., and Alnylam Pharmaceuticals, Inc., dated March 11, 2004, together with
Letter Agreements dated March 9, 2004 and March 11, 2004, respectively, and as amended on June 14,
2005, and as further amended from time to time.
1.52 Joint Collaboration IP
means, collectively, (a) any improvement, discovery or Know-How,
patentable or otherwise, first identified, invented, discovered or developed jointly by the Parties
or their Affiliates or others acting on behalf of Tekmira and Alnylam in the performance of the
Collaboration, the Manufacturing Activities and/or the obligations of the Parties under the
Original INEX Agreements, and (b) any Patent Rights in the Territory which claim, cover or relate
to such improvements, discoveries or Know-How.
1.53 Joint Research Committee
or
JRC
means the joint research committee as more fully
described in Article 4.
1.54 Know-How
means, with respect to a Royalty Product, all biological materials and other
tangible materials, inventions, practices, methods, protocols, formulas, formulations, knowledge,
know-how, trade secrets, processes, assays, skills, experience, techniques and results of
experimentation and testing, including without limitation pharmacological, toxicological and
pre-clinical and clinical test data and analytical and quality control data, patentable or
otherwise, which relates to the identification, characterization, optimization, construction,
expression, formulation, use
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or production of such Royalty Product and which are reasonably useful or necessary to
Research, Develop, Manufacture or Commercialize such Royalty Product in the Territory in (a) the
Alnylam Field, in the case of Alnylam Royalty Products and Tekmira Development Products or (b) the
Tekmira IOC Field, in the case of Tekmira IOC Products.
1.55 Lead Formulation
means a Formulation that has been identified by Tekmira and Alnylam as
being the end product of Tekmiras and Alnylams work under the Research Plan for a particular
Alnylam siRNA or miRNA payload(s) directed at a particular Target. It is expected that formulated
materials using a number of different initial Formulations would be delivered by Tekmira to
Alnylam, tested by Alnylam, and (on the basis of such tests, and subsequent iterative tests if
needed) culled or otherwise adjusted by Tekmira to the point where both parties believe that no
further formulation adjustments, or improvements are anticipated under the Research Plan. That
Formulation is the Lead Formulation in that situation.
1.56 Loan Agreement
means that certain Loan and Security Agreement between the Parties dated
the Original Effective Date, as amended by the First Amendment and Partial Termination of Loan and
Security Agreement between the Parties dated March 28, 2008.
1.57
Major Market
means any of the United States, the European Union, United Kingdom,
France, Germany, Italy, Spain or Japan.
1.58 Manufacturing
or
Manufacture
means, with respect to a Royalty Product, all activities
associated with the production, manufacture and processing of such Royalty Product, and the
filling, finishing, packaging, labeling, shipping, and storage of such Royalty Product, including
without limitation formulation process scale-up for toxicology and clinical study use, aseptic fill
and finish, stability testing, analytical development, quality assurance and quality control, and
in the case of the Manufacturing of Alnylam Royalty Products by Tekmira, the production of the bulk
finished dosage form of Alnylam Royalty Product from the RNAi or miRNA construct.
1.59 Manufacturing Activities
of a Party means those activities performed by such Party
under the Manufacturing Plan, the Supply Agreement, and/or the Quality Agreements relating to the
Manufacture and supply of Alnylam Royalty Products.
1.60
Manufacturing Plan
means the detailed written plan of work for the Manufacture of the
bulk finished dosage form of Alnylam Royalty Products for Alnylam by Tekmira pursuant to Section
5.1 for any given Contract Year of the Agreement Term, as such plan is approved and updated by the
JRC as necessary pursuant to Section 4.1. The updated Manufacturing Plan for calendar year 2008 is
attached to this Agreement as Schedule 5.1. The Manufacturing Plan shall be further updated
pursuant to Section 5.1(b).
1.61 Manufacturing Term
means the period commencing on the Original Effective Date and
continuing through the end of the Agreement Term, unless the Manufacturing Activities are
terminated earlier in accordance with the terms of this Agreement, including without limitation,
Section 11.6.
1.62 miRNA Product
means a product containing, comprised of or based on native or chemically
modified RNA oligomers designed to either modulate an miRNA and/or provide the function of an
miRNA.
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1.63 MIT License Agreement
means the Amended and Restated Exclusive Patent License Agreement
effective as of May 9, 2007 between the Massachusetts Institute of Technology and Alnylam, as
further amended from time to time.
1.64 NDA
means a New Drug Application, Biologics License Application, Worldwide Marketing
Application, Marketing Authorization Application, Section 510(k) filing or similar application or
submission filed with a Regulatory Authority in a country or group of countries to obtain marketing
approval for a biological, pharmaceutical or other therapeutic, prophylactic or diagnostic product
in that country or in that group of countries.
1.65
Necessary Third Party IP
means, with respect to any country in the Territory, on a
country-by-country basis, Know-How or Patent Rights in such country owned or controlled by a Third
Party that Cover a Royalty Product, it being understood and agreed that for this purpose, no
Know-How or Patent Rights controlled by Protiva and licensed to Alnylam under the Protiva License
Agreement will be considered Necessary Third Party IP.
1.66 Net Sales
means, with respect to a Royalty Product, the aggregate gross invoice prices
of all units of such Royalty Product sold by a Party and its Related Parties to Third Parties
(other than a Sublicensee of such Party) after deducting, if not previously deducted, from the
amount invoiced or received (a) trade and quantity discounts actually given, including early-pay
cash discounts; (b) returns, rebates, chargebacks and other allowances actually given; (c)
retroactive price reductions that are actually granted; and (d) bad debts, sales or excise taxes,
transportation and insurance, custom duties, and other governmental charges actually incurred or
accounted for in accordance with generally accepted accounting principles in the United States or
Canada, if applicable, consistently applied by the applicable Party
With respect to sales of Combination Products, Net Sales shall be calculated on the basis of the
gross invoice price of the Royalty Product(s) containing the same composition and concentration of
Royalty Product sold without other clinically active ingredients. In the event that the Royalty
Product is sold only as a Combination Product and not sold without other clinically active
ingredients, the Parties shall negotiate in good faith another basis on which to calculate Net
Sales with respect to the Combination Product that fairly reflects the value of the Royalty Product
relative to the other clinically active ingredients in the Combination Product.
A percentage of the deductions set forth in clauses (a) through (d) above equal to the ratio of the
Net Sales for the Royalty Product to the Net Sales of the Combination Product will be applied in
calculating Net Sales for a Combination Product.
1.67 Non-Exclusively Licensed Tekmira IP
means all Tekmira Technology, Tekmira Collaboration
IP and Tekmiras interest in Joint Collaboration IP, other than the Exclusively Licensed Tekmira
IP.
1.68
Novartis Agreement
means the Research Collaboration and License Agreement between
Novartis Institutes for BioMedical Research, Inc. (
Novartis
) and Alnylam Pharmaceuticals,
Inc. dated October 12, 2005, as amended by the Addendum Re: Influenza Program to Research
Collaboration and License Agreement effective as of February 17, 2006, and as further amended from
time to time.
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1.69 Original INEX Agreements
means (i) the Original Agreement and (ii) the Evaluation
Agreement among Alnylam, Tekmira and INEX dated March 25, 2006, the Letter Agreement among Alnylam,
Tekmira and INEX dated March 25, 2006, as each of the Evaluation Agreement and Letter Agreement
were amended by the Letter Agreement among Alnylam, Tekmira and INEX dated July 13, 2006.
1.70 Particular Moiety
means a specific nucleotide sequence of an RNAi Product or miRNA
Product, in either case directed against a particular Target.
1.71 Party
means Tekmira and/or Alnylam.
1.72 Patent Rights
means all patents (including all reissues, extensions, substitutions,
confirmations, re-registrations, re-examinations, invalidations, supplementary protection
certificates and patents of addition) and patent applications (including all provisional
applications, continuations, continuations-in-part and divisionals).
1.73 Permitted Financing Merger
means any transaction, or series of related transactions,
whereby Tekmira merges, reorganizes, amalgamates or consolidates with another entity, and the
shareholders of Tekmira owning at least fifty percent (50%) of the outstanding voting securities of
Tekmira immediately prior to such transaction(s) own less than fifty percent (50%) of the
outstanding voting securities of Tekmira or the surviving entity as a result of such
transaction(s), but where: (a) the business of Tekmira immediately prior to such transaction(s) is
the primary business of Tekmira or the surviving entity immediately after such transaction(s); (b)
members of the Board of Directors of Tekmira immediately prior to such transaction(s) comprise more
than 50% of the Board of Directors of Tekmira or the surviving entity immediately after such
transaction(s) and for the subsequent twelve (12) months; and (c) the chief executive officer and
chief financial officer of Tekmira immediately prior to such transaction(s) remain the chief
executive officer and chief financial officer of Tekmira or the surviving entity immediately after
such transaction(s) and for the subsequent twelve (12) months.
1.74 Person
means and includes any individual, corporation, partnership, firm, joint
venture, syndicate, association, trust, government body, and any other form of entity or
organization.
1.75 Phase I Study
means a clinical study of an Alnylam Royalty Product in human volunteers
or patients the purpose of which is preliminary determination of safety and tolerability of a
dosing regime and for which there are no primary endpoints (as understood by the FDA or other
Regulatory Authorities) in the protocol relating to efficacy.
1.76 Phase II Study
means (a) a dose exploration, dose response, duration of effect,
kinetics, dynamic relationship or preliminary efficacy and safety study of an Alnylam Royalty
Product in the target patient population or (b) a controlled dose-ranging clinical trial to
evaluate further the efficacy and safety of an Alnylam Royalty Product in the target patient
population and to define the optimal dosing regimen.
1.77 Phase III Study
means a controlled pivotal clinical study of an Alnylam Royalty Product
that is prospectively designed to demonstrate statistically whether such Alnylam Royalty Product is
effective and safe for use in a particular indication in a manner sufficient to obtain Regulatory
Approval to market such Alnylam Royalty Product.
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1.78 Pre-Existing Alnylam Alliance Agreements
means the agreements set forth in Schedule
1.78.
1.79 Product Trademarks
means the trademark(s), service mark(s), accompanying logos, trade
dress and/or indicia of origin used in connection with the distribution, marketing, promotion and
sale of Royalty Products in the Territory. For purposes of clarity, the term Product Trademark(s)
shall not include, without limitation, the corporate names and logos of either Party, and shall
include any internet domain names incorporating such Product Trademarks.
1.80
Quality Agreement
means an agreement or agreements to be entered into between the
Parties containing quality assurance provisions for the Manufacture by Tekmira, its permitted
Affiliates or their respective permitted subcontractors, for Alnylam, of the finished dosage form
of Alnylam Royalty Products pursuant to the Manufacturing Plan.
1.81 Regulatory Approval
means any and all approvals, licenses, registrations or
authorizations of any Regulatory Authority, necessary for the Commercialization of a Royalty
Product, including the approval of NDAs.
1.82 Regulatory Authority
means any applicable government regulatory authority involved in
granting approvals for the Research, Development, Manufacturing, Commercialization, reimbursement
and/or pricing of a Royalty Product in the Territory, including without limitation the FDA.
1.83 Related Party
means a Partys Affiliates and permitted Sublicensees, which term does
not include wholesale distributors of the Party or its Affiliates who purchase Royalty Products
from such Party or its Affiliates in an arms -length transaction and who have no other obligation,
including without limitation a reporting obligation, to such Party or its Affiliates.
1.84 Research
or
Researching
means identifying, evaluating, validating and optimizing RNAi
Products (and/or miRNA Products in the case of Alnylam).
1.85 Research Plan
means the detailed written plan of work for the Collaboration for a given
Contract Year of the Collaboration Term, as approved and updated by the Joint Research Committee as
necessary during the Collaboration Term pursuant to Sections 3.1.1 and 4.1.
1.86 Research Program Product
means the Formulations that are related to RNAi Product(s)
and/or miRNA Product(s) developed under the Research Plan under this Agreement and/or under the R&D
Research Plan (as defined in the Protiva License Agreement) for which Alnylam or its Affiliate has
established an Active Internal Development Program.
1.87 RNAi Product
means a product containing, comprised of or based on siRNAs or siRNA
derivatives or other double-stranded moieties effective in gene function modulation and designed to
modulate the function of particular genes or gene products by causing degradation through RNA
interference of a Target mRNA to which such siRNAs or siRNA derivatives or moieties are
complementary.
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1.88
Royalty Payor
means, in relation to (a) an Alnylam Royalty Product, Alnylam, and (b) a
Tekmira Royalty Product, Tekmira.
1.89 Royalty Product
means, either (a) an Alnylam Royalty Product, or (b) a Tekmira Royalty
Product.
1.90
Royalty Recipient
means, in relation to (a) an Alnylam Royalty Product, Tekmira, and
(b) a Tekmira Royalty Product, Alnylam.
1.91
Selection Term
means the period commencing on the Original Effective Date and
continuing for five (5) Contract Years of the Agreement Term thereafter, unless such period is
extended pursuant to the terms of Section 2.2.
1.92
Significant Pharmaceutical Company
means a pharmaceutical company, biotechnology
company, or group of such companies acting in concert, with annual sales of human pharmaceutical
products greater than [**].
1.93 Small Interfering RNA
or
siRNA
means a double-stranded ribonucleic acid (RNA)
composition designed to act primarily through an RNA interference mechanism that consists of either
(a) two separate oligomers of native or chemically modified RNA that are hybridized to one another
along a substantial portion of their lengths, or (b) a single oligomer of native or chemically
modified RNA that is hybridized to itself by self-complementary base-pairing along a substantial
portion of its length to form a hairpin.
1.94 Sublicensee
means a Third Party to whom a Party grants a sublicense permitted under
this Agreement under any Alnylam RNAi Technology, Alnylam IOC Technology, Alnylam Lipidoid Patent
Rights, Tekmira Technology, Tekmira IOC Technology (to the extent permitted for purposes of the
Collaboration only) or Collaboration IP (or a license in the case of Joint Collaboration IP), as
the case may be, to Research, Develop, Manufacture or Commercialize a Royalty Product in the
Territory and in (a) the Alnylam Field, in the case of Alnylam Royalty Products and Tekmira
Development Products or (b) the Tekmira IOC Field, in the case of Tekmira IOC Products, in each
case subject to Sections 6.1.1(b) or 6.2, or otherwise grants rights to distribute, promote or sell
a Royalty Product.
1.95
Supply Agreement
means that certain Manufacturing and Supply Agreement between the
Parties dated February 7, 2007.
1.96
Target
means: (a) a polypeptide or entity comprising a combination of at least one
polypeptide and other macromolecules, that is a site or potential site of therapeutic intervention
by a therapeutic agent; or a nucleic acid which is required for expression of such polypeptide; (b)
variants of a polypeptide, cellular entity or nucleic acid described in clause (a); (c) a defined
non-peptide entity, including a microorganism, virus, bacterium or single cell parasite;
provided
that the entire genome of a virus shall be regarded as a single Target; or (d) a
naturally occurring interfering RNA or miRNA or precursor thereof.
1.97
Target-Specific Claim
means a claim in an issued or pending patent that recites one or
more specified Particular Moiety(ies).
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1.98 Tax Convention
means the Canada-US Tax Convention (1980), as amended.
1.99 Tekmira
means Tekmira Pharmaceuticals Corporation.
1.100 Tekmira Collaboration IP
means (a) any improvement, invention, discovery, Know-How or
other Intellectual Property Right, patentable or otherwise, first identified, invented, discovered
or developed by employees of Tekmira or its Affiliates or other persons (other than Protiva) not
employed by Alnylam acting on behalf of Tekmira, in the performance of the Collaboration, the
Manufacturing Activities, and/or Tekmiras obligations under the Original INEX Agreements, and (b)
any Patent Rights in the Territory which claim, cover or relate to such improvements, discoveries
or Know-How. Tekmira Collaboration IP excludes Tekmiras interest in Joint Collaboration IP.
1.101 Tekmira In-License
means an agreement between Tekmira or its Affiliates, and a Third
Party, pursuant to which Tekmira or any of its Affiliates Control(s) Tekmira Technology relating to
the Alnylam Field under a license or sublicense from such Third Party, including without
limitation, the Existing Tekmira In-Licenses.
1.102 Tekmira IOC Field
means the treatment, prophylaxis and diagnosis of diseases in humans
using an IOC Product.
1.103 Tekmira IOC Technology
means (a) Know-How and other Intellectual Property Rights with
respect to IOC Products and/or IOCs that are either (i) Controlled by Tekmira or its Affiliates on
the Original Effective Date, or (ii) come within the Control of Tekmira or its Affiliates after the
Original Effective Date, and (b) Patent Rights that (i) claim (x) such Know-How or other
Intellectual Property Rights, or (y) the identification, characterization, optimization,
construction, expression, formulation, delivery, use or production of an IOC Product and/or IOC,
and that are useful or necessary to Research, Develop, Commercialize and/or Manufacture IOC
Products in the Tekmira IOC Field in the Territory, and (ii) are Controlled by Tekmira or its
Affiliates.
1.104 Tekmira Know-How
means Know-How with respect to an RNAi Product or miRNA Product
(excluding any Tekmira Collaboration IP, Tekmiras interest in Joint Collaboration IP and any such
Know-How sublicensed to Alnylam pursuant to the UBC Sublicense) that (a) is Controlled by Tekmira
or its Affiliates on the Original Effective Date, or (b) comes within the Control of Tekmira or its
Affiliates following the Original Effective Date.
1.105 Tekmira Patent Rights
means Patent Rights that (a) claim (i) Tekmira Know-How, or (ii)
the identification, characterization, optimization, construction, expression, formulation,
delivery, use or production of an RNAi Product or miRNA Product, and that are useful or necessary
to Research, Develop, Commercialize and/or Manufacture RNAi Products or miRNA Products in the
Alnylam Field in the Territory, and (b) are Controlled by Tekmira or its Affiliates at any time
during the Agreement Term(excluding any Patent Rights included in Tekmira Collaboration IP,
Tekmiras interest in Joint Collaboration IP and any such Patent Rights licensed to Alnylam
pursuant to the UBC Sublicense).
1.106
Tekmira Royalty Product
means any (a) Tekmira Development Product that, but for the
licenses granted hereunder, would be Covered by one or more Valid Claims under the Alnylam Core
Patent Rights or the Alnylam Lipidoid Patent Rights, or (b) IOC Product that but for the licenses
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granted hereunder, would be Covered by one or more Valid Claims under the Alnylam IOC
Technology.
1.107 Tekmira Technology
means, collectively, Tekmira Know-How and Tekmira Patent Rights.
1.108 Tekmira-UBC License Agreement
means that certain license agreement between Tekmira and
the University of British Columbia (
UBC
) dated effective July 1, 1998, as amended by
Amendment Agreement between Tekmira and UBC dated effective July 11, 2006, and Second Amendment
Agreement dated effective the Original Effective Date.
1.109 Territory
means all of the countries in the world, and their territories and
possessions.
1.110 Third Party
means an entity other than a Party and its Affiliates.
1.111
Third Party Liposome Patent Rights
means with respect to an Alnylam Royalty Product,
(a) the Alnylam Lipidoid Patent Rights and/or (b) other technology comprising a lipid component or
liposomal formulation useful or necessary for the Research, Development, Manufacture or
Commercialization of such Alnylam Royalty Product and Controlled by Alnylam under a license from a
Third Party, and in each case with respect to which Intellectual Property Rights Alnylam has
granted to Tekmira a non-exclusive, royalty- and milestone fee-bearing (on a pass-through basis)
license to Research, Develop, Manufacture and Commercialize Tekmira Royalty Products in the Alnylam
Field in the case of Tekmira Development Product, and in the Tekmira IOC Field in the case of IOC
Products.
1.112 Transaction Documents
means the Alnylam Subscription Agreement, the Supply Agreement,
the Quality Agreements, the Tekmira-UBC License Agreement, the UBC Sublicense Documents, the Loan
Agreement, all letter agreements and other documents executed by the Parties on or about the
Original Effective Date in connection with the Original Agreement, and any other documents or
agreements that are executed by the Parties after the Original Effective Date as contemplated by
this Agreement.
1.113 UBC Sublicense Documents
means the collective reference to (a) the Sublicense
Agreement dated as of the Original Effective Date between the Parties (the
UBC
Sublicense
), (b) the Consent and Agreement dated as of the Original Effective Date among the
Parties and UBC, and (c) the Assignment dated the Original Effective Date between Tekmira and UBC.
1.114
Valid Claim
means a claim of: (a) an issued and unexpired Patent Right, which claim
has not been revoked or held unenforceable, unpatentable or invalid by a decision of a court or
other governmental agency of competent jurisdiction that is not appealable or has not been appealed
within the time allowed for appeal, and which has not been abandoned, disclaimed, denied or
admitted to be invalid or unenforceable through reissue, re-examination or disclaimer or otherwise,
or (b) a patent application for a patent included within the Patent Rights a claim of which has
been pending less than five (5) years and which claim has not been cancelled, withdrawn or
abandoned or finally rejected by an administrative agency action from which no appeal can be taken.
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1.115 Additional Definitions.
The following terms have the meanings set forth in the
corresponding Sections of this Agreement:
|
|
|
Term
|
|
Section
|
AAA
|
|
12.6.1
|
Agreement Term
|
|
11.1
|
Alnylam Class 1 Royalty Products
|
|
6.1.1(b)(i)
|
Alnylam Class 2 Royalty Products
|
|
6.1.1(b)(ii)
|
Alnylam Data
|
|
3.2(e)
|
Alnylam Indemnitees
|
|
9.5.1
|
Alnylam Subscription Agreement
|
|
Recitals
|
Bankrupt Party
|
|
11.3
|
Breaching Party
|
|
11.2.1(a)
|
Code
|
|
11.3
|
Collaboration
|
|
3.1.1
|
Condition Satisfaction Date
|
|
11.1
|
Closing
|
|
Recitals
|
CRT Agreement
|
|
6.5.1
|
Dispute
|
|
12.6.1
|
Effective Date
|
|
11.1
|
Equipment
|
|
3.4
|
Escrow Agreement
|
|
Recitals
|
Excluded Claim
|
|
12.6.1
|
Follow-On Product
|
|
7.2(d)
|
FTO Notice
|
|
6.9(a)
|
Indemnitee
|
|
9.5.3
|
INEX
|
|
Preamble
|
Infringement Claim
|
|
10.4.1
|
Losses
|
|
9.5.1
|
Manufacturing Activities Committee
|
|
4.1
|
[**] Entities
|
|
Recitals
|
[**] Restriction
|
|
6.2.3
|
[**]
|
|
Recitals
|
miRNA
|
|
Preamble
|
More Favorable Terms
|
|
6.9(a)(ii)
|
Non-Bankrupt Party
|
|
11.3
|
Non-Breaching Party
|
|
11.2.1(a)
|
Novartis
|
|
1.68
|
Opportunity Response Period
|
|
6.9(b)(i)
|
Original Agreement
|
|
Recitals
|
Original Effective Date
|
|
Recitals
|
Original Protiva License Agreement
|
|
Recitals
|
Permitted Investor
|
|
12.17.1(c)
|
Platform License
|
|
6.9(a)
|
Post-IND Opportunity Response Period
|
|
6.9(b)(i)
|
Product Notice
|
|
6.9(b)
|
Project Manager
|
|
4.1
|
Confidential
18
|
|
|
Term
|
|
Section
|
Prosecuting Party
|
|
10.2.4(e)
|
Protiva
|
|
Recitals
|
Protiva License Agreement
|
|
Recitals
|
Purchase Agreement
|
|
Recitals
|
Region
|
|
11.2.2
|
Responsible Party
|
|
10.4.3
|
Restricted Joint Invention
|
|
3.7.4
|
Restriction Period
|
|
3.7.1
|
RNAi
|
|
Preamble
|
Roche
|
|
Recitals
|
Roche-Nutley
|
|
6.2.2(c)
|
Roche Sublicensees
|
|
6.2.2(c)
|
Roche Subscription Agreement
|
|
Recitals
|
Shares
|
|
7.1
|
SPC
|
|
10.7
|
Stanford Agreement
|
|
6.5.1
|
Successful Product
|
|
7.2(d)
|
Target Response Notice
|
|
2.2
|
Tekmira Development Product
|
|
2.1
|
Tekmira Development Target
|
|
2.1
|
Tekmira Facilities Option
|
|
3.7.2
|
Tekmira Indemnitees
|
|
9.5.2
|
Tekmira In-License Provisions
|
|
6.4(a)
|
Tekmira IOC Product
|
|
6.9(b)(i)
|
Tekmira Patent
|
|
11.5(a)
|
UBC
|
|
1.108
|
UBC Sublicense
|
|
1.113
|
2.
TEKMIRA DEVELOPMENT TARGETS
.
2.1
Tekmira Development Targets
. During the Selection Term, and subject to the terms
and conditions of this Agreement and Alnylams right to grant rights thereto at the time of
selection, Tekmira may select up to three (3) Targets with respect to which Tekmira shall Research,
Develop, Manufacture and Commercialize RNAi Products directed to such Target under its license to
the Alnylam Core Patent Rights and Alnylam Lipidoid Patent Rights pursuant to Section 6.1.2(a)
(each such Target, a
Tekmira Development Target
, and each such RNAi Product, a
Tekmira Development Product
). For clarity, the Parties acknowledge that the three (3)
Tekmira Development Targets shall be in addition to the PLK Target and the three Protiva
Development Targets that are among the subjects of the Protiva License Agreement. The Parties
acknowledge that the selection of each Tekmira Development Target is subject to Novartis right of
first offer under the Novartis Agreement and to other Alnylam obligations to Third Parties.
2.2
Selection Process
. The following process shall apply to the selection of Tekmira
Development Targets. Tekmira shall initially notify Alnylam in writing of the NCBI Gene ID number
(or, if a NCBI Gene ID number is not available, the specific sequence of the proposed Target) of
each Target nominated by Tekmira for selection as a Tekmira Development Target. Prior to
nominating a Target to Alnylam, Tekmira shall possess bona fide data regarding the validation of
such Target for
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19
potential therapeutic modulation by siRNAs. Within [**] following Alnylams receipt of a
notice nominating a Target, Alnylam shall notify Tekmira in writing (a
Target Response
Notice
) whether such Target is either: (a) subject to a contractual obligation to a Third
Party that would be breached by the inclusion of such Target as a Tekmira Development Target under
this Agreement, or (b) determined by Alnylam after its review in good faith of its ongoing or
planned scientific and/or business activities and strategy to be a Target of interest to Alnylam.
If neither of these criteria apply, the Target shall be considered to have been successfully
nominated as a Tekmira Development Target. Alnylam shall use Commercially Reasonable Efforts
consistent with the terms of the Novartis Agreement to obtain Novartis consent to the selection by
Tekmira of such Target as a Tekmira Development Target under this Agreement, and shall notify
Tekmira in writing as to whether or not such Target is available for license hereunder. If a
Target submitted to Alnylam is not so available for license as a Tekmira Development Target, then
Tekmira may nominate an additional Target as a Tekmira Development Target, until an aggregate of
three (3) Tekmira Development Targets have been identified and approved for selection pursuant to
the foregoing procedure;
provided
, that Tekmira may not submit more than three (3) proposed
Targets (in addition to any Protiva Development Targets or candidate Protiva Development Targets
submitted under the Protiva License Agreement) to Alnylam for evaluation pursuant to the foregoing
procedure in any single Calendar Quarter. Any Target approved for selection pursuant to the
foregoing procedure shall be a Tekmira Development Target. If upon the expiration of the Selection
Term all three (3) Tekmira Development Targets have not been approved for selection pursuant to the
foregoing procedure, then the Selection Term shall be extended until the earlier of (i) the date on
which an aggregate of three (3) Tekmira Development Targets have been so identified and approved
for selection and (ii) the [**] anniversary of the Original Effective Date. For clarity,
notwithstanding the number of Targets evaluated by Alnylam for availability for selection as a
Tekmira Development Target, Tekmira shall not be entitled to more than three (3) Tekmira
Development Targets.
3. COLLABORATION
3.1
Collaboration
.
3.1.1 Collaboration and Research Plan
. During the Collaboration Term Alnylam and Tekmira shall
use Commercially Reasonable Efforts to collaborate in the research, development and process (and
analytical methods) development of liposomal formulations of RNAi Products, miRNA Products and IOC
Products, as specifically set forth in the Research Plan (such activities, are referred to as the
Collaboration
). The JRC has agreed upon a detailed Research Plan for the Collaboration
for the full twelve-months of the first Contract Year of the Collaboration Term. Attached to this
Agreement as Schedule 3.1 is an updated Research Plan for the second Contract Year of the
Collaboration Term, which Research Plan shall be updated quarterly by the JRC during the remainder
of the Collaboration Term. The Parties shall update, and the JRC shall approve in accordance with
Section 4.1, updates to the Research Plan for each Contract Year thereafter (if any) during the
Collaboration Term.
3.1.2 FTEs and Collaboration Funding
. Tekmira agrees to provide up to [**] FTEs in each
Contract Year of the Collaboration Term to perform its obligations under the Collaboration as
provided in the Research Plan. The use of additional FTEs will be subject to approval by the JRC.
Alnylam shall fund the Collaboration in accordance with Section 7.5.1.
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20
3.2
Information Exchange
. Subject to and in accordance with the provisions of
Article 6, as set forth below:
(a) Within three (3) months after the Effective Date and on an ongoing basis during the
Agreement Term Tekmira shall disclose to Alnylam all Tekmira Technology that is Controlled by
Tekmira or its Affiliates as of the Original Effective Date and/or during the Agreement Term, and
all Collaboration IP that, in each case, has not been previously disclosed, and shall update such
disclosure at least once each Calendar Quarter;
(b) During the Collaboration Term, through the JRC, Tekmira shall disclose to Alnylam Tekmira
IOC Technology Controlled by Tekmira on the Original Effective Date and/or during the Collaboration
Term, as and to the extent Tekmira determines, in its reasonable judgment, that such Tekmira IOC
Technology is necessary or useful for Alnylams performance of its obligations under the
Collaboration with respect to IOC Products;
(c) During the Collaboration Term, through the JRC, Alnylam shall disclose to Tekmira (i) all
Alnylam IOC Technology, Alnylam Collaboration IP and Joint Collaboration IP that, in each case, has
not been previously disclosed, and shall update such disclosure at least once each Calendar Quarter
with regard to Alnylam Collaboration IP and Joint Collaboration IP;
(d) During the Collaboration Term, through the JRC, Alnylam shall disclose to Tekmira Alnylam
RNAi Technology as and to the extent Alnylam determines, in its reasonable judgment, that such
Alnylam RNAi Technology is necessary or useful for Tekmiras performance of its obligations under
the Collaboration and Manufacturing Activities with respect to Alnylam Royalty Products;
(e) Promptly after the Effective Date and on an ongoing and timely basis thereafter during the
Research Term, Alnylam shall (unless otherwise requested by Tekmira in any instance or instances)
disclose to Tekmira data generated by Alnylam using any of the materials or chemical compounds
provided by Tekmira to Alnylam for use in furtherance of the conduct of the Collaboration
(
Alnylam Data
); and
(f) Each Party shall make available its employees, consultants and subcontractors engaged in
the performance of its obligations under the Collaboration and/or the Manufacturing Activities upon
reasonable notice during normal business hours to consult with the other Party with respect to the
Collaboration and/or the Manufacturing Activities, as coordinated through the Project Managers or
such other individual of a Party as may be designated by such Party and consistent with the
resource requirements specified in the Research Plan and/or the Manufacturing Plan.
3.3
Alnylam Materials for Collaboration
.
Unless the Parties otherwise agree in
writing, Tekmira will supply, in accordance with the relevant approved raw material specifications,
all materials to be used by Tekmira in the performance of its obligations under the Collaboration
other than the Alnylam Materials listed in the Research Plan. Alnylam or its designees will
provide Tekmira with the Alnylam Materials listed in the Research Plan. Except as explicitly
authorized in writing by Alnylam, all Alnylam Materials delivered to Tekmira shall remain the sole
property of Alnylam. Tekmira agrees (a) to account for all Alnylam Materials, (b) not to provide
Alnylam Materials to any Third Party (other than to subcontractors of Tekmira permitted under
Section 3.5) without the express prior written consent of Alnylam, (c) not to use Alnylam Materials
for any
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21
purpose other than performing its obligations under the Collaboration, including, without
limitation, not to analyze, characterize, modify or reverse engineer any Alnylam Materials or take
any action to determine the structure or composition of any Alnylam Materials unless required to
perform its obligations under the Collaboration, and (d) to destroy or return to Alnylam all unused
quantities of Alnylam Materials according to Alnylams written directions. The Alnylam Materials
supplied for use in the Collaboration must be used with prudence and appropriate caution in any
experimental work, since not all their characteristics may be known;
however
, Alnylam shall
notify Tekmira of any health hazards of which it is or becomes aware relating to the use or
handling of the Alnylam Materials.
3.4
Alnylam Equipment for Collaboration
. Unless otherwise agreed by the Parties in
writing, Tekmira will supply all equipment and machinery necessary to perform its obligations under
the Collaboration (
Equipment
). If Alnylam or its designees provide Tekmira with
Equipment, (a) such Equipment will not be used by Tekmira except in performance of its obligations
under the Collaboration under this Agreement, (b) title to such Equipment will remain with Alnylam,
(c) Tekmira will ensure that such Equipment is properly labeled as Alnylam property and remains
free and clear of any liens or encumbrances, (d) Tekmira will install the Equipment in a manner
which will permit its removal without material injury to the place of installation and (e) the
Equipment shall be installed at Tekmiras or Protivas facility located in British Columbia,
Canada, and shall be maintained and used at such and not elsewhere without the prior written
consent of Alnylam. At Alnylams written request, such Equipment will be returned to Alnylam, or
to Alnylams designee. Tekmira will be responsible, at its own cost, for maintenance of such
Equipment;
provided
,
however
, that Alnylam shall be responsible for: (i) ensuring
all Equipment provided by Alnylam is in good working order at the time of delivery to Tekmira, and
(ii) unless otherwise agreed by the Parties, performing equipment qualification and calibration
prior to either Partys use of such Equipment at Tekmiras premises. Tekmira shall not be required
to purchase spare parts for the Equipment. To the extent Alnylam provides spare parts for such
Equipment, such spare parts will remain the property of Alnylam and will be used by Tekmira only
for maintenance of such Equipment. Tekmira will immediately notify Alnylam if at any time it
believes any such Equipment has been damaged, lost or stolen.
3.5
Subcontractors and Third Party Research Collaborations
. (a) Tekmira may utilize
the services of Affiliates or Third Party contractors to perform its obligations under the
Collaboration only as specified in the Research Plan or with the prior written approval of the JRC;
provided
that (i) prior to the expiration of the Restriction Period, Tekmira may not, under
any circumstances, subcontract any aspect of its obligations under the Research Plan or the
Collaboration to Protiva without Alnylams prior written consent, which consent shall not be
unreasonably withheld or delayed; (ii) Tekmira shall remain at all times fully liable for its
responsibilities under this Agreement; and (iii) Tekmiras agreement with any permitted
subcontractor provides Alnylam the same rights under this Agreement as if Tekmira had done the work
itself, and any such agreement shall include confidentiality and non-use provisions which are no
less stringent than those set forth in Article 8 of this Agreement.
(b) In addition, the Parties agree that it may be necessary or useful to enter into Third
Party collaborations which provide technology, information, data or know-how, patentable or
otherwise, which are necessary or useful for Tekmira and/or Alnylam to perform its obligations
under the Collaboration. Such Third Party collaborations shall not conflict with the terms and
conditions of this Agreement. In the event that any such Third Party collaborations are
contemplated in connection with
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22
the Collaboration, the JRC shall discuss, subject to Third Party confidentiality obligations, and
agree upon entering into such Third Party collaborations, and the Research Plan shall be amended to
include such Third Party collaborations. The Parties shall use good faith efforts to ensure that,
to the extent possible, all such Third Party collaborations shall provide that any and all data and
results, discoveries and inventions, whether patentable or not, arising out of the Third Party
collaboration may be used by bona fide collaborators of the Party entering into the Third Party
collaboration agreement and shall include confidentiality and non-use provisions which are no less
stringent than those set forth in Article 8 of this Agreement. In addition, the Party entering
into such Third Party collaborations shall use Commercially Reasonable Efforts to obtain a right to
sublicense to the other Party and its Related Parties any Intellectual Property Rights arising out
of the Third Party collaboration.
3.6
Records
. Each Party shall maintain scientific records, in sufficient detail and
in good scientific manner appropriate for patent and regulatory purposes, which shall fully and
properly reflect all work done and results achieved in the performance of the Collaboration.
Alnylam shall have the right, during normal business hours and upon reasonable notice, to inspect
and copy (or request Tekmira to copy) all records of Tekmira maintained in connection with the work
done and results achieved in the performance of the Collaboration to the extent such records relate
to Alnylam Royalty Products. Tekmira shall have the right, during normal business hours and upon
reasonable notice, to inspect and copy (or request Alnylam to copy) all records of Alnylam
maintained in connection with the work done and results achieved in the performance of the
Collaboration to the extent such records relate to IOC Products. All such records and the
information disclosed therein shall be maintained in confidence in accordance with Article 8.
3.7
Separate Conduct of Certain Activities by Tekmira and Protiva
.
3.7.1
Separate Conduct
. Immediately upon the effective date of the Purchase Agreement
and through [**] (the
Restriction Period
), Tekmira has taken and will take all steps
necessary to ensure, to the maximum extent practicable, that there was and is no collaboration
between, or joint inventive work conducted by, Tekmira and Protiva under the Research Plan or the
Manufacturing Plan, or under the Second Target Research Plan, the PLK Research Plan or the R&D
Research Plan (as each such term is defined in the Protiva License Agreement), or any activities
contemplated thereunder, [**]. Such steps shall include, without limitation, the requirement that
during the Restriction Period, Tekmira has maintained and shall maintain research and manufacturing
operations that are separate from the research and manufacturing operations of Protiva for all
activities under the Research Plan, the Manufacturing Plan, the Second Target Research Plan, the
PLK Research Plan and the R&D Research Plan (as each such term is defined in the Protiva License
Agreement), and has ensured and shall ensure that the Tekmira personnel who work on the Research
Plan or the Manufacturing Plan did not and do not undertake research or Manufacturing activities
with or for Protiva under the Second Target Research Plan, the PLK Research Plan or the R&D
Research Plan.
3.7.2
Common Management; Tekmira Facilities Option
. Notwithstanding the requirements
of Section 3.7.1, during the Restriction Period (a) Tekmira and Protiva may (i) have common
management in the form of one person who serves as CEO of both companies, (ii) have interlocking
boards of directors, and (iii) share with each other or loan to each other specific items of
equipment and/or other tangible and intangible assets (but not human resources, other than
administrative personnel not involved in Research, Development or Manufacturing activities); and
(b) Protiva may use Tekmiras physical facilities solely to Manufacture (i) at Alnylams sole
discretion, a
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23
product formulation developed by Protiva for Alnylam under the Protiva License Agreement; or
(ii) upon mutual written agreement of Alnylam, Tekmira and Protiva, an RNAi Product directed to the
PLK Target (as such terms are defined under the Protiva License Agreement) (
Tekmira Facilities
Option
).
3.7.3
Notification
. During the period from the Effective Date through [**], Tekmira
shall notify Alnylam in writing within thirty (30) days after conception of any intellectual
property conceived by Tekmira or Protiva (or their employees or consultants) prior to [**], with
respect to which Alnylam has or should have a license under this Agreement, the UBC Sublicense or
the Protiva License Agreement, it being understood that such notice as to the period from the end
of the Restriction Period through [**] will be for informational purposes only.
3.7.4
Violations, Penalties
. In the event that any joint invention is made (i) by
inventor(s) who are employees or consultants of Tekmira and inventor(s) who are employees or
consultants of Protiva during the Restriction Period, (ii) due to or in respect of the conduct of
Protiva and/or Tekmira during the Restriction Period and (iii) without any inventive contribution
from Alnylam or communication by or through Alnylam of any information or materials from Protiva or
Tekmira to the other in a manner that is material to the determination of inventorship (any such
joint invention is hereinafter referred to as a
Restricted Joint Invention
), with the
result that any rights to such Restricted Joint Invention are licensed to [**] (or would have been
so licensed to [**] as they existed on the Effective Date), then, except and solely to the extent
that any such Restricted Joint Invention arises from Manufacturing performed by Protiva at a
Tekmira facility as a result of the exercise of the Tekmira Facilities Option:
(a) Tekmira shall cause Protiva to pay to Alnylam any and all royalties and milestone
payments received from [**] with respect to the development or commercialization of any
product as to which the [**] owed such royalties or milestones due to the Coverage of such
product by any claims (whether issued or pending) Covering such Restricted Joint Invention
(or that would have been so received from [**] under the terms of the [**] as they existed
on the Effective Date);
(b) Alnylam shall have a fully-paid, perpetual, milestone-free, royalty-free, and exclusive
(except as to the Merck Entities rights under the [**]) license to Tekmiras right, title
and interest in the Restricted Joint Invention;
(c) Alnylam shall have the unilateral right, exercisable at any time upon written notice to
Tekmira, to terminate Alnylams obligation to retain Tekmira as Alnylams exclusive
manufacturer pursuant to Section 5.1 and the Supply Agreement; and
(d) any and all royalties required to be paid by Alnylam to Tekmira under this Agreement
with respect to Alnylam Royalty Products Covered by the Exclusively Licensed Tekmira IP
shall be reduced by [**].
4. JOINT RESEARCH COMMITTEE
.
4.1
Joint Research Committee and Project Managers
. As soon as practicable after the
Original Effective Date the Parties established a Joint Research Committee with authority to
approve the initial Research Plan, review for approval the annual update to such Research Plan,
coordinate the
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24
conduct of activities under the Collaboration, and the Manufacturing Activities, approve the
initial Manufacturing Plan, review for approval the quarterly update to such Manufacturing Plan,
coordinate the conduct of activities under the Manufacturing Plan, and generally facilitate
communication between the Parties. The JRC shall consist of two (2) representatives of each Party,
together with such other personnel of a Party as such Party deems reasonably necessary to
accomplish the objectives of this Agreement. Each Party shall also designate a
Project
Manager
. The Project Managers will be responsible for the day-to-day coordination of the
Collaboration and the Manufacturing Activities, and will serve to facilitate communication between
the Parties. Each Party may change its designated Project Manager from time to time upon written
notice to the other Party. The JRC shall be empowered to create subcommittees of itself, including
without limitation, a committee to oversee Manufacturing Activities (the
Manufacturing
Activities Committee
), as it may deem appropriate or necessary. The Manufacturing Activities
Committee shall consist of representatives of the Parties manufacturing and quality assurance
departments. Each such subcommittee shall report to the JRC, which shall have the authority to
approve or reject recommendations or actions proposed thereby subject to the terms of this Article
4.
4.2
Meetings
. The JRC shall meet in accordance with schedules established by mutual
written agreement of the Parties, but no less frequently than once per Contract Quarter during the
Collaboration Term, with the location for such meetings alternating between Alnylam and Tekmira
facilities (or such other locations as are determined by the JRC). Alternatively, the JRC may meet
by means of teleconference, videoconference or other similar communications equipment, but at least
two (2) meetings per Calendar Year shall be conducted in person. Each Party shall bear its own
expenses relating to attendance at such meetings by its representatives. With respect to decisions
of the JRC, the representatives of each Party shall have collectively one vote on behalf of such
Party. For each meeting of the JRC, at least one (1) representative of each Party shall constitute
a quorum. Action on any matter may be taken at a meeting, by teleconference, videoconference or by
written agreement.
4.3
Minutes
. A secretary shall be appointed for each meeting and shall prepare minutes
of the meeting, which shall provide a written description in reasonable detail of the discussions
held at the meeting and a list of any actions, decisions or determinations approved by the JRC.
4.4
Disputes
. The JRC shall attempt to resolve any and all disputes relating to this
Agreement by consensus;
provided,
that the Manufacturing Activities Committee (if it exists
at the relevant time) shall first attempt to resolve any and all disputes relating to the
Manufacturing Activities (if necessary or appropriate, by reference to the Supply Agreement and the
applicable Quality Agreement, including without limitation, the batch evaluation, acceptance and
rejection procedures and standards set forth therein), and failing resolution by the Manufacturing
Activities Committee, the JRC shall attempt to resolve such dispute. If the JRC is unable to reach
a consensus with respect to a dispute, then the dispute shall be submitted to escalating levels of
Tekmira and Alnylam senior management for review. If such dispute cannot be resolved despite
escalation, then the Chief Executive Officers of Alnylam and Tekmira shall attempt to resolve such
dispute. In the event that the Chief Executive Officers cannot reach an agreement regarding such
dispute within thirty (30) days after submission to them for resolution, then:
(a) If the dispute is one over which the JRC has authority pursuant to Section 4.1, then
Alnylam shall have final decision-making authority;
provided
,
however
, that Alnylam
may not, without Tekmiras consent, increase Tekmiras obligation during the Collaboration Term to
provide
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25
FTEs to perform its obligations under the Collaboration in excess of [**] FTEs per Contract
Year of the Collaboration Term; and
(b) With respect to all other disputes between the Parties, the dispute resolution provisions
of Section 12.6 shall apply.
Notwithstanding the foregoing, if the dispute between the Parties is over the reasonable
comparability of the factors described in Section 5.1(a)(ii) and the Manufacturing Activities
Committee cannot agree within five (5) Business Days after submission of the bona fide Third Party
quote to the Manufacturing Activities Committee, then the Parties shall not refer the matter to the
JRC but rather to an independent Third Party manufacturing consultant reasonably acceptable to the
Parties and the Parties shall cause such independent Third Party to render his/her decision as soon
as possible but no later than fifteen (15) Business Days after submission, which decision shall be
binding on the Parties.
5. MANUFACTURING
5.1
Manufacturing and Supply
.
(a)
Exclusive Manufacturing Obligations
. Alnylam hereby retains Tekmira, on a
product-by-product basis, as Alnylams exclusive manufacturer to Manufacture and supply Alnylams
requirements of the bulk finished dosage form of each Alnylam Royalty Product formulated using
Tekmira Technology, and/or Alnylam Technology, including, without limitation, the Third Party
Liposome Patent Rights, in each case for toxicology and other non-clinical studies and clinical
development, through the completion of all Phase II Studies of such Alnylam Royalty Product that
are initiated prior to the initiation of the first Phase III Study of such Alnylam Royalty Product;
provided
, however, that such exclusive supply engagement shall only apply during the
Manufacturing Term and shall not apply to any Alnylam Royalty Product (on a product-by-product
basis):
(i) that Tekmira cannot or will not Manufacture and supply (or is not or will not be able to
Manufacture and supply), to Alnylams reasonable satisfaction, (x) at the requisite scale, in
sufficient quantities, within requisite timelines based on Alnylams actual and/or planned
development program for such Alnylam Royalty Product and in accordance with the applicable product
master batch record, specifications and other quality requirements for such Alnylam Royalty Product
as set forth in the Supply Agreement and the applicable Quality Agreement, (y) in accordance with
all applicable laws and regulations, including without limitation the requirements of cGMP, and (z)
using a facility with respect to which Tekmira or its permitted subcontractor has obtained approval
from the applicable Regulatory Authorities to Manufacture and supply such Alnylam Royalty Product;
or
(ii) with respect to which Alnylam would be required to pay Tekmira an amount per batch of the
bulk finished dosage form of such Alnylam Royalty Product that is [**] greater than the cost per
batch for the Manufacture of such finished dosage form as quoted in a bona fide offer received by
Alnylam from a Third Party;
provided
, that the specifications for such finished dosage
form, and the batch size, quantity, and quality of product would be at least reasonably comparable.
In the event that Alnylam would be entitled under this clause (ii) to obtain its requirements of
the finished dosage form of an Alnylam Royalty Product from a Third Party, then prior to Alnylam
engaging such Third Party for such services Tekmira may submit a revised per batch price quote for
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26
such finished dosage form and if Tekmiras revised per batch price quote is [**] Third Partys
quote, Alnylam shall continue to obtain its supply of such finished dosage form from Tekmira in
accordance with this Article 5.
Moreover, Alnylam may obtain supply of the bulk finished dosage form of any Alnylam Royalty Product
from a Third Party in such amounts as may be required in order to qualify and maintain such Third
Party as a backup supplier as part of Alnylams prudent supply chain management policies;
provided, however, that so long as Tekmira is able to comply with the requirements set forth in
this Section 5.1(a), Tekmira shall continue to be Alnylams primary supplier. For purposes of
determining whether Tekmira is able to comply with the requirements of this Section 5.1(a), the
capabilities of Tekmira and its wholly-owned subsidiary Protiva, acting either together or
separately, shall be taken into account, and Protiva acting separately will not be considered
unable to comply with such requirements solely due to any refusal of Alnylam to approve
subcontracting to Protiva pursuant to Section 5.3(b), whether or not such refusal is reasonable.
(b)
Alternate Supplier
. Tekmira shall, upon Alnylams written request provided to
Tekmira at any time after (i) the Effective Date, identify and reasonably verify the suitability of
a Third Party as a backup supplier of Alnylam Royalty Products as soon as reasonably possible
and/or (ii) [**], establish and qualify a Third Party as a backup supplier of Alnylam Royalty
Products as soon a reasonably possible, but in no event more than twelve (12) months after receipt
of such request;
provided
,
however
, that the JRC may agree to extend such time
periods. Alnylam shall have the right to propose such backup supplier(s) and Tekmira shall have
the right to consent to such backup supplier(s), which consent shall not be unreasonably withheld
or delayed. Within thirty (30) days after the Effective Date Tekmira will deliver to the JRC, for
review and approval, an update to the Manufacturing Plan containing a project overview for
establishing and qualifying a backup supplier. This project overview will include contract
manufacturing organization targets, timelines, equipment requirements, and both FTE and
out-of-pocket expense estimates. The qualification of a backup supplier is not intended in any
way to alter Tekmiras rights to Manufacture Alnylam Royalty Products under this Agreement. All
internal FTE costs and extraordinary out-of-pocket expenses actually incurred by Tekmira in, and
reasonably required, to qualify a backup supplier as set forth in this Section 5.1(b) shall be
reimbursed by Alnylam (in the case of FTE costs, at the applicable FTE Rate and not to exceed the
project overview estimate without the prior approval of the JRC). Tekmira acknowledges and agrees
that the FTE Rate reflects Tekmiras fully-loaded costs and expenses in performing its obligations
under the project overview portion of the Manufacturing Plan, and that Tekmira is solely
responsible for its costs and expenses in performing its obligations thereunder. However, Alnylam
agrees to reimburse Tekmira for any extraordinary out-of pocket costs and expenses incurred by
Tekmira in performing its obligations under this Section 5.1(b) to the extent that such out-of
pocket costs and expenses are approved by the JRC in advance in writing and are reasonable,
documented costs and expenses actually and directly incurred by Tekmira.
5.2
Manufacturing Funding
. Alnylam shall pay Tekmira for the supply of bulk finished
dosage form of Alnylam Royalty Products in accordance with Section 7.5.2.
5.3
Supply Agreement; Subcontracting Restriction; Phase III and Commercial Supply
.
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(a) The Parties have entered into the Supply Agreement effective the Original Effective Date.
The Parties hereby amend the terms of the Supply Agreement by: (i) replacing each reference to
Initial Collaboration Term in Section 8.1(b) of the Supply Agreement with Collaboration Term
and (ii) replacing the reference to Section 5.1(a) or (b) in Section 14.2 of the Supply Agreement
with Section 5.1(a)(i) or (ii).
(b) Notwithstanding anything in this Agreement or in the Supply Agreement to the contrary,
prior to December 31, 2008, Tekmira may not, under any circumstances, subcontract any aspect of its
obligations under the Manufacturing Plan, the Manufacturing Activities or the Supply Agreement to
Protiva without Alnylams prior written consent, which consent shall not be unreasonably withheld
or delayed.
(c) The Parties agree to discuss in good faith from time to time Tekmiras Manufacture and
supply of Alnylams requirements of the bulk finished dosage form of Alnylam Royalty Products for
Phase III Studies and commercial sale, however, nothing in this Agreement or the Supply Agreement
shall be deemed to be a binding obligation of either Party to enter into such a transaction.
5.4
Technology Transfer
. If Alnylam elects to Manufacture the finished dosage form of
an Alnylam Royalty Product, or to have such finished dosage form Manufactured by a Third Party, in
each case as permitted under this Agreement, including without limitation Sections 5.1 above and
Sections 11.2.2, 11.4 and 11.6, then Tekmira will provide to Alnylam or its designee, all
Manufacturing information, including, without limitation, documentation, technical assistance, and
any materials or equipment owned by Alnylam, and cooperation by appropriate employees of Tekmira as
Alnylam or its designee may reasonably require in order to Manufacture such finished dosage form.
Alnylam will compensate Tekmira for such assistance at the FTE Rate, except in the case of a
material breach by Tekmira of this Agreement, the Supply Agreement or a Quality Agreement by
Tekmira in which event Tekmira shall provide such assistance free of charge for an appropriate and
reasonable period of time.
6. LICENSES
6.1
License Grants
.
6.1.1
Alnylam Royalty Products.
(a)
Exclusive Alnylam Royalty Product License.
Subject to the terms and conditions of this
Agreement, Tekmira hereby grants to Alnylam an exclusive, royalty-bearing license under and to use
the Exclusively Licensed Tekmira IP to Research, Develop, Manufacture and Commercialize Alnylam
Royalty Products in the Alnylam Field and in and for the Territory. Such license includes the
right to grant sublicenses as provided in Section 6.2 below.
(b)
Non-Exclusive Alnylam Royalty Product Licenses.
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(i)
Class 1 Non-Exclusively Licensed Tekmira IP
. Tekmira grants to Alnylam a
non-exclusive, royalty-bearing license under and to use Class 1 Non-Exclusively Licensed Tekmira IP
to Research, Develop, Manufacture and Commercialize Alnylam Royalty Products in the Alnylam Field
and in and for the Territory (
Alnylam Class 1 Royalty Products
). Such license includes
the right to grant sublicenses as provided in Section 6.2 below.
(ii)
Class 2 Non-Exclusively Licensed Tekmira IP
. Tekmira grants to Alnylam a
non-exclusive, royalty-bearing license under and to use Class 2 Non-Exclusively Licensed Tekmira IP
to Research, Develop, Manufacture and Commercialize Alnylam Royalty Products for any Alnylam Target
in the Alnylam Field and in and for the Territory (
Alnylam Class 2 Royalty Products
).
Such license includes the right to grant sublicenses as provided in Section 6.2 below.
(c)
Collaboration and Manufacturing Activity License.
Subject to the terms and conditions of
this Agreement, Alnylam hereby grants Tekmira a non-exclusive, royalty-free license under (i)
Alnylam RNAi Technology and Alnylam Collaboration IP and (ii) Alnylams rights in Tekmira
Technology, and Tekmira Collaboration IP, in each case as permitted and solely for the purposes of
performing (x) Tekmiras obligations under the Collaboration with respect to Alnylam Royalty
Products in accordance with the Research Plan as set forth in Article 3, and (y) the Manufacturing
Activities. Such license does not include the right to grant sublicenses except to subcontractors
of Tekmira permitted under Sections 3.5 or 5.3(b) or the Supply Agreement.
6.1.2
Tekmira Royalty Products.
(a)
Tekmira Development Product License.
Subject to the terms and conditions of this
Agreement, Alnylam hereby grants Tekmira (i) an exclusive, royalty-bearing license under the
Alnylam Core Patent Rights, the Alnylam Lipidoid Patent Rights, Alnylam Collaboration IP and
Alnylams interest in Joint Collaboration IP, and (ii) an exclusive, royalty-free license under
Alnylams rights in Tekmira Technology and Tekmira Collaboration IP, in each case to Research,
Develop, Manufacture and Commercialize Tekmira Development Products in the Alnylam Field in and for
the Territory. Such license includes the right to grant sublicenses as provided in Section 6.2
below.
(b)
Alnylam Data License
. Alnylam grants to Tekmira a perpetual, non-exclusive, royalty-free,
worldwide license to use and exploit the Alnylam Data;
provided
,
however
, that:
(i) Tekmira will, pursuant to Article 8, protect from disclosure any of such Alnylam Data that
constitutes Alnylams Confidential Information and (ii) to the extent any Alnylam Data that
constitutes Alnylams Confidential Information relates to a Particular Moiety (other than a
Particular Moiety directed at a Tekmira Development Target), Tekmira will not use or exploit such
Alnylam Data, or transfer or sublicense such ALNYLAM Data to any Third Party, for the purposes of
Research, Development, or Commercialization of products directed at the Target of such Particular
Moiety, except to subcontractors of Tekmira permitted under Section 3.5 or 5.3(b) or the Supply
Agreement.
(c)
IOC Product License.
Subject to the terms and conditions of this Agreement, Alnylam
hereby grants Tekmira an exclusive, royalty-bearing license under Alnylams interest in the Alnylam
IOC Technology, Alnylam Collaboration IP and Alnylams interest in Joint Collaboration IP to
Research, Develop, Manufacture and Commercialize IOC Products in the Tekmira IOC Field in and for
the United States. Such license includes the right to grant sublicenses as provided in Section 6.2
below.
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(d)
Collaboration License
. Subject to the terms and conditions of this Agreement, Tekmira
hereby grants Alnylam a non-exclusive, royalty-free license under (i) Tekmira Technology and
Tekmira Collaboration IP, and (ii) Tekmira IOC Technology that is Controlled by Tekmira on the
Original Effective Date and during the Collaboration Term, as permitted and solely for the purposes
of performing Alnylams obligations under the Collaboration with respect to Tekmira Royalty
Products in accordance with the Research Plan as set forth in Article 3. Such license does not
include the right to grant sublicenses except to subcontractors of Alnylam permitted under Section
3.5.
6.1.3
Royalty Term
. Upon expiration of all royalty obligations hereunder all licenses
of the Parties under this Article 6 then in effect shall become fully paid-up, perpetual,
non-exclusive licenses.
6.2
Sublicenses.
6.2.1 Affiliates
. Each Party shall be entitled to grant sublicenses of its rights under this
Agreement (and licenses of its rights under and to Joint Collaboration IP) to its Affiliates for so
long as such entities remain Affiliates and upon written confirmation by such Affiliates that they
agree to be bound by the terms and conditions of this Agreement;
provided
,
however
,
that (a) Tekmira may not sublicense its rights under this Agreement to perform the Collaboration or
to perform Manufacturing Activities to a Tekmira Affiliate of which [**] or more of the outstanding
voting securities are owned, controlled or held by a Significant Pharmaceutical Company or by any
investment entity affiliated with any such Significant Pharmaceutical Company and (b) any such
sublicense shall be subject in all respects to the terms of Section 3.7. If a Party grants a
sublicense to its Affiliate: (i) the granting Party unconditionally guarantees the performance of
such Affiliate as if such Affiliate were a signatory to this Agreement to the extent the
performance or lack of performance is a breach of this Agreement, and (ii) the obligations and
liabilities of such Affiliate shall be joint and several and the non-granting Party shall not be
obliged to seek recourse against such Affiliate before enforcing its rights against the granting
Party. For greater certainty, it is hereby confirmed that any default or breach by such Affiliate
of any term of this Agreement will also constitute a default by the granting Party under this
Agreement, and the non-granting Party shall be entitled to exercise its rights hereunder, in
addition to any other rights and remedies to which the non-granting Party may be entitled.
6.2.2 Alnylam Royalty Products
. Alnylam shall be entitled to grant sublicenses of its rights
under this Agreement (and licenses under and to its rights in any Joint Collaboration IP) to Third
Parties to Research, Develop, Manufacture and Commercialize Alnylam Royalty Products;
provided
, that:
(a) with respect to any license or sublicense of Alnylams rights under Section 6.1.1(b)(i),
such license or sublicense may only be granted to one or more Third Parties in a Bona Fide
Collaboration with Alnylam, but solely within the scope of and for the purposes of such Bona Fide
Collaboration, or with respect to the Research, Development, Manufacture and/or Commercialization
of Alnylam Class 1 Royalty Products that meet one or more of the following: (i) such Alnylam Class
1 Royalty Product was initially Developed at least to the point of preclinical proof-of-principle
by Alnylam in an Active Internal Development Program; (ii) such Alnylam Class 1 Royalty Product is
an Alnylam Partnered Product; or (iii) such Alnylam Class 1 Royalty Product is a Research Program
Product;
(b) with respect to any license or sublicense of Alnylams rights under Section 6.1.1(b)(ii),
such right to license or sublicense will apply only with respect to the Research, Development,
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Manufacturing, and/or Commercialization of Alnylam Class 2 Royalty Products that meet one or
more of the following:
(x) such Alnylam Class 2 Royalty Product is a Research Program Product; or
(y) such Alnylam Class 2 Royalty Product incorporates the same Formulation as the Lead
Formulation of a Research Program Product, whether or not it is directed at the same Target as such
Research Program Product, and also meets one or more of the following: (1) such Alnylam Class 2
Royalty Product was initially Developed at least to the point of preclinical proof-of-principle by
Alnylam in an Active Internal Development Program; or (2) such Alnylam Class 2 Royalty Product is
an Alnylam Partnered Product;
(c) Alnylam may sublicense any and all of its rights under Section 6.1.1(b) to Roche and to
Hoffmann-La Roche Inc. (
Roche-Nutley
, and together with Roche, the
Roche
Sublicensees
) pursuant to an agreement substantially in the form set forth in
Schedule
6.2.2
.
(d) (i) with respect to any sublicense of Alnylams rights under Sections 6.1.1(a) and/or (b)
in respect of any Alnylam Royalty Product for which Tekmira
has not
initiated Manufacturing of
batches of finished dosage form for GLP toxicology studies, Alnylam shall use Commercially
Reasonable Efforts to facilitate a business discussion between Tekmira and Alnylams Sublicensee
(other than Tekmira or its Affiliates) with respect to the provision of manufacturing services by
Tekmira to such Sublicensee, (ii) with respect to any sublicense of Alnylams rights under Sections
6.1.1(a) and/or (b) in respect of any Alnylam Royalty Product for which Tekmira
has
initiated
Manufacturing of batches of finished dosage form for GLP toxicology studies, Alnylams Sublicensee
(other than Tekmira or its Affiliates) shall be required to obtain its requirements of the bulk
finished dosage form of such Alnylam Royalty Product from Tekmira on the terms set forth in Article
5, however, Tekmira agrees to negotiate in good faith with Alnylam and/or Alnylams Sublicensee
either an alternate or modified supply arrangement or the release of such Sublicensee from such
exclusive supply obligation in return for reasonable compensation to Tekmira, and (iii) prior to
entering into an InterfeRx License Transaction with a Third Party that includes a license and/or
sublicense to Alnylams rights under Sections 6.1.1(a) and/or (b), Alnylam and Tekmira shall
discuss in good faith and agree in writing, on a sublicense-by-sublicense basis, as the case may
be, on the portion of any license fees, milestones and/or royalties that would be payable to
Tekmira in respect of such sublicense.
(e) In no event shall the provisions of this Section 6.2.2 be construed as requiring Alnylam
to enter into any sublicensing transactions with respect to the Tekmira Technology.
(f) For clarity, in no event will the sublicensing restrictions described in Sections
6.2.2(a), (b) or (c) apply to licenses and sublicenses of Alnylams rights under Section 6.1.1(a).
Alnylam may also sublicense any and all of its rights under Section 6.1.1(a) to Protiva under the
terms of the Protiva License Agreement. Tekmira acknowledges and agrees that in the case of a
sublicense to Protiva, Protiva shall be fully responsible for payment and performance of all
obligations under this Agreement pertaining to such sublicense and Tekmira hereby releases Alnylam
from any and all obligations and liabilities under this Agreement with respect to such sublicense.
6.2.3 Tekmira Royalty Products
. Tekmira shall be entitled to grant sublicenses of its rights
under this Agreement (and licenses under and to its rights in any Joint Collaboration IP) to Third
Parties to Research, Develop, Manufacture and Commercialize Tekmira Royalty Products to any Third
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Party upon prior written notice to Alnylam; provided, however, that (i) in no event may
Tekmira or its Affiliates grant a sublicense under any of the Exclusively Licensed Tekmira IP to
the [**] (the [**]) and (ii) in all events, any such sublicense shall be subject to the terms of
Section 3.7.
6.2.4 Sublicense Terms
. Each license and/or sublicense granted by a Party pursuant to Section
6.2.2 or 6.2.3 shall be subject and subordinate to the terms and conditions of this Agreement and
shall contain terms and conditions consistent with those in this Agreement, including, without
limitation, the requirements of Section 6.4 below. Agreements with any Commercializing Sublicensee
shall contain the following provisions: (a) a requirement that such Sublicensee submit applicable
sales or other reports consistent with those required hereunder; (b) an audit requirement similar
to the requirement set forth in Section 7.6; and (c) a requirement that such Sublicensee comply
with the confidentiality and non-use provisions of Article 8 with respect to both Parties
Confidential Information. Each Party shall at all times be responsible for the performance of its
Sublicensees under this Agreement. In the event a granting Party becomes aware of a material
breach of any sublicense by a Third Party Sublicensee, the granting Party shall promptly notify the
other Party of the particulars of same and take all Commercially Reasonable Efforts to enforce the
terms of such sublicense.
6.2.5 Notice.
Unless otherwise provided in this Agreement, a Party granting a license and/or
sublicense as contemplated in Section 6.2.4 will notify the other Party within ten (10) Business
Days after execution of such sublicense and provide a copy of the fully executed license and/or
sublicense agreement, as the case may be, to the other Party within the same time frame (with such
reasonable redactions as the disclosing Party may make,
provided
that such redactions do
not include provisions necessary to demonstrate compliance with the requirements of this
Agreement), which shall be treated as Confidential Information of the disclosing Party; and
provided
further that Alnylam may disclose such agreement(s) to Third Parties under
confidence if and to the extent required in order to comply with Alnylams contractual obligations
under both this Agreement and Third Party agreements.
6.2.6 Survival
. Any sublicense contemplated in Section 6.2.4 granted by a Party shall survive
termination of the licenses or other rights granted to the sublicensing Party under this Agreement
in accordance with this Article 6, and be assumed by the other Party as long as (a) the Sublicensee
is not then in breach of its license and/or sublicense agreement, (b) the Sublicensee agrees in
writing to be bound to the other Party as a licensor under the terms and conditions of the license
and/or sublicense agreement, and (c) the Sublicensee agrees in writing that in no event shall the
other Party assume any obligations or liabilities, or be under any obligation or requirement of
performance, under any such license and/or sublicense extending beyond such other Partys
obligations and liabilities under this Agreement.
6.3
Joint Collaboration IP
.
Subject to the rights granted each Party under this
Agreement, each Party shall have the right to use, sell, keep, license or assign its interest in
Joint Collaboration IP and otherwise undertake all activities a sole owner might undertake with
respect to such Joint Collaboration IP without the consent of and without accounting to the other
Party.
6.4
In-Licenses
.
(a) (i) All licenses and other rights granted to Tekmira under this
Article 6 are subject to the rights granted to Alnylam under the Existing Alnylam In-Licenses and
are also subject to and limited to the extent of, the rights Alnylam has granted and is required to
grant to Third Parties pursuant to the Pre-Existing Alnylam Alliance Agreements. All licenses and
other rights granted to Alnylam with respect to the Tekmira Technology under this Article 6 are
subject to the
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rights granted to Tekmira, and to Tekmiras ability to grant rights to Alnylam under the
Tekmira In-Licenses.
(ii) Concurrently with the Original Effective Date the Parties and UBC entered into the UBC
Sublicense Documents each containing provisions governing or relating to the sublicense to Alnylam
of rights to Tekmira Technology and Tekmira Collaboration IP in the Alnylam Field that are
Controlled by Tekmira by virtue of its licenses from UBC under the Tekmira-UBC License Agreement.
Alnylam hereby agrees, effective as of the end of the Restriction Period, that its rights and
licenses under the UBC Sublicense Documents, to the extent applicable to any Technology (as defined
in the Tekmira-UBC License Agreement) first discovered or reduced to practice following the end of
the Restriction Period or otherwise first included in the licenses to Tekmira under the Tekmira-UBC
License Agreement following the end of the Restriction Period (including without limitation any
Tekmira Collaboration IP discovered or reduced to practice following the end of the Restriction
Period that is to be assigned to UBC under the UBC Sublicense Documents), shall be non-exclusive,
notwithstanding anything to the contrary in the UBC Sublicense Documents or otherwise. If and to
the extent that the foregoing requires any notice to or consent from UBC, Alnylam agrees to assist
Tekmira as reasonably requested, at any time and from time to time following the Effective Date, to
provide such notice or facilitate such consent (it being understood and agreed that Alnylam is not
obligated to provide UBC, directly or indirectly, with any additional compensation in order to
secure any such consent).
(iii) Following the Original Effective Date, each and every Tekmira In-License entered into by
Tekmira shall contain terms substantially similar to the provisions set forth in Schedule 6.4(a)
(such provisions, the
Tekmira In-License Provisions
). For clarity, if Tekmira possesses
a reasonable belief at the time Tekmira enters into an agreement with a Third Party for the
in-license of Intellectual Property Rights, that such Intellectual Property Rights do not and will
not relate to the Alnylam Field, then Tekmira shall not be required to include the Tekmira
In-License Provisions in such Third Party in-license agreement;
provided,
however
,
that if after execution of such an in-license agreement it is discovered or determined that some or
all of such in-licensed Intellectual Property Rights does relate to the Alnylam Field, then Tekmira
shall use Commercially Reasonable Efforts to amend such Third Party in-license agreement to
incorporate provisions substantially similar to the Tekmira In-License Provisions.
(b) Each Party shall comply with all applicable terms and conditions of the In-Licenses, the
Tekmira-UBC License Agreement and the UBC Sublicense Documents to which it is a party, and shall
take such actions as may be required to allow the other Party to comply with its obligations
thereunder, including but not limited to, obligations relating to patent matters, confidentiality,
reporting, indemnification and diligence. Without limiting the foregoing, Tekmira agrees to comply
with the requirements set forth in the MIT License Agreement, including but not limited to, the
requirements listed on Schedule 6.4(b).
(c) Alnylam shall be solely responsible for obtaining licenses of Necessary Third Party IP for
the Research, Development, Manufacturing or Commercialization of Alnylam Royalty Products. Tekmira
shall be solely responsible for obtaining licenses of Necessary Third Party IP for the Research,
Development, Manufacturing or Commercialization of Tekmira Royalty Products. Such licenses shall
not grant rights to any Third Party that conflict with the terms and conditions of this Agreement.
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6.5
Options to Obtain Additional Patent Rights
.
6.5.1 [**]
.
6.5.2 [**]
.
6.6
No Other Rights
.
Except as otherwise expressly provided in this Agreement, under
no circumstances shall a Party hereto, as a result of this Agreement, obtain any ownership
interest, license or other right in any Intellectual Property Rights of the other Party, including
rights owned, controlled or developed by the other Party, or provided by the other Party to the
receiving Party at any time pursuant to this Agreement.
6.7
Diligence and Annual Reports.
(a) Alnylam shall use Commercially Reasonable
Efforts to Research, Develop and Commercialize an Alnylam Royalty Product in the Territory.
Tekmira shall use Commercially Reasonable Efforts to Research, Develop and Commercialize a Tekmira
Royalty Product in the Territory.
(b) Each Party agrees that it shall deliver to the other Party an annual report, due no later
than December 31 of each Contract Year of the Agreement Term, which summarizes the major activities
undertaken by the reporting Party during the preceding twelve (12) months to Research, Develop and
Commercialize its Royalty Products in the Territory in the applicable field. The report will
include an outline of the status of any such Royalty Products in clinical trials and the existence
of any sublicenses with respect to such Royalty Products which have not been previously disclosed.
6.8
Compliance
. Each Party shall conduct its obligations under this Agreement in
accordance with all applicable laws, rules and regulations, including without limitation current
governmental regulations concerning good laboratory practices, good clinical practices, cGMP and
the requirements of the United States Federal government in connection with activities funded by
it, as applicable.
6.9
Alnylam Rights Relating to Tekmira IOC Technology and IOC Products
.
(a)
IOC Technology.
Until the expiration of the last Valid Claim of the Alnylam IOC Patent
Rights, Alnylam may, upon written notice to Tekmira (an
FTO Notice
), elect to take from
Tekmira, and Tekmira will grant to Alnylam, a worldwide, royalty-bearing, non-exclusive license
(with no rights to sublicense) to the Tekmira IOC Technology to Research, Develop and Commercialize
IOC Products (a
Platform License
). For clarity, such Platform License will not grant
Alnylam any rights to Tekmira IOC Technology Covering only a specific Tekmira IOC Product or
particular uses of such IOC Product, and is intended to provide Alnylam with freedom to operate
under the Tekmira IOC Technology to Research, Develop and/or Commercialize IOC Products Controlled
by Alnylam. Upon Tekmiras receipt of such FTO Notice from Alnylam, the Parties shall promptly
commence good faith negotiations for a period of up [**] in an effort to reach a mutually
acceptable definitive agreement for such Platform License that is consistent with the terms of this
Section 6.9(a) and contains other customary and reasonable terms mutually agreeable to the Parties.
(i) Whether or not Alnylam has previously provided an FTO Notice, Tekmira will provide
Alnylam with at least thirty (30) days prior written notice before entering into any
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34
agreement with a Third Party with respect to a Platform License. Such notice will
include a description of the financial terms of such proposed Platform License sufficient to
permit Alnylam to understand and evaluate such terms.
(ii) If Tekmira offers a Platform License to a Third Party or a Third Party offers to
obtain a Platform License at any time during the first five (5) years after Alnylam has
provided an FTO Notice, and the terms of such Platform License offer, taken as a whole, are
the same as, or more favorable to such Third Party than (x) the terms of the Parties
definitive agreement for a Platform License, or (y) if the Parties have not yet entered into
a definitive agreement for a Platform License, the last proposal for a Platform License made
in the course of the Parties negotiations pursuant to this Section 6.9(a) (in either case
of (x) or (y),
More Favorable Terms
), then upon written notice from Alnylam,
either (A) the Parties will amend the Parties definitive agreement for a Platform License
to match or improve upon the More Favorable Terms; or (B) the Parties will promptly conclude
a definitive agreement for a Platform License on substantially similar terms as the More
Favorable Terms.
(b)
IOC Products
.
Prior to the expiration of the last Valid Claim of the Alnylam IOC
Patent Rights, Tekmira shall notify Alnylam in writing (a
Product Notice
) prior to
entering into bona fide negotiations with a Third Party for the rights to Research, Develop and/or
Commercialize any IOC Product Controlled by Tekmira (an
Tekmira IOC Product
). Such
Product Notice shall include material information relating to such Tekmira IOC Product that Alnylam
may reasonably require in order for Alnylam to evaluate and determine its interest in such Tekmira
IOC Product.
(i) If Tekmira issues the Product Notice prior to the acceptance of a bona fide IND
filing by a Regulatory Authority in the United States or one of the Major Markets for the
applicable Tekmira IOC Product, then Alnylam shall have forty-five (45) days after receipt
of such Product Notice (the
Opportunity Response Period
) to notify Tekmira in
writing of its interest in such Tekmira IOC Product. If Alnylam notifies Tekmira in writing
within the Opportunity Response Period that it is interested in such Tekmira IOC Product,
then the Parties shall promptly commence good faith negotiations (in Tekmiras case on an
exclusive basis) for a period of up to ninety (90) days after Alnylam receives the Product
Notice in an effort to conclude a mutually acceptable definitive agreement for the exclusive
rights to Research, Develop and Commercialize such Tekmira IOC Product (
Product
License
). The royalties payable to Tekmira in respect of such Tekmira IOC Product
contained in such definitive agreement will be equal to the royalties and milestones payable
with respect to an IOC Product under this Agreement;
provided
,
however
that
Tekmira shall not be required to reimburse Alnylam for any royalties or milestones payable
by Alnylam in respect of such Tekmira IOC Product under any Third Party agreements pursuant
to which Alnylam Controls the Alnylam IOC Technology licensed to Tekmira under this
Agreement that Cover such Tekmira IOC Product, and the agreement will otherwise contain
reasonable and customary terms that are consistent with the terms of this Section 6.9(b);
provided
,
however
, that the Parties shall enter into good faith negotiations
to agree upon ancillary financial provisions to compensate Tekmira for its prior reasonable
Research and Development expenditures solely in connection with such Tekmira IOC Product,
which expenditures shall be based on the properly allocated costs and expenses directly
incurred by Tekmira for the Research, Development and/or Manufacture of such Tekmira IOC
Product through and including the Opportunity Response Period, which costs shall include all
reasonable and properly allocated internal costs
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(determined in accordance with the then-current Tekmira FTE Rate) for the FTEs directly
performing Research, Development and Manufacturing activities with respect to such Tekmira
IOC Product during such period and the reasonable, direct out-of-pocket expenses actually
paid by Tekmira in its performance of the Research, Development and/or Manufacture of such
Tekmira IOC Product. If Tekmira issues the Product Notice after the acceptance of a bona
fide IND filing by a Regulatory Authority in the United States or one of the Major Markets
for the applicable Tekmira IOC Product, then Alnylam shall have ninety (90) days after
receipt of such Product Notice (the
Post-IND Opportunity Response Period
) to
notify Tekmira in writing of its interest in such Tekmira IOC Product. If Alnylam notifies
Tekmira in writing within the Post-IND Opportunity Response Period that it is interested in
such Tekmira IOC Product, then the Parties will use Commercially Reasonable Efforts to
negotiate and execute a definitive agreement for the Product reasonable and customary terms
mutually agreeable to the Parties, including appropriate financial consideration after
taking into account the maturity of Tekmiras Research, Development and Commercialization
activities through and including the Opportunity Response Period. If (x) Alnylam notifies
Tekmira that it is not interested in obtaining a Product License with respect to such
Tekmira IOC Product, (y) Alnylam does not notify Tekmira in writing within the Opportunity
Response Period that it is interested in such Tekmira IOC Product, or (z) despite each
Partys good faith efforts, Alnylam and Tekmira are not able to reach agreement on and
execute a definitive agreement for a Product License within such one hundred and twenty
(120) day period, then Tekmira may enter into negotiations with any Third Party for such
Tekmira IOC Product.
(ii) If (x) at any time prior to the expiration of the last Valid Claim of the Alnylam
IOC Patent Rights Tekmira offers to a Third Party or a Third Party offers to obtain rights
to Research, Develop and/or Commercialize a Tekmira IOC Product that has been the subject of
a Product Notice and with respect to which Alnylam does not have a Product License, and (y)
the terms of such Third Party Product License offer, taken as a whole, are the same as, or
more favorable to the Third Party than the last Product License offer with respect to such
Tekmira IOC Product made by a Party to the other in the course of the Parties negotiations
pursuant to this Section 6.9(b), then prior to executing any agreement with such Third Party
(A) Tekmira will provide to Alnylam a description of the terms of such Third Party Product
License offer sufficient to permit Alnylam to evaluate such offer terms, and (B) Alnylam
will have thirty (30) days to evaluate such offer and determine if Alnylam wishes to enter
into a Product License agreement with Tekmira for such Tekmira IOC Product on terms that are
substantially similar to those offered to or by such Third Party. If Alnylam elects to enter
into an agreement with Tekmira in accordance with the immediately preceding sentence, then
the Parties will promptly conclude an agreement on substantially similar terms to the Third
Party Product License offer. If Alnylam does not notify Tekmira in writing within such
thirty (30) day period that it is interested in concluding a Product License agreement for
such Tekmira IOC Product, then Tekmira may conclude an agreement with a Third Party for such
Tekmira IOC Product on terms that are, taken as a whole, not more favorable to such Third
Party than the terms presented to Alnylam pursuant to this Section 6.9(b).
7. PAYMENTS; ROYALTIES AND REPORTS
7.1
Upfront Consideration
.
As partial consideration for the license and grant of
rights under this Agreement, Alnylam previously paid to Tekmira Eight Million Dollars ($8,000,000)
by
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36
issuing to Tekmira 361,990 shares of Alnylams common stock, par value $0.01 per share (the
Shares
).
7.2
Milestone Fees Payable by Alnylam
.
(a) As partial consideration for the grant by Tekmira to Alnylam of the licenses and other
rights hereunder, Alnylam shall make the milestone payments to Tekmira set forth below no later
than thirty (30) calendar days after the earliest date on which the corresponding milestone event
has been achieved with respect to each Alnylam Royalty Product (other than an Alnylam Royalty
Product directed to a Biodefense Target) to achieve such milestone event:
|
|
|
Milestone Event
|
|
Payment
|
[**]
|
|
[**]
|
[**]
|
|
[**]
|
[**]
|
|
[**]
|
[**]
|
|
[**]
|
[**]
|
|
[**]
|
[**]
|
|
[**]
|
In the event one or more milestone events set out above are skipped for any reason, the payment for
such skipped milestone event(s) will be due at the same time as the payment for the next achieved
milestone event.
(b) If, however, an Alnylam Royalty Product is directed to a Biodefense Target, in lieu of the
milestone payments set forth in Section 7.2(a), the following milestone payments shall be payable
no later than thirty (30) calendar days after the later of (i) the earliest date on which the
corresponding milestone event has been achieved with respect to such Alnylam Royalty Product, and
(ii) receipt by Alnylam of all funding from a Funding Authority that Alnylam is eligible to receive
for the achievement of such milestone event with respect to such Alnylam Royalty Product:
|
|
|
Milestone Event
|
|
Payment
|
[**]
|
|
[**]
|
[**]
|
|
[**]
|
[**]
|
|
[**]
|
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37
In the event one or more milestone events set out above are skipped for any reason, the
payment for such skipped milestone event(s) will be due at the same time as the payment for the
next achieved milestone event.
(c) Notwithstanding that an Alnylam Royalty Product is directed to a Biodefense Target, if
Alnylam or its Related Parties Commercialize or sell such Alnylam Royalty Product other than to a
Funding Authority, the milestone payment amounts set forth in Section 7.2(a) shall then apply in
lieu of the amounts set forth in Section 7.2(b).
(d) The milestone payments described above shall be payable only once in relation to each
Alnylam Royalty Product that achieves Approval in a Major Market (or, in the case of an Alnylam
Royalty Product directed to a Biodefense Target, an Alnylam Royalty Product that achieves the First
Commercial Sale in a Major Market) (each, a Successful Product). Therefore, unless and until
there is a Successful Product directed to a particular Alnylam Target, any of the milestone
payments made by ALNYLAM under this Section in connection with an Alnylam Royalty Product directed
to such Target shall be fully creditable against the repeated achievement of such milestone event
by any other Alnylam Royalty Product directed to such Target. However, in the event that there is
a Successful Product with respect to an Alnylam Target and Alnylam subsequently begins to Develop
or continues to Develop another Alnylam Royalty Product directed to such Target (a
Follow-On
Product
), then, if and when any of the milestone events set out above is thereafter achieved
for such Follow-On Product, in addition to the milestone payment for such milestone event, there
will also be due and payable all of the milestone payment(s) for any such milestones that were
achieved for such Follow-On Product prior to the achievement of Approval or First Commercial Sale
(as the case may be) in a Major Market of a Successful Product with respect to such Target).
(e) With respect to any Alnylam Development Product that is a Licensed Product (as such terms
are defined in the Protiva License Agreement) that also meets the definition of an Alnylam Royalty
Product under this Agreement, Alnylam shall not be required to pay milestone fees under both such
agreements, but, rather, shall pay only the larger of such milestone fees under such agreements,
respectively. Milestone payments shall be made by Alnylam in cash by wire transfer to a bank
account of Tekmira pursuant to wire instructions provided by Tekmira to Alnylam in writing in
advance.
7.3
Royalties
.
7.3.1 Royalties Payable on Net Sales by Alnylam.
As partial consideration for the grant by
Tekmira to Alnylam of the licenses and other rights hereunder, subject to the terms and conditions
of this Agreement, Alnylam shall pay to Tekmira royalties on Net Sales of Alnylam Royalty Products
in the Territory by Alnylam and its Related Parties as follows:
|
(a)
|
|
Where the Net Sales are those of, and are invoiced by, any one of the
following:
|
|
(i)
|
|
Alnylam or its Affiliate;
|
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(ii)
|
|
a Roche Sublicensee under a sublicense granted in accordance with
Section 6.2.2(c);
|
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|
(iii)
|
|
Regulus Therapeutics LLC, under a sublicense granted by Alnylam
in compliance with Section 6.2.1; or
|
|
(iv)
|
|
another Sublicensee under a sublicense granted by Alnylam in
connection with, and solely for the purpose of, a Bona Fide Collaboration of
Alnylam, and solely for the purposes of such Bona Fide Collaboration,
|
|
|
|
the applicable running royalty rates shall be as set out in the table below (all
references are to U.S. dollars, and the Net Sales figures are the aggregated sums
with respect to Alnylam and all of its Affiliates and Sublicensees):
|
|
|
|
Aggregate Calendar Year Net Sales of the
|
|
Royalty
|
Alnylam Royalty Product in the Territory
|
|
(as a percentage of Net Sales)
|
On the first [**]
|
|
[**]
|
On the subsequent [**]
|
|
[**]
|
Greater than [**]
|
|
[**]
|
(b) In all other cases, the applicable running royalty rates shall be as set out in the table
below:
|
|
|
Aggregate Calendar Year Net Sales of the
|
|
Royalty
|
Alnylam Royalty Product in the Territory
|
|
(as a percentage of Net Sales)
|
On the first [**]
|
|
[**]
|
On the subsequent [**]
|
|
[**]
|
On the subsequent [**]
|
|
[**]
|
Greater than [**]
|
|
[**]
|
7.3.2 Royalties Payable on Net Sales by Tekmira
.
(a) As partial consideration for the grant by Alnylam to Tekmira of the licenses and other
rights hereunder, subject to the terms and conditions of this Agreement, Tekmira shall pay to
Alnylam royalties on Net Sales of Tekmira Development Products that are Tekmira Royalty Products,
in the Territory by Tekmira and its Related Parties as follows:
|
|
|
|
Aggregate Calendar Year Net Sales of the
|
|
|
Royalty
|
Tekmira Development Product in the Territory
|
|
|
(as a percentage of Net Sales)
|
On the first [**]
|
|
|
[**]
|
On the subsequent [**]
|
|
|
[**]
|
On the subsequent [**]
|
|
|
[**]
|
Greater than [**]
|
|
|
[**]
|
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(b) Subject to the terms and conditions of this Agreement, Tekmira shall pay to Alnylam
royalties on Net Sales of IOC Products that are Tekmira Royalty Products, in the Territory by
Tekmira and its Related Parties as follows:
|
|
|
|
Aggregate Calendar Year Net Sales of the
|
|
|
Royalty
|
IOC Product in the Territory
|
|
|
(as a percentage of Net Sales)
|
On the first [**]
|
|
|
[**]
|
On the subsequent [**]
|
|
|
[**]
|
Greater than [**]
|
|
|
[**]
|
7.3.3 Additional Royalty Provisions
. Royalties on Royalty Products at the rate set forth
above, shall be payable on a country-by-country and product-by-product basis commencing on the date
of First Commercial Sale of such Royalty Product in a country and continuing until the later of the
expiration of the last Valid Claim Covering the Manufacture or Commercialization of such Royalty
Product in the country of sale, subject to the following conditions:
(a) only one royalty shall be due with respect to the same unit of Royalty Product. Moreover,
with respect to any Alnylam Development Product that is a Licensed Product (as such terms are
defined in the Protiva License Agreement) that also meets the definition of an Alnylam Royalty
Product under this Agreement, Alnylam shall not be required to pay royalties under both such
agreements, but, rather, shall pay only the larger of such royalties under such agreements,
respectively;
(b) no royalties shall be due upon the sale or other transfer among a Party and its Related
Parties, but in such cases the royalty shall be due and calculated upon such Partys or its Related
Partys Net Sales to the first independent Third Party;
(c) no royalties shall accrue on the sale or other disposition of the Royalty Product by a
Party or its Related Parties for use in a clinical study sponsored by such Party or under an IND
prior to Regulatory Approval of such Royalty Product in the applicable jurisdiction; and
(d) no royalties shall accrue on the disposition of a Royalty Product in reasonable quantities
by a Party or its Related Parties as samples (promotion or otherwise) or as donations (for example,
to non-profit institutions for a non-commercial purpose).
Moreover, the Parties acknowledge and agree that nothing in this Agreement (including without
limitation any exhibits or attachments hereto) shall be construed as representing an estimate or
projection of either (i) the number of Royalty Products that will or may be successfully
Researched, Developed or Commercialized or (ii) anticipated sales or the actual value of any
Royalty Product, and that the figures set forth in this Article 7 or elsewhere in this Agreement or
that have otherwise been
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discussed by the Parties are merely intended to define a Partys royalty payment obligations to
each other in the event such sales performance is achieved.
7.3.4 Reports; Payment of Royalty
. During the Agreement Term, commencing upon the First
Commercial Sale of a Royalty Product, the Royalty Payor shall furnish to the Royalty Recipient a
quarterly written report showing the quantity of Royalty Products sold in each country (as measured
in saleable units of product), the gross sales of such Royalty Product in each country, total
deductions for such Royalty Product for each country included in the calculation of Net Sales, the
Net Sales in each country of such Royalty Product subject to royalty payments sold by the Royalty
Payor and its Related Parties during the reporting period and the royalties payable with respect to
such Royalty Product under this Agreement. Quarterly reports shall be due no later than the
twenty-fifth (25
th
) day following the close of each Calendar Quarter. Royalties shown
to have accrued by each royalty report shall be due and payable on the date such royalty report is
due. The Royalty Payor shall keep complete and accurate records in sufficient detail to enable the
royalties and other payments payable hereunder to be determined.
7.4
Necessary Third Party IP.
7.4.1 Third Party License Payments
. Tekmira shall pay [**] of all royalties, license fees,
milestones and similar payments (if any) payable to Tekmiras Affiliates or to any Third Parties
for the rights to Tekmira Technology licensed to Alnylam under this Agreement under any Tekmira
In-License and shall pay [**] of all amounts owed to UBC under the Tekmira-UBC License Agreement in
respect of the sublicense to Alnylam under the UBC Sublicense. Alnylam shall pay [**] of all
royalties, license fees, milestones and similar payments (if any) payable to Alnylams Affiliates
or to any Third Parties for the rights to Alnylam RNAi Technology, Alnylam IOC Technology and
Alnylam Lipidoid Patent Rights licensed to Tekmira under this Agreement; [**].
7.4.2 Royalty Adjustment
. If the Research, Development, Manufacture or Commercialization of a
Royalty Product by a Royalty Payor in accordance with this Agreement infringes Necessary Third
Party IP, the applicable royalties in each country in the Territory payable to the Royalty
Recipient pursuant to Section 7.3 will be reduced by the amount of royalties paid with respect to
Necessary Third Party IP;
provided
,
however
, that in no event shall the royalties
due be reduced by [**] of the royalties otherwise due (and will not in any case be reduced below
[**] of the amount of royalties that would otherwise be due).
7.4.3 Adjustments for Payments to UBC.
In the event that Alnylam is required to make any
payments to UBC in respect of the Tekmira Technology or Tekmira Collaboration IP licensed to
Alnylam pursuant to the UBC Sublicense Agreement or pursuant to a direct license agreement between
UBC and Alnylam as a result of the default by, or bankruptcy or insolvency of, Tekmira as more
fully described in Section 3.4 and Article 17.0 of the Tekmira-UBC License Agreement, then Alnylam
shall be entitled to offset any amounts payable by Alnylam to Tekmira under this Agreement (or
under the Protiva License Agreement if payments are due instead to Protiva pursuant to Sections
7.2(e) or 7.3.3(a)) by the amount of Alnylams payments to UBC until such amounts have been
credited in full.
7.4.4 Adjustment for More Favorable Terms.
If after the Effective Date, Tekmira grants to a
Third Party any license under the Tekmira Technology substantially similar in scope and
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substance to the license granted to Alnylam by Tekmira under this Agreement on terms calling
for milestone fees and royalties that are, as a whole, more favorable (to the licensee in such
other license) than the comparable terms contained in this Article VII with respect to milestones
fees and royalties payable by Alnylam, then Tekmira shall so notify Alnylam, and at Alnylams
option, such more favorable financial terms granted to such Third Party shall apply to Alnylams or
its Affiliates or Sublicensees license for Alnylam Royalty Products, rather than the milestone
fees and royalty terms under this Article VII.
7.5
Collaboration and Manufacturing Activity Funding
.
7.5.1 Collaboration Funding
. As consideration for the performance by Tekmira of its
obligations under the Collaboration, Alnylam agrees to fund the FTEs provided by Tekmira as
follows:
(a) During the Collaboration Term, the compensation to Tekmira for up to [**] FTEs in each
Contract Year of the Collaboration Term to perform its obligations under the Collaboration as
provided in the Research Plan shall not be less than an aggregate of [**] in each such Contract
Year; and
(b) the use of any additional FTEs in each Contract Year of the Collaboration Term as approved
by the JRC shall be funded at the FTE Rate pro-rated to the duration that such FTEs actually
perform such activities under the Collaboration in accordance with the Research Plan, and as
documented by Tekmira pursuant to Section 7.5.3 below.
Tekmira acknowledges and agrees that the FTE Rate reflects Tekmiras fully-loaded costs and
expenses in performing its obligations under the Collaboration and that Tekmira is solely
responsible for its costs and expenses in performing its obligations under the Collaboration.
However, Alnylam agrees to reimburse Tekmira for any extraordinary out-of pocket costs and expenses
incurred by Tekmira in performing its obligations under the Collaboration in accordance with the
Research Plan to the extent that such costs and expenses are approved by the JRC in advance in
writing and are reasonable, documented costs and expenses actually and directly incurred by
Tekmira. After the Collaboration Term, Alnylams funding obligation shall cease and (to the extent
mutually agreed by the Parties) each Party shall be responsible for funding its own participation
in the Collaboration and all expenses incurred by such Party in connection therewith.
7.5.2 Product Manufacturing Cost
. As consideration for the performance by Tekmira of the
Manufacturing Activities and the delivery of quantities of bulk finished dosage form of Alnylam
Royalty Product Manufactured and supplied by Tekmira to Alnylam pursuant to Section 5.1(a), Alnylam
agrees to purchase each such batch of bulk finished dosage form at a price comprised of:
(a) [**]; and
(b) [**].
Tekmira shall provide Alnylam upon request with an estimate of Tekmiras per batch price for any
Alnylam Royalty Product.
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7.5.3 Invoicing and Payment
. Tekmira shall, within thirty (30) days following the end of each
calendar month during the Collaboration Term, deliver to Alnylam a detailed invoice (a) stating the
number of FTEs that performed activities under the Collaboration during such calendar month and the
nature of such work, and (b) detailing any out-of-pocket expenses invoiced to Tekmira to be
reimbursed by Alnylam pursuant to Section 5.1(b), 7.5.1 or 7.5.2, and accompanied by adequate
documentation of such expenses. All undisputed payments shall be made by Alnylam within forty-five
(45) days of its receipt of such an invoice.
7.6
Audits
.
7.6.1 Access.
Upon the written request of a Party and not more than once in each Calendar
Year, the other Party and/or its Related Parties shall permit an independent certified public
accounting firm of nationally recognized standing selected by the requesting Party and reasonably
acceptable to the other Party, at the requesting Partys expense except as set forth below, to have
access during normal business hours to such of the records of the other Party as may be reasonably
necessary to verify the accuracy of the royalty, FTE, expense and other financial reports required
to be delivered under this Agreement for any Calendar Year ending not more than thirty-six (36)
months prior to the date of such request, for the sole purpose of verifying the basis and accuracy
of payments made under this Article 7.
7.6.2 Discrepancies; Default Interest
. If such accounting firm identifies a discrepancy made
during such period, the appropriate Party shall pay the other Party the amount of the discrepancy
within twenty (20) Business Days of the date the requesting Party delivers to the other Party such
accounting firms written report so concluding, or as otherwise agreed by the Parties in writing.
Such written report shall be binding upon the Parties. The fees charged by such accounting firm
shall be paid by the requesting Party, unless such discrepancy represents an underpayment by the
other Party of more than the lesser of [**] or [**] of the total amounts due hereunder, in which
case such fees shall be paid by the other Party. Unless an audit for such Calendar Year has been
commenced upon the expiration of [**] following the end of such Calendar Year, the calculation of
royalties and other payments payable with respect to such Calendar Year shall be binding and
conclusive upon both Parties, and each Party and its Related Parties shall be released from any
further liability or accountability with respect to royalties and other payments for such Calendar
Year. All amounts due and owing to a Party hereunder by the other Party but not paid by the other
Party on the due date thereof shall bear interest at the rate of one per cent (1%) per month.
7.6.3 Confidentiality
. Each Party shall treat all financial information subject to review
under this Section 7.6 or under any sublicense agreement in accordance with the confidentiality and
non-use provisions of Article 8 of this Agreement, and shall cause its accounting firm to enter
into an acceptable confidentiality agreement with the other Party and/or its Related Parties
obligating it to retain all such information in confidence pursuant to such confidentiality
agreement.
7.7
Payment Exchange Rate
. All dollar amounts in this Agreement are United States
dollar amounts. All payments to be made under this Agreement, including without limitation, any
payments based on revenues generated by Related Parties in respect of Royalty Products, shall be
made in United States dollars and shall be paid by bank wire transfer in immediately available
funds to such bank account in Canada or the United States, as may be designated in writing by the
receiving Party from time to time. In the case of sales outside the United States by any Party and
its Related
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Parties, the rate of exchange to be used in computing the amount of currency equivalent in
United States dollars due shall be made at the rate of exchange utilized by such Party in its
worldwide accounting system, prevailing on the third to the last Business Day of the month
preceding the month in which such sales are recorded.
7.8
Income Tax Withholding
. (a) If laws, rules or regulations require withholding of
income taxes or other taxes imposed upon payments set forth in this Article 7, the paying Party
shall make such withholding payments as required and subtract such withholding payments from the
payments set forth in this Article 7. The paying Party shall submit appropriate proof of payment
of the withholding taxes to the receiving Party within a reasonable period of time. At the request
of the receiving Party, the paying Party shall, at its cost, give the receiving Party such
reasonable assistance, which shall include the provision of appropriate certificates of such
deductions made together with other supporting documentation as may be required by the relevant tax
authority, to evidence such payment and to enable the receiving Party to claim exemption from such
withholding or other tax imposed or to obtain a repayment thereof or reduction thereof, and shall
upon request provide such additional documentation from time to time as is reasonably required to
confirm the payment of tax.
(b) Tekmira represents and warrants that, as of the Effective Date, it is a resident of Canada
for Canadian income tax purposes and for purposes of the Tax Convention. Alnylam represents and
warrants that, as of the Effective Date, it is a resident of the United States of America for
United States income tax purposes and for purposes of the Tax Convention. The paying Party confirms
that, with regard to any payment under Article 7, it will withhold at the rate applicable under the
Tax Convention if and to the extent that the Tax Convention governs the withholding from such
payment required by applicable law. Tekmira and Alnylam agree to provide written notice to the
other Party if its rights or obligations under the Agreement are assigned to a Person that is not a
resident of the United States of America (in the case of Alnylam) for United States income tax
purposes and for purposes of the Tax Convention, or a resident of Canada (in the case of Tekmira)
for Canadian income tax purposes and for purposes of the Tax Convention.
8. CONFIDENTIALITY AND PUBLICATION
8.1
Nondisclosure Obligation
. (a) All Confidential Information disclosed by one Party
to the other Party hereunder shall be maintained in confidence by the receiving Party and shall not
be disclosed to a Third Party or used for any purpose except as set forth herein without the prior
written consent of the disclosing Party, except to the extent that such Confidential Information:
|
(i)
|
|
is known by the receiving Party at the time of its receipt, and not through a
prior disclosure by the disclosing Party, as documented by the receiving Partys
business records;
|
|
(ii)
|
|
is in the public domain by use and/or publication before its receipt from the
disclosing Party, or thereafter enters the public domain through no fault of the
receiving Party;
|
|
(iii)
|
|
is subsequently disclosed to the receiving Party by a Third Party who may
lawfully do so and is not under an obligation of confidentiality to the disclosing
Party; or
|
|
(iv)
|
|
is developed by the receiving Party independently of Confidential Information
received from the disclosing Party, as documented by the receiving Partys business
records.
|
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(b) Notwithstanding the obligations of confidentiality and non-use set forth above and in
Section 8.2.2 below, a receiving Party may provide Confidential Information disclosed to it, and
disclose the existence and terms of this Agreement and the other Transaction Documents, in each
case as may be reasonably required in order to perform its obligations and to exploit its rights
under this Agreement and the other Transaction Documents, and specifically to (i) Related Parties,
and their employees, directors, agents, consultants, advisors and/or other Third Parties for the
performance of its obligations hereunder (or for such entities to determine their interest in
performing such activities) in accordance with this Agreement in each case who are obligated to
keep such Confidential Information confidential; (ii) governmental or other Regulatory Authorities
in order to obtain patents or perform its obligations or exploit its rights under this Agreement;
provided
, that such Confidential Information shall be disclosed only to the extent
reasonably necessary to do so, (iii) the extent required by applicable law, including without
limitation by the rules or regulations of the United States Securities and Exchange Commission or
similar regulatory agency in a country other than the United States or of any stock exchange or
Nasdaq, (iv) any bona fide actual or prospective underwriters, investors, lenders or other
financing sources and any bona fide actual or prospective collaborators or strategic partners and
to consultants and advisors of such Party, in each case who are obligated to keep such Confidential
Information confidential, (v) to Third Parties to the extent a Party is required to do so pursuant
to the terms of an In-License or a Pre-Existing Alnylam Alliance Agreement, and (vi) UBC to the
extent a Party is required to do so in order to comply with its obligations to UBC under the UBC
Sublicense Documents or the Tekmira-UBC License Agreement, as the case may be.
If a Party is required by judicial or administrative process to disclose Confidential Information
that is subject to the non-disclosure provisions of this Section 8.1 or Section 8.2, such Party
shall promptly inform the other Party of the disclosure that is being sought in order to provide
the other Party an opportunity to challenge or limit the disclosure obligations. Confidential
Information that is disclosed by judicial or administrative process shall remain otherwise subject
to the confidentiality and non-use provisions of this Section 8.1 and Section 8.2, and the Party
disclosing Confidential Information pursuant to law or court order shall take all steps reasonably
practical, including without limitation seeking an order of confidentiality, to ensure the
continued confidential treatment of such Confidential Information. In addition to the foregoing
restrictions on public disclosure, if either Party concludes that a copy of this Agreement must be
filed with the United States Securities and Exchange Commission or similar regulatory agency in a
country other than the United States, such Party shall seek the maximum confidential treatment
available under applicable law, provide the other Party with a copy of this Agreement showing any
sections as to which the Party proposes to request confidential treatment, provide the other Party
with an opportunity to comment on any such proposal and to suggest additional portions of this
Agreement for confidential treatment, and take such Partys reasonable comments into consideration
before filing this Agreement.
8.2
Publication and Publicity
.
8.2.1 Publication
. Tekmira and Alnylam each acknowledge the other Partys interest in
publishing the results of the Collaboration. Each Party also recognizes the mutual interest in
obtaining valid patent protection and in protecting business interests and trade secret
information. Consequently, except for disclosures permitted pursuant to Section 8.1 and 8.2.2(b),
either Party, its Affiliates, or their respective employees or consultants wishing to make a
publication or a disclosure to a Third Party relating to the Collaboration or any Royalty Product
of the other Party shall deliver to the other Party a copy of the proposed written publication or
an outline of an oral disclosure at least
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45
thirty (30) days prior to submission for publication or presentation. The reviewing Party
shall have the right (a) to propose modifications to the publication or presentation for patent
reasons, trade secret reasons or business reasons, or (b) to request a reasonable delay in
publication or presentation in order to protect patentable information. If the reviewing Party
requests a delay, the publishing Party shall delay submission or presentation for a period of
thirty (30) days to enable patent applications protecting each Partys rights in such information
to be filed in accordance with Article 10 below. Upon expiration of such thirty (30) days, the
publishing Party shall be free to proceed with the publication or presentation. If the reviewing
Party requests modifications to the publication or presentation, the publishing Party shall edit
such publication to prevent disclosure of trade secret or proprietary business information prior to
submission of the publication or presentation. With respect to any proposed publications or
disclosures by investigators or academic or non-profit collaborators, such materials shall be
subject to review under this Section 8.2 to the extent that Tekmira or Alnylam, as the case may be,
has the right and ability (after using reasonable efforts) to do so. For the avoidance of doubt,
subject to its obligations under Section 8.1, each Party may make publications and disclosures to
Third Parties relating to its own Royalty Products outside of the Collaboration without any
obligation to permit the other Party to review or comment on such publication or disclosure.
8.2.2 Publicity
. (a) Except as set forth in Section 8.1 above and clause (b) below, no
disclosure of the existence of, or the terms of, this Agreement or the other Transaction Documents
may be made by either Party, and no Party shall use the name, trademark, trade name or logo of the
other Party or its employees in any publicity, news release or disclosure relating to this
Agreement or its subject matter, without the prior express written permission of the other Party,
except as may be required by law or expressly permitted by the terms hereof.
(b) The Parties expect that upon the Effective Date of this Agreement Tekmira will, and
Alnylam may, issue separate press releases publicizing the execution of this Agreement and the
Protiva License Agreement, and that prior to the execution of this Agreement, Alnylam and Tekmira
shall agree in writing upon any such press releases. After such initial press releases, neither
Party shall issue a press release or public announcement relating to this Agreement without the
prior written approval of the other Party, which approval shall not be unreasonably withheld,
except that a Party may (i) once a press release or other written statement is approved in writing
by both Parties, make subsequent public disclosure of the information contained in such press
release or other written statement without the further approval of the other Party, and (ii) issue
a press release or public announcement as required, in the reasonable judgment of such Party, by
applicable law, including without limitation by the rules or regulations of the United States
Securities and Exchange Commission or similar regulatory agency in a country other than the United
States or of any stock exchange or NASDAQ.
9. REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION
9.1
Mutual Representations and Warranties
. Each Party represents and warrants to the
other Party that each representation and warranty made by it under this Article 9 that is made as
of or on the Effective Date, is also made by it as of and upon the Condition Satisfaction Date.
Each Party represents and warrants to the other Party that as of the Effective Date of this
Agreement:
9.1.1
It is duly organized and validly existing under the laws of its jurisdiction of
incorporation or formation, and has full corporate or other power and authority to enter into this
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Agreement and the other Transaction Documents to which it is a party, and to carry out the
provisions hereof. Further, except for any Regulatory Approvals, pricing and/or reimbursement
approvals, manufacturing approvals and/or similar approvals necessary for the Research,
Development, Manufacture or Commercialization of the Royalty Products, all necessary consents,
approvals and authorizations of all government authorities required to be obtained by such Party as
of the Effective Date in connection with the execution, delivery and performance of this Agreement
and the other Transaction Documents to which it is a party have been obtained by the Effective
Date.
9.1.2
It is duly authorized to execute and deliver this Agreement and the other Transaction
Documents to which it is a party, and to perform its obligations hereunder, and the person or
persons executing this Agreement and the other Transaction Documents to which it is a party on its
behalf has been duly authorized to do so by all requisite corporate action.
9.1.3
This Agreement and the other Transaction Documents to which it is a party are legally
binding upon it and enforceable in accordance with its terms. Except as set forth in Section 9.1.3
of Schedule 9 to this Agreement, the execution, delivery and performance of this Agreement and the
other Transaction Documents to which it is a party by it does not conflict with any agreement,
instrument or understanding, oral or written, to which it is a party and by which it may be bound,
or with its charter or by-laws.
9.1.4
Except, in Alnylams case, as set forth in Section 9.1.3 of Schedule 9 to this
Agreement, it has not, and will not during the Agreement Term, grant any right to any Third Party
which would conflict with the rights granted to the other Party hereunder. It has (or will have at
the time performance is due) maintained and will maintain and keep in full force and effect all
agreements (including license agreements) and filings (including patent filings) necessary in such
Partys reasonable judgment to perform its obligations hereunder. Further, (a) the execution and
delivery of this Agreement and the other Transaction Documents to which it is a party by such
Party, (b) the performance of such Partys obligations hereunder and the other Transaction
Documents to which it is a party and (c) the licenses and sublicenses to be granted by such Party
pursuant to this Agreement or the other Transaction Documents do not conflict with or violate any
requirement of applicable laws or regulations existing as of the Effective Date and applicable to
such Party.
9.1.5
Neither Party nor any of its Affiliates has been debarred or is subject to debarment and
neither Party nor any of its Affiliates will use in any capacity, in connection with the
Collaboration or, in the case of Tekmira the Manufacturing Activities, any person or entity that
has been debarred pursuant to Section 306 of the United States Federal Food, Drug, and Cosmetic
Act, or that is the subject of a conviction described in such section. Each Party agrees to inform
the other Party in writing immediately if it or any Person that is performing activities in the
Collaboration, and Tekmira agrees to inform Alnylam immediately in writing if it or any person or
entity that is performing the Manufacturing Activities, is debarred or is the subject of a
conviction described in Section 306, or if any action, suit, claim, investigation or legal or
administrative proceeding is pending or, to the best of the notifying Partys knowledge, is
threatened, relating to the debarment or conviction of the notifying Party or any person or entity
used in any capacity by such Party or any of its Affiliates in connection with the Collaboration or
the Manufacturing Activities, as the case may be.
9.2
Alnylam Representations and Warranties
. Alnylam represents and warrants to
Tekmira that as of the Effective Date of this Agreement:
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9.2.1
To Alnylams knowledge, the Alnylam Core Patent Rights and the Patent Rights comprising
Alnylam IOC Technology exist and are not invalid or unenforceable, in whole or in part;
9.2.2
Except as set forth on Section 9.1.3 of Schedule 9 to this Agreement, it has not
assigned, transferred, conveyed or otherwise encumbered its right, title and interest in the
Alnylam RNAi Technology, the Alnylam Lipidoid Patent Rights, Alnylam IOC Technology or the Alnylam
Collaboration IP or Alnylams interest in Joint Collaboration IP in a manner that conflicts with
any rights granted to Tekmira hereunder;
9.2.3
There are no claims, judgments or settlements actually made or, to Alnylams knowledge,
threatened, against or amounts with respect thereto owed by, Alnylam or its Affiliates relating to
the Alnylam RNAi Technology, Alnylam Lipidoid Patent Rights or Alnylam IOC Technology;
9.2.4
Alnylams obligations under the Collaboration Research Plan will be performed with
requisite care, skill and diligence, in accordance with applicable laws and industry standards, and
by individuals who are appropriately trained and qualified;
9.2.5
All siRNA, miRNA and other materials supplied by Alnylam to be used by Tekmira in the
manufacture of Alnylam Royalty Products will have been Manufactured in accordance with the master
batch records and released in accordance with the applicable specifications for such siRNA, miRNA
and other materials, cGMP (if applicable), and all other applicable laws; and
9.2.6
None of the terms of the Existing Alnylam In-Licenses or Pre-Existing Alnylam Alliance
Agreements prohibit or limit the use by Tekmira, for the Research, Development, Manufacture or
Commercialization of the Tekmira Royalty Products, of any Intellectual Property Rights granted by
Tekmira to Alnylam hereunder.
9.3
Tekmira Representations and Warranties
. Tekmira represents and warrants to Alnylam
that:
9.3.1
The Patent Rights listed in Schedule 1.73 are all the Tekmira Patent Rights existing on
the Effective Date. As of the Effective Date, to Tekmiras knowledge, the Tekmira Patent Rights
exist and are not invalid or unenforceable, in whole or in part. To Tekmiras knowledge, the
conception, development and reduction to practice of the Tekmira Patent Rights and the Tekmira
Collaboration IP and Joint Collaboration IP existing on the Effective Date have not constituted or
involved the misappropriation of trade secrets or other rights or property of any person or entity;
9.3.2
The Patent Rights identified on Schedule 1.73 as Controlled by Tekmira through an
ownership interest are owned by Tekmira free and clear of any liens or encumbrances. [**];
9.3.3
Tekmira has not assigned, transferred, conveyed or otherwise encumbered its right, title
and interest in the Tekmira Technology or the Patent Rights identified on Schedule 1.73, the
Tekmira Collaboration IP or its interest in Joint Collaboration IP or in the Tekmira IOC
Technology, in a manner that conflicts with the rights granted to Alnylam hereunder;
9.3.4
There are no (a) claims, judgments or settlements actually made or, to Tekmiras
knowledge, threatened, against, or amounts with respect thereto owed by, Tekmira or its Affiliates
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relating to the Tekmira Technology or any Patent Rights or Know-How licensed to Alnylam
pursuant to the UBC Sublicense, nor (b) any pending or threatened claims or litigation relating to
the Tekmira Technology or any Patent Rights or Know-How licensed to Alnylam pursuant to the UBC
Sublicense. Tekmira will promptly notify Alnylam in writing should it become aware of any claims
asserting such infringement;
9.3.5
Tekmiras obligations under the Collaboration Research Plan and the Manufacturing
Activities will be performed with requisite care, skill and diligence, in accordance with
applicable laws and industry standards, and by individuals who are appropriately trained and
qualified, and at the time of delivery to Alnylam, the Alnylam Royalty Products Manufactured and
supplied by Tekmira under this Agreement (a) will have been Manufactured in accordance with the
master batch records and released in accordance with the Specifications (as such term is defined in
the Supply Agreement) for such Alnylam Royalty Product and cGMP (if applicable), and all other
applicable laws, and (b) will not be adulterated or misbranded under all applicable laws; and
9.3.6
Prior to the Effective Date Tekmira re-sold all the Shares in a manner consistent with
the terms of the Original Agreement, and pursuant to and in accordance with the Plan of
Distribution and other terms and conditions set forth in the Registration Statement on Form S-3ASR
filed by Alnylam on January 18, 2007, and all other applicable law. During the period from the
Original Effective Date through the Effective Date, Tekmira was and is not an investment company
under the U.S. Investment Company Act of 1940, as amended, and during the Agreement Term Tekmira
shall take, all actions necessary to ensure that it is not an investment company under the U.S.
Investment Company Act of 1940, as amended.
9.3.7
As of the Effective Date, (a) Tekmira is not and will not be in default in the
performance or in breach of any of its obligations pursuant to any Transaction Document, (b) no
representation or warranty of Tekmira set forth in any Transaction Document shall have been untrue
when made and (c) Tekmira shall not have committed any fraud or material misstatement or omission
of fact in its dealings with Alnylam pursuant to the Transaction Documents.
9.3.8
The [**] does not provide that any payments other than milestone and royalty payments
will be owed or would be owed by the [**] to Protiva or its Affiliates with respect to the
development or commercialization of any product due to the coverage of such product by any claims
(whether issued or pending) covering any Restricted Joint Invention.
9.4
Warranty Disclaimer
. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN THIS AGREEMENT OR
IN THE OTHER TRANSACTION DOCUMENTS, NEITHER PARTY MAKES ANY REPRESENTATION OR EXTENDS ANY WARRANTY
OR CONDITIONS OF ANY KIND, EITHER EXPRESS OR IMPLIED, TO THE OTHER PARTY WITH RESPECT TO ANY
INTELLECTUAL PROPERTY, ROYALTY PRODUCTS, GOODS, THE COLLABORATION, RIGHTS OR OTHER SUBJECT MATTER
OF THIS AGREEMENT OR THE OTHER TRANSACTION DOCUMENTS AND HEREBY DISCLAIMS ALL IMPLIED CONDITIONS,
REPRESENTATIONS, AND WARRANTIES, INCLUDING WITHOUT LIMITATION, WARRANTIES OF MERCHANTABILITY,
FITNESS FOR A PARTICULAR PURPOSE AND NONINFRINGEMENT OR VALIDITY OF PATENT RIGHTS WITH RESPECT TO
ANY AND ALL OF THE FOREGOING. EACH PARTY HEREBY DISCLAIMS ANY REPRESENTATION OR WARRANTY THAT THE
DEVELOPMENT, MANUFACTURE OR
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COMMERCIALIZATION OF ANY ROYALTY PRODUCT PURSUANT TO THIS AGREEMENT WILL BE SUCCESSFUL OR THAT
ANY PARTICULAR SALES LEVEL WITH RESPECT TO SUCH ROYALTY PRODUCTS WILL BE ACHIEVED.
9.5
Indemnification
.
9.5.1
Indemnification by Tekmira.
Tekmira shall indemnify, hold harmless, and defend
Alnylam, its Affiliates, and their respective directors, officers, employees, consultants and
agents (
Alnylam Indemnitees
) from and against any and all Third Party claims, suits,
losses, liabilities, damages, costs, fees and expenses (including reasonable legal fees)
(collectively,
Losses
) arising out of or resulting from, directly or indirectly, (a) any
breach of, or inaccuracy in, any representation or warranty made by Tekmira in this Agreement or in
the other Transaction Documents, or any breach or violation of any covenant or agreement of Tekmira
in or pursuant to this Agreement or in the other Transaction Documents, (b) the negligence or
willful misconduct by or of Tekmira, its Affiliates and its and their respective Sublicensees, and
their respective directors, officers, employees, consultants and agents, (c) the Research,
Development, Manufacture or Commercialization of a Tekmira Royalty Product to the extent such
activities are not performed by an Alnylam Indemnitee, or (d) the performance by Tekmira of its
obligations under the Collaboration or the Manufacturing Activities. The indemnification
obligations under this Agreement exclude Losses arising out of Infringement Claims resulting from
Tekmiras exercise in accordance with the terms of this Agreement of any Intellectual Property
Rights granted by Alnylam to Tekmira or its Affiliates hereunder. Tekmira shall have no obligation
to indemnify the Alnylam Indemnitees to the extent that the Losses arise out of or result from,
directly or indirectly, (i) any breach of, or inaccuracy in, any representation or warranty made by
Alnylam in this Agreement or in the other Transaction Documents, (ii) any breach or violation of
any covenant or agreement of Alnylam in or pursuant to this Agreement or the other Transaction
Documents, or (iii) the negligence or willful misconduct by or of any of the Alnylam Indemnitees or
Alnylam Sublicensees.
9.5.2
Indemnification by Alnylam
. Alnylam shall indemnify, hold harmless, and defend
Tekmira, its Affiliates and their respective directors, officers, employees, consultants and agents
(
Tekmira Indemnitees
) from and against any and all Losses arising out of or resulting
from, directly or indirectly, (a) any breach of, or inaccuracy in, any representation or warranty
made by Alnylam in this Agreement or in the other Transaction Documents, or any breach or violation
of any covenant or agreement of Alnylam in or pursuant to this Agreement or the other Transaction
Documents, (b) the negligence or willful misconduct by or of Alnylam, its Affiliates and its and
their respective Sublicensees, and their respective directors, officers, employees, consultants and
agents, (c) the Research, Development, Manufacture or Commercialization of an Alnylam Royalty
Product to the extent such activities are not performed by a Tekmira Indemnitee, or (d) the
performance by Alnylam of its obligations under the Collaboration. The indemnification obligations
under this Agreement exclude Losses arising out of Infringement Claims resulting from Alnylams
exercise in accordance with the terms of this Agreement or the UBC Sublicense Documents of any
Intellectual Property Rights granted by Tekmira to Alnylam or its Affiliates hereunder or
thereunder. Furthermore, Alnylam shall have no obligation to indemnify the Tekmira Indemnitees to
the extent that the Losses arise out of or result from, directly or indirectly, (i) any breach of,
or inaccuracy in, any representation or warranty made by Tekmira in this Agreement or in the other
Transaction Documents, (ii) any breach or violation of any covenant or agreement of Tekmira in or
pursuant to this Agreement or the other Transaction Documents, (iii) the negligence or willful
misconduct by or of any of the Tekmira
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Indemnitees or Tekmira Sublicensees, and/or (iv) the Research, Development or Manufacturing of
an Alnylam Royalty Product to the extent such activities are performed by a Tekmira Indemnitee.
9.5.3
Indemnification Procedure
.
In the event of any such claim against any Tekmira
Indemnitee or Alnylam Indemnitee (individually, an
Indemnitee
), the indemnified Party
shall promptly notify the other Party in writing of the claim and the indemnifying Party shall
manage and control, at its sole expense, the defense of the claim and its settlement. The
Indemnitee shall cooperate with the indemnifying Party and may, at its option and expense, be
represented in any such action or proceeding. The indemnifying Party shall not be liable for any
settlements, litigation costs or expenses incurred by any Indemnitee without the indemnifying
Partys written authorization. Notwithstanding the foregoing, if the indemnifying Party believes
that any of the exceptions to its obligation of indemnification of the Indemnitees set forth in
Sections 9.5.1 or 9.5.2 may apply, the indemnifying Party shall promptly notify the Indemnitees,
which shall then have the right to be represented in any such action or proceeding by separate
counsel at their expense;
provided,
that the indemnifying Party shall be responsible for
payment of such expenses if the Indemnitees are ultimately determined to be entitled to
indemnification from the indemnifying Party.
9.6
Limitation of Liability
. NEITHER PARTY HERETO WILL BE LIABLE FOR SPECIAL,
INCIDENTAL, CONSEQUENTIAL OR PUNITIVE DAMAGES ARISING OUT OF THIS AGREEMENT OR THE OTHER
TRANSACTION DOCUMENTS OR THE EXERCISE OF ITS RIGHTS HEREUNDER OR THEREUNDER, INCLUDING LOST PROFITS
ARISING FROM OR RELATING TO ANY BREACH OF THIS AGREEMENT, REGARDLESS OF ANY NOTICE OF SUCH DAMAGES,
EXCEPT AS A RESULT OF A PARTYS WILLFUL MISCONDUCT OR A MATERIAL BREACH OF THE CONFIDENTIALITY AND
NON-USE OBLIGATIONS IN ARTICLE 8. NOTHING IN THIS SECTION 9.6 IS INTENDED TO LIMIT OR RESTRICT THE
INDEMNIFICATION RIGHTS OR OBLIGATIONS OF EITHER PARTY.
9.7
Injunctive Relief
. Each Party acknowledges the competitive and technical value
and the sensitive and confidential nature of the Confidential Information, and agrees that monetary
damages alone will be inadequate to protect the other Partys interests against any actual or
threatened material breach of Article 8 of this Agreement. Each Party further acknowledges the
importance of the standstill obligations in Section 12.17 to the other Partys business and
corporate development, and agrees that monetary damages alone will be inadequate to protect the
other Partys interests against any actual or threatened material breach of Section 12.17 of this
Agreement. Accordingly, each Party consents to the granting of specific performance and injunctive
or other equitable or other relief to the other Party in respect of any actual or threatened breach
of Article 8 or Section 12.17 of this Agreement, without proof of actual damages. These specific
remedies are in addition to any other remedy to which the Parties may be entitled at law or in
equity.
9.8
Insurance
. Each Party shall secure and maintain in full force and effect
throughout the term of this Agreement (and for at least three (3) years thereafter for claims made
coverage), insurance with coverage and minimum policy limits set forth as follows:
(a) Alnylam:
(i)
Workers Compensation
, (to the extent applicable) including coverage for occupational
disease, with benefits determined by statute, and at least [**] of coverage for
Employers
Liability
.
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(ii)
Comprehensive General Liability
and
Personal/Advertising Injury
, including coverage for
contractual liability assumed by such Party and coverage for such Partys independent
contractor(s), with per occurrence limits of at least [**] each and a general aggregate limit of
[**].
(iii)
Umbrella Liability
, exclusive of the coverage provided by the policies listed above,
with a limit per occurrence of at least [**].
(vi)
Products Liability
, exclusive of the coverage provided by the Comprehensive General
Liability policy, with an aggregate limit of at least (i) [**] upon the earlier of (x) initiation
of clinical studies of a Royalty Product by such Party or (y) the commencement of Manufacturing of
a Royalty Product by or on behalf of such Party, and (ii) [**] upon the First Commercial Sale of a
Royalty Product by such Party; and
(b) Tekmira:
(i)
Workers Compensation
, (to the extent applicable) including coverage for occupational
disease, with benefits determined by statute, and at least [**] of coverage for Employers
Liability.
(ii)
Commercial General Liability
,
including coverage for contractual liability
assumed by such Party and coverage for such Partys independent contractor(s), with per occurrence
limits of at least [**] each and a general aggregate limit of [**].
(iii)
Umbrella / Excess Liability
, exclusive of the coverage provided by the policies listed
above, with a limit per occurrence of at least [**].
(iv)
Products Liability
, exclusive of the coverage provided by the Commercial General
Liability policy, with an aggregate limit of at least (i) [**] per claim and [**] on an annual
aggregate basis upon the earlier of (x) initiation of clinical studies of a Royalty Product by such
Party or (y) the commencement of Manufacturing of a Royalty Product by or on behalf of such Party,
and (ii) [**] upon the First Commercial Sale of a Royalty Product by such Party or an amount
mutually agreed to by both Parties.
Each Party shall furnish to the other Party a certificate from an insurance carrier (having a
minimum AM Best rating of A) demonstrating the insurance requirements set forth above. The
insurance certificate shall confirm each of the following: (x) such insurance is primary and
non-contributing to any liability insurance carried by the other Party; and (y) the insured shall
endeavor to provide thirty (30) days prior written notice to the other Party in the event of
cancellation. Provided that Tekmira, acting reasonably, determines it is not prejudicial to its
business interests (and provided that such provision is available from Tekmiras then-current
insurance underwriter) Tekmira will add Alnylam as an additional insured under its Products
Liability Policy at any time during the term of this Agreement (and in any event, Tekmira shall use
commercially reasonable efforts to add Alnylam as an additional insured under its Products
Liability Policy before the first commercial sale of any Alnylam Royalty Product). Alnylam agrees
that upon Tekmira adding Alnylam as an additional
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insured under its Products Liability Policy, Alnylam will also add Tekmira as an additional
insured under its own Products Liability policy.
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10.
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INTELLECTUAL PROPERTY OWNERSHIP, PROTECTION AND RELATED MATTERS
|
10.1
Inventorship and Ownership of Collaboration IP
. (a) Inventorship for patentable
inventions conceived or reduced to practice during the course of the performance of activities
pursuant to this Agreement shall be determined in accordance with United States patent laws for
determining inventorship.
(b) The Parties hereby acknowledge and agree that except as otherwise provided in this
Agreement, any Intellectual Property Rights owned by either Party prior to the Original Effective
Date shall remain owned by such Party. Alnylam shall own the entire right, title and interest in
and to all Alnylam Collaboration IP. Subject to clause (c) below, Tekmira shall own the entire
right, title and interest in and to all Tekmira Collaboration IP. The Parties shall jointly own
any Joint Collaboration IP.
(c) Subject to the grant of license rights between the Parties set forth in this Agreement,
Tekmira agrees to promptly assign its right, title and interest in and to all Tekmira Collaboration
IP to UBC, (i) all in accordance with the terms of the UBC-Tekmira License Agreement and the UBC
Sublicense Documents, and (ii) subject to the grant by UBC of an exclusive license to Tekmira in
the Alnylam Field under the UBC-Tekmira License Agreement, and, subject to Section 6.4(a)(ii), to
the grant by Tekmira of an exclusive license to Alnylam in the Alnylam Field under the UBC
Sublicense Documents.
10.2
Prosecution and Maintenance of Patent Rights
.
10.2.1 Alnylam Patent Rights and Know-How
. Alnylam has the sole responsibility to, at
Alnylams discretion, file, prosecute, conduct
ex parte
and
inter partes
proceedings (including the
defense of any interference or opposition proceedings) and maintain, in the Territory, all Patent
Rights comprising Alnylam RNAi Technology, Alnylam IOC Technology or Alnylam Collaboration IP, in
Alnylams name.
10.2.2 Tekmira Patent Rights and Know-How
. Tekmira has the sole responsibility to, at
Tekmiras discretion, file, prosecute, conduct
ex parte
and
inter partes
proceedings, (including
the defense of any interference or opposition proceedings), and maintain, in the Territory, all
Patent Rights comprising Tekmira Technology or Tekmira IOC Technology, in Tekmiras name, or
Tekmira Collaboration IP, in UBCs name.
10.2.3 Joint Collaboration IP
. Subject to Tekmiras continuing right to the prior review of,
comment on, revision to and approval of material documents, which shall not be unreasonably delayed
or withheld, Alnylam has the sole responsibility to, at Alnylams discretion, file, conduct
ex
parte
and
inter partes
prosecution, and maintain (including the defense of any interference or
opposition proceedings) in the Territory, all Patent Rights comprising Joint Collaboration IP, in
the names of both Tekmira and Alnylam. Each Party shall use Commercially Reasonable Efforts to
make available to Alnylam or its authorized attorneys, agents or representatives, such of its
employees as Alnylam in its
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reasonable judgment deems necessary in order to assist it in obtaining patent protection for
such Joint Collaboration IP. Each Party shall sign, or use Commercially Reasonable Efforts to have
signed, all legal documents necessary to file and prosecute patent applications or to obtain or
maintain patents in respect of such Joint Collaboration IP, at no cost to Alnylam.
10.2.4 Contingent Rights
.
(a) In the event that Alnylam elects not to seek or continue to seek or maintain patent
protection on any Alnylam IOC Technology or Alnylam Collaboration IP which is subject to Tekmiras
licensed rights under Section 6.1.2(a) or (b), or Joint Collaboration IP, then Tekmira shall have
the right (but not the obligation), at its expense, to file, prosecute and maintain in any country
within the Territory patent protection on such Alnylam IOC Technology or Alnylam Collaboration IP
in the name of Alnylam or on such Joint Collaboration IP in the names of Alnylam and Tekmira. In
the event that Alnylam declines to file, prosecute and/or maintain Valid Claims at Tekmiras
request in Joint Collaboration IP, then Tekmira shall have the right (but not the obligation) at
its expense, to file, prosecute and maintain in any country within the Territory patent prosecution
on such Joint Collaboration IP in the names of Alnylam and Tekmira.
(b) In the event that Tekmira elects not to seek or continue to seek or maintain patent
protection on any Tekmira Technology or Tekmira Collaboration IP, which is subject to Alnylams
licensed rights under Section 6.1.1(a), then subject to the provisions of the UBC Sublicense
Documents, Alnylam shall have the right (but not the obligation), at its expense, to prosecute and
maintain in any country within the Territory patent protection on such Tekmira Technology in the
name of Tekmira or Tekmira Collaboration IP in the name of UBC.
(c) The Party having the right to prosecute and maintain patents under Sections 10.2.1, 10.2.2
and 10.2.3 shall be referred to as the
Prosecuting Party
. The Prosecuting Party shall use
Commercially Reasonable Efforts to make available to the other Party or its authorized attorneys,
agents or representatives, such of its employees as are reasonably necessary to assist the other
Party in obtaining and maintaining the patent protection described under this Section 10.2.4. The
Prosecuting Party shall sign or use Commercially Reasonable Efforts to have signed all legal
documents necessary to file and prosecute such patent applications or to obtain or maintain such
patents.
10.2.5 Cooperation
. Each Party hereby agrees: (a) to make its employees, agents and
consultants reasonably available to the other Party (or to the other Partys authorized attorneys,
agents or representatives), to the extent reasonably necessary to enable such Party to undertake
patent prosecution; (b) to provide the other Party with copies of all material correspondence
pertaining to prosecution with the patent offices; (c) to cooperate, if necessary and appropriate,
with the other Party in gaining patent term extensions wherever applicable to Patent Rights; and
(d) to endeavor in good faith to coordinate its efforts with the other Party to minimize or avoid
interference with the prosecution and maintenance of the other Partys patent applications.
10.2.6 Patent Expenses.
The patent filing, prosecution and maintenance expenses incurred
after the Original Effective Date with respect to Patent Rights comprised of Alnylam Core Patent
Rights, Alnylam IOC Technology, Alnylam Lipidoid Patent Rights, Tekmira Technology, Tekmira IOC
Technology and Collaboration IP shall be borne by each Party having the right to file, prosecute
and maintain such Patent Rights under this Section 10.2.
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10.3
Third Party Infringement
.
10.3.1 Notices
. Each Party shall promptly report in writing to the other Party during the
Agreement Term (a) any known or suspected infringement of any Alnylam RNAi Technology, Alnylam IOC
Technology, Tekmira Technology, Tekmira IOC Technology or Collaboration IP with respect to a
Royalty Product, or (b) unauthorized use or misappropriation of any Confidential Information by a
Third Party of which it becomes aware, and shall provide the other Party with all available
evidence supporting such infringement, or unauthorized use or misappropriation
10.3.2 Rights to Enforce.
(a) Subject to the provisions of any Tekmira In-License and the provisions of the UBC
Sublicense Documents, in respect of the Alnylam Royalty Products in the Alnylam Field in the
Territory, Alnylam shall have the sole and exclusive right to initiate an infringement or other
appropriate suit anywhere in the world against any Third Party who at any time has infringed, or is
suspected of infringing, any Patent Rights, or of using without proper authorization, any Know-How,
comprising any of the Exclusively Licensed Tekmira IP, with respect to such Alnylam Royalty
Products.
(b) Tekmira shall have the sole and exclusive right to initiate an infringement or other
appropriate suit anywhere in the world against any Third Party who at any time has infringed, or is
suspected of infringing, any Patent Rights, or of using without proper authorization, any Know-How,
comprising any Non-Exclusively Licensed Tekmira IP other than any Patent Rights or Know-How
comprising Joint Collaboration IP.
(c) Alnylam shall have the sole and exclusive right to initiate an infringement or other
appropriate suit anywhere in the world against any Third Party who at any time has infringed, or is
suspected of infringing, any Patent Rights, or of using without proper authorization any Know-How,
comprising Alnylam RNAi Technology, Alnylam IOC Technology or Alnylam Collaboration IP;
provided
, that if Alnylam fails to initiate a suit or take other appropriate action with
respect to Alnylam IOC Technology in the United States with respect to an IOC Product that it has
the initial right to initiate or take pursuant thereto within ninety (90) days after becoming aware
of the basis for such suit or action, then Tekmira may, in its discretion, provide Alnylam with
written notice of Tekmiras intent to initiate a suit or take other appropriate action with respect
to such IOC Product. If Tekmira provides such notice and Alnylam fails to initiate a suit or take
such other appropriate action within thirty (30) days after receipt of such notice from Tekmira,
then Tekmira shall have the right to initiate a suit or take other appropriate action that it
believes is reasonably required to protect its licensed interests under the Alnylam IOC Technology
and Alnylam Collaboration IP with respect to such IOC Product.
(d) Alnylam shall have the first right to initiate an infringement or other appropriate suit
anywhere in the world against any Third Party who at any time has infringed, or is suspected of
infringing, any Patent Rights, or of using without proper authorization any Know-How, comprising
Joint Collaboration IP that is Non-Exclusively Licensed Tekmira IP;
provided
, that if
Alnylam fails to initiate a suit or take other appropriate action with respect to such Joint
Collaboration IP in the Territory within ninety (90) days after becoming aware of the basis for
such suit or action, then Tekmira may, in its discretion, provide Alnylam with written notice of
Tekmiras intent to initiate a
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suit or take other appropriate action with respect to such Joint Collaboration IP. If Tekmira
provides such notice and Alnylam fails to initiate a suit or take such other appropriate action
within thirty (30) days after receipt of such notice from Tekmira, then Tekmira shall have the
right to initiate a suit or take other appropriate action that it believes is reasonably required
to protect its licensed interests under such Joint Collaboration IP.
10.3.3 Procedures; Expenses and Recoveries
. The Party having the right to initiate any
infringement suit pursuant to Section 10.3.2 above shall have the sole and exclusive right to
select counsel for any such suit, and shall pay all expenses of the suit, including legal fees and
court costs and reimbursement of the other Partys reasonable out-of-pocket expense in rendering
assistance requested by the initiating Party. If required under applicable law in order for the
initiating Party to initiate and/or maintain such suit, or if the initiating Party is unable to
initiate or prosecute such suit solely in its own name or it is otherwise advisable to obtain an
effective legal remedy, in each case, the other Party shall join as a party to the suit and will
execute and cause its Affiliates to execute all documents necessary for the initiating Party to
initiate litigation to prosecute and maintain such action. In addition, at the initiating Partys
request, the other Party shall provide reasonable assistance to the initiating Party in connection
with an infringement suit at no charge to the initiating Party except for reimbursement by the
initiating Party of reasonable out-of-pocket expenses incurred in rendering such assistance. The
other Party shall have the right to participate and be represented in any such suit by its own
counsel at its own expense, and to share equally all expenses of such suit if it so elects. If the
Parties obtain from a Third Party, in connection with such suit, any damages, license fees,
royalties or other compensation (including any amount received in settlement of such litigation),
such amounts shall be allocated in all cases, first to reimburse each Party for all expenses of the
suit, including legal fees and disbursements, court costs and other litigation expenses; with the
balance being allocated as follows:
(i) in the case of amounts received in respect of an infringement of Exclusively Licensed
Tekmira IP in a suit brought by Alnylam pursuant to Section 10.3.2(a) with respect to an Alnylam
Royalty Product, such amount remaining after deduction of expenses as set forth above shall be
treated as if it were Net Sales of such Alnylam Royalty Product, with Tekmira receiving a royalty
on such remaining amount pursuant to the terms of Section 7.3.1; and the balance being retained by
Alnylam;
or
(ii) in the case of amounts received in respect of an infringement suit brought by Tekmira
pursuant to Section 10.3.2(b), the entire such amount remaining after deduction of expenses as set
forth above shall be retained by Tekmira;
or
(iii) in the case of amounts received in respect of an infringement of Alnylam RNAi
Technology, Alnylam IOC Technology or Alnylam Collaboration IP in a suit brought by Alnylam
pursuant to Section 10.3.2(c), such amount remaining after deduction of expenses as set forth above
shall be retained by Alnylam;
or
(iv) in the case of amounts received in respect of an infringement suit brought by Tekmira
pursuant to the proviso in Section 10.3.2(c) with respect to an IOC Product, such amount remaining
after deduction of expenses as set forth above shall be treated as if it were Net Sales of such IOC
Product, with Alnylam receiving a royalty on such remaining amount pursuant to the terms of Section
7.3.2; and the balance being retained by Tekmira;
or
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(v) in the case of amounts received in respect of an infringement suit brought by either Party
with respect to Joint Collaboration IP that is Non-Exclusively Licensed Tekmira IP pursuant to
Section 10.3.2(d), the entire such amount remaining after deduction of expenses as set forth above
shall be paid to the Party conducting the litigation, or shared equally if both Parties
participated voluntarily throughout the litigation and shared its expenses.
10.4
Claimed Infringement
.
10.4.1 Notice
. In the event that a Third Party at any time provides written notice of a claim
to, or brings an action, suit or proceeding against, any Party or any of their respective
Affiliates or Sublicensees, claiming infringement of its patent rights or unauthorized use or
misappropriation of its know-how, based upon an assertion or claim arising out of the use of the
Intellectual Property Rights of the other Party that is licensed or assigned under this Agreement
in the Research, Development, Manufacture or Commercialization of a Royalty Product in the
Territory and in (a) the Alnylam Field, in the case of Alnylam Royalty Products and Tekmira
Development Products or (b) the Tekmira IOC Field, in the case of Tekmira IOC Products
(
Infringement Claim
), such Party shall promptly notify the other Party of the claim or
the commencement of such action, suit or proceeding, enclosing a copy of the claim and all papers
served.
10.4.2 Responsibility
.
(a)
Alnylam Royalty Products
. Any Infringement Claim brought against either Party or its
Affiliates or Sublicensees arising out of the Research, Development, Manufacture or
Commercialization of any Alnylam Royalty Product in the Alnylam Field in the Territory, shall be
defended by Alnylam if it so desires. Tekmira agrees to make reasonably available to Alnylam its
advice and counsel regarding the technical merits of any such claim and to offer reasonable
assistance to Alnylam at no cost to Alnylam.
(b)
Tekmira Royalty Products
. Any Infringement Claim brought against either Party or its
Affiliates or Sublicensees arising out of the Research, Development, Manufacture or
Commercialization of any Tekmira Royalty Product in the Territory and in (a) the Alnylam Field, in
the case of Tekmira Development Products or (b) the Tekmira IOC Field, in the case of Tekmira IOC
Products, shall be defended by Tekmira if it so desires. All liabilities, damages, costs and
expenses arising out of such Infringement Claims shall be borne by Tekmira.
10.4.3 Procedure
. The Party with responsibility for the Infringement Claim under Section
10.4.2 (the
Responsible Party
) shall have the sole and exclusive right to select counsel
for any Infringement Claim;
provided
, that it shall consult with the other Party with
respect to selection of counsel for such defense. The Responsible Party shall keep the other
Party informed, and shall from time to time consult with such other Party regarding the status of
any such claims and shall provide such other Party with copies of all documents filed in, and all
written communications relating to, any suit brought in connection with such claims. The other
Party shall also have the right to participate and be represented in any such claim or related
suit, at its own expense. The other Party shall have the sole and exclusive right to control the
defense of an Infringement Claim in the event the Responsible Party fails to exercise its right to
assume such defense within thirty (30) days following written notice of such Infringement Claim. No
Party shall settle any claims or suits involving rights of another Party without obtaining the
prior written consent of such other Party, which consent shall not be unreasonably withheld.
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10.4.4 Limitations
. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN THIS AGREEMENT, THE FOREGOING
STATES THE ENTIRE RESPONSIBILITY OF ALNYLAM AND TEKMIRA, AND THE SOLE AND EXCLUSIVE REMEDY OF
ALNYLAM OR TEKMIRA, AS THE CASE MAY BE, IN THE CASE OF ANY CLAIMED INFRINGEMENT OF ANY THIRD PARTY
PATENT RIGHTS OR UNAUTHORIZED USE OR MISAPPROPRIATION OF ANY THIRD PARTYS KNOW-HOW.
10.5
Other Infringement Resolutions
. In the event of a dispute or potential dispute
that has not ripened into a demand, claim or suit of the types described in Sections 10.3 and 10.4
of this Agreement (e.g., actions seeking declaratory judgments and revocation proceedings), the
same principles governing control of the resolution of the dispute, consent to settlements of the
dispute, and implementation of the settlement of the dispute (including the sharing in and
allocation of the payment or receipt of damages, license fees, royalties and other compensation)
shall apply.
10.6
Product Trademarks
. Alnylam shall own the Product Trademarks for Alnylam Royalty
Products and shall be solely responsible for filing and maintaining such Product Trademarks in the
Territory (including payment of costs associated therewith), Alnylam shall assume full
responsibility, at its sole cost and expense, for any infringement of a Product Trademark for an
Alnylam Royalty Product by a Third Party and for any claims of infringement of the rights of a
Third Party by the use of a Product Trademark in connection with such Alnylam Royalty Product.
Tekmira shall own the Product Trademarks for Tekmira Royalty Products and shall be solely
responsible for filing and maintaining such Product Trademarks in the Territory (including payment
of costs associated therewith). Tekmira shall assume full responsibility, at its sole cost and
expense, for any infringement of a Product Trademark for a Tekmira Royalty Product by a Third Party
and for any claims of infringement of the rights of a Third Party by the use of a Product Trademark
in connection with such Tekmira Royalty Product.
10.7
Patent Term Extensions
.
The Parties shall use reasonable efforts to obtain all
available supplementary protection certificates (
SPC
) and other extensions of Patent
Rights (including those available under the Hatch-Waxman Act). Each Party shall execute such
authorizations and other documents and take such other actions as may be reasonably requested by
the other Party to obtain such extensions. The Parties shall cooperate with each other in gaining
patent term restorations, extensions and/or SPCs wherever applicable to Patent Rights. The Party
first eligible to seek patent term restoration or extension of any such Patent Rights or any SPC
related thereto shall have the right to do so;
provided
,
that if in any country the first
Party has an option to extend the patent term for only one of several patents, the first Party
shall consult with the other Party before making the election. If more than one patent is eligible
for extension or patent term restoration, the Parties shall agree upon a strategy that shall
maximize patent protection and commercial value for Royalty Products, as the case may be. All
filings for such extensions and certificates shall be made by the Party to whom responsibility for
prosecution and maintenance of the Patent Rights is assigned,
provided
,
that in the event
that the Party to whom such responsibility is assigned elects not to file for an extension or SPC,
such Party shall (a) inform the other Party of its intention not to file and (b) grant the other
Party the right to file for such extension or SPC in the patentees name and such Party shall
provide all necessary assistance in connection therewith.
10.8
Patent Certification
.
To the extent required by law or permitted by law, the
Parties shall use Commercially Reasonable Efforts to maintain with the applicable Regulatory
Authorities
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during the Agreement Term correct and complete listings of applicable Patent Rights for
Royalty Products, as the case may be, being commercialized, including all so called Orange Book
listings required under the Hatch-Waxman Act.
11.
TERM AND TERMINATION
11.1
Effective Date; Agreement Term and Expiration
. The Effective Date shall be the
date upon which this Agreement and the Protiva License Agreement are released from escrow and
delivered to the appropriate parties in accordance with the terms of the Escrow Agreement. Unless
and until the foregoing condition is met, the Original Agreement shall remain in full force and
effect and the terms and conditions of the Original Agreement shall govern the Parties without any
regard being given to this Agreement or its terms and conditions. On the date upon which the
foregoing condition is met (the
Condition Satisfaction Date
), this Agreement will
supersede and replace the Original Agreement and this Agreement shall continue until terminated
pursuant to Section 11.2. (
Agreement Term
).
11.2
Termination for Cause.
11.2.1 Cause for Termination
. This Agreement may be terminated at any time during the
Agreement Term:
(a) upon written notice by either Party (the
Non-Breaching Party
) if the other Party
(the
Breaching Party
) is in breach of any of its material obligations under this
Agreement, in any case by causes and reasons within the Breaching Partys control and, if the
breach is capable of being cured, the Breaching Party has not cured such breach within ninety (90)
days after receiving such notice, which notice shall set out the requirements to cure such breach;
provided
,
however
, in the event of a good faith Dispute with respect to the
existence of a material breach that is capable of being cured, the ninety (90) day cure period
shall be tolled until such time as the Dispute is resolved pursuant to Section 12.6 hereof; or
(b) upon written notice by the Non-Breaching Party if the Breaching Party is in breach of any
of its material obligations under any Transaction Document to which it is a party (other than the
Supply Agreement or any Quality Agreement), in any case by causes and reasons within the Breaching
Partys control, and if the breach is capable of being cured, the Breaching Party has not cured
such breach within the period provided for cure under the applicable Transaction Document or, if
greater, ninety (90) days after receiving such notice;
provided
, that (x) if the breach is
capable of being cured, the written notice of breach provided by the Non-Breaching Party shall set
out the requirements to cure such breach and the applicable cure period, and (y) in the event of a
good faith dispute with respect to the existence of a material breach if the breach is capable of
being cured, the applicable cure period shall be tolled until such time as the dispute is resolved
pursuant to the dispute resolution provisions of the applicable Transaction Document, or in the
absence of any dispute resolution provisions in the applicable Transaction Document, Section 12.6
hereof; or
(c) by either Party upon the filing or institution of bankruptcy, reorganization, liquidation
or receivership proceedings, or upon an assignment of a substantial portion of the assets for the
benefit of creditors by the other Party;
provided
,
however
, that in the event of
any involuntary bankruptcy or receivership proceeding such right to terminate shall only become
effective if the Party consents to the
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involuntary bankruptcy or receivership or such proceeding is not dismissed within thirty (30)
days after the filing thereof.
11.2.2 Effect of Termination for Cause
. Notwithstanding the foregoing, if the material
breach has, or is reasonably likely to have, a material adverse effect only on the Research,
Development, Manufacture or Commercialization of a Royalty Product in a Region or Regions, then
this Agreement shall not terminate with respect to such Royalty Product in the Territory outside of
such Region(s);
provided,
that with respect to such Royalty Product in such Region(s):
(a) except to the extent such licenses are necessary for the Breaching Party to perform its
obligations under clause (c) below, the licenses granted to the Breaching Party under this
Agreement with respect to the Research, Development, Manufacture and Commercialization of such
Royalty Product in such Region(s) shall terminate; and
(b) subject to the Breaching Partys obligations under the In-Licenses, if the Breaching Party
is
(i) Alnylam with respect to a Tekmira Development Product, the license granted to Tekmira in
Section 6.1.2(a)(i) shall be converted into royalty-free, perpetual license;
(ii) Alnylam with respect to an IOC Product, the license granted to Tekmira in Section
6.1.2(b) shall be converted into a royalty-free, perpetual license; or
(iii) Tekmira with respect to an Alnylam Royalty Product, the licenses granted to Alnylam in
Sections 6.1.1(a) and (b) shall be converted into a royalty-free, perpetual license and the
milestone obligations with respect to such Alnylam Royalty Product shall also terminate;
provided
,
however
, that to the extent (x) such license in clauses (i), (ii) or
(iii) includes a sublicense under Necessary Third Party IP, including without limitation the
In-Licenses, the non-Breaching Party shall be fully responsible for all royalties, milestones or
other payments under such license of Necessary Third Party IP reasonably allocable to such Royalty
Product in such Region(s) or (y) Tekmira is the Breaching Party and the applicable Alnylam Royalty
Product is Covered by Intellectual Property Rights sublicensed to Alnylam by Tekmira pursuant to
the UBC Sublicense Documents, Alnylam shall be fully responsible for all royalties and sublicense
revenue payable by Tekmira to UBC in respect of such sublicensed Intellectual Property Rights under
the Tekmira-UBC License Agreement after the effective date of clause (iii) above subject to
Alnylams right to offset such payments pursuant to Section 7.4.3;
(c) in the event that Tekmira is the Breaching Party with respect to an Alnylam Royalty
Product and is Manufacturing and supplying such Alnylam Royalty Product pursuant to Section 5.1,
Tekmira shall have the obligation, if requested by Alnylam, to continue to Manufacture and supply
such Alnylam Royalty Product for such Region(s) for a period of up to eighteen (18) months after
the effective date of termination on the same terms thereunder, the Supply Agreement and the
applicable Quality Agreement.
For purposes of this Article 11,
Region
shall mean any of the following regions in the
Territory: (i) [**].
Moreover, any breach of the restrictions in Section 6.1.2(b) which Tekmira fails to cure pursuant
to Section 11.2.1 shall result in the termination of Tekmiras license under such Section to the
Alnylam Data, but it shall not, by itself, result in the termination of any other licenses to
Tekmira under this
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Agreement unless Alnylam meets the burden of demonstrating that such breach has had or is
reasonably likely to have a material adverse effect on the benefits, taken as a whole, that Alnylam
reasonably anticipates it will obtain from this Agreement and the Protiva License Agreement and the
activities and grants contemplated under such agreements.
11.3
Termination upon Bankruptcy of a Party
.
If this Agreement is terminated by
either Party (the
Non-Bankrupt Party
) pursuant to Section 11.2.1(c) due to the rejection
of this Agreement by or on behalf of the other Party (the
Bankrupt Party
) under Section
365 of the United States Bankruptcy Code (the
Code
), all licenses and rights to licenses
granted under or pursuant to this Agreement by the Bankrupt Party to the Non-Bankrupt Party are,
and shall otherwise be deemed to be, for purposes of Section 365(n) of the Code, licenses of rights
to intellectual property as defined under Section 101(35A) of the Code. The Parties agree that
the Non-Bankrupt Party, as a licensee of such rights under this Agreement, shall retain and may
fully exercise all of its rights and elections under the Code, and that upon commencement of a
bankruptcy proceeding by or against the Bankrupt Party under the Code, the Non-Bankrupt Party shall
be entitled to a complete duplicate of, or complete access to (as the Non-Bankrupt Party deems
appropriate), any such intellectual property and all embodiments of such intellectual property.
Such intellectual property and all embodiments thereof shall be promptly delivered to the
Non-Bankrupt Party (a) upon any such commencement of a bankruptcy proceeding upon written request
therefor by the Non-Bankrupt Party, unless the Bankrupt Party elects to continue to perform all of
its obligations under this Agreement or (b) if not delivered under (a) above, upon the rejection of
this Agreement by or on behalf of the Bankrupt Party upon written request therefor by the
Non-Bankrupt Party. The foregoing provisions are without prejudice to any rights the Non-Bankrupt
Party may have arising under the Code or other applicable law.
11.4
Termination upon a Change of Control
. Upon Tekmira (a) receiving or otherwise
becoming aware of a proposal or intention by a Third Party to take any action, whether directly or
indirectly, including without limitation a non-binding letter of intent, that could lead to a
Change of Control, (b) Tekmira planning to solicit or soliciting offers relating to its or
Protivas voting securities or assets that could lead to a Change of Control, or (c) any Change of
Control, Tekmira shall provide prompt written notice thereof to Alnylam. In the event of a Change
of Control Alnylam may elect, upon prior written notice to Tekmira, to terminate any or all of the
following: (i) the Collaboration, (ii) all Manufacturing Activities, the Supply Agreement and/or
any Quality Agreements, (iii) Section 12.17 and/or (v) Alnylams license grants to Tekmira under
the Alnylam Lipidoid Patent Rights;
provided
,
however
, that subject to the terms
and conditions of the MIT License Agreement, to the extent that a Tekmira Development Product is
Covered by a Valid Claim of an Alnylam Lipidoid Patent Right and is also comprised of a Library
Component (as defined in the MIT License Agreement) on the effective date of termination, such
license grant shall survive, but only with respect to such Tekmira Development Product and such
Library Component.
11.5
Termination upon an Invalidity Challenge
.
(a)
Invalidity Challenge by Alnylam
. If Alnylam or its Related Party asserts in any court or
other governmental agency of competent jurisdiction that a Tekmira Patent Right or a Patent Right
Controlled by Tekmira by virtue of the Tekmira-UBC License Agreement and sublicensed to Alnylam
pursuant to the UBC Sublicense (in either case, an
Tekmira Patent
) is invalid,
unenforceable, or that no issued Valid Claim embodied in such Tekmira Patent excludes a Third Party
from making, having made, using, selling, offering for sale, importing or having imported an
Alnylam Royalty Product in
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such jurisdiction, then Tekmira shall be entitled, upon written notice to Alnylam, to
terminate all licenses granted to Alnylam for such Alnylam Royalty Product(s) covered by such
Tekmira Patent that is under challenge in the applicable jurisdiction;
provided
however
, that Tekmira shall not terminate such license if within thirty (30) days of
Alnylams receipt of Tekmiras notification hereunder, Alnylam has:
(i) confirmed by written notice to Tekmira that Alnylam no longer intends to challenge the
validity or enforceability of such Tekmira Patent; or
(ii) provided to Tekmira documentation to confirm Alnylams withdrawal of its filing,
submission, or other process commenced in any court or other governmental agency of competent
jurisdiction to challenge the validity or enforceability of any such Tekmira Patent.
(b)
Invalidity Challenge by Tekmira.
If Tekmira or its Related Party asserts in any court or
other governmental agency of competent jurisdiction that any Patent Right comprising Alnylam RNAi
Patent Rights, Alnylam Lipidoid Patent Rights, Alnylam IOC Technology or Alnylam Core Patent Rights
is invalid, unenforceable, or that no issued Valid Claim embodied in such Patent Right excludes a
Third Party from making, having made, using, selling, offering for sale, importing or having
imported a Tekmira Royalty Product in such jurisdiction, then Alnylam shall be entitled, upon
written notice to Tekmira, to terminate all licenses granted to Tekmira for such Tekmira Royalty
Product(s) covered by the Alnylam RNAi Patent Rights, Alnylam Lipidoid Patent Rights, Alnylam IOC
Technology or Alnylam Core Patent Rights under challenge in the applicable jurisdiction;
provided
,
however
, that Alnylam shall not terminate such license if within thirty
(30) days of Tekmiras receipt of Alnylams notification hereunder, Tekmira has:
(i) confirmed by written notice to Alnylam that Tekmira no longer intends to challenge the
validity or enforceability or any Patent Right under the Alnylam RNAi Patent Rights, Alnylam
Lipidoid Patent Rights, Alnylam IOC Technology or Alnylam Core Patent Rights; or
(ii) provided to Alnylam, documentation to confirm Tekmiras withdrawal of its filing,
submission, or other process commenced in any court or other governmental agency of competent
jurisdiction to challenge the validity or enforceability of any Patent Right under the Alnylam RNAi
Patent Rights, Alnylam Lipidoid Patent Rights, Alnylam IOC Technology or Alnylam Core Patent
Rights.
11.6
Termination of Exclusive Manufacturing Obligations.
Alnylam shall have the right
to terminate the Manufacturing Activities, the Supply Agreement and any Quality Agreement in the
event of a breach by Tekmira of any of its material obligations under Article 5, the Supply
Agreement or any Quality Agreement, in any case by causes and reasons within Tekmiras control,
upon written notice to Tekmira setting out the requirements to cure, and if the breach is capable
of being cured, Tekmira has not cured such breach within ninety (90) days after receiving such
notice;
provided
,
however
, that in the event of a good faith Dispute with respect
to the existence of a material breach that is capable of being cured, the ninety (90) day cure
period shall be tolled until such time as the Dispute is resolved pursuant to Section 12.6 hereof.
11.7
Effect of Expiration or Termination; Survival
. Expiration or termination of this
Agreement shall not relieve the Parties of any obligation accruing prior to such expiration or
termination. Any expiration or termination of this Agreement shall be without prejudice to the
rights of either Party against the other accrued or accruing under this Agreement prior to
expiration or
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termination, including without limitation the obligation to pay royalties sold prior to such
expiration or termination. The provisions of Articles 1, 8, 9, and 12 and Sections 3.3 (third and
fourth sentences only), 3.4, 3.6, 3.7.3, 3.7.4, 5.4, 6.1.2(b), 6.2.6, 6.3, 6.6, 7.6, 7.7, 7.8(b),
10.1, 10.2.3, 10.4.2, 10.4.3, 10.4.4, 10.5 (to the extent relevant to a demand, claim or suit of
the type described in Section 10.4), 10.6, 11.2.2, 11.3, and 11.7 shall survive any expiration or
termination of this Agreement;
provided
,
however
, that if this Agreement is
terminated pursuant to Section 11.2.1 and the Breaching Party or the Bankrupt Party is (a) Tekmira
or its Affiliate, then Sections 6.1.2(b) and 12.17 shall terminate or (b) Alnylam, then Section
6.9 shall terminate. Except as set forth in this Article 11, upon termination or expiration of
this Agreement all other rights and obligations cease.
12. MISCELLANEOUS
12.1
Force Majeure
. Neither Party shall be held liable to the other Party nor be
deemed to have defaulted under or breached this Agreement for failure or delay in performing any
obligation under this Agreement to the extent that such failure or delay is caused by or results
from causes beyond the reasonable control of the affected Party, potentially including without
limitation embargoes, war, acts of war (whether war be declared or not), insurrections, riots,
civil commotions, strikes, lockouts or other labor disturbances, fire, floods, or other acts of
God, or acts, omissions or delays in acting by any governmental authority or the other Party. The
affected Party shall notify the other Party of such
force majeure
circumstances as soon as
reasonably practical, and shall promptly undertake all reasonable efforts necessary to cure such
force majeure
circumstances.
12.2
Assignment
. This Agreement may not be assigned or otherwise transferred, nor may
any right or obligation hereunder be assigned or transferred, by either Party by operation of law
or otherwise, without the prior written consent of the other Party;
provided
,
however
, that subject to Section 11.4, either Party may, without the other Partys consent,
assign this Agreement and its rights and obligations hereunder in whole or in part to an Affiliate
or, to a party that acquires, by merger, sale of assets or otherwise, all or substantially all of
the business of such Party to which the subject matter of this Agreement relates. Notwithstanding
the foregoing, Tekmira may not assign (a) this Agreement or its rights and obligations hereunder to
Protiva without Alnylams prior written consent, except that Tekmira may, upon prior written notice
to Alnylam, transfer its rights and obligations with respect to any Tekmira Development Target and
any Tekmira Development Products to Protiva;
provided
that, (i) any such transfer shall be
subject in all respects to the [**] Restriction and the terms of Section 3.7, (ii) Protiva is and
remains a wholly-owned subsidiary of Tekmira, (iii) Protiva agrees in writing to perform all of
Tekmiras obligations with respect to such Tekmira Development Target(s) and Tekmira Development
Product(s) and (iv) Tekmira guarantees in writing the performance of Protivas obligations to
Alnylam with respect to such Tekmira Development Target(s) and Tekmira Development Product(s); or
(b) its rights under this Agreement to perform the Collaboration or to perform Manufacturing
Activities to any Tekmira Affiliate of which [**] or more of the outstanding voting securities are
owned, controlled or held by a Significant Pharmaceutical Company or by any investment entity
affiliated with any such Significant Pharmaceutical Company. The above notwithstanding: (i)
Tekmira agrees not to assign or transfer this Agreement to any Third Party who is not also the
assignee or transferee of all ownership rights in the Tekmira Technology or otherwise in a manner
that would be inconsistent with Alnylams rights under this Agreement; and (ii) Alnylam agrees not
to assign this Agreement to any Third Party who is not also the assignee or transferee of all
ownership rights in the Alnylam Core Patent Rights or otherwise in a manner that would be
inconsistent with Protivas rights under this Agreement. Any attempted assignment not in
accordance
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with this Section 12.2 shall be void. The assigning Party shall remain responsible for the
performance by its assignee of this Agreement or any obligations hereunder so assigned to such
assignee. Alnylam agrees to notify Tekmira in the event that all or a part of this Agreement is
assigned to an Affiliate of Alnylam, which assignment may result in payments from such Affiliate to
the Tekmira under the agreement;
provided
,
however
, that the failure to provide
such notice shall not constitute a material breach of this Agreement.
12.3
Severability
. If any one or more of the provisions contained in this Agreement
is held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability
of the remaining provisions contained herein shall not in any way be affected or impaired thereby,
unless the absence of the invalidated provision(s) adversely affects the substantive rights of the
Parties. The Parties shall in such an instance use their best efforts to replace the invalid,
illegal or unenforceable provision(s) with valid, legal and enforceable provision(s) which, insofar
as practical, implement the purposes of this Agreement.
12.4
Notices
. All notices which are required or permitted hereunder shall be in
writing and sufficient if delivered personally, sent by facsimile (and promptly confirmed by
personal delivery, registered or certified mail or overnight courier), sent by
nationally-recognized overnight courier or sent by registered or certified mail, postage prepaid,
return receipt requested, addressed as follows:
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ALNYLAM PHARMACEUTICALS, INC.
300 Third Street
Cambridge, MA 02142
Attention: Chief Executive Officer
Facsimile No.: (617) 551-8101
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and:
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FABER DAEUFER & ROSENBERG PC
950 Winter Street, Suite 4500
Waltham, MA 02451
Attention: Sumy Daeufer
Facsimile No.: 781-795-4747
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If to Tekmira, to:
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TEKMIRA PHARMACEUTICALS CORPORATION
#200 8900 Glenlyon Parkway
Burnaby, B.C.
Canada V5J 5J8
Attention: President and C.E.O
Facsimile No.: (604) 419-3201
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and:
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LANG MICHENER LLP
1500-1055 West Georgia Street
Vancouver, British Columbia
Attention: Leo Raffin
Facsimile No.: (604) 893-2356
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or to such other address as the Party to whom notice is to be given may have furnished to the other
Party in writing in accordance herewith. Any such notice shall be deemed to have been given: (a)
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when delivered if personally delivered or sent by facsimile on a Business day (or if delivered or
sent on a non-Business Day, then on the next Business day); (b) on receipt if sent by
nationally-recognized overnight courier; and/or (c) on receipt if sent by mail.
12.5
Applicable Law
. The Agreement shall be governed by and construed in accordance
with the laws of the State of Delaware, U.S.A;
provided
that (i) matters of intellectual
property law concerning the existence, validity, ownership, infringement or enforcement of
intellectual property shall be determined in accordance with the national intellectual property
laws relevant to the intellectual property in question, and (ii) the application of the 1980 United
Nations Convention on Contracts for the International Sale of Goods is expressly excluded from this
Agreement.
12.6
Dispute Resolution
.
12.6.1 Disputes.
The Parties shall negotiate in good faith and use reasonable efforts to
settle any dispute, controversy or claim arising from, or related to, this Agreement or to the
breach hereof (collectively,
Dispute
). In the event that the Chief Executive Officers
cannot reach an agreement regarding a Dispute within thirty (30) days after submission to them for
resolution, the provisions of Section 4.4(a) do not apply, and a Party wishes to pursue the matter,
each such Dispute that is not an Excluded Claim shall be finally resolved by binding arbitration
in accordance with the Commercial Arbitration Rules and Supplementary Procedures for Large Complex
Disputes of the American Arbitration Association (
AAA
) and Section 12.6.2 below, and
judgment on the arbitration award may be entered in any court having jurisdiction thereof. As used
in this Section 12.6, the term
Excluded Claim
shall mean a dispute that concerns (a) the
validity or infringement of a patent, trademark or copyright, or (b) any antitrust, anti-monopoly
or competition law or regulation, whether or not statutory.
12.6.2 Arbitration.
The arbitration shall be conducted by a panel of three (3) persons
experienced in the pharmaceutical business who are independent of both Parties and neutral with
respect to the Dispute presented for arbitration. Within thirty (30) days after initiation of
arbitration, each Party shall select one person to act as arbitrator and the two Party-selected
arbitrators shall select a third arbitrator within thirty (30) days of their appointment. If the
arbitrators selected by the Parties are unable or fail to agree upon the third arbitrator, the
third arbitrator shall be appointed by the AAA. The place of arbitration shall be Chicago,
Illinois, USA, and all proceedings and communications shall be in English.
Either Party may apply to the arbitrators for interim injunctive relief until the arbitration
award is rendered or the controversy is otherwise resolved. Either Party also may, without waiving
any remedy under this Agreement, seek from any court having jurisdiction any injunctive or
provisional relief necessary to protect the rights or property of that Party pending the
arbitration award. The arbitrators shall have no authority to award punitive or any other type of
damages not measured by a Partys compensatory damages. Each Party shall bear its own costs and
expenses and attorneys fees, and the Party that does not prevail in the arbitration proceeding
shall pay the arbitrators and any administrative fees of arbitration. Except to the extent
necessary to confirm an award or as may be required by law, neither a Party nor an arbitrator may
disclose the existence, content, or results of an arbitration without the prior written consent of
both Parties. In no event shall an arbitration be initiated after the date when commencement of a
legal or equitable proceeding based on the Dispute, controversy or claim would be barred by the
applicable Massachusetts statute of limitations.
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(a) The Parties agree that, in the event of a Dispute over the nature or quality of
performance under this Agreement, neither Party may terminate this Agreement until final resolution
of the Dispute through arbitration or other judicial determination. The Parties further agree that
any payments made pursuant to this Agreement pending resolution of the Dispute shall be refunded
promptly if an arbitrator or court determines that such payments are not due.
(b) The Parties hereby agree that any disputed performance or suspended performances pending
the resolution of the arbitration that the arbitrator determines to be required to be performed by
a Party must be completed within a reasonable time period following the final decision of the
arbitrator.
(c) The Parties hereby agree that any monetary payment to be made by a Party pursuant to a
decision of the arbitrator shall be made in United States dollars, free of any tax or other
deduction. The Parties further agree that the decision of the arbitrator shall be the sole,
exclusive and binding remedy between them regarding determination of the matters presented to the
arbitrator.
12.7
Entire Agreement; Amendments
. This Agreement, together with the other
Transaction Documents, contain the entire understanding of the Parties with respect to the subject
matter hereof and licenses granted hereunder. All express or implied agreements and
understandings, either oral or written, with regard to the subject matter hereof and the licenses
granted hereunder, including without limitation, the Original INEX Agreements, are superseded by
the terms of this Agreement and the other Transaction Documents. This Agreement (including the
Schedules hereto) and the other Transaction Documents may be amended, or any term hereof modified,
only by a written instrument duly executed by authorized representatives of both Parties hereto.
12.8
Headings
. The captions to the Articles and Sections hereof are not a part of
this Agreement, but are merely for convenience to assist in locating and reading the several
Articles and Sections hereof.
12.9
Independent Contractors
. It is expressly agreed that Alnylam and Tekmira shall
be independent contractors and that the relationship between Alnylam and Tekmira shall not
constitute a partnership, joint venture or agency. Neither Party shall have the authority to make
any statements, representations or commitments of any kind, or to take any action, which shall be
binding on the other Party, without the prior written consent of such other Party.
12.10
Waiver
. The waiver by either Party hereto of any right hereunder, or of the
failure of the other Party to perform, or of a breach by the other Party, shall not be deemed a
waiver of any other right hereunder or of any other breach or failure by such other Party, whether
of a similar nature or otherwise.
12.11
Cumulative Remedies
. No remedy referred to in this Agreement is intended to be
exclusive, but each shall be cumulative and in addition to any other remedy referred to in this
Agreement or otherwise available under law.
12.12
Waiver of Rule of Construction
. Each Party has had the opportunity to consult
with counsel in connection with the review, drafting and negotiation of this Agreement.
Accordingly, the
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rule of construction that any ambiguity in this Agreement shall be construed against the
drafting Party shall not apply.
12.13
Counterparts
. The Agreement may be executed in two or more counterparts, each
of which shall be deemed an original, but all of which together shall constitute one and the same
instrument.
12.14
Binding Effect
. Subject to Section 11.1, as of the Effective Date, this
Agreement shall be binding upon and inure to the benefit of the Parties and their respective
permitted successors and permitted assigns.
12.15
No Third Party Beneficiaries
. Except as expressly contemplated herein, no Third
Party, including any employee of any Party to this Agreement, shall have or acquire any rights by
reason of this Agreement.
12.16
Finders Fee
.
Tekmira agrees to indemnify and to hold harmless Alnylam from any
liability for any commission or compensation in the nature of a finders fee (and the reasonable
costs and expenses of defending against such liability or asserted liability) for which Tekmira or
any of its officers, partners, employees, or representatives is responsible. Alnylam agrees to
indemnify and hold harmless Tekmira from any liability for any commission or compensation in the
nature of a finders fee (and the reasonable costs and expenses of defending against such liability
or asserted liability) for which Alnylam or any of its officers, employees or representatives is
responsible.
12.17
Standstill
.
(a) Subject to the terms of this Section 12.17, until the fifth year anniversary of the
Original Effective Date, without the approval of the Board of Directors of Tekmira, neither Alnylam
nor any of its Affiliates will:
(i) acquire or offer to acquire in one or more transactions, any voting securities or other
securities convertible into voting securities of Tekmira representing in aggregate 10% or more of
the issued and outstanding voting securities of Tekmira (assuming the conversion of such other
securities convertible into voting securities of Tekmira);
(ii) solicit proxies with respect to the voting of any securities of Tekmira or otherwise
attempt to influence the voting of any securities of Tekmira by the holders of such securities;
(iii) enter in any agreement with or assist any Third Party, or assist or participate in any
group acting jointly or in concert, with respect to any of the foregoing; or
(iv) make any public announcement or disclosure with respect to any of the foregoing, except
to the extent required by applicable law and except for disclosure of the foregoing terms as
contemplated by Article 8.
(b) Alnylam represents and warrants to Tekmira that, as of the Effective Date, Alnylam,
together with its Affiliates, does not beneficially own, or exercise control or direction over, any
voting securities or other securities convertible into voting securities of Tekmira, except for (i)
securities
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owned, or over which Alnylam and/or its Affiliates exercise control or direction, for purposes of
any 401(k) or similar benefit plan maintained by Alnylam or its Affiliates for its or their
employees over which Alnylam has no independent investment control and (ii) securities acquired by
Alnylam pursuant to the Alnylam Subscription Agreement. For as long as the restrictions in Section
12.17.1(a) are in effect, Alnylam agrees to provide Tekmira with prompt notice of any acquisition
of voting securities or other securities convertible into voting securities of Tekmira.
(c) Upon Tekmira receiving or otherwise becoming aware of a bona fide proposal or intention by
a Third Party (other than a Permitted Investor) to take any action described in Section
12.17.1(a)(i)-(iv), whether directly or indirectly, including without limitation a non-binding
letter of intent, Tekmira shall immediately notify Alnylam of such proposal or intention. The
restrictions in Section 12.17.1(a) shall immediately terminate and be of no further force or effect
on the earlier of (a) such bona fide proposal or intention being disclosed publicly (other than by
Alnylam) or (b) the Board of Directors or management of Tekmira engaging in substantive discussions
with such Third Party concerning such proposal or intention. A
Permitted Investor
means
any investor, other than a pharmaceutical or biotechnology company, who acquires in one or more
transactions, any voting securities or other securities convertible into voting securities of
Tekmira representing in aggregate 10% or more, but less than 20%, of the issued and outstanding
voting securities of Tekmira (assuming the conversion of such other securities convertible into
voting securities of Tekmira), so long as such investor evidences no intent to seek to influence
the management of Tekmira (other than by voting such acquired securities).
(d) In the event that Tekmira plans to solicit or does solicit offers (other than in respect
of a public offering of its securities, including any private placement to a Permitted Investor)
relating to the acquisition of voting securities or other securities convertible into voting
securities of Tekmira representing 10% or more of the issued and outstanding voting securities of
Tekmira (assuming the conversion of such other securities convertible into voting securities of
Tekmira), or in the event Tekmira engages in any discussions in which Tekmira may solicit or
receive any offer relating to the acquisition of an ownership interest (excluding licenses) in any
Tekmira Technology, Tekmira shall immediately notify Alnylam of such circumstance and the
restrictions in Section 12.17.1(a) shall immediately terminate and be of no further force or
effect.
(e) Upon a breach by Tekmira of any of the representations, warranties or covenants set forth
in the Alnylam Subscription Agreement, the restrictions in Section 12.17.1(a) shall immediately
terminate and be of no further force or effect.
(f) Nothing in this Section 12.17.1 shall be deemed to affect or impair the right of Alnylam
to enforce its lawful remedies against Tekmira or to prevent Alnylam from exercising any rights
granted by Tekmira to Alnylam.
(g) Nothing in this Section 12.17.1 shall prohibit Alnylam or its Affiliates from owning or
making open market purchases of any voting securities of Tekmira, or any securities convertible
into or exercisable for any such voting securities, for purposes of any 401(k) or similar benefit
plan maintained by Alnylam or its Affiliates for its or their employees;
provided
that Alnylam and
its Affiliates will not request or direct that the trustee or other administrator of any such plan
acquire any voting securities of Tekmira or exercise any influence over the voting of such
securities.
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(h) Alnylam and Tekmira agree and acknowledge that the restrictions contained in this Section
12.17.1: (i) shall continue in full force and effect following both the execution of the Purchase
Agreement and the Closing, and (ii) shall not apply to the transactions contemplated in the Alnylam
Subscription Agreement and the Roche Subscription Agreement.
12.18
Employees
. Until the fifth year anniversary of the Original Effective Date,
neither Alnylam nor any of its Affiliates will knowingly offer to hire or hire any individual who
is, at such time, an officer or employee of Tekmira or any of its Affiliates, and who was, at any
time in the preceding three (3) months, involved in (i) selecting the Tekmira Development Targets,
(ii) the Research, Development, Manufacture and Commercialization of Tekmira Development Products
and/or (iii) conducting the Collaboration. For clarity, placing an advertisement in a newspaper,
periodical or other publication of general availability, or other general recruitment activities
not directed at a particular individual, do not constitute an offer to hire.
12.19
Protiva License Agreement
.
Tekmira, as the parent company of Protiva, hereby
agrees to use reasonable and diligent efforts to cause Protiva to perform Protivas obligations in
accordance with the terms of the Protiva License Agreement. Moreover, Tekmira hereby
unconditionally and irrevocably agrees that, if and to the extent Protiva fails to pay to Alnylam
when due any financial obligation at any time owed by Protiva to Alnylam in connection with the
Protiva License Agreement (including without limitation any damages for breach), Tekmira shall be
responsible for such financial obligation, and will be required to make such payment to Alnylam in
satisfaction of Protivas obligation.
12.20
Further Assurances
.
The Parties will with reasonable diligence, do all such
things and provide all such reasonable assurances as may be required to consummate the transactions
contemplated by this Agreement, and each Party will provide such further documents or instruments
required by the other Party as may be reasonably necessary or desirable to give effect to the
purpose of this Agreement and carry out its provisions.
[THE REMAINDER OF THIS PAGE HAS BEEN LEFT INTENTIONALLY BLANK]
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IN WITNESS WHEREOF
, the Parties have executed this Agreement as of the date first set forth
above.
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TEKMIRA PHARMACEUTICAL CORPORATION
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ALNYLAM PHARMACEUTICALS, INC.
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BY:
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/s/ Ian Mortimer
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BY:
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/s/ John Maraganore
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NAME:
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Ian Mortimer
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NAME:
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John Maraganore
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TITLE:
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CFO
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TITLE:
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Chief Executive Officer
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DATE:
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DATE:
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SCHEDULE 1.4
ALNYLAM CORE PATENT RIGHTS
[**]
A total of eight pages were omitted pursuant to a request with the Securities and Exchange
Commission.
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SCHEDULE 1.6
ALNYLAM IOC PATENT RIGHTS
[**]
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SCHEDULE 1.7
ALNYLAM LIPIDOID PATENT RIGHTS
[**]
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SCHEDULE 1.15
BIODEFENSE TARGETS
[**]
A total of three pages were omitted pursuant to a request with the Securities and Exchange
Commission.
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SCHEDULE 1.35
EXISTING ALNYLAM IN-LICENSES
[**]
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SCHEDULE 1.36
EXISTING TEKMIRA IN-LICENSES
[**]
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SCHEDULE 1.73
TEKMIRA PATENT RIGHTS
[**]
A total of thirty pages were omitted pursuant to a request with the Securities and Exchange
Commission.
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SCHEDULE 1.78
PRE-EXISTING ALNYLAM ALLIANCE AGREEMENTS
[**]
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SCHEDULE 3.1
UPDATED RESEARCH PLAN
[**]
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SCHEDULE 5.1
UPDATED MANUFACTURING PLAN
[**]
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SCHEDULE 6.2.2
ROCHE SUBLICENSE AGREEMENT
[**]
A total of four pages were omitted pursuant to a request with the Securities and Exchange
Commission.
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SCHEDULE 6.4(a)
TEKMIRA IN-LICENSE PROVISION
[**]
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SCHEDULE 6.4(b)
MIT LICENSE AGREEMENT OBLIGATIONS
[**].
A total of two pages were omitted pursuant to a request with the Securities and Exchange Commission.
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SCHEDULE 9
EXCEPTIONS TO REPRESENTATIONS AND WARRANTIES
[**]
Confidential
Exhibit 10.40
EXECUTION COPY
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
AMENDED AND RESTATED
CROSS-LICENSE AGREEMENT
Between
ALNYLAM PHARMACEUTICALS, INC.
And
PROTIVA BIOTHERAPEUTICS INC.
Dated: May 30, 2008
AMENDED AND RESTATED CROSS-LICENSE AGREEMENT
This Amended and Restated Cross-License Agreement (this Agreement) is entered into as of May
30, 2008, by and between ALNYLAM PHARMACEUTICALS, INC., a corporation organized under the laws of
the State of Delaware having a principal office at 300 Third Street, Cambridge, MA 02142, U.S.A.,
and PROTIVA BIOTHERAPEUTICS INC., a Canadian corporation, having a principal office at 100-3480
Gilmore Way, Burnaby, B.C., Canada.
RECITALS
WHEREAS
, ALNYLAM owns or controls certain intellectual property covering fundamental aspects
of the structure and uses of therapeutic products that (a) function through RNA interference
(RNAi), including but not limited to compositions and methods of use of siRNAs (defined below),
or (b) are, or function through the modulation of, miRNAs (as defined below); and ALNYLAM is
developing capabilities to develop and commercialize such therapeutic products;
WHEREAS
, PROTIVA owns or controls certain intellectual property covering certain targeted
nucleic acid delivery technology known as Stable Nucleic Acid Lipid Particle technology (the SNALP
Technology) which is useful for the delivery of a variety of therapeutic products that function
through RNAi or are, or function through the modulation of, miRNA, and is also engaged in the
business of discovering, developing, manufacturing and commercializing human therapeutic products;
WHEREAS
, ALNYLAM and PROTIVA are parties to a Cross-License Agreement dated as of August 14,
2007 (the Original Cross-License Agreement) under which:
(i) ALNYLAM granted PROTIVA non-exclusive licenses under certain ALNYLAM intellectual property
to research, develop and commercialize products directed at up to four Targets (as defined below).
PROTIVA selected the PLK Target and the Second Target (each as defined below) prior to the
effective date of this Agreement, and has the right to select two additional Targets, subject to
ALNYLAMs obligations to Third Parties (as defined below) and the terms of this Agreement;
(ii) PROTIVA granted ALNYLAM a non-exclusive license under certain of PROTIVAs intellectual
property related to delivery technologies also known as SNALP Technology with application to one or
more products to be researched, developed and commercialized by ALNYLAM alone or in partnership
with Third Parties; and
(iii) ALNYLAM agreed to support certain research and development activities to be conducted by
PROTIVA over a [**]-year period to develop RNAi products to be delivered using PROTIVAs
technology, and obtained a non-exclusive license under certain PROTIVA intellectual property to
further develop and commercialize the products that are the subject of such research and
development activities;
1
WHEREAS
, following the execution of the Original Cross-License Agreement, PROTIVA entered into
[**] agreement (the [**]) with [**] and its affiliated companies (including without limitation
[**]) (collectively, the [**]) effective as of [**], under which, among other things, PROTIVA
granted to the [**] a non-exclusive license to certain intellectual property of PROTIVA;
WHEREAS
, ALNYLAM and TEKMIRA Pharmaceuticals Corporation (as successor in interest to Inex
Pharmaceuticals Corporation) (TEKMIRA) are parties to a License and Collaboration Agreement dated
as of January 8, 2007 (the Original ALNYLAM-TEKMIRA License Agreement), which as a condition to
ALNYLAMs agreement to enter into this Agreement, is being amended and restated concurrently with
this Agreement (as so amended and restated, the ALNYLAM-TEKMIRA License Agreement);
WHEREAS
, on March 28, 2008, TEKMIRA, PROTIVA and all holders of securities of PROTIVA entered
into a Share Purchase Agreement (the Purchase Agreement) pursuant to which, upon completion of
the transactions contemplated therein (the Closing), TEKMIRA will purchase all of the outstanding
shares of capital stock of PROTIVA and PROTIVA will become a wholly-owned subsidiary of TEKMIRA;
WHEREAS
, following the execution and delivery of the Purchase Agreement, and as a condition to
Closing thereunder, TEKMIRA entered into a subscription agreement with ALNYLAM (the ALNYLAM
Subscription Agreement) and a subscription agreement with F. Hoffmann-La Roche Ltd (ROCHE) (the
ROCHE Subscription Agreement), pursuant to which ALNYLAM and ROCHE have each, separately, agreed
to purchase certain shares of TEKMIRAs common stock upon the Closing if certain conditions are
met;
WHEREAS
, as a condition to the effectiveness of the ALNYLAM Subscription Agreement, ALNYLAM
has agreed to enter into this Agreement on the terms and conditions contained herein, including but
not limited to, the Parties agreement to harmonize the license grants from PROTIVA to ALNYLAM
contained in this Agreement with certain license grants from TEKMIRA to ALNYLAM in the
ALNYLAM-TEKMIRA License Agreement and the Parties agreement to harmonize the royalty and milestone
payment obligations of the Parties with the obligations of TEKMIRA and ALNYLAM contained in the
ALNYLAM-TEKMIRA License Agreement; and
WHEREAS
, concurrent with the execution of this Agreement, the Parties have entered into an
escrow agreement (the Escrow Agreement) pursuant to which the original signature pages to this
Agreement and the fully-executed ALNYLAM-TEKMIRA License Agreement, among other agreements, shall
be placed into escrow and shall be either (i) released from escrow and delivered to the appropriate
parties pursuant to the terms of the Escrow Agreement and, thereafter, this Agreement shall become
effective, or (ii) each Partys original signature pages shall be returned to it pursuant to the
terms of the Escrow Agreement and this Agreement will never become fully executed, delivered or
effective.
NOW, THEREFORE,
in consideration of the mutual covenants contained herein, and other good and
valuable consideration, the receipt of which is hereby acknowledged,
2
ALNYLAM and PROTIVA enter into this Agreement effective as of the Effective Date (defined
below) and subject to the terms of Section 12.1:
ARTICLE I
DEFINITIONS
General
. When used in this Agreement, each of the following terms, whether used in
the singular or plural, will have the meanings set forth in this Article I.
1.1
Act
means the United States Food, Drug and Cosmetic Act of 1938, 21 U.S.C.
§§
321
et seq., as such may be amended from time to time, and its implementing regulations.
1.2
Active Internal Development Program
, with respect to a particular RNAi Product or
miRNA Product, means that the following criteria have been satisfied, as of the relevant time under
this Agreement:
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(a)
|
|
an active program of Research, Development or Commercialization with respect to
such RNAi Product or miRNA Product has been commenced and remains in effect internally
at ALNYLAM or its Affiliates; and
|
|
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(b)
|
|
if such program has not previously established preclinical proof-of-principle
for such RNAi Product or miRNA Product, ALNYLAM or its Affiliates have committed to
conduct such program at least through the completion of significant preclinical
proof-of-principle testing of a specific Formulation for such RNAi Product or miRNA
Product.
|
1.3
Affiliate
means any corporation, company, partnership, joint venture and/or firm
which controls, is controlled by, or is under common control with a Party. For purposes of the
foregoing sentence, control will mean (a) in the case of corporate entities, direct or indirect
ownership of at least fifty percent (50%) of the stock or shares having the right to vote for the
election of directors, (b) in the case of non-corporate entities, direct or indirect ownership of
at least fifty percent (50%) of the equity interest with the power to direct the management and
policies of such non-corporate entities, and (c) in any country where local law does not permit
foreign entities to own stock or shares or have equity interest of fifty percent (50%) or more in
such entities, the direct or indirect ownership or control of the maximum percentage of such stock
or shares or equity interest as is permitted under local law.
1.4
ALNYLAM
means Alnylam Pharmaceuticals, Inc., a Delaware corporation, its
Affiliates (including its subsidiary, Alnylam U.S., Inc.), Alnylam Europe AG and its successors and
assigns.
1.5
ALNYLAM Development Products
means ALNYLAM Class 1 Development Products and
ALNYLAM Class 2 Development Products.
1.6
ALNYLAM Field
means, with respect to any Target, the use of prophylactic or
therapeutic RNAi Products or miRNA Products against such Target for the prevention or treatment of
human disease, and related Research, Development and Commercialization.
3
1.7
ALNYLAM Partnered Product
means an RNAi Product or miRNA Product, as the case may
be, that is at the relevant time being Researched, Developed, and/or Commercialized by ALNYLAM with
the participation or sponsorship of one or more Third Parties or, prior to the end of the
Restriction Period, TEKMIRA. For clarity, it is understood and agreed that no RNAi Product or
miRNA Product developed or to be developed in a project or arrangement in which all or
substantially all of ALNYLAMs contributions or anticipated contributions are or will be in the
form of the grant by ALNYLAM of licenses or sublicenses to one or more intellectual properties will
be considered an ALNYLAM Partnered Product.
1.8
ALNYLAM Patent Rights
means (a) the patents and patent applications listed on
Exhibit A-1
and all patent applications hereafter filed that derive priority from the
patents and patent applications listed on
Exhibit A-1
, including all continuations,
continuations-in-part, divisions, applications for certificate of invention, provisionals, or any
substitute applications, any patents issued with respect to any such patent applications; and all
reissues, substitutions, confirmations, re-registrations, re-examinations, supplementary protection
certificates, certificates of invention and patents of addition of any such patents; and all
foreign equivalents of any of the foregoing; and (b) the Exclusively Licensed Tekmira IP.
Moreover, solely with respect to the PROTIVA Development Target that is the Second Target, ALNYLAM
Patent Rights will also include the patents and patent applications listed on
Exhibit A-1-A
and all patent applications hereafter filed by ALNYLAM that derive priority from the patents and
patent applications listed on
Exhibit A-1-A
, including all continuations,
continuations-in-part, divisions, applications for certificate of invention, provisionals, or any
substitute applications, any patents issued with respect to any such patent applications; and all
reissues, substitutions, confirmations, re-registrations, re-examinations, supplementary protection
certificates, certificates of invention and patents of addition of any such patents; and all
foreign equivalents of any of the foregoing.
1.9
ALNYLAM Target
means any Target that is neither the PLK Target nor a PROTIVA
Development Target, nor a Tekmira Development Target under (and as defined in) the ALNYLAM-TEKMIRA
License Agreement;
provided, however
, that the exclusion of the PLK Target will not apply
if PROTIVA provides notice to ALNYLAM that PROTIVA is terminating its license rights under this
Agreement with respect to RNAi Products or miRNA Products for the PLK Target.
1.10
Approval
means, with respect to each Licensed Product Developed and
Commercialized, the receipt of sufficient authorization from the appropriate regulatory authority
on a country-by-country basis to market and sell such Licensed Product in a country, including
(where necessary in a particular country prior to marketing a Licensed Product) all separate
pricing and/or reimbursement approvals that may be required for marketing
1.11
Biodefense Targets
means (a) a Target within the genome of one or more Category
A, B and C pathogens, as defined by the National Institute of Allergy and Infectious Diseases,
including without limitation, pathogens listed on
Schedule 1.15
to the ALNYLAM-TEKMIRA
License Agreement, but specifically excluding influenza virus, or (b) an endogenous cellular Target
against which ALNYLAM Develops and/or Commercializes an ALNYLAM Development Product that is a
Licensed Product for commercial supply to one or more Funding Authorities.
4
1.12
Bona Fide Collaboration
means a collaboration between a Party and one or more
Third Parties involving the Research and Development of one or more RNAi Products (and/or miRNA
Products in the case of ALNYLAM) and established under a written agreement in which (i) the scope
of the licenses granted, and financial or other commitments of value, are of material value to such
Party, and (ii) such Party undertakes and performs substantial, mutual research activity with the
Third Party. For purposes of clarity, it is understood and agreed that no collaboration in which
all or substantially all of ALNYLAMs contributions or anticipated contributions are or will be in
the form of the grant by ALNYLAM of licenses or sublicenses to one or more intellectual properties
will be considered a Bona Fide Collaboration.
1.13
Commercialize
or
Commercialization
means any and all activities directed
to manufacturing (including, without limitation, by means of contract manufacturers), marketing,
promoting, distributing, importing, exporting and selling an RNAi Product (and/or an miRNA Product
in the case of ALNYLAM), in each case for commercial purposes, and activities directed to obtaining
pricing and reimbursement approvals, as applicable.
1.14
Commercially Reasonable Efforts
means the level of efforts and resources that
would be employed by ALNYLAM or PROTIVA as the case may be in connection with Researching,
Developing, and Commercializing its own products of similar market potential at a similar stage of
its product life, taking into account the apparent attributes of the molecule, the competitiveness
of the relevant marketplace, the proprietary positions of Third Parties, regulatory structures,
including the likelihood of obtaining an Approval, and the anticipated profitability of such
product.
1.15
Confidential Information
means all proprietary or confidential information and
materials, patentable or otherwise, of a Party which are disclosed by or on behalf of such Party to
the other Party hereunder, including, without limitation, chemical substances, formulations,
techniques, methodology, equipment, data, reports, know how, sources of supply, patent positioning,
business plans, and also including without limitation proprietary and confidential information of
Third Parties in possession of such Party under an obligation of confidentiality, whether or not
related to making, using or selling RNAi Products or miRNA Products.
1.16
Develop
,
Developing
or
Development
means with respect to an RNAi
Product (and/or an miRNA Product in the case of ALNYLAM), preclinical and clinical drug development
activities, including without limitation: test method development and stability testing,
toxicology, formulations, manufacturing scale-up, preclinical and clinical manufacture, quality
assurance/quality control development, statistical analysis and report writing; clinical studies
and regulatory affairs; Approval and registration.
1.17
Exclusively Licensed Tekmira IP
shall have the meaning ascribed to it in the
ALNYLAM-TEKMIRA License Agreement.
1.18
FDA
means the United States Food and Drug Administration or any successor agency
thereto.
1.19
Field
means, with respect to the PLK Target and any PROTIVA Development
5
Target, the use of prophylactic or therapeutic RNAi Products against such Target for the
prevention or treatment of human disease, and related Research, Development and Commercialization.
1.20
First Commercial Sale
means, with respect to each Licensed Product, the first
commercial sale in a country as part of a nationwide introduction after receipt by a Product Seller
(as defined below) of Approval in such country, excluding
de minimis
named patient and
compassionate use sales.
1.21
Formulation
means a particular SNALP formulation, characterized by its components
and its unique ratios among components.
1.22
Funding Authorities
means the United States Department of Health and Human
Services or other United States or foreign government or international agencies responsible for
requesting, approving and/or funding the development and manufacture of products for biodefense
purposes.
1.23
GAAP
means United States generally accepted accounting principles applied on a
consistent basis. Unless otherwise defined or stated, financial references shall be calculated by
the accrual method under GAAP.
1.24
Generic Claim
means a claim in an issued or pending patent that meets the
following criteria:
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(a)
|
|
the claim recites a nucleic acid-lipid particle comprising: an siRNA or miRNA, at least
one cationic lipid, at least one non-cationic lipid, and a conjugated lipid that inhibits
aggregation of particles, and/or methods or uses of such particle in the delivery of siRNA or
miRNA; and
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|
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(b)
|
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the claim does not recite any Particular Moiety or any particular or specific cationic
lipid, non-cationic lipid, or conjugated lipid.
|
1.25
IND
or
Investigational New Drug Application
means a United States
investigational new drug application or its equivalent or any corresponding foreign application.
1.26
Joint Patent Rights
means all patents and patent applications to the extent
specifically claiming inventions or improvements discovered or reduced to practice jointly by
PROTIVA and ALNYLAM (as determined in accordance with U.S. patent law) directly in the course of
work conducted after the Original Effective Date and before the Effective Date by them under the
Second Target Research Plan or under the R&D Research Plan, or conducted after the Effective Date
by them whether or not under the PLK Research Plan or the R&D Research Plan, together with all
patent applications hereafter filed that derive priority from such patents and patent applications,
including all continuations, continuations-in-part, divisions, applications for certificate of
invention, provisionals, or any substitute applications, any patents issued with respect to any
such patent applications; and all reissues, substitutions, confirmations, re-registrations,
re-examinations, supplementary protection certificates, certificates of invention and patents of
addition of any such patents; and all foreign equivalents of any of the foregoing.
6
1.27
Joint Steering Committee
or
JSC
means the committee described in Section
6.1 of this Agreement.
1.28
Lead Formulation
is a Formulation that has been identified by PROTIVA and ALNYLAM
as being the end product of PROTIVAs and ALNYLAMs work under the R&D Research Plan (and, if
ALNYLAM exercises its Opt-In Right, also under the PLK Research Plan) for a particular ALNYLAM
siRNA payload(s) directed at a particular Target. It is expected that formulated materials using a
number of different initial Formulations would be delivered by PROTIVA to ALNYLAM, tested by
ALNYLAM, and (on the basis of such tests, and subsequent iterative tests if needed) culled or
otherwise adjusted by PROTIVA to the point where both parties believe that no further formulation
adjustments, or improvements are anticipated under the R&D Research Plan (or, as applicable, the
PLK Research Plan). That Formulation is the Lead Formulation in that situation.
1.29
Licensed Information
means all biological materials and other tangible materials,
information, data, inventions, practices, methods, protocols, formulas, formulations, knowledge,
know-how, trade secrets, processes, assays, skills, experience, techniques and results of
experimentation and testing, including without limitation pharmacological, toxicological and
preclinical and clinical test data and analytical and quality control data, patentable or
otherwise, which relates to the identification, characterization, optimization, construction,
expression, formulation, use or production of RNAi Products or miRNA Products and Formulations
thereof and which are reasonably useful or necessary to Research, Develop, or Commercialize such
RNAi Products or miRNA Products in the Territory in the ALNYLAM Field and are controlled by
PROTIVA;
provided
,
however
, that in no event shall Licensed Information include
Confidential Information of PROTIVA with respect to, or methods for the development of, the
chemistry, formulation or manufacture of RNAi Products or miRNA Products beyond the scope of the
information, materials and data described in
Appendix II
.
1.30
Licensed Product
means: (a) with respect to PROTIVA and its Affiliates and
Sublicensees, an RNAi Product, the identification, characterization, validation, synthesis,
development, use, formulation, manufacture, production or sale of which, where and when occurring,
would, but for the grant of a license or sublicense from ALNYLAM, infringe a Valid Claim of the
ALNYLAM Patent Rights; and (b) with respect to ALNYLAM and its Affiliates and Sublicensees, an RNAi
Product or miRNA Product, the identification, characterization, validation, synthesis, development,
use, formulation, manufacture, production or sale of which, where and when occurring, would, but
for the grant of a license or sublicense from PROTIVA, infringe a Valid Claim of the PROTIVA Patent
Rights.
1.31
Major Market
means, individually and collectively, [**].
1.32
miRNA Product
means a product containing, comprised of or based on native or
chemically modified RNA oligomers designed to either modulate microRNA transcripts (miRNA) and/or
provide the function of an miRNA.
1.33
Necessary Third Party IP means
, with respect to any country in the Territory, on
a country-by-country basis, information, materials, data, know-how or patent rights (including,
7
without limitation, all rights in patents and patent applications) in such country owned or
controlled by a Third Party that in the absence of a license would be infringed through the
manufacture, use or sale of, as applicable, (a) ALNYLAM Development Products that are Licensed
Products; (b) PROTIVA Development Products; and (c) Licensed Products for the PLK Target;
provided, however
, that, for clarity, in each of (a), (b) and (c) above, information,
materials, data, know-how or patent rights (including, without limitation, all rights in patents
and patent applications) in such country owned or controlled by TEKMIRA and licensed to ALNYLAM
under the ALNYLAM-TEKMIRA License Agreement shall not be considered Necessary Third Party IP.
1.34
Net Sales
means, with respect to any Licensed Products, the gross amount
invoiced, with respect to Articles II and III hereof, by PROTIVA, its Affiliates or Sublicensees,
or, with respect to Article IV hereof, by ALNYLAM, its Affiliates or Sublicensees (in each case, a
Product Seller) on sales or other dispositions of such Licensed Products to Third Parties which
are not Affiliates or Sublicensees of the Product Seller, less, (a) to the extent allowed and
taken, sales returns and allowances, granted or accrued, including trade, quantity and cash
discounts and any other adjustments, including those granted on account of price adjustments,
billing errors, rejected goods, damaged or defective goods, recalls, returns, rebates, chargebacks,
reimbursements or similar payments granted or given to wholesalers or other distributors, buying
groups, health care insurance carriers or other institutions; (b) adjustments arising from consumer
discount programs or similar programs, or arising in connection with any Discount or Savings
Program (as defined below); (c) customs or excise duties, sales tax, consumption tax, value added
tax, and other similar taxes (except income taxes) measured by the production, sale, or delivery of
goods; (d) duties relating to sales and any payments in respect of sales to the United States
government, any State government or any foreign government, or to any governmental authority, or
with respect to any government subsidized program or managed care organization; and (e) charges for
freight and insurance related to the return of Licensed Products and not otherwise paid by the
customer. For purposes of this definition of Net Sales only, Discount or Savings Program means
any discount, rebate or reimbursement program applicable to a Licensed Product under which the
Product Seller provides to low income, uninsured or other patients the opportunity to purchase
pharmaceutical products at discounted prices.
In the event that a Licensed Product is sold in any country in the form of a combination product
containing one or more therapeutically active ingredients in addition to such Licensed Product in
any year, Net Sales of such combination product will be adjusted by multiplying actual Net Sales of
such combination product in such country by the fraction A/(A+B), where A is the average Net Sales
price per daily dose during such year of the Licensed Product in such country, if sold separately
in such country, and B is the average Net Sales price per daily dose of any product containing the
other therapeutically active ingredients in the combination product in such country, if sold
separately in such country. If, in a specific country, the product containing the other
therapeutically active ingredients in the combination product are not sold separately in such
country, Net Sales will be calculated by multiplying actual Net Sales of such combination product
by the fraction A/C, where A is the average Net Sales price per daily dose of the Licensed Product
in such country and C is the average Net Sales price per daily dose of the combination product in
such country. If, in a specific country, the Licensed Product is not sold
8
separately in such country, Net Sales will be calculated by multiplying actual Net Sales of such
combination product by the fraction (C-B)/C, where B is the average Net Sales price per daily dose
of the product containing the other therapeutically active ingredients in the combination product
in such country and C is the average Net Sales price per daily dose of the combination product in
such country. If, in a specific country, both the Licensed Product and the product containing the
other therapeutically active ingredients in the combination product are not sold separately in such
country, the Net Sales price for the Licensed Product and the product containing the other
therapeutically active ingredients in the combination product will be negotiated by the Parties in
good faith based upon the costs, overhead and profit as are then incurred for the Licensed Product
and all similar substances then being made and marketed by the selling Party and having an
ascertainable market price.
In the event a Product Seller receives non-monetary consideration in exchange for the sale or other
disposition of Licensed Products to Third Parties that are not Affiliates or Sublicensees of the
Product Seller, Net Sales for such sale or other disposition shall include the fair market value of
the non-cash consideration received as a result of such sale or other disposition. If such sale or
other disposition occurred in a country where such Product Seller, within the preceding six months,
sold the same Licensed Product in commercial quantities solely for monetary consideration, the fair
market value of the non-cash consideration received for such Licensed Product shall be determined
on the basis of the value received in such solely monetary transactions. If such Product Seller
did not have sales or other dispositions of Licensed Product in such country solely for monetary
consideration in such six-month period, then the fair market value of such products shall be
determined on the basis of all relevant facts and circumstances.
In the event that the Product Seller prices and sells Licensed Products in conjunction with other
products of such Product Seller at a single price or rate or at a discount for collectively buying
such products, then Net Sales with respect to such Licensed Product shall equal the number of units
of the Licensed Product sold together with the non-Licensed Products multiplied by the average Net
Sales price at which the Product Seller sold the Licensed Product individually to similar customers
for similarly sized orders.
Net Sales shall be determined from books and records maintained in accordance with generally
accepted accounting principles in the United States, consistently applied throughout the
organization and across all products of the entity whose sales of Licensed Product are giving rise
to Net Sales.
1.35
Opt-In Period
is defined in Section 2.8.
1.36
Opt-In Right
is defined in Section 2.8.
1.37
Original Effective
Date means August 14, 2007.
1.38
Particular Moiety
means a specific nucleotide sequence of an RNAi Product or
miRNA Product, in either case directed against a particular individual Target.
9
1.39
Party
means either ALNYLAM or PROTIVA;
Parties
means both ALNYLAM and
PROTIVA.
1.40
Phase I Clinical Trial
means the first study of a Licensed Product in humans the
primary purpose of which is the determination of safety and which may include the determination of
pharmacokinetic and/or pharmacodynamic profiles in healthy individuals or patients.
1.41
Phase II Clinical Trial
means (a) a study of dose exploration, dose response,
duration of effect, kinetics or preliminary efficacy and safety study of a Licensed Product in the
target patient population, or (b) a controlled dose-ranging clinical trial to evaluate further the
efficacy and safety of such Licensed Product in the target population and to define the optimal
dosing regimen.
1.42
Phase III Clinical Trial
means a controlled study of a Licensed Product in
patients of the efficacy and safety of such Licensed Product which is prospectively designed to
demonstrate statistically whether such Licensed Product is effective and safe for use in a
particular indication in a manner sufficient to obtain Approval to market such Licensed
Product.
1.43
PLK Research Plan
means the plan described in Section 2.3 of this Agreement.
1.44
PLK Target
means polo-like kinase 1 as more specifically described in
Appendix I
.
1.45
PLK Term
means the period of time commencing on the Effective Date and ending
upon the expiration or abandonment of all issued patents and filed applications within the ALNYLAM
Patent Rights or the earlier notice by PROTIVA to ALNYLAM that PROTIVA is terminating its license
rights under this Agreement with respect to RNAi Products for the PLK Target.
1.46
PROTIVA
means Protiva Biotherapeutics Inc., a Canadian corporation, its
Affiliates (including its subsidiary, Protiva Biotherapeutics (USA), Inc., but excluding, solely
for purposes of this definition, TEKMIRA), and its successors and assigns.
1.47
PROTIVA Patent Rights
means:
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(a)
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the following (collectively the Class 1 PROTIVA Patent
Rights):
|
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(1)
|
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the patents and patent applications listed on
Exhibit A-2
;
|
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(2)
|
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all Generic Claims as reflected in any of the
patents and patent applications described in subsection 1.47(b)(i);
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(3)
|
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all Generic Claims as reflected in any patents
or patent applications claiming intellectual property discovered or
reduced to practice solely by PROTIVA directly in the course of work
conducted by it following the Original Effective Date and prior to the
Effective Date under the Second Target Research Plan or following the
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10
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Effective Date under the PLK Research Plan (prior to, but not after, the end of
the Opt-In Period, if ALNYLAM fails to exercise its Opt-In Right) or
under the R&D Research Plan; and
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(4)
|
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all Generic Claims as reflected in any patents
or patent applications claiming intellectual property owned or
controlled by PROTIVA and that are useful or necessary for Researching,
Developing, or Commercializing an RNAi Product or miRNA Product in the
ALNYLAM Field;
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together with all Generic Claims in patent applications hereafter filed that derive priority from
the patents and patent applications described in (1), (2), (3) or (4) above, including all
continuations, continuations-in-part, divisions, applications for certificate of invention,
provisionals, or any substitute applications, any Generic Claims in patents issued with respect to
any such patent applications; and all reissues, substitutions, confirmations, re-registrations,
re-examinations, supplementary protection certificates, certificates of invention and patents of
addition of any such claims; and all foreign equivalents of any of the foregoing; and
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(b)
|
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the following (collectively the Class 2 PROTIVA Patent
Rights):
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(1)
|
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claims (other than Generic Claims and
Target-Specific Claims) as reflected in the patents and patent
applications listed on
Exhibit A-3
;
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(2)
|
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claims (other than Generic Claims) as reflected
in all patents and patent applications claiming intellectual property
discovered or reduced to practice solely by PROTIVA directly in the
course of work conducted by it following the Original Effective Date
and prior to the Effective Date under the Second Target Research Plan
or following the Effective Date under the PLK Research Plan (prior to,
but not after, the end of the Opt-In Period, if ALNYLAM fails to
exercise its Opt-In Right) or under the R&D Research Plan; and
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(3)
|
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claims (other than Generic Claims and
Target-Specific Claims) as reflected in all patents and patent
applications claiming intellectual property owned or controlled by
PROTIVA and that is useful or necessary for Researching, Developing, or
Commercializing an RNAi Product or miRNA Product in the ALNYLAM Field,
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together with all claims (other than Generic Claims and Target-Specific Claims) in patent
applications hereafter filed that derive priority from the patents and patent applications
described in (1) or (3) above, and all claims (other than Generic Claims) in patent applications
hereafter filed that derive priority from the patents and patent applications described in (2)
above, including all continuations, continuations-in-part, divisions, applications for certificate
of invention, provisionals, or any substitute applications, any claims (other than Generic Claims) in
11
patents issued with respect to any such patent applications; and all reissues, substitutions,
confirmations, re-registrations, re-examinations, supplementary protection certificates,
certificates of invention and patents of addition of any such claims; and all foreign equivalents
of any of the foregoing.
1.48
R&D Program Product
means the Formulations that are related to RNAi Product(s)
and/or miRNA Products(s) developed under the R&D Research Plan under this Agreement and/or under
the Research Plan (as defined in the ALNYLAM-TEKMIRA License Agreement) for which ALNYLAM has
established an Active Internal Development Program.
1.49
R&D Research Plan
means the plan described in Section 5.4 of this Agreement.
1.50
Research
or
Researching
means identifying, evaluating, validating and
optimizing RNAi Products (and/or miRNA Products in the case of ALNYLAM).
1.51
RNAi Product
means a product containing, comprised of or based on siRNAs or siRNA
derivatives or other double-stranded moieties effective in gene function modulation and designed to
modulate the function of particular genes or gene products by causing degradation through RNA
interference of a Target mRNA to which such siRNAs or siRNA derivatives or moieties are
complementary.
1.52
Royalty Quarter
means each of the four (4) calendar quarters that begin January
1, April 1, July 1 and October 1 of each year
1.53
Second Target
means the Target described in
Appendix I
.
1.54
Second Target Research Plan
means the research plan for the Second Target
described in the Original Cross-License Agreement, and in effect as of the Effective Date.
1.55
siRNA
means a double-stranded ribonucleic acid (RNA) composition designed to act
primarily through an RNA interference mechanism that consists of either (a) two separate oligomers
of native or chemically modified RNA that are hybridized to one another along a substantial portion
of their lengths, or (b) a single oligomer of native or chemically modified RNA that is hybridized
to itself by self-complementary base-pairing along a substantial portion of its length to form a
hairpin.
1.56
Sublicensee
means a Third Party that is not an Affiliate of a Party, to whom such
Party (or another permitted sublicensee of such Party under this Agreement) grants a sublicense of
all or a portion of the rights licensed to it hereunder as permitted herein, including the right to
manufacture or have manufactured a Licensed Product. A Sublicensee will be deemed to include any
Third Party who is granted a sublicense hereunder by such Party pursuant to the terms of the
outcome or settlement of any infringement or threatened infringement action.
1.57
Target
means (a) a polypeptide or entity comprising a combination of at least one
polypeptide and other macromolecules, that is a site or potential site of therapeutic intervention
by a therapeutic agent; or a nucleic acid which is required for expression of such polypeptide,
together with all variants of such polypeptide, cellular entity or nucleic acid described
above; (b)
12
a defined non-peptide entity, including a microorganism, virus, bacterium or single cell
parasite;
provided
that the entire genome of a microorganism, virus, bacterium, or single
cell parasite shall be regarded as a single Target; or (c) a naturally occurring interfering RNA or
miRNA or precursor thereof.
1.58
Target-Specific Claim
means a claim in an issued or pending patent that recites
one or more specified Particular Moiety(ies).
1.59
Territory
means worldwide. For clarity, at any time the Territory will not
include any country to which the exportation or re-exportation of materials, products and related
technical data covered by this Agreement is restricted by the laws, rules or executive orders of
the federal government of the United States, which restriction has not been removed or waived.
1.60
Third Party(ies)
means any person or entity other than PROTIVA, ALNYLAM, and
their respective Affiliates.
1.61
Valid Claim
means (a) any claim in an issued and unexpired patent within the
ALNYLAM Patent Rights or PROTIVA Patent Rights, as applicable, which has not been held
unenforceable, unpatentable or invalid by a decision of a court or other governmental agency of
competent jurisdiction, which decision is unappealable or unappealed within the time allowed for
appeal, and which has not been admitted by the holder of the patent to be invalid or unenforceable
through reissue, re-examination, or disclaimer or otherwise and (b) a patent application within the
ALNYLAM Patent Rights or PROTIVA Patent Rights, as applicable, a claim of which has been pending
less than five (5) years and which claim has not been cancelled, withdrawn or abandoned or finally
rejected by an administrative agency action from which no appeal can be taken.
|
|
|
|
|
Section
|
Additional Defined Terms
|
|
Reference
|
ALNYLAM Class 1 Development Product
|
|
4.1(a)
|
ALNYLAM Class 2 Development Product
|
|
4.1(b)
|
ALNYLAM Data
|
|
5.6
|
ALNYLAM Indemnitee
|
|
10.1
|
ALNYLAM-TEKMIRA License Agreement
|
|
Recitals
|
ALNYLAM Subscription Agreement
|
|
Recitals
|
Analytical Report
|
|
5.4(b)
|
Class 1 PROTIVA Patent Rights
|
|
1.47(a)
|
Class 2 PROTIVA Patent Rights
|
|
1.47(b)
|
Change of Control
|
|
14.7
|
Closing
|
|
Recitals
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Discount or Savings Program
|
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13.7
|
Effective Date
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12.1
|
Escrow Agreement
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|
Recitals
|
Excluded Claim
|
|
14.2(a)
|
FTE
|
|
5.2
|
13
|
|
|
|
|
Section
|
Additional Defined Terms
|
|
Reference
|
Follow-On Product
|
|
3.7
|
Licensee
|
|
9.1
|
Losses
|
|
10.1
|
[**]
|
|
Recitals
|
[**] Restriction
|
|
2.1
|
[**]
|
|
Recitals
|
miRNA
|
|
1.33
|
Novartis
|
|
3.2
|
Novartis Agreement
|
|
3.2
|
Original ALNYLAM-TEKMIRA License Agreement
|
|
Recitals
|
Original Cross-License Agreement
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|
Recitals
|
Product Seller
|
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1.36
|
Prosecuting Party
|
|
7.2(c)
|
PROTIVA Development Product
|
|
3.1
|
PROTIVA Development Target
|
|
3.1
|
PROTIVA Indemnitee
|
|
10.2
|
Purchase Agreement
|
|
Recitals
|
Research Term
|
|
5.1
|
Restriction Period
|
|
13.1
|
Restricted Joint Invention
|
|
13.4
|
RNAi
|
|
Recitals
|
ROCHE
|
|
Recitals
|
ROCHE-NUTLEY
|
|
4.1(c)
|
ROCHE Sublicensee
|
|
4.1(c)
|
ROCHE Subscription Agreement
|
|
Recitals
|
Significant Pharmaceutical Company
|
|
14.6
|
SNALP Technology
|
|
Recitals
|
Substances
|
|
5.4(c)
|
Successful Biodefense Product
|
|
4.10
|
Successful Product
|
|
3.7
|
Target Response Notice
|
|
3.2
|
TEKMIRA
|
|
Recitals
|
Tekmira Development Target
|
|
1.9
|
Tekmira Facilities Option
|
|
13.2
|
Third Party Claim
|
|
7.8(a)
|
Transaction Document
|
|
12.2(e)
|
14
ARTICLE II
PLK LICENSE GRANT AND OPT-IN RIGHTS
2.1
License of ALNYLAM Patent Rights
.
(a) Subject to the provisions of Article XIII, ALNYLAM grants to PROTIVA a non-exclusive
royalty-bearing right and license under the ALNYLAM Patent Rights, subject to the terms and
conditions of the in-license(s) identified on
Exhibit B
governing ALNYLAMs rights, and
under ALNYLAMs interest in Joint Patent Rights, only for purposes of Researching, Developing and
Commercializing RNAi Products for the PLK Target in the Field in the Territory. The license
granted in this Section 2.1 will be in effect for the PLK Term.
(b) During the PLK Term and prior to the expiration of the Opt-In Period, PROTIVA will have no
right to grant sublicenses to any Third Party under the license granted in this Section 2.1 without
the prior written consent of ALNYLAM. Following the expiration of the Opt-In Period: (i) if
ALNYLAM has duly exercised its Opt-In Right, such restriction on sublicensing will be continued and
will be made part of the Parties co-development and co-commercialization agreement referred to in
Section 2.8(a); and (ii) if ALNYLAM has not exercised its Opt-In Right, the license granted in this
Section 2.1 will thereafter include the right for PROTIVA to grant a sublicense or sublicenses to
one or more Third Parties, provided the sublicensed RNAi Product(s) either (a) incorporate or
exploit material intellectual property rights (such as, without limitation, patents and/or
Confidential Information) owned or controlled by PROTIVA, other than Valid Claims of the ALNYLAM
Patent Rights and/or (b) are substantially developed by PROTIVA in a Bona Fide Collaboration with
such Third Party. Notwithstanding the foregoing, (i) in no event may PROTIVA or its Affiliates
grant a sublicense under any of the Exclusively Licensed Tekmira IP to the [**] under the licenses
granted in this Section 2.1 or Section 3.3 (the [**] Restriction) and (ii) in all events, any
sublicense granted under this Section 2.1(b) shall be subject to the terms of Article XIII.
2.2
Retained Rights of ALNYLAM
. ALNYLAM expressly retains any rights not expressly
granted to PROTIVA under this Article II (or otherwise under this Agreement). ALNYLAM represents
and warrants that it has the right to grant the license under the ALNYLAM Patent Rights provided in
Section 2.1 with respect to the PLK Target.
2.3
PLK Research Plan
. On or prior to the Effective Date PROTIVA has, with ALNYLAMs
approval, prepared a research plan setting out the primary activities to be conducted by PROTIVA
with respect to the PLK Target (the PLK Research Plan). Such PLK Research Plan is attached to
this Agreement as
Exhibit C
. PROTIVA will fund and be responsible for conducting all
activities under the PLK Research Plan or otherwise warranted by the terms and conditions of this
Agreement.
2.4
Role of JSC
. The conduct of the PLK Research Plan will be coordinated by the
Joint Steering Committee. The JSC will attempt to act by consensus in respect of all matters
arising under or in connection with the PLK Research Plan. If such a consensus is not obtainable
with respect to a matter, PROTIVAs representatives on the JSC will, prior to an exercise by
ALNYLAM of the Opt-In Right, have the deciding vote on that matter so long as they exercise such
right in a manner that is consistent with this Agreement.
15
2.5
Conduct of Activities and Commercially Reasonable Efforts
. PROTIVA shall use
Commercially Reasonable Efforts to carry out Research, Development, and Commercialization of RNAi
Products directed at the PLK Target on a sustained basis in a continuing program for Development
and Commercialization during the PLK Term. The activities of PROTIVAs Affiliates, Sublicensees,
subcontractors, collaborators, transferees, and successors shall be attributed to PROTIVA for
purposes of determining PROTIVAs satisfaction of the foregoing diligence obligations. If PROTIVA
uses any Third Party contract resources to conduct part or all of its activities under the PLK
Research Plan, it shall obtain agreements from such contractor(s) providing for rights in favor of
ALNYLAM, substantially equivalent to the rights ALNYLAM would have had if PROTIVA had done the work
itself.
2.6
Regulatory Filings
. PROTIVA, its Affiliates or Sublicensees will be responsible
for preparing, filing, and prosecuting all appropriate governmental applications and/or filings to
obtain Approval of RNAi Products for the PLK Target during the Opt-In Period. Except as may be
otherwise agreed in the co-development agreement in the event that ALNYLAM exercises its Opt-In
Right, PROTIVA, its Affiliates or Sublicensees will own and maintain all such applications and/or
filings and Approvals of the RNAi Products for the PLK Target.
2.7
Reporting
.
(a)
General
. Promptly after the Effective Date, and on an on-going basis thereafter
(at least once each Calendar Quarter), PROTIVA will provide to ALNYLAM and the JSC all
then-existing Licensed Information in respect of RNAi Products for the PLK Target (including but
not limited to preclinical pharmacology, toxicology, clinical and regulatory plans and data), to
enable ALNYLAM to evaluate and decide whether to exercise its Opt-In Right with respect to
co-development of RNAi Products for the PLK Target and to enable the JSC to assess the progress and
direction of PROTIVAs research activities.
(b)
Clinical Events
. PROTIVA will notify ALNYLAM in writing within five (5) business
days of the dosing of the first patient in a Phase II Clinical Trial and in a Phase III Clinical
Trial for each Licensed Product for the PLK Target.
2.8
Opt-In Right for Co-Development and Co-Commercialization
.
(a) At any time during the period commencing on the Effective Date and ending sixty (60) days
following the dosing of the first patient in a Phase II Clinical Trial in respect of an RNAi
Product for the PLK Target or the selection of a back-up to such an RNAi Product (if applicable);
or, if sooner, ending on the date on which ALNYLAM notifies PROTIVA that ALNYLAM does not intend to
exercise its Opt-In Right (the Opt-In Period), ALNYLAM may exercise its right to co-develop and
co-commercialize RNAi Products for the PLK Target with PROTIVA (Opt-In Right) by providing
written notice to PROTIVA. Upon provision of such written notice, the Parties agree to negotiate
and complete a written agreement providing for the co-development and co-commercialization of the
RNAi Products for the PLK Target by the Parties in accordance with the terms and conditions set
forth in
Appendix IV
to this Agreement. Upon the full execution of such agreement, the
terms in Sections 2.10 and 2.11 of this Agreement will no longer apply. The Parties agree (i) that
the terms and conditions set forth in
16
Appendix IV
will be binding on the Parties and in effect upon the exercise by ALNYLAM
of its Opt-In Right and (ii) to use good faith efforts to complete the definitive agreement within
[**] following ALNYLAMs exercise of its Opt-In Right.
(b) If ALNYLAM does not exercise its Opt-In Right or notifies PROTIVA in writing that it does
not intend to exercise its Opt-In Right with respect to RNAi Products for the PLK Target, PROTIVA
may, subject to the terms of Article XIII and the [**] Restriction, continue its activities under
the PLK Research Plan and/or undertake different or altered activities in its discretion.
Additionally, PROTIVA may at any time thereafter notify ALNYLAM in writing if PROTIVA wishes to
terminate its license rights under this Agreement with respect to RNAi Products for the PLK Target.
If ALNYLAM has not exercised its Opt-In Right or elects not to exercise its Opt-In Right, and if
PROTIVA notifies ALNYLAM in writing that it wishes to terminate its license rights in respect of
the PLK Target, rights granted to PROTIVA under the ALNYLAM Patent Rights with respect to the PLK
Target herein will terminate immediately.
(c)
PLK Research Plan Information and Materials
. In the event that PROTIVA wishes to
terminate its activities under the PLK Research Plan, PROTIVA will provide written notice to
ALNYLAM. If such termination notice is made prior to the end of the Opt-In Period, PROTIVA will
promptly provide to ALNYLAM all then-existing Licensed Information with respect to any Formulation
with respect to the PLK Target, to the extent such Licensed Information has not previously been
provided to ALNYLAM. For purposes of clarity, any activities of ALNYLAM in respect of the PLK
Target after termination of PROTIVAs license hereunder with respect to the PLK Target will be
subject to the terms and conditions of Article IV of this Agreement to the extent relevant to the
PROTIVA Patent Rights.
2.9
Initial Fee
. In connection with the rights granted and other terms of this
Agreement, ALNYLAM has previously paid to PROTIVA three million U.S. dollars ($3,000,000) and
PROTIVA acknowledges the full receipt of such payment.
2.10
Milestone Payments with Respect to Licensed Products for the PLK Target
. With
respect to Licensed Products for the PLK Target and the achievement by PROTIVA, its Sublicensees or
Affiliates of the milestone events in the table below for Licensed Products for the PLK Target,
PROTIVA will provide written notice to ALNYLAM of the occurrence of a milestone event within [**]
of such event, and pay the indicated milestone fee to ALNYLAM within [**] after the occurrence of
the relevant event (all references are to U.S. dollars). Milestone payments will be due only once
and only in respect of the first Licensed Product for the PLK Target being Developed by PROTIVA, or
an Affiliate or Sublicensee for which the milestone event is achieved.
|
|
|
Milestone Event
|
|
Milestone Fee
|
[**]*
|
|
[**]
|
[**]
|
|
[**]
|
[**]
|
|
[**]
|
[**]
|
|
[**]
|
[**]
|
|
[**]
|
[**]
|
|
[**]
|
17
*The due date of the payment for this milestone event will be upon the end of the Opt-In Period and
only if ALNYLAM does not exercise the Opt-In Right.
In the event one or more milestone events set out above are skipped for any reason, the payment for
such skipped milestone event(s) will be due at the same time as the payment for the next achieved
milestone event.
2.11
Royalties on Licensed Products for the PLK Target
.
(a) Royalties on Net Sales will be due and payable by PROTIVA to ALNYLAM on a Licensed
Product-by-Licensed Product basis in respect of Licensed Products for the PLK Target and on a
country-by-country basis in the Territory until the expiration of the last Valid Claim covering
such Licensed Product in such country. Beginning with the first Royalty Quarter in which a First
Commercial Sale in a country occurs, and during subsequent Royalty Quarters, running royalties are
payable on Net Sales in the Territory in accordance with the applicable running royalty rates set
out in subsections (b) of this Section 2.11. If at the time of the First Commercial Sale or at any
time thereafter all of ALNYLAMs Valid Claims covering a Licensed Product expire in a particular
country, then such RNAi Product shall be royalty-free in such country;
provided
,
however
, that if one or more additional Valid Claims of ALNYLAM covering such Licensed
Product thereafter issue in such country, such Licensed Product shall thereafter be royalty-bearing
in such country for all Net Sales of such Licensed Product in such country occurring after the date
of such issuance until expiration of such Valid Claims. No royalties will be payable more than once
by PROTIVA with respect to any single unit of Licensed Product.
(b) Subject to subsection (a) of this Section 2.11, royalties will be due to ALNYLAM in
accordance with the applicable rate in the table below (all references are to U.S. dollars):
|
|
|
Aggregate Annual Net Sales
|
|
Royalty Rate
|
On the first [**]
|
|
[**]
|
On the subsequent[**]
|
|
[**]
|
On the subsequent [**]
|
|
[**]
|
Greater than [**]
|
|
[**]
|
(c) The royalties due to ALNYLAM under this Section 2.11 may be reduced on a
country-by-country basis in the Territory by the amount of royalties due to Third Parties as a
result of the in-license of Necessary Third Party IP;
provided
,
however
, that
royalties due to ALNYLAM under this Section 2.11 may not be reduced by more than one-third of the
royalties otherwise due (and will not in any case be reduced below [**] of the amount of royalties
that would otherwise be due, e.g. for Net Sales up to and including [**] the minimum effective
royalty rate would be [**]. For purposes of illustration only, if annual Net Sales of a License
18
Product for the PLK Target are [**], and royalties due in respect of Necessary Third Party IP
for the sale of such product total [**] of Net Sales (or [**]), royalties due to ALNYLAM may be
reduced only by [**] which is determined as follows: maximum reduction is [**] of the royalty due
on Net Sales of [**], calculated by [**].
2.12
Term of PLK License
. Unless terminated sooner as described in Article XII, the
term of the licenses granted to PROTIVA with respect to the PLK Target commenced on the Effective
Date and ends upon the expiration or abandonment of all issued patents and filed applications
within the ALNYLAM Patent Rights;
provided
,
however
, that following the expiration
of such license at the end of such term, PROTIVA and its Affiliates or Sublicensees shall have the
worldwide, perpetual and paid-up right to Research, Develop, and Commercialize any RNAi Product
directed at the PLK Target to the extent not covered by other patent rights.
2.13
Effect upon Second Target Research Plan
. The Parties hereby agree that, while
PROTIVA may at its option continue work under the Second Target Research Plan and otherwise on the
Second Target as a PROTIVA Development Target, ALNYLAM will no longer (as of the Effective Date)
support that work, or by virtue of its payment of the Initial Fee, be deemed to be supporting that
work.
ARTICLE
III
Target-by-Target License to PROTIVA under ALNYLAM Patent Rights
3.1
PROTIVA Development Targets
. During the [**] period beginning on the Original
Effective Date, PROTIVA may select up to three (3) Targets with respect to which PROTIVA shall
Research, Develop and Commercialize RNAi Products directed to such Targets under the ALNYLAM Patent
Rights (each such Target, a PROTIVA Development Target, and each such RNAi Product, a PROTIVA
Development Product). For clarity, the Parties acknowledge that the three PROTIVA Development
Targets shall be in addition to the three (3) Tekmira Development Targets that are the subject of
the ALNYLAM-TEKMIRA License Agreement. The Parties acknowledge that the selection of each PROTIVA
Development Target (other than the Second Target) is subject to Novartis right of first offer
under the Novartis Agreement and to other binding ALNYLAM obligations to Third Parties pre-existing
the date of PROTIVAs notice to ALNYLAM of PROTIVAs selection of such Target. Effective as of the
Effective Date, the Parties hereby agree that the Second Target shall be one of the three (3)
PROTIVA Development Targets under this Agreement, and that Section 3.2 will not be applicable to
the Second Target.
3.2
Selection Process
. The following process shall apply to the selection of PROTIVA
Development Targets. As to Targets that are peptide entities, PROTIVA shall initially notify
ALNYLAM in writing of the NCBI Gene ID number (or, if a NCBI Gene ID number is not available, the
specific sequence of the proposed Target) of each Target nominated by PROTIVA for selection as a
PROTIVA Development Target. As to Targets that are non-peptide entities, PROTIVA shall initially
notify ALNYLAM in writing of the non-peptide entity. Within [**] following ALNYLAMs receipt of a
notice nominating a Target, ALNYLAM shall notify PROTIVA in writing (a Target Response Notice)
whether such Target is either: (a) subject to a binding contractual obligation to a Third Party
that would be breached by the inclusion of such Target as a PROTIVA Development Target under these
terms, or (b) the
19
subject of an Active Internal Development Program at ALNYLAM and such Active Internal
Development Program was in existence as such prior to the receipt of such notice from PROTIVA and
ALNYLAM determines in good faith that it intends to continue such Active Internal Development
Program, and so notifies PROTIVA. If neither of these criteria applies, the Target shall be
considered to have been successfully nominated as a PROTIVA Development Target. ALNYLAM shall use
commercially reasonable efforts consistent with the terms of the Novartis Agreement to obtain
Novartis consent to the selection by PROTIVA of such Target as a PROTIVA Development Target under
these terms, and shall notify PROTIVA in writing as to whether or not such Target is available for
license hereunder. If a Target submitted to ALNYLAM is not so available for license as a PROTIVA
Development Target, then PROTIVA may nominate an additional Target as a PROTIVA Development Target,
until two (2) PROTIVA Development Targets (in addition to the Second Target) have been identified
and approved for selection pursuant to the foregoing procedure;
provided
, that PROTIVA may
not have pending at any given time more than two (2) proposed Targets to ALNYLAM for evaluation
pursuant to the foregoing procedure (in addition to any Tekmira Development Targets or candidate
Tekmira Development Targets submitted or pending under the ALNYLAM-TEKMIRA License Agreement). Any
Target approved by ALNYLAM for selection pursuant to the foregoing procedure shall be a PROTIVA
Development Target. As used herein, Novartis Agreement means that certain Research Collaboration
and License Agreement between Novartis Institutes for BioMedical Research, Inc. (Novartis) and
ALNYLAM dated October 12, 2005, as amended by the Addendum Re: Influenza Program to Research
Collaboration and License Agreement effective as of February 17, 2006, and as further amended from
time to time.
3.3
License
. Subject to the provisions of Article XIII and the terms and conditions
of the in-licenses identified on
Exhibit B
governing ALNYLAMs rights, ALNYLAM will grant
to PROTIVA a non-exclusive license under the ALNYLAM Patent Rights and under ALNYLAMs interest in
Joint Patent Rights with respect to up to three (3) PROTIVA Development Targets, to Research,
Develop and Commercialize PROTIVA Development Products covered by such ALNYLAM Patent Rights in the
Field in the Territory. Such license will be royalty-bearing with respect to PROTIVA Development
Products covered by Valid Claims of the ALNYLAM Patent Rights and will include the right to grant
sublicenses to Third Parties to Research, Develop and Commercialize PROTIVA Development Product(s),
provided such PROTIVA Development Product(s) either (a) incorporate or exploit material
intellectual property rights (such as, without limitation, patents and/or Confidential Information)
owned or controlled by PROTIVA, other than such Valid Claims of the ALNYLAM Patent Rights and/or
(b) are substantially developed by PROTIVA in a Bona Fide Collaboration with such Third Party. A
copy of the fully executed sublicense agreement will be promptly provided to ALNYLAM.
Notwithstanding the foregoing, (i) any sublicense, to the extent applicable to any Exclusively
Licensed Tekmira IP, shall be subject to the [**] Restriction and (ii) in all events, any
sublicense granted under this Section 3.3 shall be subject to the terms of Article XIII.
3.4
Term
. Unless terminated sooner as described in Article XII, the term of the
license grant in respect of each PROTIVA Development Target begins upon the approval of a Target as
a PROTIVA Development Target (or in the case of the Second Target, upon the Effective Date, it
being understood and agreed that PROTIVA held certain licenses under the Original Cross License
Agreement with respect to the Second Target from the Original Effective
20
Date through the Effective Date) and ends upon the expiration or abandonment of all issued
patents and filed applications within the ALNYLAM Patent Rights; provided, however, that following
the expiration of such license at the end of such term, PROTIVA and its Affiliates or Sublicensees
shall have the worldwide, perpetual and paid-up right to Research, Develop, and Commercialize any
PROTIVA Development Product to the extent not covered by other patent rights.
3.5
Sublicense
.
(a) Any sublicense granted by PROTIVA pursuant to Section 3.3 shall be subject and subordinate
to the terms and conditions of this Agreement and shall contain terms and conditions consistent
with those in this Agreement, including, without limitation, the requirements of Section 3.6 below.
Agreements with any Sublicensee shall contain the following provisions: (a) a requirement that
such Sublicensee submit applicable sales or other reports consistent with those required hereunder;
(b) an audit requirement similar to the requirement set forth in Section 9.5; and (c) a requirement
that such Sublicensee comply with the confidentiality and non-use provisions of Article VIII.
PROTIVA shall assume full responsibility for the performance of all obligations and observance of
all terms herein under the licenses granted to PROTIVA Development Targets and will itself pay and
account to ALNYLAM for all payments due under such licenses by reason of such sublicense.
Sublicenses under the license granted to PROTIVA Development Targets will remain in full force and
effect in the event of any termination of such license, provided that Sublicensee(s) are in
compliance with the sublicense agreement (or are in compliance within thirty (30) days of the
termination) and agree in writing with ALNYLAM to the same terms and conditions as in the
sublicense agreement. In the event PROTIVA becomes aware of a material breach of any sublicense by
a Sublicensee, PROTIVA shall promptly notify ALNYLAM of the particulars of same and take all
reasonable efforts to enforce the terms of such sublicense.
(b) Unless otherwise provided in this Agreement, PROTIVA will notify ALNYLAM within ten (10)
business days after execution of a sublicense entered into under Section 3.3 and provide a copy of
the fully executed sublicense agreement to ALNYLAM within the same time frame (with such reasonable
redactions as PROTIVA may make,
provided
that such redactions do not include provisions
necessary to demonstrate compliance with the requirements of this Agreement), which shall be
treated as Confidential Information under Article VIII; and
provided
further that ALNYLAM
may disclose such agreement(s) to Third Parties under confidence if and to the extent required in
order to comply with ALNYLAMs contractual obligations under both this Agreement and Third Party
agreements.
3.6
Retained Rights of ALNYLAM
. ALNYLAM expressly retains any rights not expressly
granted to PROTIVA under this Article III (or otherwise under this Agreement). ALNYLAM represents
and warrants that it has the right to grant the license under the ALNYLAM Patent Rights provided in
Section 3.3.
3.7
Milestones with Respect to PROTIVA Development Products
. On a Licensed
Product-by-Licensed Product basis for PROTIVA Development Products that are Licensed Products,
payments will be due by PROTIVA to ALNYLAM based upon the achievement of
21
certain milestone events as set forth in the table below (all references are to U.S. dollars).
PROTIVA will provide written notice to ALNYLAM of the occurrence of a milestone event within
[**] of such event, and pay the indicated milestone fee to ALNYLAM within [**] after the occurrence
of the relevant event.
Capitalized terms in the chart below shall be read in context to apply to PROTIVA Development
Products that are Licensed Products.
|
|
|
Milestone Event
|
|
Milestone Fee
|
[**]
|
|
[**]
|
[**]
|
|
[**]
|
[**]
|
|
[**]
|
[**]
|
|
[**]
|
[**]
|
|
[**]
|
[**]
|
|
[**]
|
In the event one or more milestone events set out above are skipped for any reason, the payment for
such skipped milestone event(s) will be due at the same time as the payment for the next achieved
milestone event. The milestone payments described above shall be payable only once in relation to
each Licensed Product that achieves Approval in a Major Market (each, a Successful Product).
Therefore, unless and until there is a Successful Product directed to a particular Target, any of
the milestone payments made by PROTIVA under this Section in connection with a Licensed Product
directed to such Target shall be fully creditable against the repeated achievement of such
milestone event by any other Licensed Product directed to such Target. However, in the event that
there is a Successful Product with respect to a Target and PROTIVA subsequently begins to Develop
or continues to Develop another Licensed Product directed to such Target (a Follow-On Product),
then, if and when any of the milestone events set out above is thereafter achieved for such
Follow-On Product, in addition to the milestone payment for such milestone event, there will also
be due and payable all of the milestone payment(s) for any such milestones that were achieved for
such Follow-On Product prior to the achievement of Approval in a Major Market of a Successful
Product with respect to such Target.
3.8
Clinical Events
. PROTIVA will notify ALNYLAM in writing within [**] of the dosing,
respectively, of the first patient in a Phase II Clinical Trial and in a Phase III Clinical Trial
for each PROTIVA Development Product.
3.9
Royalties on PROTIVA Development Products
. The license granted with respect to
PROTIVA Development Targets under ALNYLAM Patent Rights will be royalty-bearing with respect to
PROTIVA Development Products that are, with respect to PROTIVA, Licensed
22
Products. Beginning with the first Royalty Quarter in which a First Commercial Sale in a country occurs, and on a
country-by-country basis during subsequent Royalty Quarters, running
royalties on Net Sales of PROTIVA Development Products covered by one or more Valid Claims of
ALNYLAM Patent Rights in the Territory will be due in accordance with the applicable running
royalty rates set out in the table below (all references are to U.S. dollars, and the Net Sales
figures are the aggregated sums with respect to PROTIVA and all of its Affiliates and
Sublicensees). If at the time of the First Commercial Sale or at any time thereafter all of the
Valid Claims of ALNYLAM Patent Rights covering a PROTIVA Development Product expire in a particular
country, then such product shall be royalty-free in such country;
provided
,
however
, that if one or more additional Valid Claims of ALNYLAM Patent Rights covering the
PROTIVA Development Product thereafter issue in such country, such PROTIVA Development Product
shall thereafter be royalty-bearing in such country for all Net Sales of such PROTIVA Development
Product in such country occurring after the date of such issuance until expiration of such Valid
Claim(s). No royalties will be payable more than once by PROTIVA with respect to any single unit
of Licensed Product.
|
|
|
Aggregate Annual Net Sales
|
|
Royalty Rate
|
On the first [**]
|
|
[**]
|
On the subsequent [**]
|
|
[**]
|
On the subsequent [**]
|
|
[**]
|
Greater than [**]
|
|
[**]
|
3.10
Royalty Reduction
. The royalties due to ALNYLAM under Section 3.9 above may be
reduced on a country-by-country basis in the Territory by the amount of royalties paid or payable
with respect to Necessary Third Party IP;
provided
,
however
, that royalties due to
ALNYLAM under Section 3.9 may not be reduced by more than [**] of the royalties otherwise due (and
will not in any case be reduced below [**] of the amount of royalties that would otherwise be due,
e.g. for Net Sales up to and including [**] the minimum effective royalty rate would be [**].
For purposes of illustration only, if annual Net Sales of a PROTIVA Development Product are [**]
and royalties due to Third Parties in respect of the sale of such product total [**] of Net Sales
(or [**]), royalties due to ALNYLAM may be reduced only by [**] which is determined as follows:
maximum reduction is [**] of the royalty due on Net Sales of [**], calculated by [**].
3.11
Studies by ALNYLAM
. With mutual acknowledgement by PROTIVA and ALNYLAM, ALNYLAM
has conducted certain activities as described in
Appendix III
to the Original Cross License
Agreement. ALNYLAM has made the results of such studies available to PROTIVA under the Original
Cross-License Agreement. The Parties hereby affirm their agreement to permit use, without royalty
or other additional fee, of such results or other results arising from the Feasibility Study
Agreement between ALNYLAM and PROTIVA dated April
23
16, 2007 and referenced under the letter agreement between the Parties dated June 1, 2007 in a manner consistent with the activities
described in
Appendix III
to the Original Cross-License
Agreement and in conjunction with or in support of PROTIVAs past and expected activities
under the Second Target Research Plan (whether before or after the Effective Date).
ARTICLE
IV
License to ALNYLAM under PROTIVA Patent Rights and Intellectual
Property
4.1
Grants by PROTIVA
.
(a)
Class 1
: PROTIVA grants to ALNYLAM a non-exclusive license under Class 1 PROTIVA
Patent Rights, PROTIVAs interest in Joint Patent Rights and the Licensed Information to Research,
Develop and Commercialize RNAi Products and miRNA Products for any Target in the ALNYLAM Field and
in the Territory (ALNYLAM Class 1 Development Products). Such license includes the right to
grant sublicenses under the license granted under this Section 4.1(a) to one or more Third Parties
in a Bona Fide Collaboration with ALNYLAM, but solely within the scope of and for the purposes of
such Bona Fide Collaboration, or with respect to the Researching, Developing and/or Commercializing
of ALNYLAM Class 1 Development Products that meet one or more of the following: (i) such ALNYLAM
Class 1 Development Product was initially Developed at least to the point of preclinical
proof-of-principle by ALNYLAM in an Active Internal Development Program; (ii) such ALNYLAM Class 1
Development Product is an ALNYLAM Partnered Product; or (iii) such ALNYLAM Class 1 Development
Product is an R&D Program Product.
(b)
Class 2
: PROTIVA grants to ALNYLAM a non-exclusive license under Class 2 PROTIVA
Patent Rights and the Licensed Information to Research, Develop and Commercialize RNAi Products and
miRNA Products for any ALNYLAM Target in the ALNYLAM Field and in the Territory (ALNYLAM Class 2
Development Products). Such license includes the right to grant sublicenses under the license
granted in this Section 4.1(b);
provided
that such right to sublicense will apply only with
respect to the Researching, Developing and/or Commercializing of ALNYLAM Class 2 Development
Products that meet one or more of the following:
|
(i)
|
|
such ALNYLAM Class 2 Development Product is an R&D Program Product; or
|
|
|
(ii)
|
|
such ALNYLAM Class 2 Development Product incorporates the same Formulation as
the Lead Formulation of an R&D Program Product, whether or not it is directed at the
same ALNYLAM Target as that R&D Program Product, and also meets one or more of the
following: (1) such ALNYLAM Class 2 Development Product was initially Developed at
least to the point of preclinical proof-of-principle by ALNYLAM in an Active Internal
Development Program; or (2) such ALNYLAM Class 2 Development Product is an ALNYLAM
Partnered Product.
|
(c) ALNYLAM may sublicense any and all of its rights under this Section 4.1 to ROCHE and to
Hoffmann-La Roche Inc. (
ROCHE-NUTLEY
, and together with ROCHE, the ROCHE Sublicensees)
pursuant to an agreement substantially in the form set forth in
Exhibit E
to this
Agreement.
24
(d) ALNYLAM and PROTIVA acknowledge and agree that the determination of which items to include
under Class 1 PROTIVA Patent Rights and Class 2 PROTIVA Patent
Rights, both as defined in Section 1.47 and listed in
Exhibits A-2 and A-3
respectively, was made based upon the descriptions included such Section. Accordingly, ALNYLAM and
PROTIVA agree that any item listed in
Exhibit A-3
as Class 2 PROTIVA Patent Rights or claim
thereunder that meets the definition of Class 1 PROTIVA Patent Rights as described in Section 1.47
will become a Class 1 PROTIVA Patent Right and the relevant Exhibits will be updated accordingly.
For purposes of clarity, only items or claims under Class 2 PROTIVA Patent Rights may change to
Class 1 PROTIVA Patent Rights, and the Parties agree that Class 1 PROTIVA Patent Rights will not
change to Class 2 PROTIVA Patent Rights for any purpose of this Agreement.
4.2
Retained Rights of PROTIVA
. PROTIVA expressly retains any rights of PROTIVA not
expressly granted to ALNYLAM under this Article IV (or otherwise under this Agreement). PROTIVA
represents and warrants that it has the right to grant the license under the PROTIVA Patent Rights
provided in Section 4.1.
4.3
Term
. Unless terminated sooner as described in Article XII, the term of the
licenses granted to ALNYLAM under the Class 1 PROTIVA Patent Rights and the Class 2 PROTIVA Patent
Rights commenced on the Original Effective Date and ends upon the expiration or abandonment of all
issued patents and filed applications with the Class 1 PROTIVA Patent Rights and Class 2 PROTIVA
Patent Rights, respectively; provided, however, that following the expiration of such license at
the end of such term, ALNYLAM and its Affiliates or Sublicensees shall have the worldwide,
perpetual and paid-up right to Research, Develop, and Commercialize any Class 1 ALNYLAM Development
Product or Class 2 ALNYLAM Development Product to the extent not covered by other patent rights.
4.4
No grant of rights to TEKMIRA
. Except in connection with the exercise of the
Tekmira Facilities Option or as otherwise specifically set forth in this Agreement, prior to the
end of the Restriction Period, in no event will ALNYLAM have the right to sublicense or agree to
sublicense any PROTIVA Patent Rights to TEKMIRA.
4.5
Sublicense
.
(a) Any sublicense granted by ALNYLAM pursuant to Section 4.1 shall be subject and subordinate
to the terms and conditions of this Agreement and shall contain terms and conditions consistent
with those in this Agreement, including, without limitation, the requirements of Sections 4.2 and
4.4 above. Agreements with any Sublicensee shall contain the following provisions: (i) a
requirement that such Sublicensee submit applicable sales or other reports consistent with those
required hereunder; (ii) an audit requirement similar to the requirement set forth in Section 9.5;
and (iii) a requirement that such Sublicensee comply with the confidentiality and non-use
provisions of Article VIII. ALNYLAM shall assume full responsibility for the performance of all
obligations and the observance of all terms herein under a sublicense to the license granted for
ALNYLAM Development Products and will itself pay and account to PROTIVA for all payments due by
reason of such sublicense. Sublicenses under the
25
licenses granted for ALNYLAM Development Products
will remain in full force and effect in the event of any termination of one or both of the
licenses, provided that sublicensee(s) are in compliance with the sublicense agreement (or are in
compliance within thirty (30) days of the termination) and agree in writing with PROTIVA to the
same terms and conditions as in the
sublicense agreement. In the event ALNYLAM becomes aware of a material breach of any
sublicense by a Sublicensee, ALNYLAM shall promptly notify PROTIVA of the particulars of same and
take all reasonable efforts to enforce the terms of such sublicense.
(b) Unless otherwise provided in this Agreement, ALNYLAM will notify PROTIVA within ten (10)
business days after execution of a sublicense entered into under Section 4.1 and provide a copy of
the fully executed sublicense agreement to PROTIVA within the same time frame (with such reasonable
redactions as ALNYLAM may make,
provided
that such redactions do not include provisions
necessary to demonstrate compliance with the requirements of this Agreement), which shall be
treated as Confidential Information under Article VIII; and
provided
further that PROTIVA
may disclose such agreement(s) to Third Parties under confidence if and to the extent required in
order to comply with PROTIVAs contractual obligations under both this Agreement and Third Party
agreements.
4.6
License Fee; Payment
. In addition to the fee paid by ALNYLAM pursuant to Section
2.9, ALNYLAM has previously paid PROTIVA an upfront license fee of [**] for the licenses granted to
ALNYLAM under Section 4.1 of this Agreement. PROTIVA acknowledges the full receipt of such
payment.
4.7
Milestones with Respect to ALNYLAM Development Products
. On a product-by-product
basis for ALNYLAM Development Products that are Licensed Products, and subject to the provisions of
Section 4.10, payments will be due by ALNYLAM to PROTIVA based on the achievement of certain
milestone events as set forth in the table below (all references are to U.S. dollars). ALNYLAM will
provide written notice to PROTIVA of the occurrence of a milestone event within [**] of such event,
and pay the indicated milestone fee to PROTIVA within [**] after the occurrence of the relevant
event.
Capitalized terms in the chart below shall be read in context to apply to ALNYLAM Development
Products that are Licensed Products; provided, however, that only one milestone payment will be due
in respect of a given Licensed Product.
26
|
|
|
Milestone Event
|
|
Milestone Fee
|
[**]
|
|
[**]
|
[**]
|
|
[**]
|
[**]
|
|
[**]
|
[**]
|
|
[**]
|
[**]
|
|
[**]
|
[**]
|
|
[**]
|
In the event one or more milestone events set out above are skipped for any reason, the payment for
such skipped milestone event(s) will be due at the same time as the payment for the next achieved
milestone event. The milestone payments described above shall be payable only once in relation to
each Successful Product. Therefore, unless and until there is a Successful Product directed to a
particular Target, any of the milestone payments made by ALNYLAM under this Section in connection
with a Licensed Product directed to such Target shall be fully creditable against the repeated
achievement of such milestone event by any other Licensed Product directed to such Target.
However, in the event that there is a Successful Product with respect to a Target and ALNYLAM
subsequently begins to Develop or continues to Develop a Follow-On Product, if and when any of the
milestone events set out above is thereafter achieved for such Follow-On Product, in addition to
the milestone payment for such milestone event, there will also be due and payable all of the
milestone payment(s) for any such milestones that were achieved for such Follow-On Product prior to
the achievement of Approval in a Major Market of a Successful Product with respect to such Target .
4.8
Clinical Events
. ALNYLAM will notify PROTIVA in writing within [**] of the dosing,
respectively, of the first patient in each of a Phase I Clinical Trial, a Phase II Clinical Trial,
and a Phase III Clinical Trial for each ALNYLAM Development Product.
4.9
Royalties on ALNYLAM Development Products
. The license granted with respect to
ALNYLAM Development Products under PROTIVA Patent Rights will be royalty-bearing with respect to
ALNYLAM Development Products that are, with respect to ALNYLAM, Licensed Products (whether or not
the same are directed to Biodefense Targets). Beginning with the first Royalty Quarter in which a
First Commercial Sale in a country occurs, and on a country-by-country basis during subsequent
Royalty Quarters, and subject to the provisions of Section 4.10, running royalties on Net Sales of
ALNYLAM Development Products covered by one or more Valid Claims of PROTIVA Patent Rights in the
Territory will be determined and due, as follows:
(a) Where the Net Sales are those of, and are invoiced by, any one of the
following:
|
(i)
|
|
ALNYLAM or its Affiliate;
|
|
|
(ii)
|
|
a ROCHE Sublicensee under a sublicense granted in accordance
with Section 4.1(c);
|
27
|
(iii)
|
|
Regulus Therapeutics LLC, under a sublicense granted by
ALNYLAM in compliance with Section 4.5; or
|
|
|
(iv)
|
|
another Sublicensee under a sublicense granted by ALNYLAM in
connection with, and solely for the purpose of, a Bona Fide Collaboration of
ALNYLAM, and solely for the purposes of such Bona Fide Collaboration,
|
|
|
the applicable running royalty rates shall be as set out in the table below (all
references are to U.S. dollars, and the Net Sales figures are the aggregated sums
with respect to ALNYLAM and all of its Affiliates and Sublicensees):
|
|
|
|
Aggregate Annual Net Sales
|
|
Royalty Rate
|
On the first [**]
|
|
[**]
|
On the subsequent [**]
|
|
[**]
|
Greater than [**]
|
|
[**]
|
|
(b)
|
|
In all other cases, the applicable running royalty rates shall be as set out in
the table below:
|
|
|
|
Aggregate Annual Net Sales
|
|
Royalty Rate
|
On the first [**]
|
|
[**]
|
On the subsequent [**]
|
|
[**]
|
On the subsequent [**]
|
|
[**]
|
Greater than [**]
|
|
[**]
|
|
(c)
|
|
If at the time of the First Commercial Sale or at any time thereafter all of
the Valid Claims of PROTIVA Patent Rights covering an ALNYLAM Development Product
expire in a particular country, then such product shall be royalty-free in such
country;
provided
,
however
, that if one or more additional Valid Claims
of PROTIVA Patent Rights covering the ALNYLAM Development Product thereafter issue in
such country, such ALNYLAM Development Product shall thereafter be royalty-bearing in
such country for all Net Sales of such ALNYLAM Development Product in such country
occurring after the date of such issuance until expiration of such Valid Claim(s). No
royalties will be payable more than once by ALNYLAM with respect to any single unit of
Licensed Product.
|
28
|
|
|
4.10
Biodefense Targets
. The milestone fees payable by ALNYLAM to PROTIVA under
Section 4.7 with respect to ALNYLAM Development Products that are Licensed Products directed
to Biodefense Targets that are not intended for sale to a Funding Authority, will be as set
forth in Section 4.7. The milestone fees payable by ALNYLAM to PROTIVA with respect to
ALNYLAM Development Products that are Licensed Products directed to Biodefense Targets which
are intended for sale to a Funding Authority shall be payable on a product-by-product basis
as follows:
|
|
|
|
Milestone Event
|
|
Milestone Fee
|
[**]
|
|
[**]
|
[**]
|
|
[**]
|
[**]
|
|
[**]
|
In the event one or more milestone events set out above are skipped for any reason, the payment for
such skipped milestone event(s) will be due at the same time as the payment for the next achieved
milestone event. The milestone payments described above shall be payable only once in relation to
each Licensed Product directed to a Biodefense Target that achieves First Commercial Sale in a
Major Market (each, a Successful Biodefense Produc
t
). Therefore, unless and until there
is a Successful Biodefense Product directed to a particular Biodefense Target, any of the milestone
payments made by ALNYLAM under this Section in connection with a Licensed Product directed to such
Biodefense Target shall be fully creditable against the repeated achievement of such milestone
event by any other Licensed Product directed to such Biodefense Target. However, in the event that
there is a Successful Product with respect to a Biodefense Target and PROTIVA subsequently begins
to Develop or continues to Develop a Follow-On Product, then, if and when any of the milestone
events set out above is thereafter achieved for such Follow-On Product, in addition to the
milestone payment for such milestone event, there will also be due and payable all of the milestone
payment(s) for any such milestones that were achieved for such Follow-On Product prior to the
achievement of Approval in a Major Market of a Successful Product with respect to such Biodefense
Target.
4.11
Royalty Reduction
. Any royalties due PROTIVA under Section 4.9 above may be
reduced on a country-by-country basis in the Territory by the amount of royalties paid with respect
to Necessary Third Party IP;
provided
,
however
, that royalties due to PROTIVA under
Section 4.9 may not be reduced by more than [**] of the royalties otherwise due (and will not in
any case be reduced below [**] of the amount of royalties that would otherwise be due, e.g. for Net
Sales up to and including [**] the minimum effective royalty rate would be [**]). For purposes of
illustration only, if annual Net Sales of an ALNYLAM Development Product are [**] and royalties due
to Third Parties in respect of the sale of such product total [**] of Net Sales (or [**]),
royalties due to PROTIVA may be reduced only by [**], which is determined as follows: maximum
reduction is one-third of the royalty due on Net Sales of [**], calculated by [**].
29
4.12
Suspension of Royalties and Milestones
. If any ALNYLAM Development Product that
is a Licensed Product is also an Alnylam Royalty Product (as such term is defined in the
ALNYLAM-TEKMIRA License Agreement), ALNYLAM shall not be required to pay royalties or milestone
fees with respect to such ALNYLAM Development Product that is a Licensed Product under both this
Agreement and the ALNYLAM-TEKMIRA License Agreement, but, rather, shall pay only the larger of such
royalties or milestone fees under such agreements, respectively. Moreover, in the event that
ALNYLAM is required to make any payments to UBC pursuant to the UBC Sublicense Agreement or
pursuant to a direct license
agreement between UBC and ALNYLAM as a result of the default by, or bankruptcy or insolvency
of, TEKMIRA as more fully described in Section 3.4 and Article 17.0 of the Tekmira-UBC License
Agreement (as such terms are defined in the ALNYLAM-TEKMIRA License Agreement), then ALNYLAM shall
be entitled to offset any amounts payable by ALNYLAM to PROTIVA under this Agreement pursuant to
this Section 4.12 by the amount of ALNYLAMs payments to UBC until such amounts have been credited
in full.
4.13
More Favorable Terms
. If after the Effective Date, PROTIVA grants to a Third
Party any license substantially similar in scope and substance to the license grant to Alnylam with
respect to the PROTIVA Patent Rights on terms calling for milestone fees and royalties that are, as
a whole, more favorable (to the licensee in such other license) than the comparable terms contained
in this Article IV, then PROTIVA shall so notify ALNYLAM and, at ALNYLAMs option, such more
favorable financial terms granted to such Third Party shall apply to ALNYLAMs or its Affiliates
or Sublicensees license with respect to the PROTIVA Patent Rights, rather than the royalty terms
and milestone fees stated under this Article IV.
4.14
Acknowledgement
. For clarity, the Parties acknowledge that no conceptions,
developments, techniques, data, inventions, improvements, technical information, or works of
authorship that were, are, or that hereafter may be in whole or in part conceived, reduced to
practice, discovered, created, authored or otherwise made or obtained by or for TEKMIRA or its
contractors at any time during the period from January 18, 2001 through the expiration of the
Restriction Period, will be considered to be owned or controlled by PROTIVA by virtue of any
agreement, right, or claim existing or arguably existing prior to the Effective Date.
ARTICLE
V
Conduct of R&D Research Plan and Funding from ALNYLAM
5.1
Research Term
. ALNYLAM and PROTIVA hereby agree to continue to conduct a research
and development program pursuant to the R&D Research Plan, which program commenced on the Original
Effective Date and shall continue until [**] (the Research Term);
provided
,
however
, that the Research Term may be extended once by ALNYLAM for an additional [**] if
ALNYLAM exercises such right by notice received by PROTIVA no later than [**] prior to the
expiration of the initial [**].
5.2 During the Research Term, PROTIVA will use commercially reasonable efforts to provide for
the conduct of activities pursuant to the R&D Research Plan by qualified employees of PROTIVA, or
individual contractors approved by the JSC, who collectively will spend time and effort working on
activities pursuant to the R&D Research Plan equivalent to the time and effort of seven (7)
full-time employees for the Research Term. Full-time employee or
30
equivalent will be based on at
least forty-five (45) weeks per calendar year and forty (40) hours per week of work (less normal
vacations, sick days and holidays) (FTE).
5.3
Funding
. ALNYLAM will continue to provide funding to PROTIVA for the staffing and
conduct of activities under the R&D Research Plan in the amount of [**] during the Research Term
(and funding in the same amount over the renewal term, if any), payable in [**] equal quarterly
installments of [**] each. The funding amount is deemed to cover PROTIVAs reasonably anticipated
costs for the FTEs dedicated to the conduct of the R&D Research Plan in accordance with Section 5.2
above, including any general and administrative overhead costs for
such FTEs and the costs and expenses for chemical and other research supplies and equipment
used by the FTEs in conducting activities under the R&D Research Plan. For purposes of clarity,
such costs and expenses will not be separately reimbursed by ALNYLAM to PROTIVA.
5.4
Conduct of Research
.
(a)
General
. PROTIVA will conduct its activities under the R&D Research Plan in good
scientific manner, and in compliance in all material respects with the requirements of applicable
laws and regulations (including, where applicable, the requirements of the United States Federal
government in connection with activities funded by it) and, where necessary, with applicable good
laboratory practices, to attempt to achieve its objectives efficiently and expeditiously. Without
limiting the foregoing, PROTIVA will carry out its obligations under the R&D Research Plan and this
Agreement using sustained efforts that are at least equivalent to those efforts and resources
commonly used by PROTIVA and other biopharmaceutical companies similar to PROTIVA for a comparable
program of research. PROTIVA will maintain laboratories, offices and all other facilities
reasonably necessary to carry out the activities to be performed by it pursuant to the R&D Research
Plan. In conformity with standard pharmaceutical and biotechnology industry practices and the
terms and conditions of this Agreement, PROTIVA will prepare and maintain, or will cause to be
prepared and maintained, complete and accurate written records, accounts, notes, reports and data
with respect to activities conducted pursuant to the R&D Research Plan.
(b)
R&D Research Plan
. PROTIVA will conduct activities under a mutually agreed upon
research plan pursuant to which PROTIVA will seek to identify and develop Formulations using
PROTIVAs SNALP Technology (and expected to be covered by PROTIVA Patent Rights) to deliver siRNA
drug molecules supplied from ALNYLAM locally or systemically (e.g. to intended cells and tissues,
organs or whole animals) (the R&D Research Plan). ALNYLAM will have sole discretion as to the
selection of siRNA molecules for inclusion under the R&D Research Plan, provided that ALNYLAM may
not select such molecules if ALNYLAM knows or reasonably should know that such molecule is directed
to any of the following: (i) the PLK Target; (ii) the Second Target; (iii) another PROTIVA
Development Target which is approved or remains in process in accordance with the terms in Section
3.2 of this Agreement or (iv) a Tekmira Development Target. During the Research Term, PROTIVA will
not work on ALNYLAM Targets included in the R&D Research Plan for its internal programs or on
behalf of any Third Party, unless PROTIVA is, at the time of ALNYLAMs request to include such
ALNYLAM Target in the R&D Research Plan, working on such Target (i) in its internal programs or
(ii) on behalf of any Third Party, or has agreed in writing to do so with a Third
31
Party; and PROTIVA promptly provides written notice to ALNYLAM with respect to which exception above applies
and for which ALNYLAM Target. ALNYLAM will have the right to suspend work on any siRNA molecule,
and, if it so desires, to name additional siRNA molecules in its place, under the R&D Research Plan
at any time upon written notice to PROTIVA. The R&D Research Plan will set forth the research
objectives and activities to be performed during the Research Term with reasonable specificity,
including without limitation: the Party responsible for performing identified activities and a
timeline for such activities. The R&D Research Plan will otherwise be consistent with this
Agreement. In the event of any conflict between the terms of this Agreement and the terms in the
R&D Research Plan as it may be updated, the terms of this Agreement will govern. The Parties have
prepared an updated R&D Research Plan setting out the primary activities to be conducted for the 2008 calendar year,
which is attached to this Agreement as
Exhibit D
. The JSC will be responsible for further
updating and amending the R&D Research Plan at least quarterly or more frequently as needed, based
on the progress and results of the conduct of the R&D Research Plan. PROTIVA will, from time to
time as outlined in the R&D Research Plan, provide, periodic reports to ALNYLAM with respect to
progress under the R&D Research Plan (no less frequently than quarterly), including without
limitation information on PROTIVAs standard-form Analytical Report for formulated materials
delivered by PROTIVA to ALNYLAM as contemplated under the R&D Research Plan and
Appendix II
to this Agreement (Analytical Report). At the end of the Research Term, PROTIVA will provide a
final report to ALNYLAM with respect to all results and outcomes (e.g., Formulations) of the then
current R&D Research Plan.
(c)
Material Transfer
. In order to facilitate the work under the R&D Research Plan,
ALNYLAM and PROTIVA will transfer to one another certain materials or chemical compounds for use in
furtherance of the conduct of the R&D Research Plan (Substances). Except as otherwise provided
under this Agreement, Substances delivered by one Party to the other Party will remain the sole
property of the supplying Party, will be used only for purposes of the R&D Research Plan and will
remain solely under the control of the supplying Party, will not be used or delivered to or for the
benefit of any Third Party without the prior written consent of the supplying Party and
will
not be used in research or testing involving human subjects
. The Substances supplied pursuant
to this Agreement will be used with prudence and appropriate caution as all of their
characteristics may not be known. THE SUBSTANCES ARE PROVIDED AS IS AND WITHOUT ANY
REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION ANY IMPLIED WARRANTY
OR MERCHANTABILITY OR OF FITNESS FOR ANY PARTICULAR PURPOSE.
(d)
Subcontracts
. PROTIVA will not be permitted to perform any of its obligations in
connection with performance of activities under the R&D Research Plan through the use of
subcontractor(s) without the prior written consent of ALNYLAM.
5.5
Role of JSC
. The conduct of the R&D Research Plan will be coordinated by the
Joint Steering Committee. If a consensus is not reached among the members of the Joint Steering
Committee with respect to the conduct of activities under the R&D Research Plan, ALNYLAMs
representatives on the JSC will have the deciding vote on that matter, provided that such decision
is otherwise made in a manner consistent with this Agreement.
32
5.6
Disclosures Pursuant to R&D Research Plan
.
(a) Promptly after the Effective Date, and on an on-going basis thereafter (at least once each
Calendar Quarter), PROTIVA will provide to ALNYLAM all then-existing Licensed Information with
respect to each Formulation identified or developed under this Agreement in connection with the R&D
Research Plan . During the Research Term, the provision of such Licensed Information by PROTIVA
will be without additional cost to ALNYLAM to the extent such activities are within the scope of
work under the R&D Research Plan.
(b) Subsequent to the Research Term as may be extended, or otherwise if outside the scope of
the work under the R&D Research Plan, and subject to mutual agreement as to
reasonable additional fees or costs, ALNYLAM may engage PROTIVA as a consultant (and PROTIVA
agrees to be so engaged) for purposes of effectuating the provision of such Licensed Information
and with respect to regulatory matters.
(c) Promptly after the Effective Date and on an ongoing and timely basis thereafter during the
Research Term, ALNYLAM shall (unless otherwise requested by PROTIVA in any instance or instances)
disclose to PROTIVA data generated by ALNYLAM using the Substances provided by PROTIVA to ALNYLAM
pursuant to Section 5.4(c) (ALNYLAM Data).
(d) ALNYLAM grants to PROTIVA a perpetual, non-exclusive, royalty-free, worldwide license to
use and exploit the ALNYLAM Data;
provided
,
however
, that: (i) PROTIVA will,
pursuant to Article VIII, protect from disclosure any of such ALNYLAM Data that constitutes
ALNYLAMs Confidential Information and (ii) to the extent any ALNYLAM Data that constitutes
ALNYLAMs Confidential Information relates to a Particular Moiety (other than a Particular Moiety
directed at the PLK Target or a PROTIVA Development Target), PROTIVA will not use or exploit such
ALNYLAM Data, or transfer or sublicense such ALNYLAM Data to any Third Party, for the purposes of
Research, Development, or Commercialization of products directed at the Target of such Particular
Moiety, except to contractors and subcontractors of PROTIVA permitted under Section 5.2 or 5.4(d).
5.7
Regulatory Matters
. ALNYLAM will have the sole authority and responsibility, at
its cost and expense, for all regulatory matters relating to conduct of any clinical trials on R&D
Program Products and seeking and obtaining regulatory approvals. In addition to performing any
activities pursuant to the R&D Research Plan, during the Research Term, PROTIVA will provide
ALNYLAM with such assistance as is reasonably requested by ALNYLAM from time to time to perform its
responsibilities with respect to regulatory matters at no additional cost to ALNYLAM. Subsequent
to the Research Term, PROTIVA will be paid its costs and reasonable fees at its then-current
consulting rates for such additional assistance.
5.8
Biological Data
. During the Research Term, to the extent not prohibited under
agreements with Third Parties, PROTIVA agrees to make available to ALNYLAM, and ALNYLAM agrees to
make available to PROTIVA, as and when more fully described in the R&D Research Plan, all relevant
biological data from material
in vitro
and
in vivo
testing (whether or not conducted under the R&D
Research Plan and whether conducted prior to or
33
following the Original Effective Date) of Formulations that may be identified or developed under the R&D Research Plan.
ARTICLE
VI
JOINT STEERING COMMITTEE
6.1
Joint Steering Committee
. The Parties previously established a Joint Steering
Committee pursuant to the Original Cross License Agreement. This JSC will continue and will
include an equal number of representatives from each Party and will meet at least once every
calendar quarter in person or via telephone conference.
6.2
JSC Responsibilities
. The JSC has the following responsibilities:
(i) coordinating the conduct of activities under the PLK Research Plan and the R&D Research
Plan;
(ii) receiving updates on the overall progress of the PLK Research Plan and the R&D Research
Plan and, consistent with
Appendix II
hereof, any Analytical Reports and related
disclosures under the respective research plans;
(iii) reviewing, recommending and approving annual updates to the PLK Research Plan and the
R&D Research Plan and related budgets; and
(iv) performing such other activities as are contemplated by this Agreement or that the
Parties agree will be the responsibility of the JSC, it being understood and agreed that the JSC
shall have no role or responsibilities following the Effective Date with respect to any work or
activities under the Second Target Research Plan.
The JSCs responsibilities with respect to the PLK Research Plan and progress thereunder may be
delegated by the Parties respective members of the JSC to senior level employees of the Parties
who will follow the requirements set forth in this Agreement for the JSC in the context of the PLK
Target.
ARTICLE VII
INTELLECTUAL PROPERTY
7.1
Ownership
. Inventorship for patentable inventions conceived or reduced to
practice during the course of the performance of activities pursuant to this Agreement shall be
determined in accordance with United States patent laws for determining inventorship. ALNYLAM will
solely own all intellectual property discovered and reduced to practice solely by ALNYLAM directly
in the course of work conducted after the Original Effective Date under the Second Target Research
Plan or under the PLK Research Plan or under the R&D Research Plan. PROTIVA will solely own all
intellectual property discovered and reduced to practice solely by PROTIVA directly in the course
of work conducted after the Original Effective Date under the Second Target Research Plan or under
the PLK Research Plan or under the R&D Research Plan. The Parties will jointly own all
intellectual property discovered and reduced to practice jointly by ALNYLAM and PROTIVA directly in
the course of work conducted after the Original Effective Date under the Second Target Research
Plan or under the PLK Research Plan or under the R&D Research Plan, and all Joint Patent Rights.
34
7.2
Prosecution and Maintenance of Patent Rights
. ALNYLAM will have the sole right
and responsibility, at ALNYLAMs discretion and at its expense, to file, prosecute and maintain
patent protection in the Territory for all ALNYLAM Patent Rights, except for Exclusively Licensed
Tekmira IP. PROTIVA will have the sole right and responsibility, at PROTIVAs discretion and at
its expense, to file, prosecute and maintain patent protection in the Territory for all PROTIVA
Patent Rights.
7.3
Joint Patent Rights
. Subject to the rights granted each Party under this
Agreement, each Party shall have the right to use, sell, keep, license or assign its interest in
Joint Patent Rights and otherwise undertake all activities a sole owner might undertake with
respect to such Joint Patent Rights without the consent of and without accounting to the other
Party. Subject to PROTIVAs continuing right to the prior review of, comment on, revision to and
approval of material documents, which shall not be unreasonably delayed or withheld, ALNYLAM has
the first responsibility to, at ALNYLAMs discretion and expense, file,
prosecute, and maintain (including the defense of any interference or opposition proceedings)
in the Territory, all Joint Patent Rights, in the names of both PROTIVA and ALNYLAM. If ALNYLAM
elects not to seek or continue to seek or maintain patent protection on any Joint Patent Rights,
then PROTIVA shall have the right (but not the obligation), at its expense, to file, prosecute and
maintain (including the defense of any interference or opposition proceedings) in the Territory,
such Joint Patent Right, in the names of both PROTIVA and ALNYLAM.
7.4
Cooperation
. Each Party hereby agrees: (a) to make its employees, agents and
consultants reasonably available to the other Party (or to the other Partys authorized attorneys,
agents or representatives), to the extent reasonably necessary to enable such Party to undertake
patent prosecution; (b) to provide the other Party with copies of all material correspondence
pertaining to prosecution with the patent offices; (c) to cooperate, if necessary and appropriate,
with the other Party in gaining patent term extensions wherever applicable to patent rights; and
(d) to endeavor in good faith to coordinate its efforts with the other Party to minimize or avoid
interference with the prosecution and maintenance of the other Partys patent applications.
7.5
Third Party Infringement of ALNYLAM Patent Rights.
(a) Each Party will promptly report in writing to the other Party during the Term any known or
suspected infringement by a Third Party of any of the ALNYLAM Patent Rights of which such Party
becomes aware, as such infringement relates to Research, Development or Commercialization of
Licensed Products for the PLK Target or one or more of the PROTIVA Development Targets, or any
PROTIVA Development Products, and will provide the other Party with all available evidence
supporting such infringement.
(b) ALNYLAM will have the sole and exclusive right to initiate an infringement or other
appropriate suit in the Territory with respect to infringements or suspected infringements of any
of the ALNYLAM Patent Rights, and to any and all recoveries obtained in connection therewith.
35
(c) ALNYLAM will have the sole and exclusive right to select counsel for any suit referred to
in subsection 7.5(b) above initiated by it and will pay all expenses of the suit, including without
limitation attorneys fees and court costs.
7.6
|
|
Third Party Infringement of PROTIVA Patent Rights.
|
(a) Each Party will promptly report in writing to the other Party during the Term any known or
suspected infringement by a third party of any of the PROTIVA Patent Rights of which such Party
becomes aware, as such infringement relates to the Research, Development or Commercialization of
Licensed Products directed at any ALNYLAM Target or any ALNYLAM Development Products and will
provide the other Party with all available evidence supporting such infringement.
(b) PROTIVA will have the sole and exclusive right to initiate an infringement or other
appropriate suit in the Territory with respect to infringements or suspected infringements of any
of the PROTIVA Patent Rights and to any and all recoveries obtained in connection therewith.
(c) PROTIVA will have the sole and exclusive right to select counsel for any suit referred to
in subsection 7.6(b) above initiated by it and will pay all expenses of the suit, including without
limitation attorneys fees and court costs.
7.7
Rights to Enforce Joint Patent Rights
.
(a) Each Party will promptly report in writing to the other Party during the Term any known or
suspected infringement by a third party of any of the Joint Patent Rights of which such Party
becomes aware. ALNYLAM will have the first right to initiate an infringement or other appropriate
suit in the Territory with respect to infringements or suspected infringements of any of the Joint
Patent Rights;
provided
, that if ALNYLAM fails to initiate a suit or take other appropriate
action with respect to a Joint Patent Right within ninety (90) days after becoming aware of the
basis for such suit or action, then PROTIVA may, in its discretion, provide ALNYLAM with written
notice of PROTIVAs intent to initiate a suit or take other appropriate action with respect to such
Joint Patent Right. If PROTIVA provides such notice and ALNYLAM fails to initiate a suit or take
such other appropriate action within thirty (30) days after receipt of such notice from PROTIVA,
then PROTIVA shall have the right to initiate a suit or take other appropriate action that it
believes is reasonably required to protect its interests under such Joint Patent Right.
(b) Regardless of which Party brings such enforcement action, the Party not bringing the
enforcement action shall (i) provide all reasonable assistance to the Party bringing the action, at
the expense of the Party bringing the action, and (ii) have the right to join and participate in
such action at its own expense with its own counsel and to share equally all expenses of such suit
if it so elects. If required under applicable law in order for the initiating Party to initiate
and/or maintain such suit, or if the initiating Party is unable to initiate or prosecute such suit
solely in its own name or it is otherwise advisable to obtain an effective legal remedy, in each
case, the other Party shall, at the expense of the initiating Party, join as a party to the suit
and will execute and
36
cause its Affiliates to execute all documents necessary for the initiating
Party to initiate litigation to prosecute and maintain such action.
(c) Any damages or other recovery, whether by settlement or otherwise, from an action under
this Section 7.7 to enforce the Joint Patent Rights shall first be applied pro rata to reimburse
the Parties for the costs and expenses of litigation in such action, and any remaining amount shall
be paid to the Party conducting the litigation, or shared equally if both Parties participated
voluntarily throughout the litigation and shared its expenses.
7.8
Claimed Infringement of Third Party Rights
.
(a) In the event that a Third Party at any time provides written notice of a claim to, or
brings an action, suit or proceeding against, either Party, or any of their respective Affiliates
or Sublicensees, claiming infringement of its patent rights based upon an assertion or claim
arising out of the development, use, manufacture, distribution, importation or sale of Licensed
Products (Third Party Claim), such Party will promptly notify the other Party of the claim or the
commencement of such action, suit or proceeding, enclosing a copy of the claim and all papers
served. Each Party agrees to make available to the other Party its advice and counsel regarding
the technical merits of any such claim at no cost to the other Party and to offer reasonable
assistance to the other Party at no cost to the other Party.
(b) Except as set forth herein, each Party shall have sole and exclusive responsibility for
the defense of its own interests in actions in which they are named in connection with any Third
Party Claim brought against either Party or any of their respective Affiliates or Sublicensees.
All litigation costs and expenses incurred by either Party in connection with the defense of such
Third Party Claim will be borne by such Party. Each Party will keep the other Party promptly
informed, and may from time to time consult with the other Party regarding the status of any such
Third Party Claims.
(c) Neither Party will settle any Third Party claim in a manner that is in derogation of the
rights of the other Party without obtaining the prior written consent of such other Party.
(d) THE PROVISIONS OF THIS SECTION 7.8 STATE THE ENTIRE RESPONSIBILITY OF THE PARTIES, AND THE
SOLE AND EXCLUSIVE REMEDY OF THE PARTIES, IN THE CASE OF ANY THIRD PARTY CLAIMS OR VIOLATION OF ANY
THIRD PARTYS RIGHTS.
7.9
Other Infringement Resolutions
. In the event of a dispute or potential dispute
which has not ripened into a demand, claim or suit of the types described above in this Article
VII, the same principles governing control of the resolution of the dispute, consent to settlements
of the dispute, and implementation of the settlement of the dispute will apply.
7.10
Interpretation of Patent Judgments
. If any claim relating to a patent under the
ALNYLAM Patent Rights or the PROTIVA Patent Rights or Joint Patent Rights becomes the subject of a
judgment, decree or decision of a court, tribunal, or other authority of competent jurisdiction in
any country, which judgment, decree, or decision is or becomes final (there being
37
no further right of review) and adjudicates the validity, enforceability, scope, or infringement of the same, the
construction of such claim in such judgment, decree or decision shall be followed thereafter in
such country in determining whether a product is a Licensed Product hereunder, not only as to such
claim but also as to all other claims in such country to which such construction reasonably
applies. If at any time there are two or more conflicting final judgments, decrees, or decisions
with respect to the same claim, the decision of the higher tribunal shall thereafter control, but
if the tribunal be of equal rank, then the final judgment, decree, or decision more favorable to
such claim shall control unless and until the majority of such tribunals of equal rank adopt or
follow a less favorable final judgment, decree, or decision, in which event the latter shall
control.
7.11
Product Trademarks
. ALNYLAM shall own trademarks for ALNYLAM Development
Products and shall be solely responsible for filing and maintaining such trademarks in the
Territory (including payment of costs associated therewith), ALNYLAM shall assume full
responsibility, at its sole cost and expense, for any infringement of a trademark for an ALNYLAM
Development Product by a Third Party and for any claims of infringement of the rights of a Third
Party by the use of a trademark in connection with such ALNYLAM Development Product. PROTIVA shall
own the trademarks for PROTIVA Development Products and shall be solely responsible for filing and
maintaining such trademarks in the Territory (including payment of costs associated therewith).
PROTIVA shall assume full responsibility, at its sole cost and expense, for any infringement of a trademark for a
PROTIVA Development Product by a Third Party and for any claims of infringement of the rights of a
Third Party by the use of a trademark in connection with such PROTIVA Development Product.
7.12
Patent Certification
. To the extent required by law or permitted by law, the
Parties shall use reasonable efforts to maintain with the applicable regulatory authorities during
the Term correct and complete listings of applicable patent rights for ALNYLAM Development Products
and PROTIVA Development Products, as the case may be, being commercialized, including all so called
Orange Book listings required under the Hatch-Waxman Act.
ARTICLE VIII
CONFIDENTIAL INFORMATION, PUBLICATION, AND NON-SOLICITATION
8.1
Non-Use and Non-Disclosure of Confidential Information
. Each Party agrees that
all Confidential Information of a Party that is disclosed by a Party to the other Party (a) will
not be used by the receiving Party except in connection with the activities contemplated by this
Agreement or in order to further the purposes of this Agreement, (b) will be maintained in
confidence by the receiving Party, and (c) will not be disclosed by the receiving Party to any
Third Party who is not a consultant or advisor under an obligation of confidentiality to, the
receiving Party or an Affiliate or Sublicensee of the receiving Party, without the prior written
consent of the disclosing Party. Notwithstanding the foregoing, the receiving Party will be
entitled to use and disclose Confidential Information of the disclosing Party which (i) was known
by the receiving Party or its Affiliates prior to its date of disclosure by the disclosing Party to
the receiving Party as demonstrated by legally admissible evidence available to the receiving Party
or its Affiliates, (ii) either before or after the date of the disclosure such Confidential
Information is lawfully disclosed to the receiving Party or its Affiliates by sources other than
the disclosing
38
Party, (iii) either before or after the date of the disclosure by the disclosing
Party to the receiving Party such Confidential Information becomes published or otherwise part of
the public domain through no fault or omission on the part of the receiving Party or its
Affiliates, (iv) is independently developed by or for the receiving Party or its Affiliates without
reference to or in reliance upon the Confidential Information as demonstrated by legally admissible
evidence available to the receiving Party or its Affiliates, (v) is reasonably necessary to conduct
clinical trials or to obtain regulatory approval of RNAi Products or miRNA Products or for the
prosecution and maintenance of patent rights, (vi) is reasonably required in order for a Party to
obtain financing or conduct discussions with Development or Commercialization partners so long as
such Third Party recipients are bound by an obligation of confidentiality or (vii) in the
reasonable judgment of the disclosing Party is required to be disclosed by the receiving Party to
comply with applicable laws or regulations or legal process, including without limitation by the
rules or regulations of the United States Securities and Exchange Commission or similar regulatory
agency in a country other than the United States or of any stock exchange or NASDAQ, provided that
the receiving Party provides prior written notice of such disclosure to the disclosing Party and
takes reasonable and lawful actions to avoid or minimize the extent of such disclosure.
If a Party is required by judicial or administrative process to disclose Confidential
Information that is subject to the non-disclosure provisions of this Section 8.1, such Party shall
promptly inform the other Party of the disclosure that is being sought in order to provide the
other Party an opportunity to challenge or limit the disclosure obligations. Confidential
Information that is disclosed by judicial or administrative process shall remain otherwise subject
to the confidentiality and non-use provisions of this Section 8.1, and the Party disclosing
Confidential Information pursuant to law or court order shall take all steps reasonably practical,
including without limitation seeking an order of confidentiality, to ensure the continued
confidential treatment of such Confidential Information. In addition to the foregoing restrictions
on public disclosure, if either Party concludes that a copy of this Agreement must be filed with
the United States Securities and Exchange Commission or similar regulatory agency in a country
other than the United States, such Party shall seek the maximum confidential treatment available
under applicable law, provide the other Party with a copy of this Agreement showing any sections as
to which the Party proposes to request confidential treatment, provide the other Party with an
opportunity to comment on any such proposal and to suggest additional portions of this Agreement
for confidential treatment, and take such Partys reasonable comments into consideration before
filing this Agreement.
8.2
Limitation on Disclosures
. Each Party agrees that it will provide Confidential
Information received from the other Party solely to its employees, consultants and advisors, and
the employees, consultants and advisors of its Affiliates or Sublicensees as applicable, who have a
legitimate business need to know and an obligation to maintain in confidence the Confidential
Information of the disclosing Party. The disclosing Party is liable for any breach of the
non-disclosure obligation of its consultants, advisors, Affiliates and Sublicensees as applicable.
8.3
Publication
. PROTIVA and ALNYLAM each acknowledge the other Partys interest in
publishing the results of the R&D Research Plan and the PLK Research Plan. Each Party also
recognizes the mutual interest in obtaining valid patent protection and in protecting
39
business interests and trade secret information. Consequently, except for disclosures
permitted pursuant to Section 8.1 and 8.2, either Party, its Affiliates, or their respective
employees or consultants wishing to make a publication or a disclosure to a Third Party relating to
the R&D Research Plan, the PLK Research Plan or any Licensed Product of the other Party shall
deliver to the other Party a copy of the proposed written publication or an outline of an oral
disclosure at least thirty (30) days prior to submission for publication or presentation. The
reviewing Party shall have the right (a) to propose modifications to the publication or
presentation for patent reasons, trade secret reasons or business reasons, or (b) to request a
reasonable delay in publication or presentation in order to protect patentable information. If the
reviewing Party requests a delay, the publishing Party shall delay submission or presentation for a
period of thirty (30) days to enable patent applications protecting each Partys rights in such
information to be filed in accordance with Article VII above. Upon expiration of such thirty (30)
days, the publishing Party shall be free to proceed with the publication or presentation. If the
reviewing Party requests modifications to the publication or presentation, the publishing Party
shall edit such publication to prevent disclosure of trade secret or proprietary business
information prior to submission of the publication or presentation. With respect to any proposed
publications or disclosures by investigators or academic or non-profit collaborators, such
materials shall be subject to review under this Section 8.3 to the extent that PROTIVA or ALNYLAM,
as the case may be, has the right and ability (after using reasonable efforts) to do so. For the
avoidance of doubt, subject to its obligations under Section 8.1, each Party may make publications
and disclosures to Third Parties relating to its own Licensed Products outside of the R&D Research
Plan without any obligation to permit the other Party to review or comment on such publication or
disclosure.
8.4
Non-Solicitation
. Until [**], neither ALNYLAM nor any of its Affiliates will
knowingly offer to hire or hire any individual who is, at such time, an officer or employee of
PROTIVA or any of its Affiliates, and who was, at any time in the preceding three (3) months,
involved in (i) selecting the PROTIVA Development Targets, (ii) the Development and
Commercialization of PROTIVA Development Products and/or (iii) conducting the R&D Research Plan or
Second Target Research Plan or PLK Research Plan. For clarity, placing an advertisement in a
newspaper, periodical or other publication of general availability, or other general recruitment
activities not directed at a particular individual, do not constitute an offer to hire.
ARTICLE
IX
REPORTS, TAXES AND PAYMENTS
9.1
Terminology
. For purposes of Articles II and III, the Licensee referred to
in this Article IX shall be understood to be PROTIVA. For purposes of Article IV, the Licensee
referred to in this Article IX shall be understood to be ALNYLAM.
9.2
Reports
. As to each Royalty Quarter commencing with the Royalty Quarter
during which the First Commercial Sale occurs, within thirty (30) days after the end of such
Royalty Quarter (if the Licensee has not entered into an agreement with a Sublicensee) and within
thirty (30) days after the receipt by the Licensee from a Sublicensee of such Sublicensees report,
as required by such Sublicensees sublicense for each Royalty Quarter (if the Licensee has entered
into an agreement with a Sublicensee), the Licensee will deliver to the other Party to
40
this Agreement a written report showing, on a country-by-country basis, the Net Sales of
Licensed Products calculated under GAAP and its royalty obligation for such quarter with respect to
such Net Sales under this Agreement together with wire transfer of an amount equal to such royalty
obligation. All Net Sales will be segmented in each such report according to sales by the Licensee
and each Affiliate and Sublicensee, as well as on a product-by-product basis, including the rates
of exchange used to convert Net Sales to United States Dollars from the currency in which such
sales were made. For the purposes of this Agreement, the rates of exchange to be used for
converting Net Sales to United States Dollars will be the simple average of the selling and buying
rates of U.S. dollars published in
The Wall Street Journal East Coast Edition
for the last business
day of the Royalty Quarter covered by the report.
9.3
Tax Withholding
. The Licensee will use all reasonable and legal efforts to
reduce tax withholding with respect to payments to be made to the other Party under this Agreement.
Notwithstanding such efforts, if the Licensee concludes that tax withholdings under the laws of
any country are required with respect to payments, the Licensee will make the full amount of the
required payment to such other Party after any tax withholding. In any such case, the Licensee
shall provide such other Party with a written explanation of such withholding and original receipts
or other evidence reasonably desirable and sufficient to allow it to document such tax withholdings
for purposes of claiming foreign tax credits and similar benefits. For purposes of clarity, any
payment due in respect of fees set out in any of Articles II, III or IV of this Agreement will be
paid in the full amount specified after any tax withholding, with the amount of any tax withholding
associated with such payments to be paid by the Licensee to the appropriate government authority.
9.4
Payments
. Unless otherwise agreed by the Parties, all payments required to be
made under this Agreement will be made in United States Dollars via wire transfer to an account
designated in advance by the receiving Party.
9.5
Audits
.
(a) At any given point in time, the Licensee will have on file and will require its
Affiliates and Sublicensees to have on file complete and accurate records for the last three (3)
years of all Net Sales of Licensed Products. The other Party to this Agreement will have the
right, once during each twelve (12) month period, to retain at its own expense an independent
qualified certified public accountant reasonably acceptable to the Licensee to review such records
solely for accuracy and for no other purpose upon reasonable notice and under a written obligation
of confidentiality, during regular business hours. If the audit demonstrates that the payments
owed under this Agreement have been understated, the Licensee will pay the balance to such other
Party together with interest on such amounts from the date on which such payment obligation accrued
at a rate equal to the then current 30-day United States dollar LIBOR rate plus two percent per
annum. If the underpayment is greater than five percent of the amount owed, then the Licensee will
reimburse such other Party for its reasonable out-of-pocket costs of the audit. If the audit
demonstrates that the payments owed under this Agreement have been overstated, such other Party to
this Agreement will credit the balance against the next payment due from the Licensee (without
interest).
41
(b) PROTIVA shall require that the terms of any sublicense under its rights in this
Agreement are fully in compliance with the terms and conditions of the in-licenses governing
ALNYLAMs rights under the ALNYLAM Patent Rights identified on
Exhibit B
, including without
limitation, all obligations with respect to maintenance of records and audit rights. ALNYLAM will
provide PROTIVA in a timely manner with a true and complete copy (subject to redaction of financial
and other information not material to ALNYLAMs ability to sublicense rights licensed thereunder to
PROTIVA under this Agreement) of all such in-licenses.
ARTICLE
X
INDEMNIFICATION AND INSURANCE
10.1
PROTIVA Indemnification
. PROTIVA agrees to indemnify and hold harmless
ALNYLAM and its Affiliates, and their respective agents, directors, officers and employees and
their respective successors and assigns (the ALNYLAM Indemnitees) from and against any and all
losses, costs, damages, fees or expenses (Losses) incurred by an ALNYLAM Indemnitee arising out
of or in connection with any claim, suit, demand, investigation or proceeding brought by a Third
Party or a PROTIVA Affiliate based on (a) the development, use, manufacture, distribution or sale
of any Licensed Product covered by ALNYLAM Patent Rights by PROTIVA or any of its Affiliates or
Sublicensees, including, but not limited to, any claims made against ALNYLAM by Third Parties or a
PROTIVA Affiliate alleging infringement, injury, damage, death or other consequence occurring to
any person claimed to result, directly or indirectly, from the possession, use or consumption of,
or treatment with, any Licensed Product covered by ALNYLAM Patent Rights, whether claimed by reason
of breach of warranty, negligence, product defect or otherwise, and regardless of the form or forum
in which any such claim is made, (b) any breach of any representation, warranty or covenant of
PROTIVA in this Agreement, and (c) actions taken or omitted to be taken by PROTIVA or its
Affiliates, subcontractors or Sublicensees, or the employees, agents or representatives of any of
them in performing PROTIVAs obligations under this Agreement.
The above indemnification shall not apply to the extent that any Losses are due to a material
breach of any of ALNYLAMs representations, warranties, covenants and/or obligations under this
Agreement.
10.2
ALNYLAM Indemnification
. ALNYLAM agrees to indemnify and hold harmless
PROTIVA and its Affiliates, and their respective agents, directors, officers and employees and
their respective successors and assigns (the PROTIVA Indemnitees) from and against any and all
Losses incurred by a PROTIVA Indemnitee arising out of or in connection with any claim, suit,
demand, investigation or proceeding brought by a Third Party or an ALNYLAM Affiliate based on (a)
the Development, use, manufacture, distribution or sale of any Licensed Product covered by PROTIVA
Patent Rights by ALNYLAM or any of its Affiliates or Sublicensees, including, but not limited to,
any claims made against PROTIVA by Third Parties or an ALNYLAM Affiliate alleging infringement,
injury, damage, death or other consequence occurring to any person claimed to result, directly or
indirectly, from the possession, use or consumption of, or treatment with, any Licensed Product
covered by PROTIVA Patent Rights, whether claimed by reason of breach of warranty, negligence,
product defect or otherwise, and regardless of the form or forum in which any such claim is made,
(b) any breach of any representation, warranty or covenant of ALNYLAM in this Agreement or any
Other Agreement,
42
and (c) actions taken or omitted to be taken by ALNYLAM or its Affiliates, subcontractors or
Sublicensees, or the employees, agents or representatives of any of them in performing ALNYLAMs
obligations under this Agreement.
The above indemnification shall not apply to the extent that any Losses are due to a material
breach of any of PROTIVAs representations, warranties, covenants and/or obligations under this
Agreement.
10.3
Tender of Defense; Counsel
. The obligation to indemnify pursuant to this
Article shall be contingent upon timely notification by the indemnitee to the indemnitor of any
claims, suits or service of process; the tender by the indemnitee to the indemnitor of full control
over the conduct and disposition of any claim, demand or suit; and reasonable cooperation by the
indemnitee in the defense of the claim, demand or suit. No indemnitor will be bound by or liable
with respect to any settlement or admission entered or made by any indemnitee without the prior
written consent of the indemnitor. The indemnitee will have the right to retain its own counsel to
participate in its defense in any proceeding hereunder. The indemnitee shall pay for its own
counsel except to the extent it is determined that (i) one or more legal defenses may be available
to it which are different from or additional to those available to the indemnitor, or (ii)
representation of both Parties by the same counsel would be inappropriate due to actual or
potential differing interests between them. In any such case and to such extent, the indemnitor
shall be responsible to pay for the reasonable costs and expenses of the separate counsel retained
to participate in the defense of the indemnitee, provided that such expenses are otherwise among
those covered by the indemnitors indemnity agreement hereunder.
Notwithstanding the
foregoing, if the indemnitor believes that any of the exceptions to its obligation of
indemnification of the indemnitee set forth in Sections 10.1 or 10.2 may apply, the indemnitor
shall promptly notify the indemnitee, which shall then have the right to be represented in any such
action or proceeding by separate counsel at their expense;
provided,
that the indemnitor
shall be responsible for payment of such expenses if the indemnitee is ultimately determined to be
entitled to indemnification from the indemnitor.
10.4
PROTIVA Insurance
. With respect to its activities under this Agreement,
PROTIVA will secure and maintain in full force and effect throughout the PLK Term and the term of
the license set out in Section 3.4, as the case may be (and for at least six (6) years thereafter
for claims-made coverage), the following types and amounts of insurance coverage with carriers
having a minimum AM Best rating of A, with per claim deductibles that do not exceed [**]:
Comprehensive General Liability and Personal Injury, including coverage for contractual liability
assumed by PROTIVA and coverage for PROTIVA independent contractor(s), with limits of at least [**]
per occurrence and a general aggregate limit of [**].
Prior to, at, and following the dosing of the first patient in a Phase I Clinical Trial of any
Licensed Product by PROTIVA or its Affiliates or Sublicensees, Umbrella Liability, exclusive of the
coverage provided by the policies listed above, with a limit of at least [**].
Prior to, at, and following the First Commercial Sale of any Licensed Product by PROTIVA or
43
its Affiliates or Sublicensees, Products/Clinical/Professional Liability, exclusive of the coverage
provided by the Comprehensive General Liability policy, with limits of at least [**] per occurrence
and an aggregate limit of at least [**], with ALNYLAM to be named as an additional insured party
with respect to each RNAi Product or miRNA Product under such coverage.
10.5
ALNYLAM Insurance
. With respect to its activities under this Agreement,
ALNYLAM will secure and maintain in full force and effect throughout the term of the license set
out in Section 4.3 (and for at least six (6) years thereafter for claims-made coverage), the
following types and amounts of insurance coverage with carriers having a minimum AM Best rating of
A, with per claim deductibles that do not exceed [**]:
Comprehensive General Liability and Personal Injury, including coverage for contractual liability
assumed by ALNYLAM and coverage for ALNYLAM independent contractor(s), with limits of at least [**]
per occurrence and a general aggregate limit of [**].
Prior to, at, and following the dosing of the first patient in a Phase I Clinical Trial of any
Licensed Product by ALNYLAM or its Affiliates or Sublicensees, Umbrella Liability, exclusive of the
coverage provided by the policies listed above, with a limit of at least [**].
Prior to, at, and following the First Commercial Sale of any Licensed Product by ALNYLAM or its
Affiliates or Sublicensees, Products/Clinical Liability, exclusive of the coverage provided by the
Comprehensive General Liability policy, with limits of at least [**] per occurrence and an
aggregate limit of at least [**], with PROTIVA to be named as an additional insured party with
respect to each Licensed Product under such coverage.
ARTICLE XI
EXPORT
11.1
General
. The Parties acknowledge that the exportation from the United States
of materials, products and related technical data (and the re-export from elsewhere of United
States origin items) may be subject to compliance with United States export laws, including without
limitation the United States Bureau of Export Administrations Export Administration Regulations,
the Act and regulations of the FDA issued thereunder, and the United States Department of States
International Traffic and Arms Regulations which restrict export, re-export, and release of
materials, products and their related technical data, and the direct products of such technical
data. The Parties agree, under this Agreement, to comply with all applicable exports laws and to
commit no act that, directly or indirectly, would violate any United States law, regulation, or
treaty, or any other international treaty or agreement, relating to the export, re-export, or
release of any materials, products or their related technical data to which the United States
adheres or with which the United States complies.
11.2
Delays
. The Parties acknowledge that they cannot be responsible for any
delays attributable to export controls which are beyond the reasonable control of either Party.
11.3
Assistance
. The Parties agree to provide assistance to one another in
connection with each Partys efforts to fulfill its obligations under this Article XI.
44
ARTICLE XII
EFFECTIVE DATE, TERM AND TERMINATION
12.1
Effective Date; Term; Expiration
. The Effective Date shall be the date
upon which this Agreement and the ALNYLAM-TEKMIRA License Agreement are released from escrow and
delivered to the appropriate parties in accordance with the terms of the Escrow Agreement. Unless
and until the foregoing condition is met, the Original Cross-License Agreement shall remain in full
force and effect and the terms and conditions of the Original Cross-License Agreement shall govern
the Parties without any regard being given to this Agreement or its terms and conditions. On and as
of the Effective Date, this Agreement will supersede and replace the Original Cross-License
Agreement and, unless terminated earlier as provided herein, the licenses granted under this
Agreement will expire at the end of the periods described in Section 2.12, 3.4 or 4.3, as
applicable to each of such licenses.
12.2
Material Breach
.
(a) ALNYLAM, as the licensor under Articles II and III, will have the right to terminate
the licenses granted under such Articles, upon written notice to PROTIVA, in the event PROTIVA
materially breaches its obligations under this Agreement related to the license granted under
Articles II or III and does not remedy such breach within ninety (90) days after receipt of written
notice from ALNYLAM specifically identifying the breach and stating that ALNYLAM intends to
terminate such licenses if PROTIVA fails to remedy the breach within the ninety (90)-day time
period; provided, however, that if PROTIVA disputes in good faith that the claimed breach exists,
such 90-day period will not start to run until such dispute has been resolved or can no longer be
maintained in good faith.
(b) PROTIVA, as the licensor under Article IV, will have the right to terminate the
licenses granted under such Article, upon written notice to ALNYLAM, in the event ALNYLAM
materially breaches its obligations under this Agreement related to the license granted under
Article IV and does not remedy such breach within ninety (90) days after receipt of written notice
from PROTIVA specifically identifying the breach and stating that PROTIVA intends to terminate such
licenses if ALNYLAM fails to remedy the breach within the ninety (90)-day time period; provided,
however, that if ALNYLAM disputes in good faith that the claimed breach exists, such 90-day period
will not start to run until such dispute has been resolved or can no longer be maintained in good
faith.
(c) In the event that ALNYLAM materially breaches its obligations under this Agreement as
referenced below, and does not remedy such breach within ninety (90) days after receipt of written
notice from PROTIVA specifically identifying the breach, PROTIVA will, in addition to its rights
under Section 12.2(b), have the following rights: (i) if ALNYLAMs material breach is in respect
of its obligations arising under Articles II or III of this Agreement, PROTIVA may (A) suspend any
obligation to make payments to ALNYLAM due under Articles II or III of this Agreement until such
time as the breach is cured and (B) suspend the performance of its obligations under the PLK
Research Plan; and/or (C) terminate its obligations under the PLK Research Plan; or (ii) if
ALNYLAMs material breach is in respect of its obligations arising under Articles IV or V of this
Agreement, PROTIVA may (A) suspend the performance of its obligations under the R&D Research Plan;
and/or (B) terminate its obligations under the R&D Research Plan; provided, however, that if
ALNYLAM disputes in good faith that the claimed breach exists, PROTIVA will not exercise its right
of termination under clauses
45
(i)(C) or (ii)(B) above until such dispute has been resolved or can no longer be maintained in
good faith. Within sixty (60) days after cure of the breach, PROTIVA will pay to ALNYLAM all
amounts previously due, but not paid as a result of any suspension of payments.
(d) In the event that PROTIVA materially breaches its obligations under this Agreement as
described below, and does not remedy such breach within ninety (90) days after receipt of written
notice from ALNYLAM specifically identifying the breach, ALNYLAM will, in addition to its rights
under Section 12.2(a), have the following rights: (i) if PROTIVAs material breach is in respect
of its obligations arising under Articles IV or V of this Agreement, ALNYLAM may suspend any
obligation to make payments to PROTIVA due under Articles IV and V of this Agreement until such
time as the breach is cured; and/or (ii) if PROTIVAs material breach is in respect of its
obligations under Articles II or III, ALNYLAM suspend its obligations under Section 3.2 with
respect to Targets proposed by PROTIVA. Within sixty (60) days after cure of the breach, ALNYLAM
will pay to PROTIVA all amounts previously due, but not paid as a result of any suspension of
payments.
(e) In the event that TEKMIRA is in breach of any of its material obligations under any
Transaction Document (defined below) to which it is a party (other than the Supply Agreement or
any Quality Agreement (as such terms are defined in the ALNYLAM-TEKMIRA License Agreement)), by
causes and reasons within the control of TEKMIRA, and if the breach is capable of being cured,
TEKMIRA has not cured such breach within the period provided for cure under the applicable
Transaction Document or, if greater, ninety (90) days after receiving notice of such breach from
the non-breaching Party, and if, and to the extent that ALNYLAM exercises its rights to terminate
any licenses under the ALNYLAM-TEKMIRA License Agreement with respect to Exclusively Licensed
Tekmira IP, then ALNYLAM may, in its sole discretion, also and concurrently (and to the same
extent, e.g., with respect to the same Region as defined in the ALNYLAM-TEKMIRA License
Agreement) terminate the licenses under this Agreement to PROTIVA with respect to Exclusively
Licensed Tekmira IP; provided, however, that, in the event of a good faith dispute with respect to
the existence of a material breach, the applicable cure period shall be tolled until such time as
the dispute is resolved pursuant to the dispute resolution provisions of the applicable Transaction
Document, or in the absence of any dispute resolution provisions in the applicable Transaction
Document, Section 12.6 of the ALNYLAM-TEKMIRA License Agreement. Transaction Documents means the
ALNYLAM Subscription Agreement, the ALNYLAM-TEKMIRA License Agreement, the Tekmira-UBC License
Agreement, the UBC Sublicense Documents, the Loan Agreement (all as defined in the ALNYLAM-TEKMIRA
License Agreement), all letter agreements and other documents executed by TEKMIRA in connection
with the Original ALNYLAM-TEKMIRA License Agreement and any other documents or agreements that are
executed by the Parties and/or TEKMIRA after the Original Effective Date as contemplated by this
Agreement or the ALNYLAM-TEKMIRA License Agreement.
12.3
Challenges of ALNYLAM Patent Rights
. In the event that PROTIVA, TEKMIRA or
any of their Affiliates shall (a) commence or participate in any action or proceeding (including,
without limitation, any patent opposition or re-examination proceeding), or otherwise assert in
writing any claim, challenging or denying the validity of any of the ALNYLAM Patent Rights licensed
hereunder, or any claim thereof or (b) actively assist any
46
other person or entity in bringing or prosecuting any action or proceeding (including, without
limitation, any patent opposition or re-examination proceeding) challenging or denying the validity
of any of such ALNYLAM Patent Rights or any claim thereof, ALNYLAM will have the right to give
notice to PROTIVA (which notice must be given, if at all, within sixty (60) days after ALNYLAM
first learns of the foregoing) that the licenses granted by ALNYLAM to such ALNYLAM Patent Right
will terminate in thirty (30) days following such notice, and, unless PROTIVA or TEKMIRA withdraws
or causes to be withdrawn all such challenge(s) within such thirty-day period, such licenses will
so terminate.
12.4
Challenges of PROTIVA Patent Rights
. In the event that ALNYLAM or any of its
Affiliates shall (a) commence or participate in any action or proceeding (including, without
limitation, any patent opposition or re-examination proceeding), or otherwise assert in writing any
claim, challenging or denying the validity of any of the PROTIVA Patent Rights or any claim thereof
or (b) actively assist any other person or entity in bringing or prosecuting any action or
proceeding (including, without limitation, any patent opposition or re-examination proceeding)
challenging or denying the validity of any of such PROTIVA Patent Rights or any claim thereof,
PROTIVA will have the right to give notice to ALNYLAM (which notice must be given, if at all,
within sixty (60) days after PROTIVA first learns of the foregoing) that ALNYLAMs license under
Class 1 PROTIVA Patent Rights and/or the license under Class 2 PROTIVA Patent Rights will
terminate in thirty (30) days following such notice, and, unless ALNYLAM withdraws or causes to be
withdrawn all such challenge(s) within such thirty-day period, such licenses will so terminate.
12.5
Consequences of Termination; Survival
.
(a) In the event of termination by ALNYLAM under Section 12.2(a) above, all licenses and
rights granted by ALNYLAM to PROTIVA under Article II and III and Section 5.6 of this Agreement
will terminate;
provided
,
however
, that to the extent such licenses and rights are
required in respect of clinical trials that are ongoing and cannot reasonably be terminated
promptly due to health or safety reasons or the requirements of applicable law, such licenses and
rights will continue in effect until such clinical trials are properly terminated. Moreover, any
breach of the restrictions in Section 5.6(d) which PROTIVA fails to cure within ninety (90) days
after receipt of written notice from ALNYLAM specifically identifying the breach, shall result in
the termination of PROTIVAs license under such Section to the Alnylam Data, but it shall not, by
itself, result in the termination of any other licenses to PROTIVA under this Agreement unless
ALNYLAM meets the burden of demonstrating that such breach has had or is reasonably likely to have
a material adverse effect on the benefits, taken as a whole, that ALNYLAM reasonably anticipates it
will obtain from this Agreement and the ALNYLAM-TEKMIRA License Agreement and the activities and
grants contemplated under such agreements.
(b) In the event of termination by PROTIVA under Section 12.2(b) above, all licenses and
rights granted by PROTIVA to ALNYLAM under Article IV of this Agreement will terminate;
provided
,
however
, that to the extent such licenses and rights are required in
respect of clinical trials that are ongoing and cannot reasonably be terminated promptly due to
health or safety reasons or the requirements of applicable law, such licenses and rights will
continue in effect until such clinical trials are properly terminated.
47
(c) Expiration or termination of this Agreement shall not relieve the Parties of any
obligation accruing prior to such expiration or termination. Any expiration or termination of this
Agreement shall be without prejudice to the rights of either Party against the other accrued or
accruing under this Agreement prior to expiration or termination, including without limitation the
obligation to pay royalties for Licensed Product sold prior to such expiration or termination. The
provisions of Article VIII shall survive the expiration or termination of this Agreement. In
addition, to the extent applicable under their terms, the provisions of Sections 4.14, 5.6(b),
5.6(d) (subject to the provisions of Section 12.2(a)), 7.1, 7.3, 7.4, 7.7, 11.1, and 13.4, and
Articles I, IX, X, XII, and XIV shall survive any expiration or termination of this Agreement.
12.6
License upon Termination
.
(a) Upon any termination of this Agreement, ALNYLAM shall enter into an agreement
containing substantially the same provisions as this Agreement with any Sublicensees of PROTIVA
existing at the time of such termination, covering the RNAi Products that had been licensed to such
Sublicensee by PROTIVA in compliance with this Agreement, provided that at the time of any
termination of this Agreement, such Sublicensees are in full compliance with the terms and
conditions of the sublicense agreement. ALNYLAM acknowledges that such Sublicensees of PROTIVA
that are then in full compliance with the terms and conditions of their respective sublicense
agreement are third party beneficiaries of this Agreement, including this Section 12.6(a).
(b) Upon any termination of this Agreement, PROTIVA shall enter into an agreement
containing substantially the same provisions as this Agreement with any Sublicensees of ALNYLAM
existing at the time of such termination, covering the RNAi Products and miRNA Products that had
been licensed to such Sublicensee by ALNYLAM in compliance with this Agreement, provided that at
the time of any termination of this Agreement, such Sublicensees are in full compliance with the
terms and conditions of the sublicense agreement. PROTIVA acknowledges that such Sublicensees of
ALNYLAM that are then in full compliance with the terms and conditions of their respective
sublicense agreement are third party beneficiaries of this Agreement, including this Section
12.6(b).
48
ARTICLE XIII
SEPARATE CONDUCT OF CERTAIN PROTIVA AND TEKMIRA ACTIVITIES
13.1
Separate Conduct
. Immediately upon the effective date of the Purchase
Agreement and through [**] (the Restriction Period), PROTIVA has taken and will take all steps
necessary to ensure, to the maximum extent practicable, that there was and is no collaboration
between, or joint inventive work conducted by, PROTIVA and TEKMIRA under the Second Target Research
Plan or under the PLK Research Plan or the R&D Research Plan, or under the Research Plan or
Manufacturing Plan (as each such term is defined in the ALNYLAM-TEKMIRA License Agreement), or any
activities contemplated thereunder, with the goal of [**]. Such steps shall include, without
limitation, the requirement that during the Restriction Period, PROTIVA has maintained and shall
maintain research and manufacturing operations that are separate from the research and
manufacturing operations of TEKMIRA for all activities under the Research Plan, the Manufacturing
Plan (as each such term is defined in the ALNYLAM-TEKMIRA License Agreement), the Second Target
Research Plan, the PLK Research Plan and the R&D Research Plan, and has ensured and shall ensure
that the PROTIVA personnel who work on the Second Target Research Plan or the PLK Research Plan or
the R&D Research Plan did not and do not undertake research activities with or for TEKMIRA under
the Research Plan or the Manufacturing Plan.
13.2
Common Management; TEKMIRA Facilities Option
. Notwithstanding the
requirements of Section 13.1, during the Restriction Period (a) PROTIVA and TEKMIRA may (i) have
common management in the form of one person who serves as CEO of both companies, (ii) have
interlocking boards of directors, and (iii) share with each other or loan to each other specific
items of equipment and/or other tangible and intangible assets (but not human resources, other than
administrative personnel not involved in Research or Development activities); and (b) PROTIVA may
use TEKMIRAs physical facilities solely to manufacture (x) at ALNYLAMs sole discretion, a product
formulation developed by PROTIVA for ALNYLAM under this Agreement; or (y) upon mutual written
agreement of ALNYLAM, TEKMIRA and PROTIVA, an RNAi Product directed to the PLK Target (TEKMIRA
Facilities Option).
13.3
Notification
. During the period from the Effective Date through December 31,
2008, PROTIVA shall notify ALNYLAM in writing within thirty (30) days after conception of any
intellectual property conceived by PROTIVA or TEKMIRA (or their employees or consultants) on or
prior to [**], with respect to which ALNYLAM has a license under this Agreement, the
ALNYLAM-TEKMIRA License Agreement or the UBC Sublicense (as defined in the ALNYLAM-TEKMIRA License
Agreement), it being understood that such notice as to the period from the end of the Restriction
Period through [**] will be for informational purposes only.
13.4
Violations, Penalties
. In the event that any joint invention is made (i) by
inventor(s) who are employees or consultants of PROTIVA and inventor(s) who are employees or
consultants of TEKMIRA during the Restriction Period, (ii) due to or in respect of the conduct of
PROTIVA and/or TEKMIRA during the Restriction Period and (iii) without any inventive contribution
from ALNYLAM or communication by or through ALNYLAM of any information or materials from TEKMIRA or
PROTIVA to the other in a manner that is material to the
49
determination of inventorship (any such joint invention is hereinafter referred to as a
Restricted Joint Invention), with the result that any rights to such Restricted Joint Invention
are licensed to [**] under the [**] as they existed on the Effective Date), then, except and solely
to the extent that any such Restricted Joint Invention arises from manufacturing performed by
PROTIVA at a TEKMIRA facility as a result of the exercise of the Tekmira Facilities Option:
(a) PROTIVA shall pay to ALNYLAM any and all royalties and milestone payments received
from [**] under the [**] with respect to the development or commercialization of any product as to
which the [**] owed such royalties or milestones due to the coverage of such product by any claims
(whether issued or pending) covering such Restricted Joint Invention (or that would have been so
received from [**] under the terms of the [**] as they existed on the Effective Date);
(b) ALNYLAM shall have a fully-paid, perpetual, milestone-free, royalty-free, and
exclusive (except as to the [**] rights under the [**]) license to PROTIVAs right, title and
interest in the Restricted Joint Invention; and
(c) any and all royalties required to be paid by ALNYLAM to PROTIVA under this Agreement
with respect to ALNYLAM Development Products that are Licensed Products the identification,
characterization, validation, synthesis, development, use, formulation, manufacture, production or
sale of which, where and when occurring, would, but for the grant of a license or sublicense from
Tekmira, infringe a Valid Claim of the Exclusively Licensed Tekmira IP shall be reduced by fifty
percent (50%).
ARTICLE XIV MISCELLANEOUS
14.1
Representations and Warranties
.
|
(a)
|
|
Mutual Representations and Warranties by PROTIVA and ALNYLAM.
|
(i) Each Party hereby represents and warrants to the other Party as of the Effective Date:
(1) It is a corporation duly organized under the laws of the state of its incorporation,
and has all necessary power and authority to conduct its business in the manner in which it is
currently being conducted, to own and use its assets in the manner in which its assets are
currently owned and used, and to enter into and perform its obligations under this Agreement.
(2) The execution, delivery and performance of this Agreement has been duly authorized by
all necessary action on the part of such Party and its Board of Directors and no consent, approval,
order or authorization of, or registration, declaration or filing with any Third Party or
governmental authority is necessary for the execution, delivery or performance of this Agreement.
(3) This Agreement constitutes the legal, valid and binding obligation of such Party,
enforceable against it in accordance with its terms, subject to (A) laws of general
50
application relating to bankruptcy, insolvency and the relief of debtors, and (B) rules of law
governing specific performance, injunctive relief and other equitable remedies.
(4) Neither it nor any of its Affiliates has been found in breach of any laws or
regulations governing the production of medicinal products in the United States or any other
jurisdiction within the Territory.
(5) Neither it nor any of its Affiliates or employees has been debarred (nor is it or any
of its Affiliates or employees using in any capacity in connection with its activities under this
Agreement any person who has been debarred) by the FDA from working for or providing services to
any pharmaceutical or biotechnology company under Section 306 of the United States Food, Drug and
Cosmetic Act. Each Party agrees to inform the other Party in writing immediately if it or any
person that is performing activities under this Agreement is debarred or is the subject of a
conviction described in Section 306, or if any action, suit, claim, investigation or legal or
administrative proceeding is pending or, to the best of the notifying Partys knowledge, is
threatened, relating to the debarment or conviction of the notifying Party or any person or entity
used in any capacity by such Party or any of its Affiliates.
(6) It has never approved or commenced any proceeding, or made any election contemplating,
the winding up or cessation of its business or affairs or the assignment of material assets for the
benefit of creditors. To such Partys knowledge, no such proceeding is pending or threatened.
(ii) Each Party will notify the other Party promptly in writing if any proceeding
described in Section 14.1(a)(i)(6) is approved, commenced or, to such Partys knowledge, becomes
pending or threatened, against it. Each Party will promptly provide copies to the other Party of
all documents filed with the court with respect to such proceedings and will consult with such
other Party in a timely manner concerning the progress and/or disposition of such proceedings.
(iii) Each Party acknowledges and agrees that the other Party has not made any
representation or warranty that it has or can provide all the rights that are necessary or useful
to Research, Develop or Commercialize (as applicable) an RNAi Product (and/or miRNA Product in the
case of ALNYLAM).
(iv) Each Party represents and warrants to the other Party that as of the Effective Date
it has the right to grant to such other Party, its Affiliates and Sublicensees the licenses granted
hereunder and has not granted any conflicting rights to any other person or entity. Each Party
shall maintain any applicable in- licenses in effect and shall not amend any such in-licenses in a
manner that is detrimental to the rights of the other Party under this Agreement without the prior
written consent of such other Party.
(b)
ALNYLAM Representations and Warranties
. ALNYLAM hereby represents and
warrants to PROTIVA that:
51
(i) except for the Exclusively Licensed Tekmira IP, as to which ALNYLAM
makes no representations or warranties, to ALNYLAMs knowledge, the conception, development
and reduction to practice of the ALNYLAM Patent Rights licensed to PROTIVA under this Agreement did
not constitute or involve the misappropriation of trade secrets or other rights or property of any
person or entity; and
(ii) except as set forth in
Appendix V
, it has not assigned, transferred, conveyed
or otherwise encumbered its right, title and interest in the ALNYLAM Patent Rights in a manner that
conflicts with any rights granted to PROTIVA hereunder.
(c)
PROTIVA Representations and Warranties
. PROTIVA hereby represents and warrants
to PROTIVA that:
(i) the patents and patent applications listed on Appendices A-2 and A-3 are all the
PROTIVA Patent Rights existing on the Effective Date, and include, without limitation, all the
patent rights licensed by PROTIVA to the [**]. To PROTIVAs knowledge, the conception, development
and reduction to practice of the PROTIVA Patent Rights and Know-How licensed to ALNYLAM under this
Agreement do not constitute or involve the misappropriation of trade secrets or other rights or
property of any person or entity;
(ii) except as set forth herein this Agreement, it has not assigned, transferred, conveyed
or otherwise encumbered its right, title and interest in the PROTIVA Patent Rights in a manner that
conflicts with any rights granted to ALNYLAM hereunder; and
(iii) the [**] does not provide that any payments, other than milestone and royalty
payments, will be owed or would be owed by the [**] to PROTIVA or its Affiliates with respect to
the development or commercialization of any product due to the coverage of such product by any
claims (whether issued or pending) covering any Restricted Joint Invention.
(d)
Warranty Disclaimer
. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN THIS
AGREEMENT, NEITHER PARTY MAKES ANY REPRESENTATION OR EXTENDS ANY WARRANTY OR CONDITIONS OF ANY
KIND, EITHER EXPRESS OR IMPLIED, TO THE OTHER PARTY WITH RESPECT TO ANY INTELLECTUAL PROPERTY,
LICENSED PRODUCTS, GOODS, THE COLLABORATION, RIGHTS OR OTHER SUBJECT MATTER OF THIS AGREEMENT AND
HEREBY DISCLAIMS ALL IMPLIED CONDITIONS, REPRESENTATIONS, AND WARRANTIES, INCLUDING WITHOUT
LIMITATION, WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE AND NONINFRINGEMENT OR
VALIDITY OF PATENT RIGHTS WITH RESPECT TO ANY AND ALL OF THE FOREGOING. EACH PARTY HEREBY
DISCLAIMS ANY REPRESENTATION OR WARRANTY THAT THE DEVELOPMENT, MANUFACTURE OR COMMERCIALIZATION OF
ANY LICENSED PRODUCT PURSUANT TO THIS AGREEMENT WILL BE SUCCESSFUL OR THAT ANY PARTICULAR SALES
LEVEL WITH RESPECT TO SUCH LICENSED PRODUCTS WILL BE ACHIEVED.
52
14.2
Dispute Resolution; Arbitration Procedures
.
(a) In the event of any dispute, controversy or claim arising out of or relating to this
Agreement, or the breach thereof, the Parties will try to settle such dispute, controversy or claim
amicably between themselves, including referring such dispute, controversy or claim to the Chief
Operating Officer of ALNYLAM or his designee, and the Chief Executive Officer of PROTIVA, or any
other officer designated by such Chief Executive Officer. In the event that after forty-five (45)
days the designated officers of both Parties fail to resolve the matter, either Party may submit
such dispute, controversy or claim that is not an Excluded Claim for resolution by binding
arbitration under the Rules of Arbitration of the International Chamber of Commerce. Judgment on
the arbitration award may be entered in any court of competent jurisdiction. The arbitration will
be conducted in New York, New York and the language of all communications and proceedings relating
to the arbitration will be English.
(b) The arbitration shall be conducted by a panel of three persons experienced in the
pharmaceutical business. Within thirty (30) days after initiation of arbitration, each Party shall
select one person to act as arbitrator and the two Party-selected arbitrators shall select a third
arbitrator within thirty (30) days of their appointment. If the arbitrators selected by the
Parties are unable or fail to agree upon the third arbitrator, the Parties shall select two
replacement arbitrators to replace the arbitrators originally selected, which replacement
arbitrators shall select a third arbitrator within thirty (30) days of their appointment. The
Parties agree (a) to meet with the arbitrator(s) within thirty (30) days of selection and (b) to
agree at that meeting or before upon procedures for discovery and as to the conduct of the hearing
which will result in the hearing being concluded within no more than six (6) months after selection
of the arbitrator(s) and in the award being rendered within thirty (30) days of any post-hearing
briefing, which briefing will be completed by both sides within thirty (30) days after the
conclusion of the hearings, or within sixty (60) days of the conclusion of the hearings if there is
no post-hearing briefing. In the event the Parties cannot agree upon procedures for discovery as
set forth in (a) above, the arbitrator(s) shall provide that discovery be limited so that the
schedule may be met without difficulty and so that neither side obtains more than a total of
twenty-five (25) hours of deposition testimony from all witnesses, including both fact and expert
witnesses, or serves more than ten (10) individual requests for documents or ten (10) individual
requests for admission or interrogatories. In no event will the arbitrator(s), absent agreement of
the Parties, allow more than three (3) days per side for the hearing or more than a total of six
(6) days for the hearing. Multiple hearing days will be scheduled consecutively to the greatest
extent possible.
(c) Either Party may apply to the arbitrators for interim injunctive relief until the
arbitration award is rendered or the controversy is otherwise resolved. Either Party also may,
without waiving any remedy under this Agreement, seek from any court having jurisdiction any
injunctive or provisional relief necessary to protect the rights or property of that Party pending
the arbitration award. The arbitrators shall have no authority to award punitive or any other type
of damages not measured by a Partys compensatory damages. Each Party shall bear its own costs and
expenses and attorneys fees and an equal share of the arbitrators fees and any administrative
fees of arbitration.
(d) Except to the extent necessary to confirm an award or as may be required by law,
neither a Party nor an arbitrator may disclose the existence, content, or results of an arbitration
without the prior written consent of both Parties. In no event shall an arbitration be initiated
after
53
the date when commencement of a legal or equitable proceeding based on the dispute,
controversy or claim would be barred by the applicable New York statute of limitations.
(e) The Parties agree that, in the event of a dispute over the nature or quality of
performance under this Agreement, neither Party may terminate this Agreement until final resolution
of the dispute through arbitration or other judicial determination. The Parties further agree that
any payments made pursuant to this Agreement pending resolution of the dispute shall be refunded if
an arbitrator or court determines that such payments are not due.
(f) As used in this Section 14.2, the term Excluded Claim shall mean a dispute,
controversy or claim that concerns (a) the validity or infringement of a patent, trade secret,
trademark or copyright; or (b) any antitrust, anti-monopoly or competition law or regulation,
whether or not statutory. Excluded Claims shall be resolved in a court of competent jurisdiction.
14.3
Publicity
. No disclosure of the existence of, or the terms of, this
Agreement may be made by either Party or its Affiliates, and no Party or its Affiliate shall use
the name, trademark, trade name or logo of the other Party or its employees in any publicity, news
release or disclosure relating to this Agreement or its subject matter, without the prior express
written permission of the other Party, except as may be required by law or as set forth in this
Section 14.3. The Parties expect that upon the Effective Date of this Agreement TEKMIRA will, and
ALNYLAM may, issue separate press releases publicizing the execution of this Agreement and the
ALNYLAM-TEKMIRA License Agreement, and that prior to the execution of this Agreement, ALNYLAM and
TEKMIRA shall agree in writing upon any such press releases. The Parties agree to consult with each
other reasonably and in good faith with respect to the text and timing of any proposed press
releases prior to the issuance thereof. Either Party may issue such press releases or otherwise
make such public statements or disclosures (such as in annual reports to stockholders or filings
with the Securities and Exchange Commission) as it determines, based on advice of counsel and with
reasonable prior written notice to the other Party, are reasonably necessary to comply with
applicable laws and regulations. In addition, following any press release(s) announcing this
Agreement or the Original Cross-License Agreement or any other public disclosure approved by both
Parties, either Party shall be free to disclose, without the other Partys prior written consent,
the existence of this Agreement, the identity of the other Party and those terms of the Agreement
which have already been publicly disclosed in accordance herewith.
14.4
Force Majeure
. No failure or omission by the Parties in the performance of
any obligation of this Agreement will be deemed a breach of this Agreement or create any liability
if the same will arise from any cause or causes beyond the control of the Parties, including, but
not limited to, the following: acts of God; acts or omissions of any government; any rules,
regulations or orders issued by any governmental authority or by any officer, department, agency or
instrumentality thereof; fire; flood; storm; earthquake; accident; war; rebellion; insurrection;
riot; and invasion. The affected Party shall notify the other Party of such force majeure
circumstances as soon as reasonably practical, and shall promptly undertake all reasonable efforts
necessary to cure such force majeure circumstances.
14.5
Consequential Damages
. NEITHER PARTY (INCLUDING ITS AFFILIATES
54
AND SUBLICENSEES) SHALL BE LIABLE UNDER THIS AGREEMENT FOR ANY SPECIAL, INCIDENTAL, OR
CONSEQUENTIAL DAMAGES OR FOR LOSS OF PROFIT OR LOST REVENUE, EVEN IF SUCH PARTY HAS BEEN ADVISED OF
THE POSSIBILITY OF SUCH DAMAGES. NOTWITHSTANDING THE FOREGOING, NOTHING IN THIS SECTION 14.5 IS
INTENDED TO OR SHALL LIMIT OR RESTRICT THE INDEMNIFICATION RIGHTS OF A PARTY OR DAMAGES AVAILABLE
FOR A PARTYS BREACH OF CONFIDENTIALITY OR NON-SOLICITATION OBLIGATIONS IN SECTION 8.3.
14.6
Assignment
. (a) This Agreement, and any of its rights and obligations, may
not be assigned or otherwise transferred by either Party without the prior written consent of the
other Party, which consent shall not be unreasonably withheld, delayed or conditioned;
provided
,
however
, that subject to Section 14.7, either Party may assign this
entire Agreement, without the consent of the other Party, to an Affiliate or in connection with
such Partys merger, consolidation or transfer or sale of all or substantially all of the assets of
such Party; and provided
further
that the successor, surviving entity, purchaser of assets,
or transferee, as applicable, expressly assumes in writing such Partys obligations under this
Agreement, if any. Notwithstanding the foregoing, PROTIVA may not assign (i) this Agreement or its
rights and obligations hereunder to TEKMIRA without ALNYLAMs prior written consent, except that
PROTIVA may, upon prior written notice to ALNYLAM, transfer or assign its rights and obligations
with respect to any PROTIVA Development Targets, any PROTIVA Development Products and /or any
Licensed Products for the PLK Target (subject to the terms and conditions of Article II) to
TEKMIRA;
provided
that, (x) any such transfer shall be subject in all respects to the [**]
Restriction and the terms of Article XIII, and (y) TEKMIRA expressly assumes in writing PROTIVAs
obligations with respect to such PROTIVA Development Target(s), PROTIVA Development Product(s)
and/or Licensed Product(s) for the PLK Target; or (ii) its rights under this Agreement to perform
the PLK Research Plan or the R&D Research Plan to any PROTIVA Affiliate of which [**] or more of
the outstanding voting securities are owned, controlled or held by a pharmaceutical company,
biotechnology company, or group of such companies acting in concert, with annual sales of human
pharmaceutical products greater than [**] of control of the management and policies of PROTIVA
(Significant Pharmaceutical Company) or by any investment entity affiliated with any such
Significant Pharmaceutical Company.
(b) Any purported transfer or assignment in contravention of this Section 14.6 shall, at
the option of the non-assigning Party, be null and void and of no effect.
(c) This Agreement will be binding upon and inure to the benefit of the Parties and their
permitted successors and assigns.
(d) The above notwithstanding: (i) PROTIVA agrees not to assign or transfer this
Agreement to any Third Party who is not also the assignee or transferee of all ownership rights in
the Class 1 PROTIVA Patent Rights and the Class 2 PROTIVA Patent Rights or otherwise in a manner
that would be inconsistent with ALNYLAMs rights under this Agreement; and (ii) ALNYLAM agrees not
to assign this Agreement to any Third Party who is not also the assignee or transferee of all
ownership rights in the ALNYLAM Patent Rights or otherwise in a manner
55
that would be inconsistent with PROTIVAs rights under this Agreement.
14.7
License, Provision of Information and other Rights Upon Material Breach,
Bankruptcy or Change of Control
. In the event PROTIVA materially breaches its obligations
under Article V of this Agreement and does not remedy such breach within ninety (90) days after
receipt of written notice from ALNYLAM specifically identifying the breach, or in the event a
proceeding is initiated with respect to PROTIVAs insolvency, bankruptcy reorganization,
liquidation or receivership, that is not withdrawn within sixty (60) days or upon an assignment of
a substantial portion of the assets for the benefit of creditors by PROTIVA or upon any Change of
Control of PROTIVA, (i) the licenses granted to ALNYLAM under this Agreement will remain in full
force and effect in accordance with their terms; and (ii) PROTIVA will promptly provide to ALNYLAM
all then-existing Licensed Information with respect to all Formulations identified or developed
under this Agreement, to the extent such Licensed Information has not previously been provided to
ALNYLAM and (iii) the conduct of activities in respect of the PLK Research Plan and R&D Research
Plan, including funding from ALNYLAM, will be terminated immediately at ALNYLAMs discretion.
For purposes of this Section 14.7, Change of Control means a Change of Control under and as
defined in the ALNYLAM-TEKMIRA License Agreement, or any other transaction, or series of related
transactions, whereby (a) PROTIVA merges, reorganizes, amalgamates or consolidates with another
entity, and the shareholders of PROTIVA owning at least fifty percent (50%) of the outstanding
voting securities of PROTIVA immediately prior to such transaction(s) own less than fifty percent
(50%) of the outstanding voting securities of PROTIVA or the surviving entity as a result of such
transaction(s); (b) PROTIVA sells, transfers or otherwise disposes of all or substantially all of
its assets to which this Agreement relates; or (c) PROTIVA issues securities to any Third Party,
TEKMIRA sells, transfers or otherwise disposes of any PROTIVA securities, or PROTIVA permits or
otherwise consents to the sale, transfer or other disposition of any PROTIVA securities, if and
only if, in any of these circumstances, such transaction or series of transactions results in a new
Affiliate of PROTIVA;
provided
,
however
, that (i) the merger, reorganization,
amalgamation or consolidation of PROTIVA with TEKMIRA after the end of the Restriction Period, and
(ii) the sale or transfer of all or substantially all of the assets to which this Agreement relates
to TEKMIRA after the end the Restriction Period, shall not be deemed a Change of Control for
purposes of this Section 14.7. ALNYLAM acknowledges and agrees that the transactions under the
Purchase Agreement will not constitute a Change of Control under either the Original
Cross-License Agreement or this Agreement. Upon (1) PROTIVA receiving or otherwise becoming aware
of a proposal or intention by a Third Party to take any action, whether directly or indirectly,
including without limitation a non-binding letter of intent, that could lead to a Change of
Control, (2) PROTIVA planning to solicit or soliciting offers relating to its voting securities or
assets that could lead to a Change of Control, or (3) any Change of Control, PROTIVA shall provide
prompt written notice thereof to ALNYLAM.
56
14.8
Notices
.
Notices to ALNYLAM will be addressed to:
Alnylam Pharmaceuticals, Inc.
300 Third Street
Cambridge, Massachusetts 02142
U.S.A.
Attention: Vice President Legal
Facsimile No.: (617) 551-8101
With copy to:
Faber Daeufer & Rosenberg PC
950 Winter Street, Suite 4500
Waltham, Massachusetts 02451
Attention: Sumy C. Daeufer, Esq.
Facsimile No.: (781) 795-4747
Notices to PROTIVA will be addressed to:
PROTIVA Biotherapeutics Inc.
100-3480 Gilmore Way
Burnaby, B.C., Canada
Attention: President & CEO
Facsimile No.: (604) 630-5103
With copy to:
Fenwick & West LLP
1191 Second Avenue
Seattle, WA 98101
Attention: Roger M. Tolbert, Esq.
Facsimile No.: (206) 389-4511
Any Party may change its address by giving notice to the other Party in the manner provided in this
Section 14.8. Any notice required or provided for by the terms of this Agreement will be in
writing and will be (a) sent by certified mail, return receipt requested, postage prepaid, (b) sent
via a reputable international express courier service, or (c) sent by facsimile transmission, with
a copy by regular mail. The effective date of the notice will be the actual date of receipt by the
receiving Party.
14.9
Independent Contractors
. It is understood and agreed that the relationship
between the Parties is that of independent contractors and that nothing in this Agreement will be
construed as authorization for either Party to act as the agent for the other Party.
14.10
Governing Law; Jurisdiction
. This Agreement will be governed and
interpreted in accordance with the substantive laws of the State of Delaware, U.S.A.,
notwithstanding the provisions governing conflict of laws under such law of the State of Delaware
to the contrary, provided that (i) matters of intellectual property law will be determined in
accordance with the national intellectual property laws relevant to the intellectual property in
question, and (ii) the
57
application of the 1980 United Nations Convention on Contracts for the International Sale of
Goods is expressly excluded from this Agreement.
14.11
Severability
. In the event that any provision of this Agreement is held by
a court of competent jurisdiction to be unenforceable because it is invalid or in conflict with any
law of the relevant jurisdiction, the validity of the remaining provisions will not be affected and
the rights and obligations of the Parties will be construed and enforced as if the Agreement did
not contain the particular provisions held to be unenforceable, provided that the Parties will
negotiate in good faith a modification of this Agreement with a view to revising this Agreement in
a manner which reflects, as closely as is reasonably practicable, the commercial terms of this
Agreement as originally signed.
14.12
No Implied Waivers
. The waiver by either Party of a breach or default of
any provision of this Agreement by the other Party will not be construed as a waiver of any
succeeding breach of the same or any other provision, nor will any delay or omission on the part of
either Party to exercise or avail itself of any right, power or privilege that it has or may have
hereunder operate as a waiver of any right, power or privilege by such Party.
14.13
Headings
. The headings of articles and sections contained this Agreement
are intended solely for convenience and ease of reference and do not constitute any part of this
Agreement, or have any effect on its interpretation or construction.
14.14
Entire Agreement
. This Agreement constitutes the entire agreement between
the Parties with respect to its subject matter and supersedes all previous written or oral
representations, agreements and understandings between the Parties including, without limitation,
the Original Cross-License Agreement. This Agreement (including the attachments hereto) may be
amended only by a writing signed by both Parties.
14.15
Waiver of Rule of Construction
. Each Party has had the opportunity to
consult with counsel in connection with the review, drafting and negotiation of this Agreement.
Accordingly, the rule of construction that any ambiguity in this Agreement shall be construed
against the drafting Party shall not apply.
14.16
No Third Party Beneficiaries
. Except as expressly contemplated herein, no
Third Party, including any employee of any Party to this Agreement, shall have or acquire any
rights by reason of this Agreement.
14.17
Further Assurances
. The Parties will with reasonable diligence, do all such
things and provide all such reasonable assurances as may be required to consummate the transactions
contemplated by this Agreement, and each Party will provide such further documents or instruments
required by the other Party as may be reasonably necessary or desirable to give effect to the
purpose of this Agreement and carry out its provisions.
14.18
Counterparts
. This Agreement may be executed in any number of counterparts,
each of which will be deemed an original, and all of which together will constitute one and the
same instrument.
58
[Signature Page Follows]
59
IN WITNESS WHEREOF, the Parties hereto have set their hand to this Agreement as of the date
first written above.
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ALNYLAM PHARMACEUTICALS, INC.
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By:
|
/s/ John Maraganore
|
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Name:
|
John Maraganore
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Title:
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CEO
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PROTIVA BIOTHERAPEUTICS INC.
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By:
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/s/ Mark J. Murray
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Name:
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Mark J. Murray
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Title:
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President and CEO
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60
EXHIBIT A-1
ALNYLAM Patent Rights
[**]
A total of eight pages were omitted and filed separately with the Securities and Exchange
Commission.
EXHIBIT A-1-A
CERTAIN ALNYLAM PATENTS RIGHTS RELATING TO THE APOB TARGET
[**]
i
EXHIBIT A-2
Class 1 PROTIVA Patent Rights
[**]
A total of six pages were omitted and filed separately with the Securities and Exchange Commission.
ii
EXHIBIT A-3
Class 2 PROTIVA Patent Rights
[**]
A total of four pages were omitted and filed separately with the Securities and Exchange
Commission.
iii
EXHIBIT B
IN-LICENSES COVERING ALNYLAM PATENT RIGHTS
[**]
iv
EXHIBIT C
PLK RESEARCH PLAN
[**]
v
EXHIBIT D
R&D RESEARCH PLAN
[**]
A total of two pages were omitted and filed separately with the Securities and Exchange Commission.
vi
EXHIBIT E
[**]
A total of
four pages were omitted and filed separately with the Securities and Exchange
Commission.
vii
APPENDIX I
PLK TARGET
[**]
viii
APPENDIX II
DESCRIPTION OF LICENSED INFORMATION TO BE DISCLOSED BY PROTIVA
[**].[**]
A total of seven pages were omitted and filed separately with the Securities and Exchange
Commission.
i
APPENDIX III
[Intentionally omitted]
i
APPENDIX IV
Terms and Conditions of Co-Development Agreement
[**].
A total of two pages were omitted and filed separately with the Securities and Exchange Commission.
i
APPENDIX V
EXCEPTIONS TO REPRESENTATIONS AND WARRANTIES
[**]
ii
Exhibit 10.42
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
Execution Copy
LICENSE AND COLLABORATION AGREEMENT
by and between
ALNYLAM PHARMACEUTICALS, INC.
and
KYOWA HAKKO KOGYO CO., LTD.
LICENSE AND COLLABORATION AGREEMENT
THIS AGREEMENT, effective as of June 19, 2008 (the
Effective Date
), by and between Alnylam
Pharmaceuticals, Inc., a corporation organized and existing under the laws of Delaware (
Alnylam
)
and Kyowa Hakko Kogyo Co., Ltd., a corporation organized and existing under the laws of Japan
(
Kyowa Hakko
).
RECITALS:
WHEREAS
, Alnylam owns or controls certain fundamental intellectual properties relating to RNA
interference, and is developing therapeutic products targeting respiratory syncytial virus (
RSV
)
that function through RNA interference, including the proprietary Alnylam product known as
ALN-RSV01;
WHEREAS
, Kyowa Hakko desires to develop and commercialize such therapeutic RNA interference
products, for the treatment of respiratory infections in humans caused by RSV, in Japan and certain
other countries in Asia;
WHEREAS
, Alnylam and Kyowa Hakko believe that a license and collaboration for such purpose on
the terms and conditions of this Agreement would be desirable.
NOW, THEREFORE
, in consideration of the foregoing premises and the mutual covenants herein
contained, the Parties hereby agree as follows:
1. DEFINITIONS
Unless specifically set forth to the contrary herein, the following terms, whether used in the
singular or plural, shall have the respective meanings set forth below:
1.1 Affiliate
means, with respect to a Party, (a) any corporation or business entity of
which fifty percent (50%) or more of the securities or other ownership interests representing the
equity, the voting stock or general partnership interest are owned, controlled or held, directly or
indirectly, by such Party; (b) any corporation or business entity, which, directly or indirectly,
owns, controls or holds fifty percent (50%) (or the maximum ownership interest permitted by law) or
more of the securities or other ownership interests representing the equity, the voting stock or,
if applicable, the general partnership interest, of such Party; or (c) any corporation or business
entity, fifty percent (50%) or more of the securities or other ownership interests representing the
equity of which is directly or indirectly owned, controlled or held by the same corporation,
business entity or security holders, or holders of ownership interests, that own, control or hold
fifty percent (50%) or more of the securities or other ownership interests representing the equity
or the voting stock of such Party. For the avoidance of doubt, Regulus Therapeutics LLC shall not
be considered an Affiliate of Alnylam for purposes hereof.
1.2
Alnylam Collaboration IP
means (a) any improvement, discovery or Know-How, patentable or
otherwise, first identified, discovered or developed solely by employees of Alnylam or its
Affiliates or other persons not employed by Kyowa Hakko acting on behalf of Alnylam, in the conduct
of the Collaboration, and (b) any Patent Rights that claim or cover such improvements, discoveries
or
2
Know-How and are Controlled by Alnylam at any time during the Term. Alnylam Collaboration IP
excludes Alnylams interest in Joint Collaboration IP.
1.3 Alnylam Indemnitees
has the meaning set forth in Section 9.5.1.
1.4 Alnylam In-License
means an agreement between Alnylam and a Third Party pursuant to
which Alnylam has rights and obligations with respect to, or which otherwise Cover, a Licensed
Product and is necessary to Develop, Commercialize and/or Manufacture the Licensed Product in the
Field, including without limitation, the Existing Alnylam In-Licenses.
1.5 Alnylam Know-How
means Know-How Controlled by Alnylam during the Term that is reasonably
necessary or useful for Kyowa Hakko and its Related Parties to perform their obligations or exploit
their rights under this Agreement with respect to the Licensed Product (other than Alnylams rights
in Joint Collaboration IP and Alnylam Collaboration IP).
1.6 Alnylam Patent Rights
means those Patent Rights Controlled by Alnylam during the Term
that are reasonably necessary or useful for Kyowa Hakko and its Related Parties to perform their
obligations or exploit their rights under this Agreement with respect to the Licensed Product
(other than Alnylams rights in Joint Collaboration IP and Alnylam Collaboration IP), including
without limitation, the Patent Rights set forth in
Schedule 1.6A
of this Agreement. For
clarity,
Schedule 1.6B
of this Agreement includes additional Patent Rights which will be
included in Alnylam Patent Rights at no additional cost to Kyowa Hakko to the extent they are
Controlled by Alnylam if they become reasonably necessary or useful for Kyowa Hakko and its Related
Parties to perform their obligations or exploit their rights under this Agreement with respect to
the Licensed Product (other than Alnylams rights in Joint Collaboration IP and Alnylam
Collaboration IP), including, by way of example, as the result of the Development of a Replacement
Product or a Successor Product.
1.7 Alnylam Technology
means, collectively, Alnylam Know-How, Alnylam Patent Rights, Alnylam
Collaboration IP and Alnylams interest in Joint Collaboration IP.
1.8 Alnylam Territory
means all countries of the world other than the Kyowa Hakko
Territory.
1.9 Alnylam Trademark
has the meaning set forth in Section 10.9(b).
1.10
Antisense Product
means a single-stranded oligonucleotide or analog thereof having a
specific sequence that inhibits protein synthesis at the nucleic acid level by specifically binding
to the sequence of a messenger or viral ribonucleic acid (RNA) by base-pairing, thus causing
selective inhibition of gene expression.
1.11
API Bulk Drug Substance
means the Licensed Product in bulk form manufactured for use as
an active pharmaceutical ingredient.
1.12 Bankrupt Party
has the meaning set forth in Section 11.2.4(d).
1.13
Bridging Clinical Study
means a human clinical study conducted [**] that is designed to
demonstrate the [**] generated in a study of [**] treated with the Licensed Product to [**]
3
of the Licensed Product in [**]. Data to evaluate in such a study might include
pharmacokinetics, efficacy and/or additional safety data. The Bridging Clinical Study shall be
designed such that, if its endpoints are met, [**], and to allow Kyowa Hakko [**] in seeking
Regulatory Approval for the Licensed Product in Japan. It is expected that a Bridging Clinical
Study shall require the enrollment of no more than [**] patients for the NDA submission in Japan.
For purposes of clarity, if the Clinical Studies required by the Japanese Regulatory Authorities
require more than [**] patients in total, those Clinical Studies shall be [**] and if the Clinical
Studies required by the Japanese Regulatory Authorities require fewer than [**] patients in total,
those Clinical Studies shall be [**].
1.14 Calendar Quarter
means the respective periods of three (3) consecutive calendar months
ending on March 31, June 30, September 30 and December 31;
provided
, that (a) the first
Calendar Quarter of the Term shall begin on the Effective Date and end on the first to occur of
March 31, June 30, September 30 or December 31 thereafter and the last Calendar Quarter of the Term
shall end on the last day of the Term and (b) the first Calendar Quarter of a Royalty Term for a
Country shall begin on the First Commercial Sale of the Licensed Product in such country and end on
the first to occur of March 31, June 30, September 30 or December 31 thereafter and the last
Calendar Quarter of a Royalty Term shall end on the last day of such Royalty Term.
1.15 Calendar Year
means each successive period of twelve (12) months commencing on January
1 and ending on December 31;
provided
, that (a) the first Calendar Year of the Term shall
begin on the Effective Date and end on the first December 31 thereafter and the last Calendar Year
of the Term shall end on the last day of the Term and (b) the first Calendar Year of a Royalty Term
for a country shall begin on the First Commercial Sale of the Licensed Product in such country and
end on the first December 31 thereafter and the last Calendar Year of the Term shall end on the
last day of such Royalty Term.
1.16 Clinical Study
means a Phase I Study, Phase II Study, Phase IIa Study, Phase IIb Study,
Phase III Study, or [**], as applicable; but excluding any Post-Approval Studies.
1.17 Clinical Study Expenses
has the meaning set forth in Section 7.2(b).
1.18 Code
has the meaning set forth in Section 11.2.4(d).
1.19 Collaboration
means the collaboration of the Parties in the Development and Regulatory
Approval of the Licensed Product.
1.20 Collaboration Manager
has the meaning set forth in Section 3.2.
1.21 Combination Product
means the Licensed Product combined with any other clinically
active therapeutic, prophylactic or diagnostic ingredient, mechanism or device. All references to
Licensed Product in this Agreement shall be deemed to include Combination Product, to the extent
applicable.
1.22 Commercialization
or
Commercialize
means any and all activities directed to
marketing, promoting, distributing, importing, exporting, offering to sell and/or selling a
product, including the conduct of Post-Approval Studies, and activities directed to obtaining
pricing and reimbursement approvals, as applicable.
4
1.23 Commercialization Plan
has the meaning set forth in Section 4.4.
1.24
Commercially Reasonable Efforts
means the carrying out of obligations in a diligent and
sustained manner using such effort and employing such resources as would normally be exerted or
employed by a similarly situated pharmaceutical company for a product of similar market or profit
potential or strategic value at a similar stage of its product life, but excluding consideration of
any obligation to the other Party under this Agreement.
1.25 Competitive Infringement
has the meaning set forth in Section 10.4.1.
1.26 Confidential Information
means any and all information and data, including without
limitation Alnylam Technology and Kyowa Hakko Technology and all other scientific, pre-clinical,
clinical, regulatory, manufacturing, marketing, financial and commercial information or data,
whether communicated in writing or orally or by any other method, which is provided by one Party to
the other Party in connection with this Agreement. Alnylam Technology and Alnylam Collaboration IP
are Confidential Information of Alnylam. Kyowa Hakko Technology and Kyowa Hakko Collaboration IP
are Confidential Information of Kyowa Hakko. Joint Collaboration IP is the Confidential
Information of the Parties.
1.27 Control, Controls or Controlled by
means, with respect to any (a) material,
know-how or other information or (b) intellectual property right, the possession of (whether by
ownership or license, other than pursuant to this Agreement), or the ability of a Party or its
Affiliates to assign, transfer, grant access to, or a license or sublicense of, such item or right
as provided for herein without violating the terms of any agreement or other arrangement with any
Third Party existing at the time such Party would be required hereunder to assign, transfer or
grant the other Party such access or license or sublicense.
1.28 Cost of Goods Sold
means, with respect to API Bulk Drug Substance and Finished Product,
as the case may be, the reasonable internal and external costs of a Party incurred in Manufacturing
such API Bulk Drug Substance or Finished Product, including: (a) to the extent that such API Bulk
Drug Substance or Finished Product is Manufactured by a Party, the fully allocated cost of
Manufacture of such API Bulk Drug Substance or Finished Product, consisting of direct material and
direct labor costs, plus Manufacturing overhead attributable to such API Bulk Drug Substance or
Finished Product (including without limitation facilities start-up costs, all directly incurred
Manufacturing variances and a reasonable allocation of related Manufacturing administrative and
facilities costs to be provided for such API Bulk Drug Substance or Finished Product, but excluding
corporate administrative overhead, depreciation and/or costs associated with excess capacity), all
calculated strictly in accordance with generally accepted accounting principles in the United
States consistently applied by the applicable Party, and (b) to the extent that such API Bulk Drug
Substance or Finished Product is Manufactured by a Third Party manufacturer, the actual fees paid
by a Party to the Third Party for the Manufacture, supply and packaging of such API Bulk Drug
Substance or Finished Product and any reasonable out-of-pocket costs actually incurred by such
Party in managing or overseeing the Third Party relationship. Cost of Goods Sold shall not include
royalties, license or other fees paid to Third Parties in respect of Necessary Third Party IP.
5
1.29 Cover, Covering or Covers
means that in the absence of a license granted under a
Valid Claim, the Development, Manufacture or Commercialization of the Licensed Product would or is
reasonably likely to infringe such Valid Claim.
1.30 Credit for Excess Clinical Expense
has the meaning set forth in Section 7.2(b).
1.31 Development, Developing
or
Develop
means the research and development activities
related to the generation, characterization, optimization, construction, expression, use and
production of the Licensed Product, any other research and development activities related to the
pre-clinical testing and qualification of the Licensed Product for clinical testing, and such other
tests, studies and activities as may be required or recommended from time to time by any Regulatory
Authority to obtain Regulatory Approval of the Licensed Product, including toxicology studies,
statistical analysis and report writing, pre-clinical testing, Clinical Studies and regulatory
affairs, product approval and registration activities.
1.32 Development Plan
has the meaning set forth in Section 2.2.
1.33 Dispute
has the meaning set forth in Section 12.11.1.
1.34 Effective Date
has the meaning set forth in the preamble.
1.35 Excluded Claim
has the meaning set forth in Section 12.11.1.
1.36 Existing Alnylam In-Licenses
means the Third Party Agreements set forth on
Schedule
1.36A
. For clarity,
Schedule 1.36B
of this Agreement includes additional Third Party
Agreements which will be included in Existing Alnylam In-Licenses at no additional cost to Kyowa
Hakko if the Alnylam Patent Rights licensed thereunder become reasonably necessary or useful for
Kyowa Hakko and its Related Parties to perform their obligations or exploit their rights under this
Agreement with respect to the Licensed Product (other than Alnylams rights in Joint Collaboration
IP and Alnylam Collaboration IP), including, by way of example, as the result of the Development of
a Replacement Product or a Successor Product.
1.37 Expiry Period
has the meaning set forth in Section 2.10(b)(i).
1.38
FDA
means the United States Food and Drug Administration and any successor governmental
authority having substantially the same function.
1.39
Field
means the treatment of disease in humans.
1.40
Finished Product
means the finished product formulation of the Licensed Product,
containing API Bulk Drug Substance, filled into unit packages for final labeling and packaging.
1.41 First Commercial Sale
means, with respect to a country, the first sale for end use or
consumption of the Licensed Product in such country after all required Regulatory Approvals have
been granted by the Regulatory Authority of such country.
1.42 Full Clinical Studies
means the collective reference to Clinical Studies of the
Licensed Product in [**]. For purposes of clarity, if the Clinical Studies required by the
Japanese
6
Regulatory Authorities require more than [**] patients in total, those Clinical Studies shall
be [**] and if the Clinical Studies required by the Japanese Regulatory Authorities require fewer
than [**] patients in total, those Clinical Studies shall be [**].
1.43 Generic Product
has the meaning set forth in Section 7.4.4(c).
1.44 Global Clinical Study
means the [**] of the Licensed Product that is conducted [**]
under [**] and the relevant guidelines issued by the applicable Regulatory Authorities in Japan.
1.45 ICC
has the meaning set forth in Section 12.11.1.
1.46 IND
means an Investigational New Drug application, Clinical Study Application or
similar application or submission for approval to conduct human clinical investigations filed with
or submitted to a Regulatory Authority in conformance with the requirements of such Regulatory
Authority.
1.47 Indemnitee
has the meaning set forth in Section 9.5.4.
1.48 Infringement Claim
has the meaning set forth in Section 10.5.1.
1.49 Initiate
,
Initiated
or
Initiation
means, with respect to a Clinical Study or a
Post-Approval Study, the administration of the first dose to a subject in such study.
1.50 In-Licenses
means, collectively, the Alnylam In-Licenses and the Kyowa Hakko
In-Licenses.
1.51 Joint Collaboration IP
means, collectively, (a) any improvement, discovery or Know-How,
patentable or otherwise, first identified, discovered or developed jointly by the Parties or their
Affiliates or others acting on behalf of Kyowa Hakko and Alnylam in the conduct of the
Collaboration, and (b) any Patent Rights which claim or cover such improvements, discoveries or
Know-How during the Term.
1.52
Joint Commercialization Team
or
JCT
means the joint commercialization team as more
fully described in Section 4.2.
1.53 Joint Steering Committee
or
JSC
means the joint steering committee as more fully
described in Section 3.1.
1.54 JSC Chairperson
has the meaning set forth in Section 3.1.2.
1.55 Know-How
means, with respect to the Licensed Product, all biological materials and
other tangible materials, inventions, practices, methods, protocols, formulas, knowledge, know-how,
trade secrets, processes, assays, skills, experience, techniques and results of experimentation and
testing, including without limitation pharmacological, toxicological and pre-clinical and clinical
test data and analytical and quality control data, patentable or otherwise, that is reasonably
necessary or useful to Develop, Manufacture and/or Commercialize the Licensed Product in the Field.
7
1.56
Kyowa Hakko Collaboration IP
means (a) any improvement, discovery or Know-How,
patentable or otherwise, first identified, discovered or developed solely by employees of Kyowa
Hakko or its Affiliates or other persons not employed by Alnylam acting on behalf of Kyowa Hakko,
in the conduct of the Collaboration, and (b) any Patent Rights which claim or cover such
improvements, discoveries or Know-How and are Controlled by Kyowa Hakko at any time during the
Term. Kyowa Hakko Collaboration IP excludes Kyowa Hakkos interest in Joint Collaboration IP.
1.57 Kyowa Hakko Indemnitees
has the meaning set forth in Section 9.5.2.
1.58 Kyowa Hakko In-License
means an agreement between Kyowa Hakko and a Third Party
pursuant to which Kyowa Hakko has rights and obligations with respect to, or which otherwise Cover,
the Licensed Product and is necessary to Develop, Commercialize and/or Manufacture the Licensed
Product in the Field, including without limitation, the agreements listed on
Schedule 1.58
.
1.59 Kyowa Hakko Know-How
means Know-How Controlled by Kyowa Hakko during the Term that
Kyowa Hakko is reasonably necessary or useful for Alnylam and its Related Parties to perform their
obligations or exploit their rights under this Agreement (other than Kyowa Hakkos rights in Joint
Collaboration IP and Kyowa Hakko Collaboration IP).
1.60 Kyowa Hakko Patent Rights
means Patent Rights that (a) claim (i) Kyowa Hakko Know-How,
or (ii) the Development, Manufacture and/or Commercialization of the Licensed Product, and that are
reasonably necessary or useful to Develop, Manufacture and/or Commercialize the Licensed Product in
the Field, and (b) are Controlled by Kyowa Hakko at any time during the Term. Kyowa Hakko Patent
Rights shall not include Patent Rights included in Kyowa Hakko Collaboration IP or Kyowa Hakkos
interest in Joint Collaboration IP.
1.61 Kyowa Hakko Technology
means, collectively, Kyowa Hakko Know-How and Kyowa Hakko Patent
Rights, Kyowa Hakko Collaboration IP and Kyowa Hakkos interest in Joint Collaboration IP.
1.62 Kyowa Hakko Territory
means the countries of Japan, China (including but not limited to
Hong Kong and Macau, but excluding Taiwan), Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar,
North Korea, Philippines, Singapore, South Korea, Taiwan, Thailand, and Vietnam.
1.63 Kyowa Hakko Trademark
has the meaning set forth in Section 10.9(b).
1.64
Lead Product
means Alnylams proprietary product known as ALN-RSV01, which is described
on
Schedule 1.64
.
1.65 Licensed Product
means, subject to Section 2.9, the Lead Product.
1.66 Losses
has the meaning set forth in Section 9.5.1.
1.67 Manufacturing
or
Manufacture
means, as applicable, all activities associated with the
production, manufacture, processing, filling, finishing, packaging, labeling, shipping, and storage
of the Licensed Product (including API Bulk Drug Substance and Finished Product), including process
and formulation development, process validation, stability testing, manufacturing scale-up,
8
pre-clinical, clinical and commercial manufacture and analytical development, product
characterization, quality assurance and quality control development, testing and release.
1.68 MicroRNA Mimic
means a double-stranded or single-stranded oligonucleotide or analog
thereof with a substantially similar base composition as a particular microRNA and which is
designed to mimic the activity of such microRNA.
1.69 NDA
means a New Drug Application, Biologics License Application, Worldwide Marketing
Application, Marketing Authorization Application, Section 510(k) filing or similar application or
submission filed with a Regulatory Authority in a country or group of countries to obtain marketing
approval for a biological, pharmaceutical or other therapeutic or prophylactic product in that
country or in that group of countries.
1.70
Necessary Third Party IP
means, with respect to any country, on a country-by-country
basis, Know-How or Patent Rights in such country owned or controlled by a Third Party that Cover
the Development, Manufacturing and/or Commercialization of the Licensed Product in or for such
country.
1.71 Negotiation Period
has the meaning set forth in Section 2.10(b).
1.72 Net Sales
means the aggregate gross invoice prices of all units of the Licensed Product
sold by Kyowa Hakko and its Related Parties to Third Parties (other than a Sublicensee) after
deducting, if not previously deducted, from the amount invoiced or received:
(a) trade and quantity discounts actually given other than early pay cash discounts;
(b) returns, rebates, chargebacks and other allowances actually given;
(c) retroactive price reductions that are actually granted
(d) sales or excise taxes, customary transportation and insurance, custom duties, and other
governmental charges; and
(e) a fixed amount equal to [**] percent ([**]%) of the amount invoiced to cover bad debt and
early payment cash discounts.
With respect to sales of Combination Products, Net Sales shall be calculated on the basis of
the gross invoice price of the Licensed Product(s) containing the same composition and
concentration of RNAi Product sold without other clinically active ingredients, mechanisms or
devices.
In the event that the Licensed Product is sold only as a Combination Product and not sold
without other clinically active ingredients, mechanisms or devices, the Parties shall negotiate in
good faith another basis on which to calculate Net Sales with respect to the Combination Product
that fairly reflects the value of the Licensed Product relative to the other clinically active
ingredients, mechanisms or devices in the Combination Product, but in no event shall such
calculation result in the gross invoice price on which Net Sales are based being less than (i)
seventy-five percent (75%) of the gross invoice price of such Combination Product, in the case
where the Combination Product is
9
comprised of the Licensed Product and a device, and (ii) fifty percent (50%) of the gross
invoice price of such Combination Product, in the case of all other Combination Products.
A percentage of the deductions set forth in paragraphs (a) through (d) above equal to the
ratio of the Net Sales for the Licensed Product to the Net Sales of the entire Combination Product
will be applied in calculating Net Sales for a Combination Product.
1.73 Non-Bankrupt Party
has the meaning set forth in Section 11.2.4(d).
1.74 Party
means Kyowa Hakko and/or Alnylam.
1.75 Patent Expenses
has the meaning set forth in Section 10.3.6.
1.76 Patent Rights
means all patents (including all reissues, extensions, substitutions,
confirmations, re-registrations, re-examinations, invalidations, supplementary protection
certificates and patents of addition) and patent applications (including all provisional
applications, requests for continuation, continuations, continuations-in-part and divisions) and
all foreign equivalents of the foregoing.
1.77 Pharmacovigilance Agreement
has the meaning set forth in Section 2.6.2.
1.78 Phase I Study
means a clinical study of the Licensed Product in human volunteers or
patients the purpose of which is preliminary determination of safety and tolerability of a dosing
regime and for which there are no primary endpoints (as understood by the FDA or other Regulatory
Authorities) in the protocol relating to efficacy.
1.79 Phase II Study
means (a) a dose exploration, dose response, duration of effect,
kinetics, dynamic relationship or preliminary efficacy and safety study of the Licensed Product in
the patient population or (b) a controlled dose ranging clinical study to evaluate further the
efficacy and safety of the Licensed Product in the patient population and to define the optimal
dosing regimen.
1.80 Phase IIa Study
means a dose exploration or dose response study that may also include
evaluation of safety and efficacy of the Licensed Product in the patient population or a controlled
dose ranging clinical study to define the optimal dosing regimen.
1.81 Phase IIb Study
means a controlled dose ranging clinical study of the Licensed Product
to evaluate further the efficacy and safety of the Licensed Product in the patient population and
to define the optimal dosing regimen.
1.82 Phase III Study
means a controlled pivotal clinical study of the Licensed Product that
is prospectively designed to demonstrate statistically whether the Licensed Product is effective
and safe for use in a particular indication in a manner sufficient to obtain Regulatory Approval to
market the Licensed Product.
1.83 Post-Approval Study
means a clinical study of the Licensed Product Initiated in a
country after receipt of Regulatory Approval for the Licensed Product in such country.
10
1.84 Product Trademark(s)
means the trademark(s) and service mark(s) for use in connection
with the distribution, marketing, promotion and sale of the Licensed Product, and/or accompanying
logos, trade dress and/or indicia of origin. Product Trademarks specifically excludes the
corporate names and logos of the Parties and their Affiliates.
1.85 Promotional Materials
has the meaning set forth in Section 4.5.
1.86 Regulatory Approval
means any and all approvals (including pricing and reimbursement
approvals), licenses, registrations or authorizations of any Regulatory Authority, necessary for
the Development, Commercialization and Manufacture of the Licensed Product, including the
acceptance or non-rejection of INDs and the approval of NDAs.
1.87 Regulatory Authority
means any applicable government regulatory authority involved in
granting approvals for the Development, Manufacturing, Commercialization, reimbursement and/or
pricing of the Licensed Product, including without limitation the FDA, the European Medicines
Agency (EMEA), the Japanese Ministry of Health, Labour and Welfare and the Pharmaceuticals and
Medical Devices Agency in Japan (PMDA).
1.88 Related Party
means a Partys Affiliates and permitted Sublicensees, which term does
not include wholesale distributors of the Party or its Affiliates who purchase the Licensed Product
from such Party or its Affiliates in an arms length transaction and who have no other obligation,
including without limitation a reporting obligation, to such Party or its Affiliates. For purposes
of clarity, such wholesale distributors do not include those distributors whose obligations to such
Party or Affiliate include responsibility for sales and/or marketing efforts in a country or
sharing of costs and expenses with respect to sales and/or marketing on behalf of a Party or its
Affiliates, which distributors shall be deemed to be permitted Sublicensees for purposes of this
definition.
1.89 Replacement Product
has the meaning set forth in Section 2.9.
1.90 Replacement Product Notice
has the meaning set forth in Section 2.9.
1.91 RNAi Product
means a composition designed to act primarily through an RNA interference
mechanism that is not a microRNA, microRNA antagonist or MicroRNA Mimic and which consists of
either (a) two separate oligomers of native or chemically modified RNA that are hybridizable to one
another along a substantial portion of their lengths, or (b) a single oligomer of native or
chemically modified RNA that is hybridizable to itself by self-complementary base-pairing along a
substantial portion of its length to form a hairpin, in either case that inactivates, including
inactivation resulting from cleavage, a target mRNA, which encodes a protein product, via a
double-stranded RNase, such as those involved in the RNA interference mechanism.
1.92 Royalty Term
has the meaning set forth in Section 7.4.2.
1.93
RSV
means all strains of the respiratory syncytial virus.
1.94 RSV Product
means an RNAi Product directed to RSV.
1.95 RSV Target
means RSV;
provided
that the entire genome of RSV shall be regarded
as a single Target.
11
1.96 SPC
has the meaning set forth in Section 10.7.
1.97 Sublicensee
means a Third Party to whom a Party grants a sublicense under any Alnylam
Technology or Kyowa Hakko Technology, as the case may be, to Develop, Manufacture or Commercialize
the Licensed Product in the Field pursuant to Section 6.2 or otherwise grants rights to distribute,
promote or sell the Licensed Product.
1.98 Successor Product
has the meaning set forth in Section 2.10(a).
1.99 Successor Product License
has the meaning set forth in Section 2.10(b).
1.100 Successor Product Notice
has the meaning set forth in Section 2.10(a).
1.101 Successor Product Option
has the meaning set forth in Section 2.10(a).
1.102 Successor Product Option Exercise Date
has the meaning set forth in Section 2.10(b).
1.103 Successor Product Option Notice
has the meaning set forth in Section 2.10(b).
1.104 Successor Product Option Period
has the meaning set forth in Section 2.10(b).
1.105 Target
means (a) a polypeptide or entity comprising a combination of at least one
polypeptide and other macromolecules, that is a site or potential site of therapeutic intervention
by a therapeutic agent; or a nucleic acid which is required for expression of such polypeptide; (b)
variants of a polypeptide (including any splice variant thereof), cellular entity or nucleic acid
described in clause (a); or (c) a defined non-peptide entity, including a microorganism, virus,
bacterium or single cell parasite;
provided
that
the entire genome of a virus shall
be regarded as a single Target.
1.106 Term
has the meaning set forth in Section 11.1.
1.107 Territory
means (a) with respect to Alnylam, the Alnylam Territory and (b) with
respect to Kyowa Hakko, the Kyowa Hakko Territory.
1.108 Third Party
means an entity other than a Party and its Affiliates.
1.109 Transfer Price
means, with respect to (a) API Bulk Drug Substance, the Cost of Goods
Sold of such API Bulk Drug Substance,
plus
[**] percent ([**]%) of the Cost of Goods Sold of such
API Bulk Drug Substance and (b) Finished Product, the Cost of Goods Sold of such Finished Product,
plus
[**] percent ([**]%) of the Cost of Goods Sold of such Finished Product.
1.110 United States
means the United States of America and its territories, possessions and
commonwealths.
1.111 Valid Claim
means a claim of: (a) an issued and unexpired Patent Right, which claim
has not been revoked or held unenforceable, unpatentable or invalid by a decision of a court or
other governmental agency of competent jurisdiction, which is not appealable or has not been
appealed within the time allowed for appeal, and which has not been abandoned, disclaimed, denied
or admitted
12
to be invalid or unenforceable through reissue, re-examination or disclaimer or otherwise, or
(b) a patent application for a patent included within the Patent Rights that has been pending less
than seven (7) years from the earliest date on which such patent application claims priority and
which claim has not been cancelled, withdrawn or abandoned or finally rejected by an administrative
agency action from which no appeal can be taken.
2. DEVELOPMENT COLLABORATION
2.1
Overview
. The Parties will collaborate in the further Development of the Licensed
Product;
provided
,
however
, that Kyowa Hakko will be responsible for the
Development of the Licensed Product in the Kyowa Hakko Territory and Alnylam will be responsible
for the Development of the Licensed Product in the Alnylam Territory.
2.2
Development Plan
. The Development activities to be undertaken with respect to the
Licensed Product in the Kyowa Hakko Territory will be set forth in a written workplan and timetable
(the
Development Plan
). The initial Development Plan will be developed by Kyowa Hakko for
Development activities with respect to the Licensed Product in Japan after consultation with and
with guidance from the Regulatory Authorities in Japan and provided promptly thereafter to Alnylam.
Kyowa Hakko shall report regularly to the JSC on the status and content of its consultations with
the Regulatory Authorities in Japan and will use Commercially Reasonable Efforts to provide Alnylam
with an initial Development Plan prior to December 31, 2008. Moreover, upon Alnylams request
Kyowa Hakko agrees to consult with Alnylam as Alnylam develops a global plan for the Development of
the Licensed Product. The Parties will update and modify the Development Plan from time to time, to
include, among other things, the results of consultation with the Regulatory Authorities in Japan
and Kyowa Hakkos Development activities with respect to the Licensed Product in each country of
the Kyowa Hakko Territory outside of Japan, and at least annually for approval by the JSC pursuant
to Section 3.1.4.
2.3
Development Activities
.
(a) Kyowa Hakko shall be responsible, at its expense, for
all Development activities under the Development Plan that are reasonably necessary for the
Regulatory Approval of the Licensed Product in the Kyowa Hakko Territory. Neither Party may conduct
Clinical Studies, Post-Approval Studies or other Development activities with respect to the
Licensed Product in the Field in the Territory of the other Party without the other Partys prior
written consent, which consent will not be unreasonably withheld or delayed.
(b) The Parties expect that the Development activities under the initial Development Plan will
entail the Development by Kyowa Hakko of the Licensed Product for Regulatory Approval in Japan
utilizing data generated by Alnylam and its Related Parties in the pre-clinical and clinical
Development of the Licensed Product in the Alnylam Territory and [**]. However, the Parties
acknowledge that the Regulatory Authorities in Japan may require Kyowa Hakko to submit data from
[**] in order to obtain Regulatory Approval of the Licensed Product in Japan. If (x) the Japanese
Regulatory Authorities require Kyowa Hakko to conduct [**] in order to obtain Regulatory Approval
of the Licensed Product in Japan and (y) Alnylam intends to conduct [**] of the Licensed Product,
to the extent requested by Kyowa Hakko, Alnylam agrees to use its Commercially Reasonable Efforts
to conduct such [**], at Alnylams expense, in such a manner as to accommodate the requirements for
Japanese Regulatory Approval as described to Alnylam by Kyowa Hakko such that Kyowa Hakko is not
required to conduct [**], including conducting some portion of [**];
provided
,
however
, that (i)
13
any such [**] must meet the requirements for Regulatory Approval of the Licensed Product [**]
and (ii) [**] shall have final decision-making authority with respect to all aspects of such [**],
including whether to include any changes to the [**] to accommodate the requirements of Japanese
Regulatory Authorities; and
provided
,
further
,
however
, that in the event
that Alnylam includes [**] Japanese sites in such [**], Alnylam will use its Commercially
Reasonable Efforts consistent with the [**] to designate Kyowa Hakko as Alnylams designee for the
conduct of such [**] in Japan and all interactions and correspondence with Japanese Regulatory
Authorities as the holder of the IND in Japan. For purposes of clarity, (x) Alnylam will be
responsible for all costs associated with such [**], including those costs related to the conduct
of such [**] in Japan;
provided
,
however
, that Kyowa Hakko shall be responsible for
any of its own expenses incurred in connection with Kyowa Hakko serving as Alnylams designee in
Japan for the conduct of such [**] and all interactions and correspondence with Japanese Regulatory
Authorities as the holder of the IND in Japan, and (y) Kyowa Hakko shall be responsible for all
other costs associated with [**] conducted by Kyowa Hakko, including [**].
2.4
Diligence
. (a) Kyowa Hakko will use Commercially Reasonable Efforts to (i) Develop
the Licensed Product for Regulatory Approval and Commercialization initially in Japan and
subsequently in each other country in the Kyowa Hakko Territory and (ii) perform the Development
activities under the Development Plan;
provided
,
however
, that Kyowa Hakko shall
have no obligation to Develop the Licensed Product for Regulatory Approval and Commercialization in
any country in the Kyowa Hakko Territory other than Japan prior to Regulatory Approval of the
Licensed Product in Japan.
(b) Alnylam will use Commercially Reasonable Efforts to Develop the Licensed Product for
Regulatory Approval in the United States and Great Britain, France, Germany, Italy and Spain.
2.5
Records and Reports
. Each Party will maintain scientific records, in sufficient
detail and in good scientific manner appropriate for patent and regulatory purposes, which will
fully and properly reflect all work done and results achieved in the performance of the Development
activities with respect to the Licensed Product by such Party. Each Party will have the right,
during normal business hours and upon reasonable notice, to inspect and copy (or request the other
Party to copy) all records of the other Party maintained in connection with the work done and
results achieved in the performance of such Development activities, but solely to the extent to
which such records relate to the Licensed Product in the inspecting Partys Territory or to the
extent access to such records is necessary for a Party to exercise its rights under this Agreement.
All such records, and the information disclosed therein, will be maintained in confidence by the
recipient in accordance with Article 8.
2.6
Regulatory Matters
.
2.6.1
Regulatory Filings and Interactions
. Except as otherwise provided in the
Development Plan, (a) each Party will own the INDs, the NDAs and related regulatory documents
submitted to the applicable Regulatory Authorities in its own Territory with respect to the
Licensed Product and (b) each Party will, with respect to its own Territory and the Licensed
Product, (i) oversee, monitor and coordinate all regulatory actions, communications and filings
with, and submissions to,
14
each Regulatory Authority, (ii) be responsible for interfacing, corresponding and meeting with
each Regulatory Authority, (iii) be responsible for maintaining all regulatory filings, and (iv)
notify the JSC in writing, including a brief description in English of the principle issues raised,
of all material communications from Regulatory Authorities within [**] business days, provide the
JSC with a summary translation of such material communications in English as soon as reasonably
possible but in any event within [**] business days, and provide a full translation of such
material communications in English as soon as reasonably possible thereafter. Kyowa Hakko will
provide the complete copies of the original correspondence in their native language to Alnylam upon
request. Each Party will have the right to reference the other Partys INDs, the NDAs and other
filings with and submissions to Regulatory Authorities with respect to the Licensed Product for the
purpose of conducting its Development activities (in the case of Kyowa Hakko, under the Development
Plan) and to otherwise obtain Regulatory Approval of the Licensed Product in its own Territory.
2.6.2
Complaints; Adverse Event Reporting Procedures; Notice of Adverse Events Affecting
the Licensed Product
. Each Party will maintain a record of any and all complaints it receives
with respect to the Licensed Product. Each Party will notify the other Party in reasonable detail
of any complaint received by it with respect to the Licensed Product within sufficient time to
allow the other Party and its Related Parties to comply with any and all regulatory and other
requirements imposed upon them in any jurisdiction in which the Licensed Product is being marketed
or tested in Clinical Studies and/or Post-Approval Studies. Alnylam will maintain a global adverse
event database for the Licensed Product at its own expense. Kyowa Hakko will have access to all
data in the global adverse event database. Kyowa Hakko will provide Alnylam with all adverse event
information and safety data relating to the Licensed Product in its Control, and Alnylam will
provide Kyowa Hakko with all adverse event information and safety data relating to the Licensed
Product in its Control through access to the global adverse event database. Each Party will report
to the other Party the details around any adverse events and serious adverse events relating to the
Licensed Product in its Control within the time periods for such reporting as specified in the
Pharmacovigilance Agreement (defined below). Each Party shall be responsible, at its own expense,
for submitting adverse event reports with respect to the Licensed Product to the applicable
Regulatory Authorities in its own Territory. In addition, each Party shall promptly notify the
other if such Party becomes aware of any information or circumstance that are likely to have a
material adverse effect on the Development, Manufacture or Commercialization of the Licensed
Product in the other Partys Territory. Within [**] months after the Effective Date, the Parties
will develop and agree in writing upon a pharmacovigilance agreement (
Pharmacovigilance
Agreement
) that will include safety data exchange procedures governing the coordination of
collection, investigation, reporting, and exchange of information concerning any adverse
experiences, and any product quality and product complaints involving adverse experiences, related
to the Licensed Product, sufficient to enable each Party to comply with its legal and regulatory
obligations.
2.7
Clinical Data Access and Development Assistance
.
2.7.1
General.
During the Term each Party shall provide, and shall have its Related
Parties provide to the other Party without additional compensation, any and all Know-How comprised
of copies of (a) pre-clinical and clinical safety and efficacy data, (b) protocols and investigator
brochures and (c) regulatory filings that are Controlled by such Party and/or its Related Parties
and that are
15
necessary or useful for the other Party (or its Related Parties) to perform its obligations or
exploit its rights under this Agreement with respect to the Licensed Product. Each Party and its
Related Parties shall use such Know-How solely for the purposes of performing its obligations or
exploiting its rights under this Agreement with respect to the Licensed Product.
2.7.2
Personnel
. Each Party will make available its employees engaged in Development
activities with respect to the Licensed Product upon reasonable notice during normal business hours
and at their respective places of employment to consult with the other Party on the progress of the
Licensed Product Development, as coordinated through each Partys Collaboration Manager or such
other individual as may be designated by the applicable Party.
2.8
Third Parties
.
2.8.1
Performance of Activities.
The Parties shall be entitled to utilize the
services of Third Party contract research and contract manufacturing organizations to perform their
respective Development and Manufacturing activities under this Agreement;
provided
that (a)
each Party shall ensure that such Third Party operates in a manner consistent with the terms of
this Agreement and (b) each Party shall remain at all times fully liable for its respective
responsibilities. Each Party shall ensure that any such Third Party agreement shall include
confidentiality and non-use provisions that are no less stringent than those set forth in Article 8
of this Agreement and shall use Commercially Reasonable Efforts to obtain ownership of, and/or a
fully sublicenseable license under and to, any Know-How and Patent Rights developed or used by such
Third Party in the performance of such agreement.
2.8.2 Collaborations.
(a)
Kyowa Hakko Collaborations
. The Parties agree that it may be necessary or useful
for Kyowa Hakko to enter into Third Party collaborations that provide technology, information, data
or know-how, patentable or otherwise, that are necessary or useful for Kyowa Hakko to perform its
obligations under this Agreement. Such Third Party collaborations shall not conflict with the
terms and conditions of this Agreement. In the event that any such Third Party collaborations are
contemplated in connection with the Development Plan, the JSC shall review, subject to Third Party
confidentiality obligations, such Third Party collaborations in advance of entering into such Third
Party collaborations, and Kyowa Hakko shall notify Alnylam in writing of each such Third Party
collaboration entered into by Kyowa Hakko. Kyowa Hakko shall use good faith efforts to ensure
that, to the extent possible, all such Third Party collaborations shall provide that any and all
data and results, discoveries and inventions, whether patentable or not, arising out of the Third
Party collaboration may be used by Alnylam and its Related Parties and shall include
confidentiality and non-use provisions that are no less stringent than those set forth in Article 8
of this Agreement. In addition, Kyowa Hakko shall use good faith efforts to obtain a right to
sublicense to Alnylam and its Related Parties any intellectual property arising out of the Third
Party collaboration. For clarity, such Third Party collaboration shall not include contract
research or contract manufacturing organizations set forth in Section 2.8.1 or the Sublicensee of
the Licensed Product.
(b)
Alnylam Collaborations
. Nothing contained in this Agreement will prevent or
prohibit Alnylam from entering into collaborations with Third Parties that provide technology,
information, data or know-how, patentable or otherwise, that are necessary or useful for Alnylam to
Develop,
16
Manufacture, or Commercialize the Licensed Product, Replacement Products or Successor Products
in the Alnylam Territory or otherwise perform its obligations under this Agreement.
2.9
Replacement Product.
Alnylam will promptly notify Kyowa Hakko in writing (a
Replacement Product Notice
) if, at any time during the Term prior to the First Commercial Sale of
the Lead Product in the Alnylam Territory, Alnylam terminates the Development of the Lead Product
and elects, in its sole discretion, to commence Development of another RSV Product (the
Replacement Product
) in the Alnylam Territory. Effective upon such notice (a) the Development
Collaboration shall terminate with respect to the Lead Product, but will continue with respect to
the Replacement Product, and the JSC will promptly update the Development Plan accordingly, (b) all
references to the Licensed Product in this Agreement will no longer include the Lead Product but
will instead include the Replacement Product, and (c) Kyowa Hakkos license rights with regard to
the Lead Product will automatically terminate, unless Alnylam consents in writing to the
continuation of such licenses under this Agreement with respect to the Lead Product (which consent
shall not be unreasonably withheld or delayed). For clarity, this provision may be applied if
Alnylam terminates the Development of a Replacement Product, and commences the Development of a
further Replacement Product.
2.10
Successor Product Option
.
(a) Alnylam will promptly notify Kyowa Hakko in writing (
Successor Product Notice
) if, at
any time during the Term after the First Commercial Sale of the Licensed Product in the Kyowa Hakko
Territory, Alnylam Initiates the first Phase III Study of an RSV Product other than the Lead
Product or the Replacement Product in the Alnylam Territory (the
Successor Product
). If the
Successor Product could reasonably be expected to be launched in the Kyowa Hakko Territory prior to
the end of the Expiry Period (defined below), then Alnylam hereby grants to Kyowa Hakko an option
to obtain an exclusive license under the Alnylam Technology to Develop and Commercialize the
Successor Product in the Field in the Kyowa Hakko Territory (the
Successor Product Option
).
(b) The Successor Product Notice will contain (i) the chemical composition of the Successor
Product and (ii) such additional information as Kyowa Hakko may reasonably require in order to
evaluate and decide whether to exercise the Successor Product Option. Kyowa Hakko shall have a
period of [**] days after the date of the Successor Product Notice (
Successor Product Option
Period
) in which to exercise the Successor Product Option by written notice to Alnylam (
Successor
Product Option Notice
). Upon Kyowa Hakko giving a Successor Product Option Notice to Alnylam (the
Successor Product Option Exercise Date
), the Parties will enter into a definitive license
agreement in accordance with the next sentence for an exclusive license under the Alnylam
Technology to Develop and Commercialize the Successor Product in the Field in the Kyowa Hakko
Territory (the
Successor Product License
) in good faith for a period not to exceed [**] days (or
such other period as the Parties may agree in writing) (
Negotiation Period
). The terms and
conditions of such definitive license agreement will be negotiated in good faith by the Parties,
but will be substantially similar to the terms of this Agreement, except that such definitive
license agreement will not include any terms and conditions relating to any subsequent Successor
Product Option, will include the Parties agreement to [**] royalties payable under Alnylam
In-Licenses of delivery technologies, and the financial terms will be based on the following terms:
17
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(i)
|
|
If the Successor Product could reasonably be expected to achieve commercial
launch in the Kyowa Hakko Territory within [**] years prior to the later of (x) the
expiration of the Term and (y) the expiration of all grants of marketing exclusivity by
a Regulatory Authority in the Kyowa Hakko Territory (such [**]year period, the
Expiry
Period
), then the financial terms of the Successor Product License will include
milestone fees that do not exceed [**] percent ([**]%) of each of the Development and
sales milestone fees set forth in Sections 7.2(a) and 7.3 of this Agreement;
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(ii)
|
|
If the Successor Product could reasonably be expected to achieve commercial
launch in the Kyowa Hakko Territory prior to the commencement of the Expiry Period,
then [**] upfront, Development or sales milestones shall be payable by Kyowa Hakko to
Alnylam; and
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(iii)
|
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In any case, Kyowa Hakko shall pay Alnylam Royalties on net sales of such
Successor Product in the Kyowa Hakko Territory calculated as set forth in Section 7.4
of this Agreement.
|
(c) If Kyowa Hakko does not deliver a Successor Product Option Notice to Alnylam within the
Successor Product Option Period, or if despite the good faith efforts of each Party, the Parties
fail to execute a definitive agreement for the Successor Product prior to the expiration of the
Negotiation Period, then Alnylam shall be free to Develop, Manufacture and Commercialize the
Successor Product in the Kyowa Hakko Territory, either on its own or with one or more Third
Parties;
provided
,
however
, that if the Parties have made a good faith effort but
failed to conclude such negotiations within the Negotiation Period and both Parties reasonably
believe that such negotiations may be successfully completed within a reasonable amount of
additional time, then the Parties may mutually agree to extend the Negotiation Period accordingly;
and
provided
,
further
,
however
, that Alnylam will not, without Kyowa
Hakkos prior written consent not to be unreasonably withheld or delayed, either on its own or with
one or more Third Parties, launch the Successor Product for commercial sale in the Kyowa Hakko
Territory until the commencement of the Expiry Period.
3. COLLABORATION MANAGEMENT
3.1
Joint Steering Committee
. The Parties hereby establish a committee to facilitate
the Collaboration as follows:
3.1.1
Composition of the Joint Steering Committee
. The Collaboration shall be
conducted under the direction of a joint steering committee (the
JSC
) comprised of no less than
[**] named representatives of Kyowa Hakko and no less than [**] named representatives of Alnylam.
Each Party shall appoint its respective representatives to the JSC from time to time, and may
substitute one or more of its representatives, in its sole discretion, effective upon notice to the
other Party of such change. Each Party shall have at least one JSC representative who is a senior
employee (director level or above), and all JSC representatives have appropriate expertise and
ongoing familiarity with the Collaboration. Additional representatives or consultants may from
time to time, by mutual consent of the Parties, be invited to attend JSC meetings, subject to such
representatives and consultants written agreement to comply with the requirements of Section 8.1.
All proceedings for the JSC shall take place in English. Each Party shall bear its own expenses
relating to attendance at such meetings by its representatives.
18
3.1.2
JSC Chairperson
. The
JSC Chairperson
shall rotate every twelve (12) months
between Alnylam and Kyowa Hakko. The initial JSC Chairperson shall be a representative of Alnylam.
The JSC Chairpersons responsibilities shall include (a) scheduling meetings at least [**] per
Calendar Quarter, but more frequently if the JSC determines it necessary; (b) setting agenda for
meetings with solicited input from other members; (c) confirming and delivering minutes to the JSC
for review and final approval; and (d) conducting effective meetings, including ensuring that
objectives for each meeting are set and achieved.
3.1.3
Meetings
. The first JSC meeting shall be held within [**] month of the
Effective Date, and the JSC shall meet in accordance with a schedule established by mutual written
agreement of the Parties, but no less frequently than [**] per Calendar Quarter, with the location
for such meetings alternating between Alnylam and Kyowa Hakko facilities (or such other locations
as are determined by the JSC). Alternatively, the JSC may meet by means of teleconference,
videoconference or other similar communications equipment, but at least two meetings per year shall
be conducted in person.
3.1.4
JSC Responsibilities
. The JSC shall have the following responsibilities with
respect to the Collaboration:
(a) providing updates regarding the Development of the Licensed Product in the Alnylam
Territory;
(b) monitoring, planning and coordinating the Development of the Licensed Product in the Kyowa
Hakko Territory;
(c) reviewing (i) an annual update to the Development Plan no later than [**] of each Calendar
Year, and (ii) any modifications to the Development Plan within [**] days of each submission to the
JSC;
(d) regularly assessing the progress of Kyowa Hakko in its conduct of the Development Plan
against the timelines contained therein, reviewing relevant data, and considering issues of
priority;
(e) reviewing proposed Third Party collaborations in accordance with Section 2.8.2(a); and
(f) performing such other activities as the Parties agree in writing shall be the
responsibility of the JSC.
For purposes of clarity, the JSC shall not have the authority to modify the terms of this
Agreement.
3.2
Appointment of Subcommittees, Project Teams and Collaboration Managers
. The JSC
shall be empowered to create such subcommittees of itself and project teams as it may deem
appropriate or necessary. Each such subcommittee and project team shall report to the JSC, which
shall have authority to approve or reject recommendations or actions proposed thereby subject to
the terms of this Agreement. Each Party shall also designate a
Collaboration Manager
. The
Collaboration Managers will be responsible for the day-to-day coordination of the Collaboration and
will serve to facilitate communication between the Parties. Each Party may change its designated
Collaboration Manager from time to time upon written notice to the other Party.
19
3.3
Reports and Minutes
. Each Party shall prepare and deliver to the JSC, by no later
than each [**] (for the period ending December 31 of the prior Calendar Year), written reports
summarizing such Partys Development activities for the Licensed Product performed to date (or
updating such report for activities performed since the last such report submitted hereunder, as
applicable). In addition, Alnylam shall provide Kyowa Hakko with prompt written notice of the
achievement by Alnylam of any milestone event set forth in Section 7.2. Each Party will provide
the members of the JSC with written copies of all materials they intend to present at a JSC
meeting. The JSC may also request at any time specific data or information related to Collaboration
activities or that a written report be prepared in advance of any meeting summarizing certain
material data and information arising out of the conduct of the Collaboration activities and the
Party or appropriate committee to whom such request is made shall promptly provide to the other
Party or JSC such report, data or information. A secretary shall be appointed for each meeting and
shall prepare minutes of the meeting, which shall provide a description in reasonable detail of the
discussions held at the meeting and a list of any actions, decisions or determinations approved by
the JSC.
3.4
Decision-Making
. The JSC shall attempt to resolve any and all disputes relating
to the Collaboration by consensus. If the JSC is unable to reach a consensus with respect to a
dispute, then the dispute shall be submitted to escalating levels of Alnylam and Kyowa Hakko senior
management for review. If such dispute cannot be resolved despite escalation, then the Chief
Executive Officers of Alnylam and Kyowa Hakko shall attempt to resolve such dispute. In the event
that the Chief Executive Officers cannot reach an agreement regarding such dispute within [**] days
after submission to them for resolution, then:
(a) if the dispute is one over which the JSC has authority pursuant to Section 3.1, then Kyowa
Hakko shall have the final decision-making authority;
provided
,
however
, that Kyowa
Hakko (x) has no final decision-making authority over the Development or Commercialization of the
Licensed Product in the Alnylam Territory or the Manufacture of the Licensed Product by Alnylam,
(y) may not conduct, sponsor, fund or otherwise support a Clinical Study or Post-Approval Study of
the Licensed Product that would materially and adversely affect the Development or
Commercialization of the Licensed Product in the Alnylam Territory, without Alnylams prior written
consent;
provided
however,
that Alnylam will consider in good faith any Clinical
Study design required by the Regulatory Authority in order to obtain Regulatory Approval in Japan
and will work diligently with Kyowa Hakko to identify Clinical Study designs which meet such
requirements in a way that does not materially and adversely affect the Development and
Commercialization of the Licensed Product in the Alnylam Territory, and (z) may not exercise its
final decision-making authority (A) to require Alnylam to use other than Commercially Reasonable
Efforts to perform its obligations under the Collaboration, (B) to require Alnylam to perform any
activities for which it is not responsible under this Agreement, (C) to require Alnylam to take or
fail to take any action that would violate any applicable law, rule or regulation or any agreement
with any Third Party or infringe the intellectual property rights of Third Parties, (D) over any
[**] conducted by Alnylam, or (E) to expand or narrow the responsibilities of the JSC; and
(b) with respect to all other disputes between the Parties, the dispute resolution provisions
of Section 12.11 shall apply.
3.5
Voting
. With respect to decisions of the JSC, the representatives of each Party
shall have collectively one vote on behalf of such Party. For each meeting of the JSC, at least
[**]
20
representatives of each Party shall constitute a quorum. Action on any matter may be taken at
a meeting, by teleconference, videoconference or by written agreement.
3.6
Dissolution of JSC
.
The JSC shall be dissolved upon the First Commercial Sale of
the Licensed Product in the Kyowa Hakko Territory;
provided
, that after the [**]
anniversary of the Effective Date Alnylam shall have the right, but shall not be obligated, to
participate in the JSC.
4. COMMERCIALIZATION OF THE LICENSED PRODUCT
4.1
Responsibility and Diligence
. Kyowa Hakko shall be solely responsible, at its
expense, for all Commercialization activities relating to the Licensed Product in the Field in the
Kyowa Hakko Territory. Kyowa Hakko shall use Commercially Reasonable Efforts to Commercialize the
Licensed Product in the Field in each country of the Territory.
4.2
Joint Commercialization Team
.
Commencing with the initiation of the first Phase
III Study of the Licensed Product, the Parties will establish a joint commercialization team
(
JCT
) to coordinate the global Commercialization of the Licensed Product. The provisions of
Sections 3.1.1, 3.1.2 and 3.1.3 relating to the operation of the JSC shall also apply to the JCT;
provided, however, that Alnylam shall have the right, but not the obligation, to participate in the
JCT. The responsibilities of the JCT include:
(a) providing updates regarding the Commercialization of the Licensed Product in the Alnylam
Territory;
(b) reviewing and commenting on the Commercialization Plan and all updates to the
Commercialization Plan;
(c) reviewing and commenting on marketing and promotional materials in the Kyowa Hakko
Territory; and
(d) performing such other activities as the Parties agree in writing shall be in the
responsibility of the JCT.
For purposes of clarity, the JCT shall not have the authority to modify the terms of this
Agreement.
4.3
Regulatory Approvals
.
Except as may be required for Alnylam to perform its
obligations under this Agreement, Kyowa Hakko (or its Related Parties) shall be the holder of all
Regulatory Approvals (including IND and NDA submissions) for the Licensed Product in the Kyowa
Hakko Territory; and with respect to the Licensed Product in the Kyowa Hakko Territory, Kyowa Hakko
shall (a) oversee, monitor and coordinate all regulatory actions, communications and filings with,
and submissions to, each Regulatory Authority, (b) be responsible for interfacing, corresponding
and meeting with each Regulatory Authority and (c) be responsible for maintaining all regulatory
filings.
4.4
Commercialization Plan
.
Commencing with the initiation of the first Phase III
Study of the Licensed Product, Kyowa Hakko shall prepare and deliver to the JCT, (a) by no later
than each [**], a written plan that describes in detail the Commercialization activities to be
undertaken with respect to the Licensed Product in the Kyowa Hakko Territory in the next Calendar
Year and the dates
21
by which such activities are targeted to be accomplished (each, a
Commercialization Plan
);
and (b) by no later than each [**], a Commercialization Plan for the next Calendar Year.
4.5
Advertising and Promotional Materials
. Kyowa Hakko will be responsible for the
creation, preparation, production, reproduction and filing with the applicable Regulatory
Authorities, of relevant written sales, promotion and advertising materials relating to the
Licensed Product (
Promotional Materials
) for use in the Kyowa Hakko Territory. All such
Promotional Materials will be compliant with all applicable laws, rules and regulations, and
consistent with the Commercialization Plan for the Kyowa Hakko Territory. Kyowa Hakko will submit
the core Promotional Materials developed by it for use in the Kyowa Hakko Territory to the JCT for
review and comment prior to use, and Kyowa Hakko shall consider in good faith any comments Alnylam
may have with respect to such Promotional Materials. Upon Alnylams reasonable request, copies or
summaries of the core Promotional Materials submitted by Kyowa Hakko to the JCT shall be translated
into English.
4.6
Reporting Obligations.
Kyowa Hakko shall prepare and deliver to the JCT, by no
later than each [**] (for the period ending December 31 of the prior Calendar Year), written
reports summarizing Kyowa Hakkos Commercialization activities for the Licensed Product performed
to date (or updating such report for activities performed since the last such report submitted
hereunder, as applicable). In addition, Kyowa Hakko shall provide Alnylam with written notice of
(a) all filings and submissions for Regulatory Approval regarding the Licensed Product in the Kyowa
Hakko Territory in a timely manner; (b) all Regulatory Approvals obtained or denied, the filing of
any IND for the Licensed Product, the First Commercial Sale of the Licensed Product in each country
of the Kyowa Hakko Territory and the achievement by Kyowa Hakko of any milestone event set forth in
Section 7.2 or 7.3, within [**] days of such event;
provided
,
however
, that in all
circumstances, Kyowa Hakko shall inform Alnylam of such event prior to public disclosure of such
event by Kyowa Hakko. Moreover, subject to the provisions of Section 6.4, Kyowa Hakko shall
prepare and deliver to Alnylam any additional reports required under the Alnylam In-Licenses, in
each case sufficiently in advance to enable Alnylam to comply with its obligations under the
Alnylam In-Licenses. Kyowa Hakko shall also provide such other information to the JCT as Alnylam
may reasonably request and shall keep the JCT reasonably informed of Kyowa Hakkos
Commercialization activities with respect to the Licensed Product.
4.7
Sales and Distribution
. Each Party and its Related Parties shall be responsible
for booking sales and shall warehouse and distribute the Licensed Product in its own Territory. If
a Party receives any orders for the Product in the other Partys Territory, it shall refer such
orders to the other Party. Moreover, each Party and its Related Parties shall be solely
responsible for handling all returns of the Product, as well as all aspects of Product order
processing, invoicing and collection, distribution, inventory and receivables, in it own Territory.
With respect to the Licensed Product, Kyowa Hakko may use the services of a Third Party wholesaler
of pharmaceutical products in Japan within its reasonable discretion, and any other Third Party
distributor in any country of the Kyowa Hakko Territory, only with the prior written consent of
Alnylam, which consent will not be unreasonably withheld or delayed. For purposes of clarity,
Kyowa Hakko may distribute in countries in the Kyowa Hakko Territory other than Japan through
Affiliates or Sublicensees of Kyowa Hakko without requiring the consent of Alnylam.
22
4.8
Recalls, Market Withdrawals or Corrective Actions
. In the event that any
Regulatory Authority issues or requests a recall or takes a similar action in connection with the
Licensed Product in a Territory, or in the event either Party determines that an event, incident or
circumstance has occurred that may result in the need for a recall or market withdrawal in its own
Territory, the Party notified of such recall or similar action, or the Party that desires such
recall or similar action, shall within [**] hours advise the other Party thereof by telephone or
facsimile. Each Party, in consultation with the other Party, shall decide whether to conduct a
recall in its own Territory and the manner in which any such recall shall be conducted (except in
the case of a government mandated recall, when such Party may act without such advance notice but
shall notify the other Party as soon as possible). Each Party shall bear the expense of any such
recall in its own Territory. Each Party will make available all of its pertinent records that may
be reasonably requested in order to effecting a recall in the other Partys Territory.
4.9
Export Monitoring
. Each Party and its Related Parties will use Commercially
Reasonable Efforts to monitor and prevent exports of the Licensed Product from its own Territory to
the other Partys Territory using methods commonly used in the industry for such purpose, and shall
promptly inform the other Party of any such exports of the Licensed Product from its own Territory,
and the actions taken to prevent such exports. Each Party agrees to take any actions reasonably
requested in writing by the other Party that are consistent with applicable law and regulation to
prevent exports of the Licensed Product from its own Territory.
5. MANUFACTURE AND SUPPLY OF THE LICENSED PRODUCT
5.1
API Bulk Drug Substance
. Alnylam will use Commercially Reasonable Efforts to
Manufacture in accordance with cGMP and supply to Kyowa Hakko API Bulk Drug Substance identical to
the API Bulk Drug Substance Manufactured by Alnylam for use in the Alnylam Territory, in quantities
that are reasonably sufficient for the conduct of Development activities by Kyowa Hakko under the
Development Plan. Kyowa Hakko shall pay Alnylam the Transfer Price for API Bulk Drug Substance
supplied by Alnylam to Kyowa Hakko pursuant to this Section 5.1 within [**] days after receipt of
an invoice therefore. Upon [**] months prior written notice to Alnylam, and subject to any binding
orders for API Bulk Drug Substance made by Kyowa Hakko under the Supply Agreement, Kyowa Hakko may
Manufacture and supply quantities of API Bulk Drug Substance for its own Development activities in
the Kyowa Hakko Territory. Upon receipt of such notice, Alnylams obligation to supply API Bulk
Drug Substance to Kyowa Hakko under this Article 5 shall cease (subject to any binding orders for
API Bulk Drug Substance made by Kyowa Hakko under the Supply Agreement). Kyowa Hakko will be
responsible for Manufacturing and supplying API Bulk Drug Substance for Commercial sale in the
Kyowa Hakko Territory.
5.2
Finished Product
. (a) During the Term, Alnylam will use Commercially Reasonable
Efforts to Manufacture in accordance with cGMP and supply to Kyowa Hakko reasonable quantities of
Finished Product, in quantities that are reasonably sufficient for the conduct of Development
activities by Kyowa Hakko under the Development Plan;
provided
,
however
, that the
foregoing supply obligation will apply only if the Finished Product for the Kyowa Hakko Territory
is [**] to the Finished Product Manufactured by Alnylam and its Related Parties in the Alnylam
Territory (i.e., [**]). If the Finished Product for the Kyowa Hakko Territory is [**] to the
Finished Product Manufactured by Alnylam and its Related Parties in the Alnylam Territory, then
unless Alnylam agrees in writing to supply such Finished Product, Kyowa Hakko will be responsible
for
23
Manufacturing and supplying Finished Product for such purposes in the Kyowa Hakko Territory;
provided,
that Alnylam will provide API Bulk Drug Substance in accordance with Section 5.1
hereof. Upon [**] months prior written notice to Alnylam, and subject to any binding orders for
Finished Product made by Kyowa Hakko under the Supply Agreement, Kyowa Hakko may Manufacture and
supply quantities of Finished Product for its own Development activities in the Kyowa Hakko
Territory. Moreover, Kyowa Hakko will be responsible for Manufacturing and supplying Finished
Product for Commercial sale in the Kyowa Hakko Territory and for the final labeling and packaging
of all Finished Product used for Development or Commercialization in the Kyowa Hakko Territory.
(b) Alnylam will supply Finished Product to Kyowa Hakko at the Transfer Price for such
Finished Product. To the extent not included in Cost of Goods Sold, Kyowa Hakko will reimburse
Alnylam for its internal and out-of-pocket expenses additionally incurred in connection with the
Manufacture of API Bulk Drug Substance and/or Finished Product specifically for the Kyowa Hakko
Territory, including without limitation, process development, process validation, process
improvement, formulation development, product characterization, manufacturing scale-up and recovery
costs, the development of SOPs and QA/QC methods and procedures, the production of qualification
lots, all additional costs incurred in obtaining and maintaining approval for the Manufacture of
such API Bulk Drug Substance and/or Finished Product specifically for the Kyowa Hakko Territory,
and the costs of preparing, submitting, reviewing and developing data and information for the
purpose of a drug master file or for submission to a Regulatory Authority to obtain or retain such
approvals in the Kyowa Hakko Territory.
5.3
Supply Agreement; Manufacturing Technology Transfer
. (a) Within [**] months after
the Effective Date, the Parties will negotiate in good faith and enter into a supply agreement
pursuant to which Alnylam will, subject to the terms of Section 5.2, initially supply API Bulk Drug
Substance and/or Finished Product to Kyowa Hakko (the
Supply Agreement
). The Supply Agreement
will include the terms set forth in
Schedule 5.3
.
(b) Until First Commercial Sale of the Licensed Product in the Kyowa Hakko Territory, upon
receipt of Kyowa Hakkos written notice described in Sections 5.1 or 5.2(a), Alnylam shall provide
Kyowa Hakko promptly with Alnylam Know-How for the Manufacture of the API Bulk Drug Substance
and/or Finished Product, as the case may be, and shall make available its personnel on a reasonable
basis to consult with Kyowa Hakko with respect thereto, all at Kyowa Hakkos expense (calculated on
a reasonable full-time equivalent personnel and out-of-pocket expenses basis). In such a case, the
Parties will negotiate in good faith and enter into a technical transfer agreement setting forth
the scope of the technical Know-How transfer and the expense reimbursement agreed between the
Parties.
6. LICENSES
6.1
License Grants
.
24
6.1.1
Development and Commercialization License
. Subject to the terms and conditions
of this Agreement, Alnylam hereby grants Kyowa Hakko and its Affiliates a license under and to
Alnylam Technology to Develop and Commercialize the Licensed Product in the Field in the Kyowa
Hakko Territory. Such license is exclusive and royalty-bearing for the Royalty Term of the
Licensed Product in each country in the Kyowa Hakko Territory as set forth in Section 7.4.2, and
shall thereafter be a non-exclusive, fully-paid license to Develop, Manufacture and Commercialize
the Licensed Product in the Field in such country. Such license shall include the right for Kyowa
Hakko and its Affiliates to grant sublicenses and licenses as provided in Section 6.2 below.
6.1.2
[Intentionally Omitted]
6.1.3
Manufacturing License
. Subject to the terms and conditions of this Agreement,
only as permitted and solely for the purposes set forth in Article 5, (a) Alnylam hereby grants
Kyowa Hakko and its Affiliates a non-exclusive license under Alnylam Technology solely for the
purpose of Manufacturing the Licensed Product for the Kyowa Hakko Territory and (b) Kyowa Hakko
hereby grants Alnylam and its Affiliates a non-exclusive license under Kyowa Hakko Technology to
Manufacture the Licensed Product. Such license shall include the right to grant sublicenses and
licenses as provided in Section 6.2 below.
6.1.4
Kyowa Hakko Technology License
.
Kyowa Hakko hereby grants Alnylam and its
Affiliates a non-exclusive, royalty-free license, with the right to grant sublicenses, under any
Kyowa Hakko Technology that is produced, generated, conceived and/or reduced to practice as a
result of, or otherwise used in, the Development, Manufacturing or Commercialization activities of
Kyowa Hakko and its Related Parties under this Agreement, to Develop, Manufacture and/or
Commercialize RSV Products. Alnylams and its Affiliates practice of the foregoing licenses will
be subject to the exclusive license grants to Kyowa Hakko under Section 6.1.1 (i.e., Alnylam may
not practice such license in the Kyowa Hakko Territory) and the terms of Sections 2.10 and 6.2.3.
6.2
Affiliates; Sublicenses; Licenses of Joint Collaboration IP.
6.2.1
Affiliates
.
The license grants to each Partys Affiliates in Section 6.1 shall
apply, and each Party is entitled to grant licenses of its rights under any Joint Collaboration IP,
to an entity that is an Affiliate only for so long as such entity remains an Affiliate of such
Party and complies in all respects with the obligations of such Party and its Affiliates under this
Agreement. Each Party hereby guarantees the full payment and performance of its Affiliates under
this Agreement.
6.2.2
Development and Commercialization License.
Subject to the terms of Sections
9.4.1 and 6.2.5, with Alnylams prior written consent, not to be unreasonably withheld or delayed,
Kyowa Hakko and its Affiliates are entitled to grant sublicenses of their rights under this
Agreement (and licenses under any Joint Collaboration IP) to Third Parties to Develop and
Commercialize the Licensed Product in the Field in the Kyowa Hakko Territory.
6.2.3
Kyowa Hakko Technology License
. Alnylam and its Affiliates are entitled to
grant sublicenses of their rights under Section 6.1.4 to Third Parties in the Alnylam Territory;
provided
,
however
, that if Alnylam or its Affiliate grants a sublicense of its
rights under Section 6.1.4 to a Third Party to Develop, Manufacture or Commercialize the Licensed
Product in the Alnylam Territory, Alnylam (or its Affiliate) shall negotiate in good faith with
such Third Party to obtain a non-exclusive,
25
royalty-free license, with the right to grant sublicenses, under such Third Partys
intellectual property that is produced, generated, conceived and/or reduced to practice as a result
of, or otherwise used in, the Development, Manufacturing or Commercialization activities of such
Third Party and its affiliates and sublicensees, to Develop, Manufacture and/or Commercialize RSV
Products.
6.2.4
Manufacturing Sublicenses
.
Subject to the terms of Section 6.2.5, (a) Alnylam
and its Affiliates are entitled to grant sublicenses of their rights under Section 6.1.3 (and
licenses under any Joint Collaboration IP) to Third Parties to Manufacture the Licensed Product and
(b) with Alnylams prior written consent, not to be unreasonably withheld or delayed, Kyowa Hakko
and its Affiliates are entitled to grant sublicenses of their rights under Section 6.1.3 (and
licenses under any Joint Collaboration IP) to Third Parties to Manufacture the Licensed Product.
6.2.5
Sublicensing Terms
.
Each sublicense granted by a Party pursuant to this Section
6.2 shall be subject and subordinate to the terms and conditions of this Agreement and shall
contain terms and conditions consistent with those in this Agreement. Kyowa Hakko shall promptly
provide Alnylam with a copy of the fully executed sublicense agreement with any Sublicensee of
Commercialization rights, and such sublicense agreement shall contain the following provisions:
(a) a requirement that such Sublicensee submit applicable sales or other reports consistent with
those required under this Agreement; (b) the audit requirement set forth in Section 7.5; (c) a
requirement that such Sublicensee comply with the confidentiality and non-use provisions of Article
8 with respect to both Parties Confidential Information; and (d) subject to the terms of Section
6.4, any other provisions required under any Alnylam In-License. In the event a granting Party
becomes aware of a material breach of any sublicense by a Sublicensee, the granting Party shall
promptly notify the other Party of the particulars of same and use Commercially Reasonable Efforts
to enforce the terms of such sublicense.
6.2.6
Liability
.
Each Party shall at all times be responsible for the performance of
its Sublicensees under this Agreement.
6.3
Joint Collaboration IP
.
Subject to the rights granted each Party under this
Agreement and the obligations of Kyowa Hakko set forth in Section 9.4.1 and the obligations of
Alnylam set forth in Section 2.10, each Party shall have the right to use, sell, keep, license,
sublicense or assign its interest in Joint Collaboration IP and otherwise undertake all activities
a sole owner might undertake with respect to such Joint Collaboration IP without the consent of and
without accounting to the other Party.
6.4
In-Licenses
.
All licenses and other rights granted to Kyowa Hakko under this
Article 6 are subject to the rights and obligations of Alnylam under the Alnylam In-Licenses. All
licenses and other rights granted to Alnylam under this Article 6 are subject to the rights and
obligations of Kyowa Hakko under the Kyowa Hakko In-Licenses. Each Party shall comply with all
applicable terms and conditions of the In-Licenses, and shall perform and take such actions as may
be required to allow the Party that is party to such In-License to comply with its obligations
thereunder, including but not limited to, obligations relating to sublicensing, patent matters,
confidentiality, reporting, audit rights, indemnification and diligence. Each Party agrees to
provide the other Party with copies of any In-Licenses of such Party. Confidential Information of
the providing Party or its counterparty may be redacted from such copies, except to the extent that
such information is required in order to enable the other Party to comply with its obligations to
the providing Party under this Agreement with respect to
26
such In-License or in order to enable the other Party to ascertain compliance by the providing
Party with the provisions of this Agreement. In order to facilitate Kyowa Hakkos compliance with
this Section 6.4, (a) Alnylam has, in good faith, created summaries of the terms of the Existing
Alnylam In-Licenses listed on Schedule 1.36A and the agreements listed on Schedule 1.36B in effect
on the Effective Date that Alnylam considers material to Kyowa Hakko, which summaries are attached
to this Agreement as Schedule 6.4A and 6.4B, respectively, and (b) Alnylam will provide Kyowa Hakko
with reasonable notice in advance of any action or information required of Kyowa Hakko in respect
of the Alnylam In-Licenses, including a description regarding Alnylams interpretation of such
requirements; and Kyowa Hakko will perform such actions and provide such information in accordance
with such requirements as interpreted by Alnylam.
6.5
Licenses of Necessary Third Party IP
. Kyowa Hakko shall be responsible for
obtaining licenses of any Necessary Third Party IP that it does not Control, and shall notify
Alnylam in writing and subject to the terms of Section 6.4, provide Alnylam with a copy of any
Kyowa Hakko In-License of Necessary Third Party IP entered into by Kyowa Hakko after the Effective
Date.
6.6
No Other Rights
.
Except as otherwise expressly provided in this Agreement, under
no circumstances shall a Party hereto, as a result of this Agreement, obtain any ownership interest
or other right in any Know-How or Patent Rights of the other Party, including items owned,
controlled or developed by the other Party, or provided by the other Party to the receiving Party
at any time pursuant to this Agreement.
7. CERTAIN FINANCIAL TERMS
7.1
Upfront Fee
. In consideration for the rights, licenses and options granted by
Alnylam to Kyowa Hakko under this Agreement, within fifteen (15) days after the Effective Date,
Kyowa Hakko shall pay Alnylam a non-refundable, non-creditable initial payment of Fifteen Million
Dollars ($15,000,000).
7.2
Development Milestone Fees
. (a) Kyowa Hakko shall make the non-refundable,
non-creditable milestone payments to Alnylam set forth below no later than [**] days after the
earliest date on which the corresponding milestone event has first been achieved with respect to
the Licensed Product;
provided
,
however
, that such schedule shall not apply in the
event the criteria set forth in Section 7.2(b) are satisfied, in which case milestone fees shall be
paid in accordance with Section 7.2(b).
|
|
|
Milestone Event
|
|
Milestone Payment
|
[**]
|
|
$ [**]
|
[**]
|
|
$[**]
|
[**]
|
|
$ [**]
|
[**]
|
|
$ [**]
|
[**]
|
|
$ [**]
|
27
|
|
|
Milestone Event
|
|
Milestone Payment
|
[**]
|
|
$[**]
|
[**]
|
|
$[**]
|
(b) If (i) Kyowa Hakko is required by the Japanese Regulatory Authorities to conduct [**] in
Japan in order to obtain Regulatory Approval of the Licensed Product in Japan, (ii) a [**] meeting
the requirements set forth in this Agreement is not feasible, and (iii) Kyowa Hakkos reasonable
[**] expenses actually incurred with respect to such Clinical Studies, [**] (collectively,
Clinical Study Expenses
) exceed $[**], then the following milestone schedule shall apply:
|
|
|
|
|
Milestone
|
Milestone Event
|
|
Payment
|
[**]
|
|
$ [**]
|
[**]
|
|
$[**]
|
[**]
|
|
$ [**]
|
[**]
|
|
$ [**]
|
[**]
|
|
$ [**]
|
[**]
|
|
$ [**]
|
[**]
|
|
$ [**]
|
[**].
(c) Each milestone payment by Kyowa Hakko to Alnylam hereunder shall be payable only once,
regardless of the number of times achieved with respect to the Licensed Product. For clarity,
Kyowa Hakko shall not be obligated to make any payments with respect to milestones achieved by the
Replacement Product for which Kyowa Hakko has already made a milestone payment with respect to the
Lead Product. If any of the foregoing milestones are not achieved, but a subsequent milestone is
achieved, then the milestone payment for the milestone(s) not achieved shall be due and payable to
Alnylam concurrently with the milestone payment for the milestone that has been achieved. For
example, under the milestone schedule set forth in Section 7.2(a), if Kyowa Hakko [**], then Kyowa
Hakko will owe Alnylam an aggregate milestone payment of $[**].
28
7.3
Sales Milestone Fees
. Kyowa Hakko shall make the non-refundable, non-creditable
milestone payments to Alnylam set forth below no later than [**] days after the earliest date on
which the corresponding milestone event has first been achieved with respect to the Licensed
Product.
|
|
|
Aggregate Calendar Year Net Sales of the Licensed Product in the Kyowa
|
|
Milestone
|
Hakko Territory exceeds (in U.S. Dollars)
:
|
|
Payment
|
$[**]
|
|
$ [**]
|
$[**]
|
|
$ [**]
|
$[**]
|
|
$[**]
|
With respect to the foregoing Sales Milestones, payment shall be made only once for each milestone
regardless of the number of times cumulative Net Sales for the Licensed Product in the Kyowa Hakko
Territory reach a particular dollar threshold. If Kyowa Hakko achieves a higher Net Sales
milestone in a Calendar Year without having first achieved a lower Net Sales milestone in any
previous Calendar Year, then the milestone payment(s) for the lower Net Sales milestone(s) shall be
due and payable to Alnylam concurrently with the milestone payment for the higher Net Sales
milestone that has been achieved. For example, if aggregate Net Sales of the Licensed Product in
the Kyowa Hakko Territory are $[**] in the first Calendar Year, and then $[**] in the next Calendar
Year, then Kyowa Hakko will owe Alnylam a milestone payment of $[**] with respect to the second
calendar year [**].
7.4
Royalties
.
7.4.1
Royalties Payable on the Licensed Product
. Subject to the terms and conditions
of this Agreement, Kyowa Hakko shall pay to Alnylam royalties on aggregate Net Sales by Kyowa Hakko
and its Related Parties of the Licensed Product, as follows:
|
|
|
|
|
Royalty
|
Aggregate Calendar Year
|
|
(as a percentage of Net
|
Net Sales in the Kyowa Hakko Territory
|
|
Sales)
|
$[**]
|
|
[**]%
|
$[**]
|
|
[**]%
|
$[**]
|
|
[**]%
|
Greater than $[**]
|
|
[**]%
|
Royalties on aggregate Net Sales shall be paid at the rate applicable to the portion of such
aggregate Net Sales within each of the Net Sales levels above during such Calendar Year.
7.4.2
Royalty Term
. Royalties on Net Sales of the Licensed Product at the rates set
forth in Section 7.4.1 shall continue to be payable on a country-by-country basis, until the later
of (a) the expiration of the last Valid Claim of the Alnylam Patent Rights Covering the Manufacture
of the Licensed Product in the country of Manufacture or sale, or the Commercialization of the
Licensed Product in the country of sale, and (b) the tenth (10
th
) anniversary of the
First Commercial Sale in the
29
country of sale (each such period, a
Royalty Term
). Only one royalty shall be due with respect to
the same unit of Licensed Product, and no royalties shall be due upon the sale or other transfer
among Kyowa Hakko or its Related Parties, but in such cases the royalty shall be due and calculated
upon Kyowa Hakkos or its Related Partys Net Sales to the first independent Third Party.
7.4.3
Necessary Third Party IP
. Alnylam shall bear (a) one hundred percent (100%) of
any royalties, any upfront fees, milestones or other payments under the Existing Alnylam
In-Licenses, and (b) [**] percent ([**]%) of any royalties, any upfront fees, milestones or other
payments under any Alnylam In-Licenses other than the Existing Alnylam In-Licenses, that are
reasonably allocable to Necessary Third Party IP used by Kyowa Hakko in the Development,
Manufacture or Commercialization of the Licensed Product in the Field in the Kyowa Hakko Territory.
Subject to Kyowa Hakkos right to offset payments of royalties, upfront fees and milestone payments
pursuant to Section 7.4.4(a), Kyowa Hakko shall bear (i) one hundred percent (100%) of any
royalties, upfront fees, milestones or other payments under the Kyowa Hakko In-Licenses, and (ii)
[**] percent ([**]%) of any royalties, upfront fees, milestones or other payments under any Alnylam
In-Licenses other than the Existing Alnylam In-Licenses, that are reasonably allocable to Necessary
Third Party IP used by Kyowa Hakko in the Development, Manufacture or Commercialization of the
Licensed Product in the Field in the Kyowa Hakko Territory.
7.4.4
Royalty Adjustments
.
(a)
Necessary Third Party IP
. Subject to Section 7.4.4(e), the aggregate royalties
payable to Alnylam pursuant to Section 7.4.1 in any period will be reduced by [**] percent ([**]%)
of the amount paid by Kyowa Hakko in royalties and upfront fees and milestone payments in such
period under all Kyowa Hakko In-Licenses of Necessary Third Party IP that are reasonably allocable
to the Development, Manufacture or Commercialization of the Licensed Product in the Field in the
Kyowa Hakko Territory.
(b)
No Alnylam Patent Rights
. Subject to Section 7.4.4(e), in the event that there is
no Valid Claim of an Alnylam Patent Right in a country of the Kyowa Hakko Territory on the date of
the First Commercial Sale of the Licensed Product in such country, then in each Calendar Quarter in
which there is no Valid Claim of an Alnylam Patent Right in such country, the royalties payable to
Alnylam in respect of the Licensed Product in such country shall be reduced to [**] percent ([**]%)
of the royalties that would otherwise be payable to Alnylam in such Calendar Quarter with respect
to the Licensed Product in such country pursuant to Section 7.4.1. For clarity, the royalty
adjustment in this Section 7.4.4(b) shall not apply to any country of the Kyowa Hakko Territory in
which there is a Valid Claim of an Alnylam Patent Right on the date of the First Commercial Sale of
the Licensed Product in such country.
(c)
Generic Products
. Subject to Section 7.4.4(e), in the event that there is a Valid
Claim of an Alnylam Patent Right in a country of the Kyowa Hakko Territory on the date of the First
Commercial Sale of the Licensed Product in such country, and if, in any Calendar Quarter after [**]
Generic Products (defined below) is launched in such country of the Kyowa Hakko Territory the
market share of all Generic Product(s) in such country is equal to or greater than [**] percent
([**]%) of the amount of aggregate sales of the Licensed Product and all Generic Product(s) in such
country, then the royalties payable by Kyowa Hakko to Alnylam in respect of the Licensed Product in
such country shall be reduced in such Calendar Quarter to [**] percent ([**]%) of the royalties
that would otherwise be payable to Alnylam in such Calendar Quarter with respect to the Licensed
Product in
30
such country pursuant to Section 7.4.1. For clarity, the royalty adjustment in this Section
7.4.4(c) shall not apply to any country of the Kyowa Hakko Territory in which there is no Valid
Claim of an Alnylam Patent Right on the date of the First Commercial Sale of the Licensed Product
in such country.
Generic Product
means any pharmaceutical product that contains an active
pharmaceutical ingredient with the exact generic name of the active pharmaceutical ingredient in
the Licensed Product.
(d)
Certain Infringement Claims
. Subject to Section 7.4.4(e), the aggregate royalties
payable to Alnylam pursuant to Section 7.4.1 in any period will be reduced by [**] percent ([**]%)
of the amount of Losses paid by Kyowa Hakko to Third Parties arising directly out of Third Party
Infringement Claims based solely on the use of Alnylam Know-How or Alnylam Patent Rights in the
Development or Commercialization of the Licensed Product in, or Manufacture of Licensed Product
for, the Kyowa Hakko Territory and in the Field.
(e)
Cumulative Adjustments
.
Notwithstanding anything to the contrary herein, under no
circumstances will aggregate royalties due to Alnylam with respect to the Licensed Product in any
country of the Kyowa Hakko Territory in any period be reduced to an amount less than the greater of
(i) [**] percent ([**]%) of the royalties otherwise payable by Kyowa Hakko to Alnylam under Section
7.4.1 in such period with respect to such country and (ii) the aggregate amount of any royalties
payable under the Alnylam In-Licenses that are reasonably allocable to the Commercialization or
Manufacture of the Licensed Product in such country in such period (where such royalties are
calculated by adding [**] to the sum of the applicable royalty rate(s) in the applicable Alnylam
In-Licenses).
7.4.5
Blended Royalty Rates.
The Parties acknowledge and agree that the Patent Rights
and Know-How licensed pursuant to this Agreement justify royalty rates of differing amounts with
respect to the sales of the Licensed Product, which rates could be applied separately to the
Licensed Product involving the exercise of such Patent Rights and/or the incorporation of such
Know-How, and that, if such royalties were calculated separately, royalties relating to Patent
Rights and royalties relating to Know-How would last for different terms. Notwithstanding the
foregoing, the Parties have determined, for reasons of convenience, that blended royalty rates for
the Patent Rights and the Know-How licensed hereunder, as set forth above, will apply during a
single royalty term.
7.4.6
Reports; Payment of Royalty
. During the Term, commencing upon the First
Commercial Sale of the Licensed Product in the Kyowa Hakko Territory, Kyowa Hakko shall furnish to
Alnylam (a) a written report within [**] days of after the end of each Calendar Quarter showing the
estimated quantity of the Licensed Product sold in each country (as measured in grams of active
pharmaceutical ingredient or saleable units of product, as the Parties may agree) and the Net Sales
of the Licensed Product in each country (and any other detail reasonably available through Kyowa
Hakkos internal sales reporting system) for the previous month, in each case on an unaudited
basis; and (b) a quarterly written report showing the quantity of the Licensed Product sold in each
country (as measured in grams of active pharmaceutical ingredient or saleable units of product, as
the Parties may agree), the gross sales of the Licensed Product in each country, and as applicable,
itemized deductions for the Licensed Product for each country included in the calculation of Net
Sales, the Net Sales in each country of the Licensed Product during the reporting period,
royalties, upfront fees, milestones or other payments payable to Third Parties under all Kyowa
Hakko In-Licenses of Necessary Third Party IP that are reasonably allocable to the Development,
Manufacture or Commercialization of the Licensed Product in the Field in the Kyowa Hakko Territory,
the launch of any Generic Product in each country of the Kyowa Hakko Territory, the market share of
all Generic Products in each country
31
of the Kyowa Hakko Territory as a percentage of the aggregate market share of the Licensed
Product and all Generic Products in such country, and the royalties payable under this Agreement.
Quarterly reports shall be due no later than the [**] day following the end of each Calendar
Quarter. In addition, subject to the provisions of Section 6.4, Kyowa Hakko shall prepare and
deliver to Alnylam any additional reports as required under the Alnylam In-Licenses. Royalties
shown to have accrued by each royalty report shall be due and payable on the date such royalty
report is due. Kyowa Hakko and its Related Parties shall keep complete and accurate records in
sufficient detail to enable the royalties and other payments payable hereunder and by Alnylam to
Third Parties under the Alnylam In-Licenses to be determined.
7.5
Audits
.
7.5.1
Upon the written request of a Party and not more than [**] in each Calendar Year, the
other Party and its Related Parties shall permit an independent certified public accounting firm of
internationally-recognized standing selected by the requesting Party and reasonably acceptable to
the other Party, at the requesting Partys expense except as set forth below, to have access during
normal business hours to such of the records of the other Party as may be reasonably necessary to
verify the accuracy of the royalty and other reports hereunder for any year ending not more than
[**] years prior to the date of such request for the sole purpose of verifying the basis and
accuracy of payments made under Sections 2.6, 10.3.6, 10.9 and Articles 5 and 7.
7.5.2
If such accounting firm identifies a discrepancy made during such period, the
appropriate Party shall pay the other Party the amount of the discrepancy, together with
late-payment interest calculated at the rate of [**] percent ([**]%) per month, within [**]
business days of the date the requesting Party delivers to the other Party such accounting firms
written report so concluding, or as otherwise agreed by the Parties in writing. Such written
report shall be binding upon the Parties. The fees charged by such accounting firm shall be paid
by the requesting Party, unless such discrepancy represents an underpayment by the other Party of
at least the lesser of [**] U.S. dollars ($[**]) or [**] percent ([**]%) of the total amounts due
hereunder in a Calendar Year, in which case such fees shall be paid by the other Party.
7.5.3
Subject to the provisions of Section 6.4, Kyowa Hakko shall comply with all applicable
audit requirements in the Alnylam In-Licenses and shall include in each sublicense granted by it
pursuant to this Agreement a provision requiring the Sublicensee to make reports to Alnylam, to
keep and maintain records of sales made pursuant to such sublicense and to grant access to such
records by Alnylams independent accountant to the same extent required of Kyowa Hakko under this
Agreement.
7.5.4
Unless an audit for such year has been commenced upon the expiration of [**] years
following the end of any year, the calculation of royalties, expense reimbursement and other
payments payable with respect to such year shall be binding and conclusive upon both Parties, and
each Party and its Related Parties shall be released from any further liability or accountability
with respect to such royalties or expense reimbursement for such year.
7.5.5
Each Party shall treat all financial information subject to review under this Section
7.5 or under any sublicense agreement in accordance with the confidentiality and non-use provisions
of this Agreement, and shall cause its accounting firm to enter into an acceptable confidentiality
32
agreement with the other Party and/or its Related Parties obligating it to retain all such
information in confidence pursuant to such confidentiality agreement.
7.6
Payment Exchange Rate
. All payments to be made under this Agreement shall be made
in United States dollars and shall be paid by bank wire transfer in immediately available funds to
such bank account in the United States as may be designated in writing by the receiving Party from
time to time. In the case of Net Sales made or expenses incurred by Kyowa Hakko and its Related
Parties, the rate of exchange to be used in computing the amount of currency equivalent in United
States dollars due shall be made at the rate of exchange utilized by such party in its worldwide
accounting system and calculated in accordance with generally accepted accounting principles in the
United States consistently applied, prevailing on the last day of each Calendar Quarter for royalty
payments, and the third to the last business day of the month preceding the month in which such
sales or expenses are recorded for other payments, as the case may be.
7.7
Income Tax Withholding
. Each Party shall use reasonable efforts to minimize tax
withholding on payments made to the other Party. Notwithstanding such efforts, if such Party
concludes that tax withholdings under the applicable laws of any country are required with respect
to payments to the other Party, such Party shall first notify the other Party and provide such
Party with [**] business days to determine whether there are actions such receiving Party can
undertake to avoid such withholding. The paying Party shall refrain from making such payment until
the receiving Party instructs the paying Party that (a) the paying Party intends to take actions
that will obviate the need for such withholding, in which case the paying Party shall make such
payment only after it is instructed to do so by the receiving Party, or (b) the paying Party should
make such payment and withhold the required amount and pay it to the appropriate governmental
authority. In such case, the withholding Party shall promptly provide the other Party with copies
of receipts or other evidence reasonably required and sufficient to allow the other Party to
document such tax withholdings adequately for purposes of claiming foreign tax credits and similar
benefits. The Parties will cooperate reasonably in completing and filing documents required under
the provisions of any applicable tax laws or under any other applicable law, in connection with the
making of any required tax payment or withholding payment, or in connection with any claim to a
refund of or credit for any such payment. The Parties will cooperate to minimize such taxes in
accordance with applicable laws. Notwithstanding the foregoing, Alnylam represents that zero
percent (0%) withholding shall be required in respect of the payments to be paid by Kyowa Hakko to
Alnylam pursuant to Section 7.1, 7.2 and 7.3 hereof, because of the eligibility of Alnylam as a
publicly traded U.S. tax resident for purposes of the U.S.-Japan Income Tax Treaty. Alnylam shall
be solely responsible for its costs incurred in registering under such treaty.
8. CONFIDENTIALITY AND PUBLICATION
8.1
Nondisclosure Obligation
. (a) All Confidential Information disclosed by one Party
to the other Party hereunder shall be maintained in confidence by the receiving Party and shall not
be disclosed to a Third Party or used for any purpose except as set forth herein without the prior
written consent of the disclosing Party, except to the extent that such Confidential Information:
|
(i)
|
|
is known by the receiving Party at the time of its receipt, and not through a
prior disclosure by the disclosing Party, as documented by the receiving Partys
business records;
|
33
|
(ii)
|
|
is in the public domain by use and/or publication before its receipt from the
disclosing Party, or thereafter enters the public domain through no fault of the
receiving Party;
|
|
|
(iii)
|
|
is subsequently disclosed to the receiving Party by a Third Party who may
lawfully do so and is not under an obligation of confidentiality to the disclosing
Party; or
|
|
|
(iv)
|
|
is developed by the receiving Party independently of Confidential Information
received from the disclosing Party, as documented by the receiving Partys business
records.
|
(b) Notwithstanding the obligations of confidentiality and non-use set forth above and in
Section 8.2 below, a receiving Party may provide Confidential Information disclosed to it, and
disclose the existence and terms of this Agreement as may be reasonably required in order to
perform its obligations and to exploit its rights under this Agreement, and specifically to (i)
Related Parties, and their employees, directors, agents, consultants, advisors and/or other Third
Parties for the performance of its obligations hereunder (or for such entities to determine their
interest in performing such activities) in accordance with this Agreement in each case who are
obligated to keep such Confidential Information confidential; (ii) governmental or other Regulatory
Authorities in order to obtain patents or perform its obligations or exploit its rights under this
Agreement;
provided
, that such Confidential Information shall be disclosed only to the
extent reasonably necessary to do so, (iii) the extent required by applicable law, including
without limitation by the rules or regulations of the United States Securities and Exchange
Commission or similar regulatory agency in a country other than the United States or of any stock
exchange or listing entity, (iv) any bona fide actual or prospective underwriters, investors,
lenders or other financing sources and any bona fide actual or prospective collaborators or
strategic partners and to consultants and advisors of such Party, in each case who are obligated to
keep such Confidential Information confidential, and (v) to Third Parties to the extent a Party is
required to do so pursuant to the terms of an In-License.
If a Party is required by judicial or administrative process to disclose Confidential Information
that is subject to the non-disclosure provisions of this Section 8.1 or Section 8.2, such Party
shall promptly inform the other Party of the disclosure that is being sought in order to provide
the other Party an opportunity to challenge or limit the disclosure obligations. Confidential
Information that is disclosed by judicial or administrative process shall remain otherwise subject
to the confidentiality and non-use provisions of this Section 8.1 and Section 8.2, and the Party
disclosing Confidential Information pursuant to law or court order shall take all steps reasonably
practical, including without limitation seeking an order of confidentiality, to ensure the
continued confidential treatment of such Confidential Information. In addition to the foregoing
restrictions on public disclosure, if either Party concludes that a copy of this Agreement must be
filed with the United States Securities and Exchange Commission or similar regulatory agency in a
country other than the United States, such Party shall provide the other Party with a copy of this
Agreement showing any sections as to which the Party proposes to request confidential treatment,
will provide the other Party with an opportunity to comment on any such proposal and to suggest
additional portions of the Agreement for confidential treatment, and will take such Partys
reasonable comments into consideration before filing the Agreement.
8.2
Publication and Publicity
.
8.2.1 Publication
. Kyowa Hakko and Alnylam each acknowledge the other Partys interest in
publishing the results of the Collaboration. Each Party also recognizes the mutual interest in
obtaining valid patent protection and in protecting business interests and trade secret
information. Consequently, except for disclosures permitted pursuant to Section 8.1 and 8.2.2(b),
either Party, its
34
Affiliates, or their respective employees or consultants wishing to make a publication or a
disclosure to a Third Party relating to the Collaboration or the Licensed Product that contains the
Confidential Information of the other Party shall deliver to the other Party a copy of the proposed
written publication or an outline of an oral disclosure at least [**] days prior to submission for
publication or presentation. The reviewing Party shall have the right (a) to propose modifications
to the publication or presentation for patent reasons, trade secret reasons or business reasons, or
(b) to request a reasonable delay in publication or presentation in order to protect patentable
information. If the reviewing Party requests a delay, the publishing Party shall delay submission
or presentation for a period of [**] days to enable patent applications protecting each Partys
rights in such information to be filed in accordance with Article 10 below. Upon expiration of
such [**] day period, the publishing Party shall be free to proceed with the publication or
presentation. If the reviewing Party requests modifications to the publication or presentation,
the publishing Party shall edit such publication to prevent disclosure of trade secret, patentable
or proprietary business information prior to submission of the publication or presentation. With
respect to any proposed publications or disclosures by investigators or academic or non-profit
collaborators, such materials shall be subject to review under this Section 8.2 to the extent that
Kyowa Hakko or Alnylam, as the case may be, has the right and ability (after using Commercially
Reasonable Efforts to obtain such right and ability) to do so.
8.2.2 Publicity
. (a) Except as set forth in Section 8.1 above and clause (b) below, the terms
of this Agreement may not be disclosed by either Party, and no Party shall use the name, trademark,
trade name or logo of the other Party or its employees in any publicity, news release or disclosure
relating to this Agreement or its subject matter, without the prior express written permission of
the other Party, except as may be required by law or expressly permitted by the terms hereof.
(b) The initial press release to be issued jointly by the Parties publicizing the execution of
this Agreement shall be as set forth in
Schedule 8.2.2
. After such initial press release,
neither Party shall issue a press release or public announcement relating to this Agreement without
the prior written approval of the other Party, which approval shall not be unreasonably withheld or
delayed, except that a Party may (i) once a press release or other written statement is approved in
writing by both Parties, make subsequent public disclosure of the information contained in such
press release or other written statement without the further approval of the other Party, and (ii)
issue a press release or public announcement as required, in the reasonable judgment of such Party,
by applicable law, including without limitation by the rules or regulations of the United States
Securities and Exchange Commission or similar regulatory agency in a country other than the United
States or of any stock exchange or listing entity.
9. REPRESENTATIONS, WARRANTIES AND COVENANTS; INDEMNIFICATION
9.1
Mutual Representations and Warranties
. Each Party represents and warrants to the
other Party that as of the Effective Date of this Agreement:
9.1.1
It is duly organized and validly existing under the laws of its jurisdiction of
incorporation or formation, and has full corporate or other power and authority to enter into this
Agreement, and to carry out the provisions hereof.
35
9.1.2
It is duly authorized to execute and deliver this Agreement, and to perform its
obligations hereunder, and the person or persons executing this Agreement on its behalf has been
duly authorized to do so by all requisite corporate action.
9.1.3
This Agreement is legally binding upon it and enforceable in accordance with its terms.
The execution, delivery and performance of this Agreement by it does not conflict with any
agreement, instrument or understanding, oral or written, to which it is a party and by which it may
be bound, or with its charter or by-laws.
9.1.4
It has not granted, and will not grant, during the Term, any right to any Third Party
that would conflict with the rights granted to the other Party hereunder.
9.1.5
Neither Party nor any of its Affiliates has been debarred or is subject to debarment and
neither Party nor any of its Affiliates will use in any capacity, in connection with the
Collaboration or the performance of its obligations under this Agreement, any person or entity that
has been debarred pursuant to Section 306 of the United States Federal Food, Drug, and Cosmetic
Act, or that is the subject of a conviction described in such section. Each Party agrees to inform
the other Party in writing immediately if it or any person or entity that is performing activities
in the Collaboration or under this Agreement, is debarred or is the subject of a conviction
described in Section 306, or if any action, suit, claim, investigation or legal or administrative
proceeding is pending or, to the best of the notifying Partys knowledge, is threatened, relating
to the debarment or conviction of the notifying Party or any person or entity used in any capacity
by such Party or any of its Affiliates in connection with the Collaboration or the performance of
its other obligations under this Agreement.
9.2 Representations and Warranties of Alnylam
.
9.2.1
As of the Effective Date Alnylam has sufficient legal and/or beneficial title and
ownership of the Alnylam Patent Rights listed in
Schedule 1.6A.1
to grant the licenses to
such Alnylam Patent Rights granted to Kyowa Hakko pursuant to this Agreement.
9.2.2
As of the Effective Date Alnylam has sufficient right in and to the Alnylam Patent
Rights listed in
Schedule 1.6A.2
to grant the sublicenses to such Alnylam Patent Rights
granted to Kyowa Hakko pursuant to this Agreement.
9.2.3
Schedule 1.6A
sets forth a complete and accurate list of the Alnylam Patent
Rights as of the Effective Date.
9.2.4
Schedule 1.36A
sets forth a complete and accurate list of the Existing Alnylam
In-Licenses as of the Effective Date.
9.2.5
As of the Effective Date, neither Alnylam nor its Affiliates are in breach or default
under any agreement set forth on Schedule 1.36, and neither Alnylam nor its Affiliates have
received any notice of breach or default with respect to any such agreement.
9.2.6
To the best knowledge of Alnylams senior management, executive officers and Board of
Directors, undertaking no duty of inquiry, as of the Effective Date, no claims of infringement or
misappropriation of the intellectual property rights of any Third Party have been made or
threatened to Alnylam with respect to the Alnylam Technology licensed to Kyowa Hakko under this
Agreement.
36
9.3
Warranty Disclaimer
. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN THIS AGREEMENT,
NEITHER PARTY MAKES ANY REPRESENTATION OR EXTENDS ANY WARRANTY OF ANY KIND, EITHER EXPRESS OR
IMPLIED, TO THE OTHER PARTY WITH RESPECT TO ANY TECHNOLOGY, LICENSED PRODUCT, GOODS, SERVICES,
RIGHTS OR OTHER SUBJECT MATTER OF THIS AGREEMENT AND HEREBY DISCLAIMS ALL IMPLIED WARRANTIES OF
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE AND NONINFRINGEMENT WITH RESPECT TO ANY AND ALL
OF THE FOREGOING. EACH PARTY HEREBY DISCLAIMS ANY REPRESENTATION OR WARRANTY THAT THE DEVELOPMENT,
MANUFACTURE OR COMMERCIALIZATION OF THE LICENSED PRODUCT PURSUANT TO THIS AGREEMENT WILL BE
SUCCESSFUL OR THAT ANY PARTICULAR SALES LEVEL WITH RESPECT TO THE LICENSED PRODUCT WILL BE
ACHIEVED.
9.4
Certain Covenants
.
9.4.1
Exclusivity
. Except as expressly provided in this Agreement, during the Term (a)
Kyowa Hakko will not, alone or with a Third Party, manufacture or commercialize any RSV Product or
any Antisense Product directed to RSV that competes with the Licensed Product in the Field in the
Kyowa Hakko Territory (and for purposes of clarity, Kyowa Hakko is prohibited from promoting or
advertising RNAi Products which are not RSV Products, for the treatment of RSV); and (b) Alnylam
will not, alone or through its Affiliates: (i) Develop or Commercialize any RSV Product, including
in collaboration with a Third Party, in the Kyowa Hakko Territory, (ii) grant a license under the
Patent Rights Controlled by Alnylam or its Affiliates to any Third Party to Develop or
Commercialize the Licensed Product, a Replacement Product or a Successor Product that is subject to
the Successor Product Option (unless Kyowa Hakko declines or fails to exercise its Successor
Product Option within the Successor Product Option Period or fails to enter into a Successor
Product License for such Successor Product within the Negotiation Period), in each case within the
Kyowa Hakko Territory, or (iii) subject only to certain Alnylam obligations to Third Parties
existing as of the Effective Date to grant licenses with respect to certain fields that may include
the RSV Target (but not the Licensed Product, a Replacement Product or a Successor Product), grant
a license under the Patent Rights Controlled by Alnylam or its Affiliates to any Third Party to
Develop or Commercialize any RSV Product in the Kyowa Hakko Territory..
9.4.2
Compliance
. Each Party and its Related Parties shall conduct the Collaboration
and the Development, Manufacture and Commercialization of the Licensed Product in accordance with
all applicable laws, rules and regulations, including without limitation current governmental
regulations concerning good laboratory practices, good clinical practices and good manufacturing
practices.
9.5
Indemnification
.
9.5.1
General Indemnification by Kyowa Hakko
. Kyowa Hakko shall indemnify, hold
harmless, and defend Alnylam, its Affiliates, and the other parties to the Alnylam In-Licenses, and
their respective directors, officers, employees and agents (
Alnylam Indemnitees
) from and
against any and all Third Party claims, suits, losses, liabilities, damages, costs, fees and
expenses (including reasonable attorneys fees) (collectively,
Losses
) arising out of or
resulting from, directly or indirectly, (a) any breach of, or inaccuracy in, any representation or
warranty made by Kyowa Hakko in this Agreement, or any breach or violation of any covenant or
agreement of Kyowa Hakko in or
37
pursuant to this Agreement, or (b) the negligence or willful
misconduct by or of Kyowa Hakko, its Affiliates and their respective Sublicensees, and their
respective directors, officers, employees and agents in the performance of Kyowa Hakkos
obligations under this Agreement. Kyowa Hakko shall have no obligation to indemnify the Alnylam
Indemnitees to the extent that the Losses arise out of or result from, directly or indirectly, any
breach of, or inaccuracy in, any representation or warranty made by Alnylam in this Agreement, or
any breach or violation of any covenant or agreement of Alnylam in or pursuant to this Agreement,
or the negligence or willful misconduct by or of any of the Alnylam Indemnitees.
9.5.2
General Indemnification by Alnylam
. Alnylam shall indemnify, hold harmless, and
defend Kyowa Hakko, its Affiliates and their respective directors, officers, employees and agents
(
Kyowa Hakko Indemnitees
) from and against any and all Losses arising out of or resulting from,
directly or indirectly, (a) any breach of, or inaccuracy in, any representation or warranty made by
Alnylam in this Agreement, or any breach or violation of any covenant or agreement of Alnylam in or
pursuant to this Agreement, or (b) the negligence or willful misconduct by or of Alnylam, its
Affiliates and their respective Sublicensees, and their respective directors, officers, employees
and agents in the performance of Alnylams obligations under this Agreement. Alnylam shall have no
obligation to indemnify the Kyowa Hakko Indemnitees to the extent that the Losses arise out of or
result from, directly or indirectly, any breach of, or inaccuracy in, any representation or
warranty made by Kyowa Hakko in this Agreement, or any breach or violation of any covenant or
agreement of Kyowa Hakko in or pursuant to this Agreement, or the negligence or willful misconduct
by or of any of the Kyowa Hakko Indemnitees.
9.5.3
Product Liability
.
(a) Kyowa Hakko shall indemnify and hold harmless the Alnylam Indemnitees from, against and in
respect of any and all Losses arising out of Third Party product liability claims incurred or
suffered by the Alnylam Indemnitees, or any of them, directly or indirectly relating to the
Licensed Product and resulting from or arising out of the negligence, willful misconduct, or breach
of this Agreement of or by Kyowa Hakko or any of the other Kyowa Hakko Indemnitees, except to the
extent caused by the negligence, willful misconduct or breach of this Agreement of or by Alnylam or
any of the other Alnylam Indemnitees.
(b) Alnylam shall indemnify and hold harmless the Kyowa Hakko Indemnitees from, against and in
respect of any and all Losses arising out of Third Party product liability claims incurred or
suffered by the Kyowa Hakko Indemnitees, or any of them, directly or indirectly relating to the
Licensed Product and resulting from or arising out of the negligence, willful misconduct, or breach
of this Agreement of or by Alnylam or any of the other Alnylam Indemnitees, except to the extent
caused by the negligence, willful misconduct or breach of this Agreement of or by Kyowa Hakko or
any of the other Kyowa Hakko Indemnitees.
(c) Any Losses arising out of Third Party product liability claims (other than such claims
entitled to indemnification under Sections 9.5.3(a) or (b)) shall be (i) borne by Kyowa Hakko, to
the extent such Losses were incurred with respect to the Development or Commercialization of the
Licensed Product in the Kyowa Hakko Territory, and (ii) be borne by Alnylam, to the extent such
Losses were incurred with respect to Development or Commercialization of the Licensed Product in
the Alnylam Territory.
38
9.5.4
Indemnification Procedure
.
In the event of any such claim against any Kyowa
Hakko Indemnitee or Alnylam Indemnitee (individually, an
Indemnitee
), the indemnified Party shall
promptly notify the other Party in writing of the claim and the indemnifying Party shall manage and
control, at its sole expense, the defense of the claim and its settlement. The Indemnitee shall
cooperate with the indemnifying Party and may, at its option and expense, be represented in any
such action or proceeding. The indemnifying Party shall not be liable for any settlements,
litigation costs or expenses incurred by any Indemnitee without the indemnifying Partys written
authorization. Notwithstanding the foregoing, if the indemnifying Party believes that any of the
exceptions to its obligation of indemnification of the Indemnitees set forth in Sections 9.5.1,
9.5.2 or 9.5.3 may apply, the indemnifying Party shall promptly notify the Indemnitees, which shall
then have the right to be represented in any such action or proceeding by separate counsel at their
expense;
provided,
that the indemnifying Party shall be responsible for payment of such
expenses if the Indemnitees are ultimately determined to be entitled to indemnification from the
indemnifying Party.
9.6
Limitation of Liability
. NEITHER PARTY HERETO WILL BE LIABLE FOR SPECIAL,
INCIDENTAL, CONSEQUENTIAL OR PUNITIVE DAMAGES ARISING OUT OF THIS AGREEMENT OR THE EXERCISE OF ITS
RIGHTS HEREUNDER, INCLUDING LOST PROFITS ARISING FROM OR RELATING TO ANY BREACH OF THIS AGREEMENT,
REGARDLESS OF ANY NOTICE OF SUCH DAMAGES, EXCEPT AS A RESULT OF A PARTYS WILLFUL MISCONDUCT OR A
MATERIAL BREACH OF THE CONFIDENTIALITY AND NON-USE OBLIGATIONS IN ARTICLE 8. NOTHING IN THIS
SECTION 9.6 IS INTENDED TO LIMIT OR RESTRICT THE INDEMNIFICATION RIGHTS OR OBLIGATIONS OF EITHER
PARTY.
9.7
Insurance
. Each Party shall maintain insurance during the Term and for a period of
at least [**] years after the last commercial sale of the Licensed Product under this Agreement,
with a reputable, solvent insurer in an amount appropriate for its business and products of the
type that are the subject of this Agreement, and for its obligations under this Agreement.
Specifically, each Party shall maintain product liability insurance of at least $[**] per
occurrence. Upon request, each Party shall provide the other Party with evidence of the existence
and maintenance of such insurance coverage.
10. INTELLECTUAL PROPERTY OWNERSHIP, PROTECTION AND RELATED MATTERS
10.1
Inventorship
.
Inventorship for patentable inventions conceived or reduced to
practice during the course of the performance of activities pursuant to this Agreement shall be
determined in accordance with United States patent laws for determining inventorship.
10.2
Ownership
. Alnylam shall own the entire right, title and interest in and to all
inventions and discoveries (and Patent Rights claiming patentable inventions therein) first made or
discovered solely by employees or consultants of Alnylam or acquired solely by Alnylam in the
course of conducting the Collaboration. Kyowa Hakko shall own the entire right, title and interest
in and to all inventions and discoveries (and Patent Rights claiming patentable inventions therein)
first made or discovered solely by employees or consultants of Kyowa Hakko or acquired solely by
Kyowa Hakko in the course of conducting the Collaboration. The Parties shall jointly own any
inventions and discoveries (and Patent Rights claiming patentable inventions therein) first made or
discovered jointly in the course of conducting the Collaboration.
39
10.3
Prosecution and Maintenance of Patent Rights
.
10.3.1
Kyowa Hakko Technology
. Kyowa Hakko has the sole responsibility to, at Kyowa
Hakkos discretion, file, conduct prosecution, and maintain (including the defense of any
interference or opposition proceedings), all Patent Rights comprising Kyowa Hakko Technology (other
than Joint Collaboration IP), in Kyowa Hakkos name.
10.3.2
Alnylam Technology
. Alnylam has the sole responsibility to, at Alnylams
discretion, file, conduct prosecution, and maintain (including the defense of any interference or
opposition proceedings), all Patent Rights comprising Alnylam Technology (other than Joint
Collaboration IP), in Alnylams name. Alnylam agrees to use Commercially Reasonable Efforts to
prosecute and maintain the Alnylam Patent Rights and the Alnylam Collaboration Technology in the
Kyowa Hakko Territory.
10.3.3
Joint Collaboration IP
. Subject to Kyowa Hakkos continuing right to the
timely prior review of and comment on material documents, Alnylam has the sole responsibility to,
at Alnylams discretion, incorporate reasonable and timely presented comments, file, conduct
prosecution, and maintain (including the defense of any interference or opposition proceedings),
all Patent Rights comprising Joint Collaboration IP, in the names of both Alnylam and Kyowa Hakko.
Kyowa Hakko shall use Commercially Reasonable Efforts to make available to Alnylam or its
authorized attorneys, agents or representatives, such of its employees as Alnylam in its reasonable
judgment deems necessary in order to assist it in obtaining patent protection for such Joint
Collaboration IP. Each Party shall sign, or use Commercially Reasonable Efforts to have signed,
all legal documents necessary to file and prosecute patent applications or to obtain or maintain
patents in respect of such Joint Collaboration IP, at its own cost.
10.3.4
Contingent Rights
. (a) In the event that Kyowa Hakko elects not to seek or
continue to seek or maintain patent protection on any Kyowa Hakko Collaboration IP in the Alnylam
Territory, Alnylam shall have the right (but not the obligation), at its expense, to seek,
prosecute and maintain in any country patent protection on such Kyowa Hakko Collaboration IP in the
name of Kyowa Hakko. Kyowa Hakko shall use Commercially Reasonable Efforts to make available to
Alnylam its authorized attorneys, agents or representatives, such of its employees as are
reasonably necessary to assist Alnylam in obtaining and maintaining the patent protection described
under this Section 10.3.4(a). Kyowa Hakko shall sign or use Commercially Reasonable Efforts to
have signed all legal documents necessary to file and prosecute such patent applications or to
obtain or maintain such patents.
(b) In the event that Alnylam elects not to seek or continue to seek or maintain patent
protection on any Joint Collaboration IP in the Kyowa Hakko Territory, Kyowa Hakko shall have the
right (but not the obligation), at its expense, to seek, prosecute and maintain in any country
patent protection on such Joint Collaboration IP in the names of both Alnylam and Kyowa Hakko.
Alnylam
shall use Commercially Reasonable Efforts to make available to Kyowa Hakko its authorized
attorneys, agents or representatives, such of its employees as are reasonably necessary to assist
Kyowa Hakko in obtaining and maintaining the patent protection described under this Section
10.3.4(b). Alnylam shall sign or use Commercially Reasonable Efforts to have signed all legal
documents necessary to file and prosecute such patent applications or to obtain or maintain such
patents.
10.3.5
Cooperation; Patent Challenges
. Each Party hereby agrees: (a) to make its
employees, agents and consultants reasonably available to the other Party (or to the other Partys
40
authorized attorneys, agents or representatives), to the extent reasonably necessary to enable such
Party to undertake patent prosecution; (b) to provide the other Party with copies of all material
correspondence pertaining to prosecution with the patent offices; (c) to cooperate, if necessary
and appropriate, with the other Party in gaining patent term extensions wherever applicable to
Patent Rights; and (d) to endeavor in good faith to coordinate its efforts with the other Party to
minimize or avoid interference with the prosecution and maintenance of the other Partys patent
applications.
10.3.6
Patent Expenses
. The patent filing, prosecution and maintenance expenses
incurred after the Effective Date with respect to Patent Rights comprised of Alnylam Technology and
Kyowa Hakko Technology (
Patent Expenses
) shall be borne by each Party having the right to file,
prosecute and maintain such Patent Rights under this Section 10.3.
10.4
Third Party Infringement
.
10.4.1
Notices
. Each Party shall promptly report in writing to the other Party during
the Term any (a) known or suspected infringement of any Alnylam Technology or Kyowa Hakko
Technology being used in the Collaboration, including without limitation any Joint Collaboration IP
or (b) unauthorized use or misappropriation of any Confidential Information or Know-How by a Third
Party of which it becomes aware, in each case only to the extent relevant to the RSV Target and/or
the Development, Manufacture or Commercialization of the Licensed Product and involving a competing
product in the Field (
Competitive Infringement
), and shall provide the other Party with all
available evidence supporting such infringement, or unauthorized use or misappropriation.
10.4.2
Rights to Enforce.
(a)
Kyowa Hakkos First Right
. Subject to the provisions of Section 10.4.2(b) and the
provisions of any Third Party agreement under which Kyowa Hakkos rights in Kyowa Hakko Technology
are granted or Alnylams rights in Alnylam Technology are granted and of any In-License, in respect
of the Licensed Product in the Field in the Kyowa Hakko Territory, Kyowa Hakko shall have the sole
and exclusive right to initiate an infringement or other appropriate suit anywhere in the world
against any Third Party who at any time has infringed, or is suspected of infringing, any Patent
Rights, or of using without proper authorization any Know-How, comprising Kyowa Hakko Patent
Rights, Kyowa Hakko Know-How, or Kyowa Hakko Collaboration IP.
(b)
Alnylams First Right
. Subject to the provisions of any Third Party agreement
under which Alnylams rights in Alnylam Technology or Kyowa Hakkos rights in Kyowa Hakko
Technology are granted and of any In-License, Alnylam shall have the sole and exclusive right to
initiate an infringement or other appropriate suit anywhere in the world against any Third Party
who at any time has infringed, or is suspected of infringing, any Patent Rights, or of using
without proper
authorization any Know-How, comprising Alnylam Patent Rights, Alnylam Know-How, Alnylam
Collaboration IP or Joint Collaboration IP.
10.4.3
Step-In Rights
. Alnylam will consider in good faith any request from Kyowa
Hakko to initiate an infringement or other appropriate suit against any Third Party with respect to
a Competitive Infringement in the Kyowa Hakko Territory of Alnylam Patent Rights, Alnylam Know-How,
or Alnylam Collaboration IP licensed to Kyowa Hakko under Article 6 or Joint Collaboration IP;
provided
,
however
, that Alnylam shall not be required to initiate any such suit.
Kyowa Hakko will
41
consider in good faith any request from Alnylam to initiate an infringement or
other appropriate suit against any Third Party with respect to a Competitive Infringement in the
Alnylam Territory of Kyowa Hakko Patent Rights, Kyowa Hakko Know-How or Kyowa Hakko Collaboration
IP licensed to Alnylam under Article 6, however Kyowa Hakko shall not be required to initiate any
such suit.
10.4.4
Procedures; Expenses and Recoveries
. The Party having the right to initiate
any infringement suit under Section 10.4.2 above shall have the sole and exclusive right to select
counsel for any such suit and shall pay all expenses of the suit, including attorneys fees and
court costs and reimbursement of the other Partys reasonable out-of-pocket expense in rendering
assistance requested by the initiating Party. If required under applicable law in order for the
initiating Party to initiate and/or maintain such suit, or if either Party is unable to initiate or
prosecute such suit solely in its own name or it is otherwise advisable to obtain an effective
legal remedy, in each case, the other Party shall join as a party to the suit and will execute and
cause its Affiliates to execute all documents necessary for the initiating Party to initiate
litigation to prosecute and maintain such action. In addition, at the initiating Partys request,
the other Party shall provide reasonable assistance to the initiating Party in connection with an
infringement suit at no charge to the initiating Party except for reimbursement by the initiating
Party of reasonable out-of-pocket expenses incurred in rendering such assistance. The
non-initiating Party shall have the right to participate and be represented in any such suit by its
own counsel at its own expense. If the Parties obtain from a Third Party, in connection with such
suit, any damages, license fees, royalties or other compensation (including any amount received in
settlement of such litigation), such amounts shall be allocated in all cases as follows:
|
(i)
|
|
first, to reimburse each Party for all expenses of the suit incurred by such
Party, including attorneys fees and disbursements, court costs and other litigation
expenses;
|
|
|
(ii)
|
|
second, [**] percent ([**]%) of the balance to be paid to the Party initiating
the suit; and
|
|
|
(iii)
|
|
third, the remainder to be paid to the other Party.
|
10.5
Claimed Infringement
.
10.5.1
Notice
. In the event that a Third Party at any time provides written notice of
a claim to, or brings an action, suit or proceeding against, any Party, or any of their respective
Affiliates or Sublicensees, claiming infringement of its patent rights or unauthorized use or
misappropriation of its know-how, based upon an assertion or claim arising out of the Development,
Manufacture or Commercialization of the Licensed Product in the Field (
Infringement Claim
), such
Party shall promptly notify the other Party of the claim or the commencement of such action, suit
or proceeding, enclosing a copy of the claim and all papers served. Each Party agrees to make
available to the other
Party its advice and counsel regarding the technical merits of any such claim at no cost to
the other Party and to offer reasonable assistance to the other Party at no cost to the other
Party.
10.5.2
Responsibility
.
Kyowa Hakko shall assume full responsibility for any
Infringement Claims brought against either Party or its Affiliates or Sublicensees arising out of
the Development or Commercialization of the Licensed Product in, or Manufacture of Licensed Product
for, the Kyowa Hakko Territory. Subject to Kyowa Hakkos right to offset certain Losses pursuant to
Section 7.4.4(d), all liabilities, damages, costs and expenses arising out of such Third Party
Infringement Claims shall be borne by Kyowa Hakko. Alnylam shall assume full responsibility for any
Infringement Claims
42
brought against either Party or its Affiliates or Sublicensees arising out of
the Development or Commercialization of the Licensed Product in, or Manufacture of Licensed for,
the Alnylam Territory. All liabilities, damages, costs and expenses arising out of such Third
Party Infringement Claims shall be borne by Alnylam.
10.5.3
Procedure
.
Each Party shall have the sole and exclusive right to select
counsel for any Infringement Claim that it chooses to defend;
provided
, that it shall
consult with the other Party with respect to selection of counsel for such defense. Each Party
will keep the other Party informed, and shall from time to time consult with the other Party
regarding the status of any such claims and shall provide the other Party with copies of all
documents filed in, and all written communications relating to, any suit brought in connection with
such claims. The other Party shall also have the right to participate and be represented in any
such claim or related suit, at its own expense. Alnylam shall have the sole and exclusive right
(but not the obligation) to control the defense of an Infringement Claim in the Kyowa Hakko
Territory in the event Kyowa Hakko fails to exercise its right to assume such defense within [**]
days following written notice from Alnylam of such Infringement Claim. No Party shall settle any
claims or suits involving rights of another Party without obtaining the prior written consent of
such other Party, which consent shall not be unreasonably withheld or delayed.
10.5.4
Limitations
.
EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN THIS AGREEMENT, THE
FOREGOING STATES THE ENTIRE RESPONSIBILITY OF ALNYLAM AND KYOWA HAKKO, AND THE SOLE AND EXCLUSIVE
REMEDY OF ALNYLAM OR KYOWA HAKKO, AS THE CASE MAY BE, IN THE CASE OF ANY CLAIMED INFRINGEMENT OF
ANY THIRD PARTY PATENT RIGHTS OR UNAUTHORIZED USE OR MISAPPROPRIATION OF ANY THIRD PARTYS
KNOW-HOW.
10.6
Other Infringement Resolutions
. In the event of a dispute or potential dispute
that has not ripened into a demand, claim or suit of the types described in Sections 10.4 and 10.5
of this Agreement (e.g., actions seeking declaratory judgments and revocation proceedings), the
same principles governing control of the resolution of the dispute, consent to settlements of the
dispute, and implementation of the settlement of the dispute (including the sharing in and
allocating the payment or receipt of damages, license fees, royalties and other compensation) shall
apply.
10.7
Patent Term Extensions
.
The Parties shall use reasonable efforts to obtain all
available supplementary protection certificates (
SPC
) and other extensions of Patent Rights
(including those available under the Hatch-Waxman Act). Each Party shall execute such
authorizations and other documents and take such other actions as may be reasonably requested by
the other Party to obtain such extensions. The Parties shall cooperate with each other in gaining
patent term restorations, extensions and/or SPCs wherever applicable to Patent Rights. The Party
first eligible
to seek patent term restoration or extension of any such Patent Rights or any SPC related
thereto shall have the right to do so;
provided
,
that if in any country the first Party has
an option to extend the patent term for only one of several patents, the first Party shall consult
with the other Party before making the election. If more than one patent is eligible for extension
or patent term restoration, the Parties shall agree upon a strategy that shall maximize patent
protection and commercial value for the Licensed Product. All filings for such extensions and
certificates shall be made by the Party to whom responsibility for prosecution and maintenance of
the Patent Rights are assigned,
provided
,
that in the event that the Party to whom such
responsibility is assigned elects not to file for an extension or SPC, such Party shall (i) inform
the other Party of its intention not to file and (ii) grant the other Party the
43
right to file for
such extension or SPC in the patentees name and such Party shall provide all necessary assistance
in connection therewith.
10.8
Patent Certification
.
To the extent required by law or permitted by law, the
Parties shall use Commercially Reasonable Efforts to maintain with the applicable Regulatory
Authorities during the Term correct and complete listings of applicable Patent Rights for the
Licensed Product being commercialized, including all so called Orange Book listings required
under the Hatch-Waxman Act.
10.9
Trademarks
.
(a) Each Party has the right to use any trademark it owns or controls (other than by virtue of
a license under this Section 10.9 of this Agreement) for the Licensed Product in its Territory at
its sole discretion, and each Party and its Affiliates shall retain all right, title and interest
in and to its and their respective corporate names and logos.
(b) Kyowa Hakko will develop and propose, and the JCT shall review and comment on, one or more
Product Trademark(s) for use by Kyowa Hakko and its Related Parties throughout the Kyowa Hakko
Territory. Such Product Trademark(s) considered by the JCT may include the Product Trademark(s)
developed and/or used by Alnylam with respect to the Commercialization of the Licensed Product in
the Alnylam Territory (the
Alnylam Trademarks
). Any Product Trademark(s) (other than the Alnylam
Trademarks) that are used by Kyowa Hakko to promote and sell the Licensed Product in the Kyowa
Hakko Territory are hereinafter referred to as the
Kyowa Hakko Trademarks
. Alnylam (or its
Related Parties, as appropriate) shall own all rights to Alnylam Trademarks, and all goodwill
associated therewith, throughout the Alnylam Territory and the Kyowa Hakko Territory. Kyowa Hakko
(or its Related Parties, as appropriate) shall own all rights to Kyowa Hakko Trademarks and all
goodwill associated therewith, throughout the Kyowa Hakko Territory. Alnylam shall also own rights
to any Internet domain names incorporating the applicable Alnylam Trademarks or any variation or
part of such Alnylam Trademarks used as its URL address or any part of such address; and Kyowa
Hakko shall also own rights to any Internet domain names incorporating the applicable Kyowa Hakko
Trademarks or any variation or part of such Kyowa Hakko Trademarks used as its URL address or any
part of such address.
(c) If Alnylam Trademarks are used to promote and sell the Licensed Product in the Kyowa Hakko
Territory, then the following provisions shall apply: Alnylam shall grant Kyowa Hakko an exclusive
license to use such Alnylam Trademarks to Commercialize the Product in the Kyowa Hakko Territory.
Kyowa Hakko agrees that the quality of the Licensed Product and the Manufacture and
Commercialization thereof shall be consistent with the quality standards applied by Alnylam
thereto. In addition, Kyowa Hakko shall comply strictly with Alnylams trademark style and
usage standards that Alnylam communicates to Kyowa Hakko from time to time with respect to the
Alnylam Trademarks. Kyowa Hakko shall at its own expense, at the request of Alnylam from time to
time, submit to Alnylam for approval a reasonable number of production samples of the Licensed
Product and related packaging materials. In the event that Alnylam reasonably objects to the
quality of the Licensed Product or the usage of the Alnylam Trademarks Controlled by it in
connection with any sample, it shall give written notice of such objection to Kyowa Hakko within
[**] days of receipt by Alnylam of the sample, specifying the way in which such usage of its
Alnylam Trademarks fails to meet the style, usage or quality standards for the Licensed Product set
forth in the first two sentences
44
of this Section 10.9(c), and Kyowa Hakko shall immediately cease
sale and distribution of the Licensed Product. If Kyowa Hakko wishes to continue to distribute and
sell the Licensed Product, it must remedy the failure and submit further samples to Alnylam for
approval.
(d) If Alnylam Trademarks are used to promote and sell the Licensed Product in the Kyowa Hakko
Territory, then Alnylam will use Commercially Reasonable Efforts to establish, maintain and enforce
such Alnylam Trademarks in the applicable countries of the Kyowa Hakko Territory during the Term.
Kyowa Hakko shall be responsible for one hundred percent (100%) of the costs of such efforts in the
Kyowa Hakko Territory and Kyowa Hakko shall reimburse Alnylam for all such costs incurred by
Alnylam within [**] days after receiving any invoice from Alnylam for such costs. Kyowa Hakko will
use Commercially Reasonable Efforts to establish, maintain and enforce the Kyowa Hakko Trademarks
in the Kyowa Hakko Territory during the Term, at its expense.
(e) In the event either Party becomes aware of any infringement of any Product Trademark by a
Third Party, such Party shall promptly notify the other Party and the Parties shall consult with
each other and jointly determine the best way to prevent such infringement, including, without
limitation, by the institution of legal proceedings against such Third Party.
11.
TERM AND TERMINATION
11.1
Term
. This Agreement shall be effective as of the Effective Date and, unless
terminated earlier pursuant to Section 11.2 below, this Agreement shall continue in effect on a
country by country basis until expiration of the last Royalty Term to expire under this Agreement
(
Term
). Upon expiration of the Term, all licenses of the Parties under Article 6 then in effect
shall become fully paid-up, perpetual, non-exclusive licenses.
11.2
Termination Rights.
11.2.1
Termination for Convenience.
Kyowa Hakko shall have the right to terminate
this Agreement at any time after the Effective Date on six (6) months prior written notice to
Alnylam.
11.2.2
Termination for Cause
. This Agreement may be terminated at any time during the
Term:
(a) upon written notice by either Party if the other Party is in breach of its material
obligations hereunder by causes and reasons within its control and has not cured such breach within
[**] business days in the case of a payment breach, or [**] days in the case of all other
breaches, after notice requesting cure of the breach; or
(b) by either Party upon the filing or institution of bankruptcy, reorganization, liquidation
or receivership proceedings, or upon an assignment of a substantial portion of the assets for the
benefit of creditors by the other Party;
provided
,
however
, that in the event of
any involuntary bankruptcy or receivership proceeding such right to terminate shall only become
effective if the Party consents to the involuntary bankruptcy or receivership or such proceeding is
not dismissed within sixty (60) days after the filing thereof.
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11.2.3
Challenges of Patent Rights
. In the event that Kyowa Hakko or any of its
Related Parties (a) commences or participates in any action or proceeding (including, without
limitation, any patent opposition or re-examination proceeding), or otherwise asserts any claim,
challenging or denying the validity or enforceability of any of the Patent Rights licensed Kyowa
Hakko under this Agreement, or any claim thereof or (b) actively assists any other person or entity
in bringing or prosecuting any action or proceeding (including, without limitation, any patent
opposition or re-examination proceeding) challenging or denying the validity or enforceability of
any of such Patent Rights or any claim thereof, then (i) Kyowa Hakko shall give notice thereof to
Alnylam within [**] days of taking such action and (ii) Alnylam will have the right, in its sole
discretion to give notice to Kyowa Hakko that the licenses and option rights granted to Kyowa Hakko
with respect to all or any portion of the Patent Rights under this Agreement will terminate in [**]
days following such notice (or such longer period as Alnylam may designate in such notice), and,
unless Kyowa Hakko withdraws or causes to be withdrawn all such challenge(s) within such [**]-day
period, such licenses and option rights will so terminate. In the event that Alnylam is not
permitted under applicable law to terminate the licenses and option rights with respect to all the
Patent Rights under this Agreement, then the Parties agree to construe this provision as to permit
Alnylam to terminate the licenses and option rights to that portion of such Patent Rights with
respect to which Alnylam has the legal right to do so.
11.2.4
Effect of Termination
.
(a)
Termination by Alnylam
. Without limiting any other legal or equitable remedies
that Alnylam may have, if Alnylam terminates this Agreement in accordance with Sections 11.2.2(a)
or (b), then (i) Kyowa Hakkos obligations under Section 9.4.1 shall survive for a period of [**]
after the effective date of termination, (ii) the license grant to Alnylam in Section 6.1.4 shall
survive, (iii) Kyowa Hakko shall as promptly as practicable transfer to Alnylam or Alnylams
designee (A) possession and ownership of all governmental or regulatory correspondence,
conversation logs, filings and approvals (including all Regulatory Approvals and pricing and
reimbursement approvals) relating to the Development, Manufacture or Commercialization of the
Licensed Product and all Kyowa Hakko Trademarks, (B) copies of all data, reports, records and
materials, and other sales and marketing related information in Kyowa Hakkos possession or Control
to the extent that such data, reports, records, materials or other information relate to the
Development, Manufacture or Commercialization of the Licensed Product, including without limitation
all non-clinical and clinical data relating to the Licensed Product, and customer lists and
customer contact information and all adverse event data in Kyowa Hakkos possession or Control;
provided
, that (i) Kyowa Hakko shall not be required by this provision to provide any
confidential information to Alnylam and (ii) Kyowa Hakko shall use Commercially Reasonable Efforts
to obtain for Alnylam the right to access all such data, reports, records, materials, and other
sales and marketing related information, and (C) all records and materials
in Kyowa Hakkos possession or Control containing Confidential Information of Alnylam, (iv)
appoint Alnylam as Kyowa Hakkos and/or Kyowa Hakkos Related Parties agent for all Licensed
Product-related matters involving Regulatory Authorities in the Kyowa Hakko Territory until all
Regulatory Approvals and other regulatory filings have been transferred to Alnylam or its designee,
(v) if the effective date of termination is after First Commercial Sale, then Kyowa Hakko shall
appoint Alnylam as its exclusive distributor of the Licensed Product in the Kyowa Hakko Territory
and grant Alnylam the right to appoint sub-distributors, until such time as all Regulatory
Approvals in the Kyowa Hakko Territory have been transferred to Alnylam or its designee, (vi) if
Kyowa Hakko or its Related Parties are Manufacturing Finished Product, at Alnylams option, supply
the Finished Product to Alnylam in the Kyowa Hakko Territory on terms no less favorable than those
on which Kyowa Hakko supplied the
46
Finished Product prior to such termination to its most favored
distributor in the Kyowa Hakko Territory, until such time as all Regulatory Approvals in the Kyowa
Hakko Territory have been transferred to Alnylam or its designee, Alnylam has obtained all
necessary manufacturing approvals and Alnylam has procured or developed its own source of Finished
Product supply, (vii) if Alnylam so requests, Kyowa Hakko shall transfer to Alnylam any Third Party
agreements relating to the Development, Manufacture or Commercialization of the Licensed Product to
which Kyowa Hakko is a party, subject to any required consents of such Third Party, which Kyowa
Hakko shall use Commercially Reasonable Efforts to obtain promptly, and (viii) Kyowa Hakko shall
grant Alnylam an exclusive right and license, with the right to grant sublicenses, under all Kyowa
Hakko Technology to Develop, Manufacture and Commercialize the Licensed Product in the Field. The
license granted pursuant to this Section 11.2.4(a) shall be royalty-free, fully-paid and perpetual.
Kyowa Hakko shall execute all documents and take all such further actions as may be reasonably
requested by Alnylam in order to give effect to the foregoing clauses (i) through (viii).
(b)
Termination by Kyowa Hakko for Convenience
. Without limiting any other legal or
equitable remedies that Alnylam may have, if Kyowa Hakko terminates this Agreement in accordance
with Section 11.2.1, then (i) Kyowa Hakkos obligations under Section 9.4.1 shall survive for a
period of [**] after the effective date of termination, (ii) the provisions of Section
11.2.4(a)(ii)-(vii) shall apply, and (iii) Kyowa Hakko shall grant to Alnylam a non-exclusive right
and license, with the right to grant sublicenses, under all Kyowa Hakko Technology that relates
solely to the Licensed Product, to Develop, Manufacture and Commercialize the Licensed Product in
the Field. The licenses granted pursuant to this Section 11.2.4(b) shall be royalty-free,
fully-paid and perpetual. Kyowa Hakko shall execute all documents and take all such further
actions as may be reasonably requested by Alnylam in order to give effect to the foregoing clauses
(i) through (iii).
(c)
Termination by Kyowa Hakko
. Without limiting any other legal or equitable remedies
that Kyowa Hakko may have, if Kyowa Hakko terminates this Agreement in accordance with Section
11.2.2(a) or (b), then the licenses granted to Alnylam under this Agreement shall terminate and the
licenses and option rights granted to Kyowa Hakko under this Agreement shall continue in full force
and effect;
provided
, that Kyowa Hakko continues to use Commercially Reasonable Efforts to
Develop and Commercialize the Licensed Product, pay all amounts due to Alnylam pursuant to Article
7 that would otherwise be applied to Commercialization of the Licensed Product and comply in all
respects with the requirements of each Alnylam In-License; and
provided
,
further
,
that if Kyowa Hakko terminates this Agreement pursuant to Section 11.2.2(a), the royalty dollar
amounts payable to Alnylam pursuant to Section 7.4 shall be reduced by up to [**]%, such amount to
be determined by arbitrators pursuant to Section 12.11.2 if such arbitrators determine that such
remedy is appropriate
(and for purposes of clarity, this reduction shall not apply to the royalty rate but to the
royalty payment determined pursuant to Article 7 hereof) and Kyowa Hakko shall be entitled to
deduct from any royalties payable to Alnylam under Article 7 the amount of any monetary payments
awarded to Kyowa Hakko pursuant to a final decision of the arbitrators pursuant to Section 12.11.2.
(d)
Termination upon Bankruptcy of a Party
.
If this Agreement is terminated by either
Party (the
Non-Bankrupt Party
) pursuant to Section 11.2.2(b) due to the rejection of this
Agreement by or on behalf of the other Party (the
Bankrupt Party
) under Section 365 of the United
States Bankruptcy Code (the
Code
), all licenses and rights to licenses granted under or pursuant
to this Agreement by the Bankrupt Party to the Non-Bankrupt Party are, and shall otherwise be
deemed to
47
be, for purposes of Section 365(n) of the Code, licenses of rights to intellectual
property as defined under Section 101(35A) of the Code. The Parties agree that the Non-Bankrupt
Party, as a licensee of such rights under this Agreement, shall retain and may fully exercise all
of its rights and elections under the Code, and that upon commencement of a bankruptcy proceeding
by or against the Bankrupt Party under the Code, the Non-Bankrupt Party shall be entitled to a
complete duplicate of, or complete access to (as the Non-Bankrupt Party deems appropriate), any
such intellectual property and all embodiments of such intellectual property. Such intellectual
property and all embodiments thereof shall be promptly delivered to the Non-Bankrupt Party (i) upon
any such commencement of a bankruptcy proceeding upon written request therefor by the Non-Bankrupt
Party, unless the Bankrupt Party elects to continue to perform all of its obligations under this
Agreement or (ii) if not delivered under (i) above, upon the rejection of this Agreement by or on
behalf of the Bankrupt Party upon written request therefor by the Non-Bankrupt Party. The
foregoing provisions are without prejudice to any rights the Non-Bankrupt Party may have arising
under the Code or other applicable law.
11.3
Effect of Expiration or Termination; Survival
. Expiration or termination of this
Agreement shall not relieve the Parties of any obligation accruing prior to such expiration or
termination. Any expiration or termination of this Agreement shall be without prejudice to the
rights of either Party against the other accrued or accruing under this Agreement prior to
expiration or termination, including without limitation the obligation to pay royalties for the
Licensed Product sold prior to such expiration or termination. The provisions of Articles 8, 10,
12 and Sections 9.5, 9.6, 11.2.4 and 11.3 shall survive any expiration or termination of this
Agreement. Except as set forth in this Article 11, upon termination or expiration of this
Agreement all other rights and obligations of the Parties under this Agreement cease.
12. MISCELLANEOUS
12.1
Assignment
. Except as provided in this Section 12.1, this Agreement may not be
assigned or otherwise transferred, nor may any right or obligation hereunder be assigned or
transferred, by either Party without the consent of the other Party. However, either Party may,
without the other Partys consent, assign this Agreement and its rights and obligations hereunder
in whole or in part to an Affiliate or to a party that acquires, by merger, sale of assets or
otherwise, all or substantially all of the business of the assigning Party to which the subject
matter of this Agreement relates. The assigning Party shall remain responsible for the performance
by its assignee of this Agreement or any obligations hereunder so assigned. An assignment to an
Affiliate shall terminate, and all rights so assigned shall revert to the assigning Party, if and
when such Affiliate ceases to be an Affiliate of the assigning Party.
12.2
Governing Law
. This Agreement shall be construed and the respective rights of
the Parties determined in accordance with the substantive laws of the State of New York,
notwithstanding any provisions of New York law governing conflicts of laws to the contrary, and the
patent laws of the relevant jurisdiction without reference to any rules of conflict of laws or
renvoi.
12.3
Entire Agreement; Amendments
. This Agreement contains the entire understanding
of the Parties with respect to the subject matter hereof, and supersedes all previous arrangements
with respect to the subject matter hereof, whether written or oral. This Agreement (including the
Schedules hereto) may be amended, or any term hereof modified, only by a written instrument
duly-executed by authorized representatives of both Parties hereto.
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12.4
Severability
. If any provision hereof should be held invalid, illegal or
unenforceable in any respect in any jurisdiction, the Parties hereto shall substitute, by mutual
consent, valid provisions for such invalid, illegal or unenforceable provisions, which valid
provisions in their economic effect are sufficiently similar to the invalid, illegal or
unenforceable provisions that it can be reasonably assumed that the Parties would have entered into
this Agreement with such valid provisions. In case such valid provisions cannot be agreed upon,
the invalid, illegal or unenforceable of one or several provisions of this Agreement shall not
affect the validity of this Agreement as a whole, unless the invalid, illegal or unenforceable
provisions are of such essential importance to this Agreement that it is to be reasonably assumed
that the Parties would not have entered into this Agreement without the invalid, illegal or
unenforceable provisions.
12.5
Headings
. The captions to the Articles and Sections hereof are not a part of
this Agreement, but are merely for convenience to assist in locating and reading the several
Articles and Sections hereof.
12.6
Waiver of Rule of Construction
. Each Party has had the opportunity to consult
with counsel in connection with the review, drafting and negotiation of this Agreement.
Accordingly, the rule of construction that any ambiguity in this Agreement shall be construed
against the drafting Party shall not apply.
12.7
No Implied Waivers; Rights Cumulative
.
No failure on the part of Alnylam or
Kyowa Hakko to exercise, and no delay in exercising, any right, power, remedy or privilege under
this Agreement, or provided by statute or at law or in equity or otherwise, shall impair, prejudice
or constitute a waiver of any such right, power, remedy or privilege or be construed as a waiver of
any breach of this Agreement or as an acquiescence therein, nor shall any single or partial
exercise of any such right, power, remedy or privilege preclude any other or further exercise
thereof or the exercise of any other right, power, remedy or privilege.
12.8
Notices
. All notices which are required or permitted hereunder shall be in
writing and sufficient if delivered personally, sent by facsimile (and promptly confirmed by
personal delivery, registered or certified mail or overnight courier), sent by
nationally-recognized overnight courier or sent by registered or certified mail, postage prepaid,
return receipt requested, addressed as follows:
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If to Alnylam, to:
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Alnylam Pharmaceuticals, Inc.
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300 Third Street
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Cambridge, MA 02142
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Attention: Vice President Legal
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Facsimile No.: (617) 551-8101
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With a copy to:
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Faber Daeufer & Rosenberg PC
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950 Winter Street, Suite 4500
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Waltham, MA 02154
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Attention: Sumy Daeufer
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Facsimile No.: (781) 795-4747
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If to Kyowa Hakko, to:
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Kyowa Hakko Kogyo Co., Ltd.
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1-6-1, Ohtemachi, Chiyoda-ku, Tokyo, 100-8185, Japan
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Attention: General Manager
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Business Development Department
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Facsimile No.: 81-3-3282-0107
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or to such other address as the Party to whom notice is to be given may have furnished to the other
Party in writing in accordance herewith. Any such notice shall be deemed to have been given: (a)
when delivered if personally delivered or sent by facsimile on a business day (or if delivered or
sent on a non-business day, then on the next business day); (b) on receipt if sent by overnight
courier; and/or (c) on receipt if sent by mail.
12.9
Compliance with Export Regulations
. Neither Party shall export any technology
licensed to it by the other Party under this Agreement except in compliance with U.S. export laws
and regulations.
12.10
Force Majeure
. Neither Party shall be held liable to the other Party nor be
deemed to have defaulted under or breached this Agreement for failure or delay in performing any
obligation under this Agreement to the extent that such failure or delay is caused by or results
from causes beyond the reasonable control of the affected Party, potentially including without
limitation embargoes, war, acts of war (whether war be declared or not), insurrections, riots,
civil commotions, strikes, lockouts or other labor disturbances, fire, floods, or other acts of
God, or acts, omissions or delays in acting by any governmental authority or the other Party. The
affected Party shall notify the other Party of such
force majeure
circumstances as soon as
reasonably practical, and shall promptly undertake all reasonable efforts necessary to cure such
force majeure
circumstances.
12.11
Dispute Resolution
.
12.11.1
Disputes
.
The Parties shall negotiate in good faith and use reasonable
efforts to settle any dispute, controversy or claim arising from, or related to, this Agreement or
to the breach hereof (collectively,
Dispute
). In particular, the Chief Executive Officer of
Alnylam and the Executive Officer of Kyowa Hakko shall attempt to resolve all Disputes. In the
event that the Chief Executive Officer and the Executive Officer cannot reach an agreement
regarding a Dispute, and a Party wishes to pursue the matter, each such Dispute that is not an
Excluded Claim shall be finally resolved by binding arbitration under the then-current Rules of
Arbitration of the International Chamber of Commerce (
ICC
) by one or more arbitrators appointed
in accordance with the said Rules and Section 12.11.2 below, and judgment on the arbitration award
may be entered in any court
having jurisdiction thereof. As used in this Section 12.11, the term
Excluded Claim
shall
mean a dispute that concerns (a) the validity or infringement of a patent, trademark or copyright,
or (b) any antitrust, anti-monopoly or competition law or regulation, whether or not statutory.
12.11.2
Arbitration
.
The arbitration shall be conducted by a panel of three (3)
persons experienced in the pharmaceutical business who are independent of both Parties and neutral
with respect to the Dispute presented for arbitration. Within thirty (30) days after initiation of
arbitration, each Party shall select one person to act as arbitrator and the two Party-selected
arbitrators shall select a third arbitrator within thirty (30) days of their appointment. If the
arbitrators selected by the Parties are unable or fail to agree upon the third arbitrator, the
third arbitrator shall be appointed by the ICC
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International Court of Arbitration. The place of
arbitration shall be San Francisco, California, USA, and all proceedings and communications shall
be in English.
Either Party may apply to the arbitrators for interim injunctive relief until the arbitration
award is rendered or the controversy is otherwise resolved. Either Party also may, without waiving
any remedy under this Agreement, seek from any court having jurisdiction any injunctive or
provisional relief necessary to protect the rights or property of that Party pending the
arbitration award. The arbitrators shall have no authority to award punitive or any other type of
damages not measured by a Partys compensatory damages. Each Party shall bear its own costs and
expenses and attorneys fees, and the Party that does not prevail in the arbitration proceeding
shall pay the arbitrators and any administrative fees of arbitration. Except to the extent
necessary to confirm an award or as may be required by law, neither a Party nor an arbitrator may
disclose the existence, content, or results of an arbitration without the prior written consent of
both Parties. In no event shall an arbitration be initiated after the date when commencement of a
legal or equitable proceeding based on the dispute, controversy or claim would be barred by the
applicable New York statute of limitations.
(a) The Parties agree that, in the event of a Dispute over the nature or quality of
performance under this Agreement, neither Party may terminate this Agreement until final resolution
of the Dispute through arbitration or other judicial determination, and this Agreement shall be
terminated only if arbitrators determine that the termination of this Agreement is an appropriate
remedy. The Parties further agree that any payments made pursuant to this Agreement pending
resolution of the Dispute shall be refunded promptly if an arbitrator or court determines that such
payments are not due.
(b) The Parties hereby agree that any disputed performance or suspended performances pending
the resolution of the arbitration that the arbitrators determine to be required to be performed by
a Party must be completed within a reasonable time period following the final decision of the
arbitrator.
(c) The Parties hereby agree that any monetary payment to be made by a Party pursuant to a
decision of the arbitrators shall be made in United States dollars, free of any tax or other
deduction. The Parties further agree that the decision of the arbitrators shall be the sole,
exclusive and binding remedy between them regarding determination of the matters presented to the
arbitrator.
12.12
Independent Contractors
. It is expressly agreed that Alnylam and Kyowa Hakko
shall be independent contractors and that the relationship between Alnylam and Kyowa Hakko shall
not constitute a partnership, joint venture or agency. Alnylam shall not have the authority to
make any
statements, representations or commitments of any kind, or to take any action, which shall be
binding on Kyowa Hakko, without the prior written consent of Kyowa Hakko, and Kyowa Hakko shall not
have the authority to make any statements, representations or commitments of any kind, or to take
any action, which shall be binding on Alnylam without the prior written consent of Alnylam.
12.13
Counterparts
. The Agreement may be executed in two or more counterparts, each
of which shall be deemed an original, but all of which together shall constitute one and the same
instrument.
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12.14
Binding Effect; No Third Party Beneficiaries
. As of the Effective Date, this
Agreement shall be binding upon and inure to the benefit of the Parties and their respective
permitted successors and permitted assigns. Except as expressly set forth in this Agreement, no
person or entity other than the Parties and their respective Affiliates and permitted assignees
hereunder shall be deemed an intended beneficiary hereunder or have any right to enforce any
obligation of this Agreement.
[THE REMAINDER OF THIS PAGE HAS BEEN LEFT INTENTIONALLY BLANK]
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IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date first set forth
above.
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KYOWA HAKKO KOGYO CO., LTD.
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ALNYLAM PHARMACEUTICALS, INC.
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BY:
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/s/ Yuzuru Matsuda
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BY:
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/s/ John M. Maraganore
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NAME:
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Yuzuru Matsuda, Ph.D.
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NAME:
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John M. Maraganore, Ph.D.
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TITLE:
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President & CEO
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TITLE:
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Chief Executive Officer
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DATE:
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June 19, 2008
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DATE:
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June 19, 2008
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53
SCHEDULE 1.6
ALNYLAM PATENT RIGHTS
See attached.
54
Schedule 1.6A
Alnylam Patent Rights
Schedule 1.6A.1
In-licensed Alnylam Patent Rights
[**]
A total of 7 pages were omitted pursuant to a request for confidential treatment filed separately
with the Securities and Exchange Commission.
55
Schedule 1.6A.2
Alnylam-owned Patent Rights
[**]
A total of 6 pages were omitted pursuant to a request for confidential treatment filed separately
with the Securities and Exchange Commission.
56
Schedule 1.6B
Additional Patent Rights
[**]
A total of 85 pages were omitted and filed separately with the Securities and Exchange Commission
pursuant to a request for confidential treatment.
57
SCHEDULE 1.36
EXISTING ALNYLAM IN-LICENSES
[**]
58
SCHEDULE 1.58
KYOWA HAKKO IN-LICENSES
[**]
59
SCHEDULE 1.64
ALN-RSV01
[**]
60
SCHEDULE 5.3
SUPPLY AGREEMENT TERMS
1. Alnylam shall be responsible for establishing the specifications, including the necessary
documentation, certificates of analysis and test results, for the API Bulk Drug Substance and
Finished Product to be supplied under the Supply Agreement (the Specifications).
2. Until the First Commercial Sale of the Licensed Product in the Kyowa Hakko Territory, Alnylam
shall supply (a) API Bulk Drug Substance and Finished Product to Kyowa Hakko for use in Kyowa
Hakkos Development activities for the Licensed Product in the Kyowa Hakko Territory conducted in
accordance with the Development Plan and (b) API Bulk Drug Substance for use in the Manufacture of
Finished Product for such Development activities in the Kyowa Hakko Territory. Kyowa Hakko shall
pay Alnylam for such API Bulk Drug Substance and Finished Product at the applicable Transfer Price.
Kyowa Hakko shall use the API Bulk Drug Substance and Finished Product supplied by Alnylam solely
for such purposes under this Agreement and shall not transfer any such API Bulk Drug Substance or
Finished Product to any Third Party for any other purpose.
3. Unless agreed otherwise in writing by the Parties, [**] months before the commencement of each
Calendar Quarter, Kyowa Hakko will give to Alnylam a forecast of Kyowa Hakkos estimated quarterly
requirements of API Bulk Drug Substance and Finished Product for the [**]year period commencing
with such Calendar Quarter. Such forecast will include quantity and unit requirements for API Bulk
Drug Substance and Finished Product on a country-by-country basis. [**] percent ([**]%) of Kyowa
Hakkos forecasted requirements of API Bulk Drug Substance and Finished Product during the first
[**] calendar quarters of such forecast, and [**] percent ([**]%) of Kyowa Hakkos forecasted
requirements of API Bulk Drug Substance and Finished Product during the next [**] calendar quarters
of such forecast, shall be considered binding. Kyowa Hakkos forecasted requirements of API Bulk
Drug Substance and Finished Product during the last [**] quarters of such forecast will be
non-binding. Kyowa Hakko will provide Alnylam with binding purchase orders for API Bulk Drug
Substance and Finished Product at least [**] months in advance of the delivery date for such API
Bulk Drug Substance or Finished Product, as the case may be.
4. In the event of a shortage of supply of API Bulk Drug Substance or Finished Product, Alnylam
shall promptly notify Kyowa Hakko and, unless otherwise agreed by the Parties, available supply
shall be allocated between the respective Parties on a pro-rata basis based on good faith forecasts
of requirements. In addition, Alnylam will use Commercially Reasonable Efforts to resolve all
failure to supply issues as promptly as possible in consultation with Kyowa Hakko.
5. Alnylam agrees that all API Bulk Drug Substance and Finished Product supplied to Kyowa Hakko
will, at the time of delivery to Kyowa Hakko, have been Manufactured in accordance with the
Specifications and cGMP.
6. In addition to more detailed terms regarding the matters specified above in this
Schedule
5.3
, the Supply Agreement shall contain other customary supply agreement provisions.
61
SCHEDULE 6.4
EXISTING ALNYLAM IN-LICENSE AGREEMENT SUMMARIES
[**]
62
Schedule 6.4A
MAX PLANCK (US)
Co-Exclusive License Agreement between Max Planck Innovation (formerly Garching Innovation GmbH)
(
Max Planck
) and Alnylam Pharmaceuticals, Inc. (
Alnylam
), dated December 20,
2002, as amended by Amendment dated July 2, 2003 and the Requirement Amendment (
Requirement
Amendment
) effective June 15, 2005, and the Waiver Amendment dated August 9, 2007 (as amended,
Max Planck US License Agreement
)
Brief Summary of Technology Covered by License:
Max Planck granted Alnylam a co-exclusive (with Alnylam Europe AG) license to develop and
commercialize RNAi therapeutics under certain patent rights developed by Dr. Thomas Tuschl relating
to RNA Interference Mediating Small RNA Molecules.
Limitations on Scope of License (Section 2.1)
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The license granted to Alnylam is limited to (1) a worldwide, co-exclusive (co-exclusive
with Alnylam Europe AG) license, with the right to sublicense, under the Patent Rights to
develop, make, have made, use, sell and import Licensed Products in the Field, which rights
are sublicenseable, and (2) a worldwide, non-exclusive license, without the right to grant
sublicenses, under the Patent Rights to develop, make, have made, use, sell and import
Licensed Products for all diagnostic uses other than for purposes of therapeutic monitoring.
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Owners retain the right to practice under the Patent Rights for research, teaching,
education, non-commercial collaboration and publication purposes. The German and the U.S.
federal government retain a royalty-free, non-exclusive, non-transferable license to practice
any government-funded invention claimed in any Patent Rights for government purposes.
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Restrictions on Sublicensing by Alnylam (Sections 2.4 and 11.8)
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Alnylam is prohibited from granting sublicenses under the Patent Rights to develop, make,
have made, use, sell and import Licensed Products for any diagnostic uses other than for
purposes of therapeutic monitoring.
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Sublicensees are required to perform their sublicense agreement in accordance with the Max
Planck US License Agreement. If Max Planck determines that Alnylam or any of its Sublicencees
has failed to fulfill any of its obligations under Section 4 (Company Diligence Obligations
and Report) of the Max Planck US License Agreement, then Max Planck may treat such failure as
a material breach.
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If any license granted to Alnylam under the Max Planck US License Agreement is terminated,
any sublicense under such license granted prior to termination of said license will remain in
full force and effect,
provided
that
(i) the Sublicensee is not then in breach
of its sublicense agreement; and (ii) the Sublicensee agrees to be bound to Max Planck as
licensor under the terms and conditions of the sublicense agreement, provided that Max Planck
will have no other obligation than to leave the sublicense granted by Alnylam in place.
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Immediately after the signature of each sublicense granted under the Max Planck US License
Agreement, Alnylam is required to provide Max Planck with a copy of the signed sublicense
agreement.
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Diligence and Reporting (Sections 4.1 and 4.2; Sections 1 and 3 of Requirement Amendment)
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Sublicensees are required to use commercially reasonable efforts to develop and to
introduce into the commercial market Licensed Products at the earliest practical date.
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Sublicensees are required to furnish information to Alnylam for inclusion in its reports to
Max Planck, which reports are due within 30 days after the end of each calendar quarter with
Alnylams standard R&D report, on the progress of its efforts during the immediately preceding
calendar quarter to develop and commercialize Licensed Products for each indication and
sub-indication within the Field. The report shall also contain a discussion of intended R&D
efforts for the calendar quarter in which the report is submitted.
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Royalty Payment Obligation (Sections 5.2 and 5.3)
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The following running royalties are payable to Max Planck by Alnylam on Net Sales of
therapeutic and prophylactic Licensed Products by Alnylam and its Sublicensees:
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(i)
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[**]% of the first US$[**] of annual accumulated Net Sales of all Licensed
Products;
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(ii)
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[**]% of annual accumulated Net Sales of all Licensed Products between US$[**]
and US$[**];
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(iii)
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[**]% of annual accumulated Net Sales of all Licensed Products between US$[**]
and US$[**];
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(iv)
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[**]% of annual accumulated Net Sales of all Licensed Products between US$[**]
and US$[**];
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(v)
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[**]% of annual accumulated Net Sales of all Licensed Products between US$[**]
and US$[**]; and
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(vi)
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[**]% of annual accumulated Net Sales of all Licensed Products above US$[**].
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If the sale of any Licensed Product is covered by more than one of the Patent Rights, multiple royalties shall not be
due. Alnylam or a Sublicensee develops diagnostic Licensed Products, Alnylam will initiate negotiations with Max
Planck at least [**] prior to the intended first commercial sale of each diagnostic Licensed Product. Alnylam and Max
Planck will negotiate in good faith [**] for such
diagnostic Licensed Product.
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Non-cash consideration will not be accepted by any Sublicensee for Licensed Products without the prior written consent
of Max Planck.
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If any Sublicensee takes, for objective commercial and/or legal reasons, a license from any third party under any
patent applications or patents that dominate the Patent Rights or is dominated by the Patent Rights in order to
develop, make, use, sell or import any Licensed Product (explicitly excluding, without limitation, any third party
patents and patent applications for formulation, stabilization and delivery), then up to [**]% of any additional
running royalties to be paid to such
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third party may be deducted, up to [**]% of the running royalties stated in Section 5.2 of the
Max Planck US License Agreement, from the date such running royalties must be paid to such third
party. However, the running royalties stated in Section 5.2 of the Max Planck US License
Agreement will not be reduced to less than a minimum of [**]% of Net Sales in any case. No
deduction is allowed from running royalties due to Max Planck for any license fees for patents
and patent applications for formulation stabilization and delivery. For avoidance of doubt, if
a Sublicensee takes a license to a third party target, in no event is a deduction allowed on any
license fees for such target from running royalties due to Max Planck under the Max Planck US
License Agreement.
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If (i) Sublicensees sell a Licensed Product in a country where no Patent Rights are issued
and no patent applications that are part of the Patent Rights are pending that have not been
pending for less than [**] after filing national patent applications in the country in
question, and (ii) such Licensed Product is manufactured in a country where Patent Rights are
issued or patent applications that are part of the Patent Rights are pending that have not
been pending for more than [**] after filing national patent applications in the country in
question, the royalties stated in Section 5.2 of the Max Planck US License Agreement will be
reduced by [**]% for such Licensed Product, until the expiration or abandonment of all issued
patents and filed patent applications within the Patent Rights in the country in which the
Licensed Product is manufactured.
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Payments and Reports (Sections 5.4 and 5.5)
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Within 30 days after the end of each calendar half year, Alnylam is required to deliver a
detailed report to Max Planck for the immediately preceding calendar half year showing at
least (i) the number of Licensed Products sold by Alnylam and its Sublicensees in each
country, (ii) the gross price charged by Alnylam and its Sublicensees for each Licensed
Products in each country, (iii) the calculation of Net Sales, and (iv) the resulting running
royalties due to Max Planck according to those figures. If no running royalties are due to
Max Planck, the report shall so state.
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Running royalties shall be payable for each calendar half year, and shall be due to Max
Planck within 60 days after the end of each calendar half year.
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Bookkeeping and Auditing (Sections 5.6 and 5.7)
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Sublicensees are obliged to keep complete and accurate books on any reports and payments
due to Max Planck under the Max Planck US License Agreement, which books shall contain
sufficient information to permit Max Planck to confirm the accuracy of any reports and
payments made to Max Planck. Upon Max Plancks request, Alnylam, or agents appointed by Max
Planck for Alnylam, shall check the books of its Sublicensees for Max Planck, once a year.
This right of auditing by Max Planck shall expire five years after each report or payment has
been made. Alnylam shall have the right to check the books of its Sublicensees according to
Section 5.6. All payments made by Sublicensees under the Max Planck US License Agreement are
nonrefundable and noncreditable against each other.
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Prosecution and Enforcement (Article 6)
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The Owners have the first right to prosecute the Patent Rights. If all Owners wish to
cease prosecution or abandon any of the Patent Rights, Alnylam will have the right to continue
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prosecution or maintenance of such Patent Rights in its discretion, in its name and at its
expense. Max Planck will inform and offer Alnylam Europe AG, respectively. If Alnylam does not
accept Max Plancks offer within 30 days after receiving it, the Owners will be free to cease
prosecution or abandon such Patent Rights.
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The Owners will have the right, but not the obligation, to prosecute in their own
discretion and at their own expense, all infringements of the Patent Rights. The total cost
of any such sole infringement action will be borne by the Owners, and the Owners will keep any
resulting recovery or damages. In any such infringement suits, Alnylam will, at the Owners
expense, cooperate in all respects.
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Alnylam will have the right to join the Owners prosecution of any infringements of the
Patent Rights. In any such joint infringement suits, the Owners and Alnylam will cooperate in
all respects. The Owners and Alnylam will agree in good faith on the sharing of the total
cost of any such joint infringement action and the sharing of any recovery or damages derived
therefrom.
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If the Owners decide not to prosecute infringements of the Patent Rights, neither solely
nor jointly with Alnylam, Max Planck will offer to Alnylam to prosecute any such infringement
in its own discretion and at its own expense. Max Planck will offer Alnylam Europe AG
respectively. The Owners will, at Alnylams expense, cooperate. The total cost of any such
sole infringement action will be borne by Alnylam, and Alnylam will keep any resulting
recovery or damages.
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Certain Termination Rights (Sections 11.2, 11.3 and 11.5)
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Alnylam has the right to terminate the Max Planck US License Agreement for any reason upon
at least 6 months prior written notice to Max Planck and payment of all amounts due to Max
Planck through the effective date of termination.
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If Alnylam ceases to carry on its business related to the Max Planck US License Agreement,
Alnylam must inform Max Planck immediately. Alnylam and Max Planck have the right to
terminate the agreement immediately upon written notice to the other.
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To the extent legally enforceable, if any Sublicensee attacks, or has attacked or supports
an attack through a third party, the validity of any of the Patent Rights, Alnylam will have
the right to terminate the sublicense agreement immediately; upon request of Max Planck,
Alnylam will have the obligation to terminate such sublicense agreement.
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Definitions
:
Field
means all uses other than the commercial sale or use of the Licensed Products as a
research reagent, including in a kit format, for research or educational purposes, including
without limitation, (a) Alnylams internal and collaborative research use, and (b) all therapeutic
and prophylactic uses, and (c) diagnostic uses for purposes of therapeutic monitoring, but
excluding all other diagnostic uses, specifically including human and veterinary diseases for all
indications.
Joint Patent Rights
means the Tuschl patent applications entitled RNA Sequence-Specific
Mediators of RNA Interference listed on
Appendix A
to the Max Planck US License Agreement,
and resulting patents and patent applications.
66
Licensed Products
means any product or part thereof the manufacture, use or sale of which
would, absent the license granted hereunder, infringe one or more issued claims of the Patent
Rights or one or more pending claims of the Patent Rights that have not been pending for more than
5 years after filing national patent applications in the country in question.
Max Planck Patent Rights
means the Tuschl patent applications entitled RNA Interference
Mediating Small RNA Molecules listed on
Appendix B
to the Max Planck US License Agreement,
and resulting patents and patent applications.
Owners
means MIT, Whitehead, UMass and Max Planck, collectively.
Patent Rights
means the Joint Patent Rights and Max Planck Patent Rights together.
67
SOUTH ALABAMA MEDICAL SCIENCE FOUNDATION
Licence Agreement between South Alabama Medical Science Foundation (SAMSF) and Alnylam, dated
November 18, 2004 (
S. Alabama Agreement
)
Limitation on License Grants (Section 3.2 and 3.5)
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Alnylams license is limited under SAMSF Patent Rights to develop, use, have used, make,
have made, sell, offer for sale, have sold, import, export, or otherwise distribute Licensed
Products in the Field.
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SAMSF retains the nonexclusive right to use, make and/or practice the Patent Rights,
through SAMSF employees or on SAMSFS behalf by University of South Alabama College of
Medicine employees, for its own noncommercial educational and academic research purposes and
purposes of the United States Government. SAMSF retains the right to grant nonexclusive
rights to other bona fide academic or research institutions to use, make and/or practice
Patent Rights solely for noncommercial educational purposes and Permitted Research Purposes.
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Certain Sublicense Terms (Section 3.4, Section 11.6)
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Alnylam has the right to grant one or more sublicenses provided that such sublicenses are
consistent with the S. Alabama Agreement and that Alnylam is responsible for the operations of
its Sublicensees relevant to the S. Alabama Agreement as if carried out by Alnylam. Alnylam
is required to incorporate into each such sublicense terms in the S. Alabama Agreement set
forth with respect to SAMSF and SAMSFs rights. No sublicense agreement may contain any
provision which would cause it to extend beyond the term of the S. Alabama Agreement.
(See
paragraph after next).
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Alnylam is required to notify SAMSF of each Sublicensee with whom it concludes a sublicense
within 45 days of full execution of said sublicense and to provide a copy of each sublicense
agreement within the same time period; provided that such copy may be redacted to the extent
that (a) Alnylam is obligated to keep certain terms confidential or (b) terms in such
agreement are not relevant to material obligations to SAMSF under this Agreement.
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Sublicenses granted by Alnylam survive termination and are assigned to SAMSF. SAMSF may
require Sublicensees to agree in writing to be bound by the applicable terms of the S. Alabama
Agreement.
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Milestone Payments (Section 4.2)
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Alnylam is obligated to make the following payments, upon achievement of milestones listed
below:
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[**]
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A milestone will be deemed to be met by Alnylam if met by an Affiliate or a Sublicensee of
Alnylam. Alnylam has to notify SAMSF in writing within [**] days upon the achievement of each
milestone and make the payment at the same time. Milestone fees are non-creditable.
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Royalty and Annual Payment Obligations (Sections 4.3 and 4.4)
68
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Running royalties are payable by Alnylam on a country-by country basis as follows (only one
royalty is due on any Licensed Product):
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(a)
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[**] percent ([**]%) of Net Sales of a Licensed Product if such
Licensed Product is covered by one or more issued claims under Patent Rights in
the country where such Licensed Products are sold, payable until the expiration
of the last to expire Patent Rights in such country; and
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(b)
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Sales of Licensed Products by Alnylam to its Affiliates or to
Sublicensees, or among them, are excluded from the royalty obligation.
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Annual payments are due to SAMSF on each anniversary of the S. Alabama Agreement to maintain
the exclusivity of the license, beginning with the third anniversary date. The payments are
fully creditable against any milestone fees and/or earned running royalties due in the same
calendar year, and will be payable according to the following schedule: (a) years [**]; (b)
years [**]-termination: $[**]
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Sublicense Consideration (Section 4.5)
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Alnylam is required to pay SAMSF [**]% of Sublicense Consideration received for granting a
sublicense that is not for contract services and not for a Research and Development
Collaboration.
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Payments, Records and Reports
(Article 5)
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Within [**] months after March 31, June 30, September 30, and December 31 of each year,
Alnylam is required to deliver to SAMSF a true and accurate report, giving such particulars of
the business conducted by Alnylam, its Affiliates, and its Sublicensees, on a
country-by-country basis, during each 3 calendar months preceding March 31, June 30, September
30, and December 31 as are pertinent to an account for royalty payments under the S. Alabama
Agreement. Such report shall include at least:
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(a)
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the quantities of Licensed Product produced;
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(b)
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the total Sales and Net Sales of such Licensed Product;
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(c)
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a detailed listing of all permitted deductions from the total
amount of Net Sales of such Licensed Product;
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(d)
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the calculation of royalties thereon;
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(e)
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the total royalties so computed and due SAMSF; and
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(f)
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All Sublicense Consideration payable to SAMSF in accordance with
Section 4.5 hereunder.
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Alnylam is required to pay to SAMSF the amount due for the period of a report at the same
time as the report is delivered. The first report and payment due under the S. Alabama
Agreement is due within [**] months after the conclusion of the quarter in which the first
Sale of a Licensed Product occurs.
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Beginning on the third anniversary of the Effective Date, and annually thereafter, Alnylam
shall deliver to SAMSF a summary written report as to Alnylams efforts and accomplishments
during the preceding year in commercializing Licensed Products and its development and
commercialization plans for the upcoming year.
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During the term of this Agreement and for [**] years thereafter, Alnylam is required to
keep records of its, its Affiliates and its Sublicensees Sales and Net Sales of Licensed
Products in sufficient detail to enable the royalties payable to be determined. Alnylam is
required to permit a Certified Public Accountant engaged by SAMSF and reasonably acceptable to
Alnylam to periodically examine, upon [**] days prior written notice, but in no instance more
than [**] per year, its books, ledgers, and records for the purpose of conducting an
inspection and audit and to the extent necessary to verify any report required under this
Agreement. The information is to be available for inspection, audit, and copying by SAMSF or
SAMSFS representative or agent at Alnylams principal place of business, during reasonable
business hours. SAMSF or SAMSFS representative or agent will be obliged to execute a
reasonable confidentiality agreement prior to commencing any such inspection. Alnylam is
required to cooperate in the performance of such inspection and audit, and to cause its
accountants and bookkeepers to cooperate fully in the inspection and audit. Such inspection
and audit is be at the sole expense of SAMSF, except if the amount due to SAMSF under this
Agreement is determined to have been underpaid by more than [**] percent ([**]%), then Alnylam
is required to pay the cost of such inspection and audit, the full amount of any underpayment,
and accrued interest with respect to such underpayment at the maximum rate of interest allowed
by law.
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Performance Milestones and Diligence (Article 6)
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Alnylam is required to use commercially reasonable efforts in the development of Licensed
Products and has sole discretion over the commercialization of the Licensed Products.
Alnylams obligations will be met if it or any Affiliate or Sublicensee achieves the
milestones below within the time frames indicated (a) [**] of Effective Date; (b) [**] of the
Effective Date.
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If Alnylam fails to achieve any of the milestones, and SAMSF so notifies Alnylam in
writing, Alnylam and SAMSF will negotiate in good faith to determine how Alnylam can either
remedy such failure or achieve alternate milestones. If Alnylam fails to make any required
efforts, after they are so determined, and does not remedy that failure within [**] days of
written notice by SAMSF, then SAMSF may by written notice terminate the license or convert it
to non-exclusive, at SAMSFS sole discretion.
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Patent Infringement and Marking (Article 8)
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Alnylam and SAMSF agree to notify the other promptly of any infringement of the licensed
Patent Rights of which it becomes aware. Alnylam has the option to commence legal proceedings
with respect to such infringement and Alnylam is required to give careful consideration to the
views of SAMSF in making its decision whether or not to commence such proceedings. Alnylam
will use commercially reasonable efforts and attorneys of its choice to enforce the licensed
Patent Rights or, subject to SAMSFS concurrence, may obligate an Affiliate or Sublicensee to
carry out an infringement action on behalf of Alnylam according to the terms set forth in
Article 8. SAMSF will have the option to participate, at its own cost. If SAMSF is
requested by Alnylam to join such the action, then Alnylam shall pay all reasonable out of
pocket costs and expenses incurred by SAMSF.
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Any monetary recovery or reimbursement in connection with an infringement action commenced
by Alnylam or its Affiliates or Sublicensees is to be applied first to reimburse Alnylam, its
Affiliates or its Sublicensees, if applicable, for all out-of-pocket expenses (including
reasonable attorneys fees) incurred in prosecuting the action and for the expenses of SAMSF
borne by Alnylam, and then to reimburse SAMSF for royalties withheld. In the event that
Alnylam elects not to exercise its option to prosecute
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an infringement of the licensed Patent Rights pursuant to Article 8, SAMSF may do so at its
own cost and expense, controlling such Action and retaining all recoveries therefrom.
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Alnylam is required to mark, and to have marked by its Affiliates and Sublicensees, every
Licensed Product covered by Patent Rights, manufactured for Sale or intended for Sale in the
United States, that is manufactured, used or sold by Alnylam, its Affiliates or Sublicensees.
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Indemnification, Product Liability & Insurance (Article 9)
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Alnylam is required to protect, defend, hold harmless and indemnify SAMSF, the University
of South Alabama College of Medicine, their respective directors, trustees, officers,
managers, employees, students and agents, and the successors and assigns of any of the
foregoing (collectively, the Indemnitees) at the expense of Alnylam for and from any and all
claims, causes of action, court or administrative orders, and liability (including but not
limited to product liability and strict liability) for any loss, expense (including reasonable
attorneys fees, court costs, any costs of settlement and other legal expenses), injury,
damage, or act in conjunction with or arising out of (1) practice by Alnylam, its Affiliates
or its Sublicensees, their directors, trustees, officers, employees, contractors,
subcontractors and agents, of the Patent Rights or (2) the design, manufacture, distribution
or use of Licensed Products.
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Alnylam has agreed that the Indemnitees shall have no liability to Alnylam or to any
purchasers or users of Licensed Products for any claims, demands, losses, costs, or damages
suffered by Alnylam or purchasers or users of Licensed Products, or any other party, which may
result from personal injury, death, or property damage related to the manufacture, use or sale
of such Licensed Products (Claims). Alnylam is required to defend, indemnify and hold
harmless the Indemnitees from any such Claims, provided that (i) Alnylam is notified promptly
of any Claims, (ii) Alnylam has the sole right to control and defend or settle any litigation
within the scope of this indemnity, and (iii) all Indemnitees cooperate to the extent
necessary in the defense of any Claims.
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Alnylam is required to obtain policies of comprehensive general liability insurance with
limits not less than [**] dollars ($[**]) per occurrence with an annual aggregate of
[**]dollars ($[**]) and to name Indemnitees as additional insureds. The policies are required
prior to initiation of human clinical testing of Licensed Products, and must be maintained for
so long as Alnylam manufactures, uses or sells any Licensed Product(s). The comprehensive
general liability insurance shall provide (i) product liability coverage and (ii) broad form
contractual liability coverage for Alnylams indemnification under the S. Alabama Agreement.
If the product liability coverage does not provide for occurrence liability, Alnylam is
required to maintain such comprehensive general liability insurance for a reasonable period of
not more than [**] years after it has ceased commercial distribution or use of any Licensed
Product. A plan of self-insurance reasonably expected to provide coverage comparable to the
above is permitted.
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Press Releases and Certain Confidentiality Terms (Section 10.1 and 10.7)
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Alnylam is required not to issue any press release or other public statements in connection
with the S. Alabama Agreement intended for use in the public media without the express written
approval of SAMSF, which approval shall not be unreasonably withheld. An exception exists if
the statement is required by law or in the normal course of business identification and
description.
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Alnylam is prohibited from disclosing Confidential Information it receives to any third
party except: (i) in accordance with the exceptions recited in Section 10.4 of the S. Alabama
Agreement; (ii) under a confidentiality agreement to a Sublicensee or potential Sublicensee;
or (iii) with the prior written consent of SAMSF.
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Rights on Termination (Section 11.6, 11.7, 11.8)
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On termination for any reason, Alnylam and its Sublicensees have the right to sell or
discpose of stock of any Licensed Products, subject to payment of royalties and fees to SAMSF.
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SAMSF may terminate the S. Alabama Agreement if Alnylam is adjudged bankrupt.
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Government Compliance (Article 12)
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Alnylam and its Affiliate and Sublicensees are required to comply with all laws that may
control the import, export, manufacture, use, sale, marketing, distribution and other
commercial exploitation of Patent Rights, Licensed Products or other activities undertaken
pursuant to the S. Alabama Agreement.
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Dispute Resolution (Article 13)
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Alnylam is required to attempt to settle controversies under the Agreement through
consultation between senior executives of each party ([**] days), and if not successful then
through mediation (60 days), and if not successful then judicially.
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CANCER RESEARCH TECHNOLOGY
Licence Agreement between Cancer Research Technology Ltd. (
CRT
) and Alnylam, dated July
18, 2003 (
CRT Agreement
)
Brief Summary of Technology Covered by License
:
CRT granted Alnylam exclusive rights to develop and commercialize RNAi therapeutics under certain
patent rights relating to Inhibiting Gene Expression with dsRNA.
Scope of License Grant (Sections 2.1 2.3, 2.5)
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The license granted to Alnylam and its Affiliate(s) is limited to an exclusive, worldwide
license in the Field under the CRT Patent Rights to research, develop, have developed, use,
keep, make, have made, import, have imported, sell, have sold and otherwise dispose or offer
to dispose of Licensed Products. Except as necessary for the development and/or sale of
Licensed Products in the Field, Alnylam does not have rights to make use of the CRT Patent
Rights for any diagnostic application, as research tools or reagents, for target validation,
or for small molecule drug discovery.
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CRT and Cancer Research UK have the right to use, and CRT has the right to consent to the
use by academic research institutions (including for the sake of clarity those in receipt of
Cancer Research UK funding) of, the CRT Patent Rights in the Field for internal, or in
collaboration with another academic research institution, non-commercial, non-commercially
sponsored research. For the sake of clarity, Cancer Research UK-funded Researchers are
permitted under the CRT Patent Rights to conduct clinical trials of potential dsRNA
therapeutic agents as part of their Cancer Research UK-funded academic research.
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CRT grants an option to Alnylam and its Affiliates to enter into non-exclusive,
non-sublicenseable and non-assignable licenses under the CRT Patent Rights in the fields of
either or both of [**] and [**] on terms to be agreed in good faith between CRT and Alnylam,
the payment terms in respect of each license which shall be no more than annual payments of
[**] pounds sterling (£[**]) or any (lesser) sum that may be agreed between CRT and a Third
Party licensee after the Commencement Date in the same field (other than a license pursuant to
which, or under the terms of a related agreement, significant resources are provided by the
Third Party in respect of a collaboration in the field).
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Restrictions on Sublicensing by Alnylam (Section 2.4)
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Any Sub-license entered into by Alnylam must be limited to the Field and contain
restrictions in equivalent terms to those set out in Clause 2.1 of the CRT Agreement.
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Any Sub-license shall terminate automatically on the expiry or termination for whatever
reason of the CRT Agreement. If the CRT Agreement is terminated pursuant to Clause 10 of the
CRT Agreement, CRT has agreed to enter into a direct licensing arrangement with any
Sub-licensee on terms substantially similar to those contained in the CRT Agreement save that
any license granted by CRT to any Sub-licensee shall be consistent with the terms of the
Sub-license granted by Alnylam (or its Affiliate) in relation to field, territory,
exclusivity, rights to sub-license and payment provisions. However, if the CRT Agreement is
terminated by Alnylam pursuant to Clause 10.2 of the CRT Agreement, the foregoing shall apply
save that the granting of such license by
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CRT shall be subject to CRTs consent. Nothing in Clause 2.4 of the CRT Agreement shall confer
upon CRT any obligation to enter into a direct licensing arrangement with the Sub-licensee where
the Sub-licensee is in default of its obligations under the Sub-license. CRT shall not be
expected to take any responsibility for any disputes between Alnylam (or its Affiliate) and its
Sub-licensees relating to the terms of the Sub-license(s) and notwithstanding the foregoing, CRT
shall not be obliged to enter into a direct license with a Sub-licensee in circumstances in
which the Sub-licensee reserves any right to maintain a claim against CRT where such claim was
previously maintained against Alnylam (or its Affiliate).
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Sublicensees are required to undertake to CRT directly to allow the same access to the
books and records as CRT has to Alnylams books and records under the CRT Agreement.
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Sublicensees are restricted with respect to rights to assign in equivalent terms to those
set out in Clause 15 of the CRT Agreement and any further sublicensing must be subject to the
terms of Clause 2.4 of the CRT Agreement.
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Alnylam or its Affiliate shall (subject to Alnylams and its Affiliates right to redact
confidential information not related to CRTs rights hereunder) provide to CRT in confidence a
copy of each and every Platform Sub-license entered into.
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Royalty Payment Obligation (Sections 3.2.1 and 3.3)
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Royalties of [**]% of Net Sales of Royalty Licensed Products in the Field are payable to
CRT.
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If at any time prior to or during the period for the payment of royalties under the CRT
Agreement in relation to any particular territory, a Sub-licensee elects in its reasonable
opinion to take a license from a Third Party to any Blocking IP to develop, make, sell, or
otherwise dispose of Licensed Products, the royalties set forth in Clause 3.2.1 shall be
reduced by [**]% of the amount paid to such Third Party to access said Blocking IP. In no
event shall the royalty payable to CRT be reduced below [**]%.
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Royalty Reports and Payment (Sections 4.2.1 and 5.1)
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Royalty payments are required to be made to CRT within 30 days of the end of the Quarter in
which sales of the relevant Licensed Products took place.
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Following the earlier of first commercial sale of a Licensed Product in the Field by
Alnylam or its Affiliate or the grant of a Sub-license, Alnylam is required to prepare an
annual statement showing all monies due to CRT under the CRT Agreement for the previous
calendar year, on a country by country basis. The statement shall include the number of units
of each Royalty Licensed Product sold in each country in which sales occurred, and shall be
submitted to CRT within 60 Business Days of March 31st of each year. If CRT gives notice
pursuant to the CRT Agreement that it does not accept the statement, Alnylam shall make
available to an independent accountant all books and records required for the purpose of
certifying such statement.
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Books and Records (Section 5.2)
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Sub-licensees are required to keep true and accurate records and books of account
containing all data necessary for calculating amounts payable to CRT. Such records and books
of account shall be kept for 5 years following the end of the calendar year to which they
relate, and shall, upon reasonable notice having been given by CRT, be open at all reasonable
times on Business Days for inspection by an independent firm of accountants.
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Diligence and Reporting (Article 6)
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Alnylam shall use reasonable efforts to develop, make, market, sell, and otherwise dispose
of Licensed Products in all therapeutic areas within the Field and market each Licensed
Product in the Field throughout the United States, Europe and Japan.
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CRT shall provide notice to Alnylam of its knowledge of a willing potential sub-licensee.
Without prejudice to Clause 6.1 of the CRT Agreement, in the event that Alnylam (itself or
through Affiliates or Sub-licensees) declines to develop, make, market, sell or otherwise
dispose of Licensed Products in any therapeutic area or any indication within the cancer
therapeutic area within the Field or any territory within the Territory in the Field, Alnylam
shall (save as hereinafter provided) upon direct approach made by, or receipt of notice from
CRT of a willing potential sublicensee in respect of a Licensed Product that has demonstrated
clinical efficacy be obliged to enter into negotiations in good faith with such Third Party to
enter into a Sub-license in relation to such therapeutic area, indication, or territory. The
preceding provisions of Clause 6.2 of the CRT Agreement shall not apply in respect of any
therapeutic area, indication, or territory in respect of which Alnylam provides to CRTs
reasonable satisfaction evidence that the conclusion of a Sub-license would:
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(a) be contrary to sound and reasonable business practice applicable to pharmaceutical
development; or
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(b) not materially increase the availability of therapeutic products covered by the CRT
Patent Rights.
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If CRT believes that Alnylam has failed to meet the diligence requirements set forth in
Clause 6 of the CRT Agreement, but Alnylam fails to reestablish diligence within [**] of
receipt of notice from CRT, CRTs remedy is limited to, at CRTs discretion, termination of
Alnylams license under the CRT Patent Rights in the particular territory or therapeutic area
or, with respect to Clause 6.2 of the CRT Agreement, indication within the cancer therapeutic
area for which Alnylam has failed to meet the diligence requirements. For the sake of
clarity, should Alnylams license be terminated in respect of a therapeutic area or territory
pursuant to Clause 6.3 of the CRT Agreement, CRT shall be free to offer such therapeutic area
or territory to a potential licensee.
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Within 30 days of the end of each Year, Alnylam shall provide CRT with a written report of
the steps taken by Alnylam, its Affiliates and Sub-licensees to comply with the performance
obligations of Clause 6.1 and Clause 6.2 of the CRT Agreement. Alnylams annual statement
shall also include a detailed description of therapeutic areas and territories under
development and an overview of Alnylams development plans for the forthcoming year (itself or
through Affiliates or Sub-licensees).
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If Alnylam intends to undertake a Phase I Clinical Trial of any Licensed Product in the UK,
Alnylam shall, at its option, notify CRT with the particulars of the proposed investigation,
and allow Cancer Research UK the opportunity of conducting or procuring the conduct of the
investigation on behalf of Alnylam or participate in such an investigation, subject to the
agreement of terms acceptable to Alnylam, CRT and Cancer Research UK.
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Prosecution and Enforcement (Sections 7.1, 7.2, 7.4 and 7.5)
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CRT shall or shall procure in consultation with and (except as set forth in Clause 7.2) at
the reasonable expense of Alnylam the filing, prosecution, and maintenance of any patents and
patent applications comprised within the CRT Patent Rights. Alnylam shall bear (except as set
forth in Clause 7.2) the full expense and shall reimburse in full and hold CRT harmless in
respect of any and all reasonable fees, charges, costs, levies or expenses incurred by CRT or
its agents after the Commencement Date in relation to such applications.
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The reasonable costs of opposition and interference proceedings in relation to the CRT
Patent Rights (together
Challenges
) shall be borne equally by the Parties. In the
event that the total aggregate costs of Challenges in any year exceed $[**], CRT shall be free
to make no further contribution to the costs of Challenges and all further costs incurred
during that year (
Further Challenge Costs
) and, at Alnylams option, the future
control of such Challenge(s) shall be borne by Alnylam solely. CRT shall give credit for
[**]% of Further Challenge Costs actually paid by Alnylam against sums due from Alnylam to CRT
pursuant to Clause 3 of the CRT Agreement from that time forward. In the event that one or
more of the CRT Patent Rights are the subject of a declaration of interference by the USPTO as
interfering with claims in a patent or patent application which is owned by or licensed by
Alnylam or its Affiliate, CRT and Alnylam shall negotiate in good faith to reasonably agree on
a mechanism outside the USPTO which simplifies the issues involved in determining priority and
which awards priority to the appropriate party to the interference.
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In any country where Alnylam elects not to have a patent application included in CRT Patent
Rights filed or to pay expenses associated with filing, prosecuting, interference or
equivalent proceedings, or maintaining a patent application or patent included in CRT Patent
Rights, CRT may file, prosecute, continue with interference or equivalent proceedings, and/or
maintain such patent application or patent at its own expense and for its own exclusive
benefit and Alnylam (and its Affiliates) thereafter shall not be licensed under such patent or
patent application. For the sake of clarity, should Alnylam elect not to continue with
interference or equivalent proceedings and CRT elect to continue with such proceedings,
Alnylam (and its Affiliates) shall cease to be licensed for the patent subject to interference
for that territory.
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Alnylam shall, at its option and at its own cost, defend and enforce or shall procure the
defense or enforcement of the rights under the CRT Patent Rights. If Alnylam opts not to
defend or enforce the relevant CRT Patent Rights, Alnylam shall grant to CRT (if CRT so
requests) any and all rights that would be necessary for CRT to undertake the enforcement or
defense. If Alnylam is unable to grant such rights, then it shall, at CRTs request, grant to
CRT the right to conduct such an action in its name. Alnylam shall provide, at CRTs request
and CRTs reasonable expense, such reasonable assistance as CRT may reasonably request in any
such proceedings.
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Termination for Patent Challenge (Section 10.5)
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CRT may terminate the CRT Agreement upon 30 days written notice to Alnylam if Alnylam or
its Affiliate commences legal proceedings, with the exception of interference proceedings
declared by the USPTO or any other patent office, contesting the validity of the CRT Patent
Rights; or commences itself, or provides any material assistance to a Third Party in relation
to, legal proceedings contesting the ownership of the CRT Patent Rights. Any actions taken
concerning determination of priority of invention under US patent law between a CRT Patent
Right and claims in a patent or patent application which is owned by or licensed by Alnylam or
its Affiliate shall not be considered a contest of validity or ownership under Clause 10.5 of
the CRT Agreement.
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Termination by Alnylam at Will (Section 10.2)
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Alnylam may terminate the CRT Agreement by written notice to CRT, and the CRT Agreement
will terminate 90 days after receipt by CRT of such notice
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Definitions
:
Blocking IP means any and all Patent Rights (other than that licensed under the CRT Agreement)
which, if claims covering subject matter of such Patent Rights issue, would render the use,
development, manufacture, sale, or other disposal of a Licensed Product unlawful in the absence of
a license to such Patent Rights from a Third Party.
CRT Patent Rights means the patent applications referred to in Schedule 1 (entitled Inhibiting
Gene Expression with dsRNA) and all Patent Rights deriving priority from them and all Patent
Rights deriving priority from such Patent Rights.
Field means the development of RNAi therapeutic products for the treatment of human disease
(including by means of gene therapy).
Licensed Products means product or products which, or the process of production of which, or the
use of which falls within the scope of a Valid Claim of the CRT Patent Rights and Licensed Product
shall be construed as any one of them.
77
SCHEDULE 6.4
EXISTING ALNYLAM IN-LICENSE AGREEMENT SUMMARIES
[**]
78
STANFORD
Agreement between the Board of Trustees of the Leland Stanford Junior University
(
Stanford
) and Alnylam, dated September 17, 2003 (
Stanford Agreement
)
Brief Summary of Technology Covered by License
:
Stanford granted Alnylam co-exclusive rights under an invention relating to Efficient RNA
Transfection in the Livers of Living Mice from the laboratory of Mark Kay, and certain patent
rights relating to [**] for the delivery of ex-vivo synthesized siRNA Molecules for research,
development and therapeutic uses.
Limitations on Scope of License (Articles 3 and 4; Sections 6.10, 13.2 and 13.7)
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The license granted to Alnylam is limited to a worldwide license under the Invention and
Licensed Patents in the Licensed Field of Use to make, have made, use, have used, sell, have
sold, import, and have imported Licensed Product.
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The license to Alnylam is Co-Exclusive, including the right to sublicense in the Licensed
Field of Use. If the other Co-Licensee discontinues licensing this Field of Use, then the
Field of Use will become exclusive for Alnylam. If the other Co-Licensee discontinues any
other therapeutic license under the Licensed Patents, Stanford will so inform Alnylam and
Alnylam will have the option to obtain an exclusive, worldwide sublicensable license to such
therapeutic field. The terms of any such license will be negotiated in good faith by Stanford
and Alnylam. This option may be exercised by Alnylam by written notice to Stanford at any
time during a period of 90 days after notification by Stanford.
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Stanford may practice the Invention and use the Technology for its own bona fide research,
including sponsored research and collaborations. Stanford has the right to publish any
information included in the Technology and Licensed Patents.
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The Stanford Agreement is subject to all of the terms and conditions of Title 25 USC
200-204, including an obligation that Licensed Product sold or produced in the U.S. be
manufactured substantially in the U.S. Alnylam will take all reasonable action necessary on
its part as licensee to enable Stanford to satisfy its obligations to the U.S. Government
under Title 35.
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If Alnylam or its sublicensee(s) is unable or unwilling to serve or develop a potential
market or market territory for which there is a willing sublicensee, Alnylam will, at
Stanfords request, negotiate in good faith a sublicense under the Licensed Patents, provided
that the same request has been made of the other Co-Exclusive licensee. Bona fide business
concerns of Alnylam will be considered in any good faith negotiations for a sublicense under
the Stanford Agreement and Alnylam will not be required to license/sublicense any other
intellectual property to such sublicensee. If the other Co-Exclusive licensee itself or
through its sublicensees is already developing a product in the market or market territory for
which there is a willing sublicensee, Alnylam will not be required to sublicense to such
party. If any other issue arises in the context of such required sublicensing, Stanford will
discuss and try to resolve such issue with Alnylam in good faith.
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Alnylam may grant royalty-free or noncash sublicenses or cross-licenses only if Alnylam
pays all royalties due Stanford from sublicensees Net Sales.
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Diligence and Reporting (Article 5)
|
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Alnylam is required to use all commercially reasonable efforts and diligence to develop,
manufacture, and sell or lease Licensed Product and to diligently develop markets for the
Licensed Product. In particular, Alnylam is required to meet the following milestones, which
will satisfy Alnylams diligence obligations: (1) By the end of the year 2005, Alnylam will
select the method of delivery. (2) By the end of the year 2006, Alnylam will optimize the
lead. (3) By the end of the year 2008, Alnylam will conclude preclinical development. If
Alnylam in good faith fails to meet a milestone set forth above, and Alnylam fails to
reestablish diligence within [**], Stanford may terminate the Stanford Agreement. Stanford
may also terminate the Stanford Agreement if Alnylam has not sold Licensed Product for any
[**] period after Alnylams first commercial sale of Licensed Product. Efforts of Alnylams
sublicensees or Affiliates will be considered efforts of Alnylam.
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On or before September 30 of each year until Alnylam markets a Licensed Product, Alnylam is
required to make a written annual report covering the preceding year ending June 30, regarding
progress toward commercialization of Licensed Product. The report must include, as a minimum,
information (e.g., summary of work completed, key scientific discoveries, summary of work in
progress, current schedule of anticipated events or milestones and market plans for
introduction of Licensed Product) sufficient to enable Stanford to satisfy reporting
requirements of the U.S. Government, and for Stanford to ascertain progress by Alnylam toward
meeting the diligence requirements of Article 5 of the Stanford Agreement.
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Royalty Payment Obligation (Article 6)
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On each anniversary of the Effective Date, a minimum yearly royalty of $[**] must be paid
to Stanford, which payments are non-refundable but creditable against earned royalties to the
extent provided in Section 6.4.
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Earned royalties of [**]% of Net Sales for Licensed Product are payable to Stanford,
subject to the following:
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(i)
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Royalty Payments are reduced up to [**]% (from [**]% of Net Sales down to [**]%
of Net Sales) by the amount of royalty paid to access additional intellectual property
necessary in order to sell Licensed Products (
Additional Earned Royalties
).
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(ii)
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Such royalty payments shall be reduced as follows:
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(1)
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[**]% if Additional Earned Royalties are [**]% or less.
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(2)
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[**]% if Additional Earned Royalties are greater than [**]% but
less than [**]%.
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(3)
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[**]% if Additional Earned Royalties are equal to or greater than
[**]% but less than [**]%.
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(4)
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[**]% if Additional Earned Royalties are equal to or greater than
[**]% but less than [**]%.
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(5)
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[**]% if Additional Earned Royalties are equal to or higher than
[**]%.
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(iii)
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Only one royalty is due on each Licensed Product, regardless of whether its
manufacture, use, importation, or sale is covered by more than one patent or patent
application included in Licensed Patents, and no further royalties will be due for use
of such Licensed Product by Alnylam or its sublicensees customers.
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Creditable payments under the Stanford Agreement will be an offset against each earned
royalty payment which is required to be paid under Section 6.3 until the entire credit is
exhausted.
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If the Stanford Agreement is not terminated in accordance with other provisions, royalties
must continue to be paid on all Licensed Products that are either sold or produced under the
license granted in Article 3, whether or not such Licensed Products are produced before the
Effective Date or sold after the Licensed Patents have expired.
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Restrictions on Sublicensing by Alnylam (Sections 13.1, 13.3-13.5 and 13.7)
|
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Alnylam may grant sublicenses in the Co-exclusive Licensed Field of Use during the
Co-Exclusive period (a) only in conjunction with intellectual property under Alnylams
control; and (b) only if Alnylam is developing or selling Licensed Products in the
Co-Exclusive Licensed Field of Use.
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Any sublicense granted by Alnylam under the Stanford Agreement must be subject and
subordinate to the terms and conditions of the Stanford Agreement.
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Any sublicense will expressly include the provisions of Articles 7 (Royalty Reports,
Payments and Accounting), 8 (Negation of Warranties) and 9 (Indemnity) for the benefit of
Stanford.
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If a sublicensee desires that its sublicense survive the termination of the Stanford
Agreement, Stanford has agreed that the sublicense will revert to Stanford subject to the
transfer of all obligations, including the payment of royalties specified in the sublicense,
to Stanford or its designee, if the Stanford Agreement is terminated.
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Alnylam will provide Stanford in confidence a copy of all relevant portions of any
sublicenses granted under the Stanford Agreement.
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Restrictions on Further Sublicensing by Sublicensee (Section 13.3)
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Sublicensees may not further sublicense, except that Sublicensees may further sublicense
rights under Licensed Patents only as needed or implied in the course of distribution or
performance of service as required for the sale to an end user of Licensed Products.
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Royalty Reports, Payments, and Accounting (Article 7)
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Beginning with the first sale of a Licensed Product, Alnylam is required to make written
reports (even if there are no sales) and earned royalty payments within 30 days after the end
of each calendar quarter. The report must be in the form of
Appendix B
to the
Stanford Agreement and state the number, description, and aggregate Net Sales of Licensed
Product during the completed
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calendar quarter, and calculation of earned royalty payment due. With each report, royalty
payments due for the completed calendar quarter must be paid.
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A written report is due within 90 days after the license expires under Section 3.2 of the
Stanford Agreement. Alnylam is required to continue to make reports after the license has
expired, until all Licensed Product produced have been sold or destroyed. Royalty payments
must also continue to be made, concurrent with the submittal of each post-termination report.
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Records must be kept and maintained for 3 years showing the manufacture, sale, use, and
other disposition of products sold or otherwise disposed of under the license, including
general-ledger records of cash receipts and expenses, as well as other information sufficient
to determine royalties due, including production records, customers, and serial numbers, and
related information in sufficient detail to enable Alnylam to determine the royalties payable
under the Stanford Agreement.
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An independent certified public accountant selected by Stanford and acceptable to Alnylam
is permitted to examine such books and records from time to time (but no more than once a
year) to the extent necessary to verify the royalty and termination reports as detailed in the
Stanford Agreement.
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Prosecution and Enforcement (Section 6.9; Article 12)
|
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Stanford will be responsible for the filing, prosecution and maintenance of the Licensed
Patents. Throughout the term of the Stanford agreement, Alnylam will retain rights to any
claims that have support in the Licensed Patents, whether or not they are in a CIP. If
Stanford elects not to continue to seek or maintain patent prosecution on any Licensed Patent
in any country during the co-exclusive term despite Alnylams willingness to pay its share of
the prosecution costs, Alnylam will have the right, at its expense, to procure, maintain and
enforce in any country such Licensed Patent.
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Stanford, Alnylam and the other Co-Exclusive licensee will meet to discuss any suspected
infringement of any Licensed Patent by a third party during the Co-Exclusive period of the
Stanford Agreement. If the Field-of-Use becomes Exclusive for Alnylam, Stanford and Alnylam
will meet to discuss the matter during the Exclusive period of the Stanford Agreement.
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If Stanford does not choose to institute suit against said third party within 60 days of
notification, then the suit may be brought in both Alnylams and the other Co-Exclusive
licensees names, and Stanfords name if necessary, and Alnylam and Co-Exclusive licensee will
share equally the out-of-pocket costs thereof and any recovery or settlement. In such
situation, Alnylam and the other Co-Exclusive licensee will agree to the manner in which they
exercise control over such action and if either party desires to also be represented by
separate counsel of its own selection, such party will pay the fees for such counsel.
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If both Stanford and the other Co-Exclusive licensee, or Stanford if there is no other
Co-Exclusive Licensee, choose not to institute suit against said third party within 60 days of
notification, then Alnylam will have the right to institute suit in its own name or if
necessary, in Stanfords name, to enjoin such infringement. Alnylam will bear the entire cost
of such litigation and will be entitled to
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retain the entire amount of any recovery or settlement. However, any recovery in excess of
litigation/settlement costs will be considered Net Sales and Alnylam must pay Stanford royalties
as indicated in Article 6 of the Stanford Agreement.
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Negation of Warranties (Article 8)
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Stanford has represented and warranted to Alnylam that, to the best of Stanfords OTL
knowledge, Stanford is the sole owner of Stanford Licensed Patents and has the right to enter
into the Stanford Agreement and to grant the rights and licenses set forth therein.
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Notwithstanding the foregoing, nothing in the Stanford Agreement or any sublicense
agreement shall be construed as:
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(i) Stanfords warranty or representation as to the validity or scope of any Licensed
Patent;
(ii) A warranty or representation that anything made, used, sold, or otherwise disposed of
under any license granted under the Stanford Agreement or any sublicense agreement is or
will be free from infringement of patents, copyrights, and other rights of third parties;
(iii) An obligation to bring suit against third parties for infringement, except as
described in Article 12 of the Stanford Agreement;
(iv) Granting by implication, estoppel, or otherwise any licenses or rights under patents or
other rights of Stanford or other persons other than Licensed Patents, regardless of whether
the patents or other rights are dominant or subordinate to any Licensed Patents; or
(v) An obligation to furnish any technology or technological information.
Except as expressly set forth in the Stanford Agreement, it is acknowledged and agreed that
Stanford makes no representations and extends no warranties of any kind, either express or
implied. There are no express or implied warranties of merchantability or fitness for a
particular purpose, or that Licensed Products will not infringe any patent, copyright,
trademark, or other rights, or any other express or implied warranties.
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Nothing in the Stanford Agreement or any sublicense agreement grants any sublicensee any
express or implied license or right under or to U.S. Patent 4,656,134 entitled Amplification
of Eucaryotic Genes or any patent application corresponding thereto.
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Indemnification and Insurance (Article 9)
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Alnylam is required to indemnify, hold harmless, and defend Stanford and Stanford Hospitals
and Clinics, and their respective trustees, officers, employees, students, and agents against
all claims for death, illness, personal injury, property damage, and improper business
practices arising out of the manufacture, use, sale, or other disposition of Invention,
Licensed Patents, Licensed Products, by Alnylam or any sublicensee, or their customers except
to the extent such claims are due to the gross negligence or willful misconduct of Stanford.
Upon notification to Alnylam in writing of any such claim, Alnylam shall manage and control,
at its own expense, the defense of such claim and its settlement. Alnylam agrees not to settle
any such claim against Stanford without Stanfords written consent where such settlement would
include any admission of liability on the part of Stanford, where the settlement would impose
any restriction on the conduct by Stanford of any of
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its activities, or where the settlement would not include an unconditional release of Stanford
from all liability for claims that are the subject matter of such claim.
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Subject to Section 9.1, neither Stanford nor Alnylam shall be liable to each other for any
loss profit, expectation, punitive or other indirect, special, consequential, or other damages
whatsoever, in connection with any claim arising out of or related to the Stanford Agreement
whether grounded in tort (including negligence), strict liability, contract, or otherwise.
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Alnylam shall at all times comply, through insurance or self-insurance, with all statutory
workers compensation and employers liability requirements covering all employees with
respect to activities performed under the Stanford Agreement.
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Alnylam shall maintain, during the term of the Stanford Agreement, Comprehensive General
Liability Insurance, including Product Liability Insurance prior to commercialization, with a
reputable and financially secure insurance carrier to cover the activities of Alnylam and its
sublicensees. Upon initiation of human clinical trials of any Licensed Product, such insurance
will provide minimum limits of liability of Five Million Dollars and will include Stanford and
Stanford Hospitals and Clinics, and their respective trustees, directors, officers, employees,
students, and agents as additional insureds. Insurance will be written to cover claims
incurred, discovered, manifested, or made during or after the expiration of the Stanford
Agreement and must be placed with carriers with ratings of at least A- as rated by A.M. Best.
Alnylam will furnish a Certificate of Insurance evidencing primary coverage and additional
insured requirements and requiring thirty (30) days prior written notice of cancellation or
material change to Stanford. Alnylam will advise Stanford, in writing, that it maintains
excess liability coverage (following form) over primary insurance for at least the minimum
limits set forth above. All insurance of Alnylam will be primary coverage; insurance of
Stanford and Stanford Hospitals and Clinics will be excess and noncontributory.
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Certain Termination Rights (Section 14.1)
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Alnylam has the right to terminate the Stanford Agreement by giving Stanford at least 30
days prior written notice.
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Definitions
:
Co-Exclusive
means that Stanford will only grant one further license in the Licensed
Territory in the Licensed Field of Use.
Invention
means Efficient RNA Transfection in the Livers of Living Mice from the
laboratory of Mark Kay, as described in Stanford Docket S00-012.
Licensed Field of Use
means delivery of ex-vivo synthesized siRNA Molecules for research,
development and therapeutic uses (including a diagnostic necessary for development, sale or
reimbursement of a therapeutic Licensed Product). The Licensed Field of Use specifically excludes
delivery of any system producing
in
vivo
expressed siRNAs for therapeutic use,
including but not limited to episomal and integrated vectors, and recombinant viruses.
Licensed Patents
means all patent applications filed on the Invention and all patents
issuing thereon, including certain patent applications entitled [**] and any divisions,
continuations and any foreign
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patent application or equivalent corresponding thereto, and any Letters patent or equivalent
thereof issuing thereon or reissue, reexamination or extension thereof. Continuation-in-part
applications that are offered to the other co-exclusive licensee will also be offered to Alnylam
for licensing in the Licensed Field of Use.
Licensed Product
means any product or part in the Licensed Field of Use, the manufacture,
use or sale of which (a) is covered by a valid claim of an issued, unexpired Licensed Patent
directed to the Invention in the country in which it is made, used or sold; or (b) is covered by
any claim being prosecuted in a pending application of Licensed Patents in the country in which it
is made, used or sold unless such claim has been pending in such application or an earlier
application of Licensed Patents for greater than [**] years.
siRNA Molecule
means an agent that modulates expression of a target gene by an RNA
interference mechanism.
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ISIS
Strategic Collaboration & License Agreement between Isis Pharmaceuticals, Inc. (
Isis
),
and Alnylam, dated March 11, 2004, as supplemented or amended by letter agreements dated March 9,
2004 (as amended by letter agreement dated October 28, 2005), March 11, 2004, June 10, 2005 and two
letter agreements dated January 31, 2008 (as amended,
Isis Agreement
)
Brief Summary of Technology Covered by License
:
Isis granted Alnylam co-exclusive rights to develop and commercialize certain double-stranded RNAi
products under certain patent rights and know-how, including Isis Current Motif and Mechanism
Patents, Isis Current Chemistry Patents, Isis Future Motif and Mechanism Patents and Isis Future
Chemistry Patents.
Alnylam granted Isis non-exclusive rights (including options) to research and develop certain
single-stranded and double-stranded RNAi products, and to develop and commercialize certain
single-stranded RNAi products, under certain patent rights and know-how, including Alnylam Current
Motif and Mechanism Patents, Alnylam Current Chemistry Patents, Alnylam Future Motif and Mechanism
Patents and Alnylam Future Chemistry Patents.
Limitations on Scope of License (Section 5.1 and 5.3; Article 6, as amended on March 11, 2004
and January 31, 2008; Sections 10.2 and 11.7)
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Alnylam is granted co-exclusive (with Isis) licenses under Isis Current Motif and Mechanism
Patents and Isis Current Chemistry Patents and subject to Section 11.8 under Isis Future Motif
and Mechanism Patents, Isis Future Chemistry Patents and Isis rights in Joint Patents to
research, develop, make, have made, use, import, offer to sell and sell Double Stranded RNA
and Double Stranded RNA Products.
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The licenses granted to Alnylam exclude the right to practice the Isis Excluded Technology.
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Isis retains its rights in the Isis Patent Rights and in the Joint Patents (x) exclusively
for the Isis Exclusive Targets and (y) exclusively for the Isis Encumbered Targets.
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Licenses to Isis Patent Rights that are joint patents with Third Parties (i.e., invented by
one or more Isis inventors and one or more non-Isis inventors) are licensed subject to the
retained rights of any non-Isis inventors and their assignees and licensees. Any such
retained rights of non-Isis inventors and their assignees and licensees existing as of the
Effective Date are set forth in Exhibit 5.3(c) attached to the Addendum Transmittal to the
Isis Agreement.
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Licenses to Isis Patent Rights that are subject to contractual obligations between Isis and
Third Parties in effect as of the Effective Date are licensed subject to the restrictions and
other terms described in Exhibit 5.3(d) attached to the Addendum Transmittal to the Isis
Agreement. Alnylams sublicensees are required to comply with such restrictions and other
terms.
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Alnylam is granted a non-exclusive license, with no right to sublicense, to practice any
Know-How disclosed to Alnylam during the performance of the Isis Agreement, subject to the
non-disclosure obligations set forth in Article 12 of the Isis Agreement.
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In addition, any licenses granted by Alnylam to a Third Party under Alnylam Patent Rights would be
subject to the following:
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Isis is granted non-exclusive licenses to research, develop, make, have made, use and
import Isis Products for Research Use, and to research, develop, make, have made, use, import,
offer to sell and sell Isis Single Stranded Products.
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For each Gene Target in the Isis Target Pool, Isis is granted an option, exercisable during
a specified period, to obtain a non-exclusive license to research, develop, make, have made,
use, import, offer for sale and sell Double Stranded RNA and Double Stranded RNA Products.
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The foregoing non-exclusive licenses, and options to obtain non-exclusive licenses, exclude
the right to practice the Alnylam Excluded Technology.
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The licenses to Alnylam Patent Rights initially shall not include licenses to Patents
licensed by Alnylam from Stanford University, provided, that, if any such licensed Patent
become issued Patents, Isis shall have the option of expanding its licenses to Alnylam Patent
Rights to include such issued Patents.
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Isis is granted an option to sublicense certain patent rights licensed by Alnylam from
Cancer Research Technology Limited pursuant to the CRT License.
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Isis is also granted a non-exclusive license to practice any Know-How disclosed to Isis
during the performance of the Isis Agreement, subject to the non-disclosure obligations set
forth in Article 12 of the Isis Agreement.
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If Alnylam grants to any Third Party that is not a Major Pharmaceutical Company a license
under the Alnylam Patent Rights to develop and commercialize Double Stranded RNA Products,
then if (a) either (i) the [**] terms of such license are more favorable to the Third Party
than the [**] terms under the Isis Agreement with respect to Isis Products are to Isis, or
(ii) the [**] covered by such license exceeds the [**] potentially licensed to Isis under the
Isis Agreement for development and commercialization of Double Stranded RNA Products, and (b)
the roles to be played by Alnylam and such Third Party in the development and
commercialization of Double Stranded RNA Products under such Third Party license, the nature
of the Gene Targets covered by such Third Party license and any other relevant terms of such
Third Party license do not collectively justify the conditions described in the preceding
clauses (a)(i) and/or (a)(ii), then Alnylam shall modify the terms of its licenses to Isis
under the Isis Agreement with respect to such conditions so that they are reasonably
equivalent to those granted to the Third Party.
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The Parties are obligated to consult about the need to license any patents Controlled by
Third Parties that would be useful or necessary for either Party to research, develop, make,
have made, use, sell, offer for sale or import Double Stranded RNA Products. If it is agreed
that there is a desire to obtain a license or to acquire any such patent, the Parties will
negotiate in good faith regarding (i) the share of the financial obligations relating to the
license or acquisition that each Party will bear; (ii) the compensation of any acquisition
costs incurred in connection with obtaining the patent rights; and (iii) an agreement by the
Parties to abide by all terms of the agreement under which the patent rights are granted.
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Certain Sublicense Terms (Sections 5.2, 5.3 and 14.4)
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Alnylam is not permitted to grant sublicenses under its co-exclusive licenses, except Naked
Sublicenses or in connection with a Bona Fide Drug Discovery Collaboration or a Development
Collaboration.
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Alnylam cannot sublicense its right to grant Naked Sublicenses under the Isis Agreement
except that Alnylam may permit its sublicensees to grant further sublicenses in connection
with an Alnylam Product.
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The rights of any sublicensee under any permitted sublicense granted in accordance with
Section 5.2 will survive the termination of the Isis Agreement.
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***Royalty Payment Obligations (Section 7.2)
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Royalties are payable to Isis on sales of Alnylam Products, equal to [**]% of Net Sales.
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The royalty may be reduced by [**]% of any additional royalties that Alnylam owes to Third
Parties on such Alnylam Product that arise from Alnylam acquiring access to new technologies
after the Effective Date (as defined in the Isis Agreement); provided, however that (a) the
royalty due under this section can never be less than a floor of [**]% and (b) additional
royalties arising as the result of the addition, pursuant to Section 11.8, of Isis Future
Chemistry Patents or Isis Future Motif and Mechanism Patents to the Isis Patent Rights
licensed to Alnylam cannot be used to reduce the royalty.
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Payment Terms and Reports (Section 9.1)
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Royalties payable under the Isis Agreement are payable on a quarterly basis within 45 days
after the end of each calendar quarter. Alnylam is required to provide Isis with a report
setting forth (i) gross sales of Alnylam Products by Alnylam, its Affiliates and sublicensees,
(ii) all deductions from such gross sales taken in calculating Net Sales, (iii) Net Sales of
Alnylam Products by Alnylam, its Affiliates and sublicensees, (iv) royalties payable based on
such Net Sales and (v) all other information relevant to the calculation of such royalties, on
a product-by-product and country-by-country basis, for each calendar quarter within [**] days
after the end of such calendar quarter.
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Prosecution; Enforcement (Article 11)
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Isis will be responsible for preparing, filing, prosecuting, maintaining and taking such
other actions as are reasonably necessary or appropriate with respect to the Isis Patent
Rights. Alnylam will be responsible for preparing, filing, prosecuting, maintaining and
taking such other actions as are reasonably necessary or appropriate with respect to the
Alnylam Patent Rights. The RMC will designate the Party responsible for prosecuting and
maintaining any Joint Patents.
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Alnylam will have the sole and exclusive right to assert and enforce any Isis Patent
Rights, Alnylam Patent Rights or Joint Patents against any party engaging in an unlicensed or
unauthorized making, having made, using, selling, offering for sale or importing of any
allegedly infringing Double Stranded RNA;
provided
,
however
,
that
Isis
will actively participate in the planning and conduct of any enforcement by Alnylam that
includes Isis Patent Rights covering a [**] chemical
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modification and will take the lead of such enforcement to the extent that the scope or validity
of any such Isis Patent Rights covering a [**] chemical modification is at risk. Otherwise,
Isis will have sole and exclusive right to assert and enforce any Isis Patent Rights, Alnylam
will have sole and exclusive right to assert and enforce any Alnylam Patent Rights, and the RMC
will agree in advance on the enforcement of any Joint Patent. A Partys enforcement rights are
further limited under the Addendum Transmittal.
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If the Enforcing Party fails to initiate proceedings against any actual or suspected
infringement within [**] and if the infringer is directly competing with the Nonenforcing
Partys Affected Product, then either (a) the Nonenforcing Party has step-in rights if the
license granted to such Party is exclusive or co-exclusive or (b) the Nonenforcing Party will
not be obligated to pay royalties during the period for which the Enforcing Party fails to
take action to eliminate the infringement if the license granted to such Party is
non-exclusive; provided, that clause (b) shall not apply if the Enforcing party elects to
grant the Nonenforcing Party enforcement rights with respect to such infringement. The
Enforcing Party will not grant a license to any such infringing Third Party with respect to
any directly competitive infringing product on terms materially more favorable (milestones and
royalties) than the terms of the license granted hereunder to the Nonenforcing Party or,
solely with respect to the Affected Product, will adjust the terms of such license so that
they are not materially less favorable than the terms of the license granted to the infringing
Third Party.
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Definitions
:
Alnylam Excluded Technology means inhibitors to specific genes or gene families, manufacturing
and analytical technologies, formulation and delivery technologies and the specific technology
listed on Schedule 1-6 attached to the Addendum Transmittal.
Alnylam Patent Rights means Alnylam Current Motif and Mechanism Patents, Alnylam Future Motif and
Mechanism Patents, Alnylam Current Chemistry Patents and Alnylam Future Chemistry Patents.
Alnylam Product means a Double Stranded RNA Product or MicroRNA Product discovered or developed
by Alnylam, its Affiliates or sublicensees, the manufacture, sale or use of which is covered by a
Valid Claim within the Isis Patent Rights.
Bona Fide Drug Discovery Collaboration means a collaboration involving the discovery and
development of Double Stranded RNA Products in which a Party plays an integral role in the
experimentation and an important, though not necessarily dominant or co-equal, role in the
decision-making, relating to the discovery and development of Double Stranded RNA Products from the
point in time at which the relevant Gene Target has been designated through the initiation of [**].
A Bona Fide Drug Discovery Collaboration may continue beyond the initiation of such [**]. For Isis
Products that are Double Stranded RNA Products, a Bona Fide Drug Discovery Collaboration must be an
Antisense Drug Discovery Program. For each Party, collaborations that do not include or involve
Patents licensed from the other Party hereunder shall not constitute Bona Fide Drug Discovery
Collaborations. A Partys experimentation relating to the discovery and development of Double
Stranded RNA Products that modulate a relevant Gene Target prior to the commencement of a
collaboration shall be deemed to have been conducted in the course or the collaboration for
purposes or determining whether the collaboration is a Bona Fide Drug Discovery collaboration. A
series of related collaborations and/or license agreements involving the discovery and development
of Double Stranded
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RNA Products with the same sublicensee or related sublicensees that includes a Bona Fide Drug
Discovery Collaboration agreement will be aggregated to constitute a single Bona Fide Drug
Discovery Collaboration.
Development Collaboration means a collaboration by either Party with a Third Party whose purpose
is the further development and/or commercialization of a Double Stranded RNA Product and that
begins at or after the initiation of IND-Enabling Studies for such Product. For each Party,
collaborations that do not include or involve Patents licensed from the other Party hereunder shall
not constitute Development Collaborations.
Double Stranded RNA means a composition designed to act primarily through an RNAi mechanism that
is not a MicroRNA Construct and which consists of either (a) two separate oligomers of native or
chemically modified RNA that are hybridized to one another along a substantial portion (greater
than or equal to 25%) of their lengths, or (b) a single oligomer of native or chemically modified
RNA that is hybridized to itself by self-complementary base-pairing along a substantial portion
(greater than or equal to 25%) of its length to form a hairpin.
Double Stranded RNA Product means a pharmaceutical composition that contains a Double Stranded
RNA.
Gene Target means a transcriptional unit of a gene, including any protein product of such
transcriptional unit, and including all splice variants.
Isis Encumbered Targets means a Gene Target (a) to which Isis has a contractual obligation to a
Third Party existing as of the Effective Date that precludes Isis from granting a license under
Section 5 with respect to such Gene Target and (b) that is identified and described on a List (as
defined in the letter agreement date March 9, 2004 between Alnylam and Isis).
Isis Excluded Technology means (a) RNase H mechanisms, RNase H motifs and RNase H
oligonucleotides when utilized in an RNase H mechanism, assays and methods thereof; (b) modulators
of specific genes, gene families or proteins; (c) manufacturing technologies; (d) analytical
technologies, kits and assays, including without limitation methods, systems and compositions of
matter for amplifying, quantifying, detecting, characterizing or identifying nucleic acids or
nonoligomeric ligands thereto; (e) formulation and delivery technologies; and (f) the specific
technology listed on Schedule 1-30 attached to the Addendum Transmittal.
Isis Exclusive Targets refer to the Reserved Targets which are designated by Isis as Isis
Exclusive Targets.
Isis Patent Rights means Isis Current Motif and Mechanism Patents, Isis Future Motif and
Mechanism Patents, Isis Current Chemistry Patents and Isis Future Chemistry Patents.
Isis Products means any Isis Single Stranded Product, MicroRNA Product or Double Stranded RNA
Product, discovered or developed by Isis, its Affiliates or sublicensees, the manufacture, sale or
use of which is covered by a Valid Claim within the Alnylam Patent Rights.
Isis Single Stranded Product means any single stranded oligomeric compound (a) that hybridizes in
whole or in part with a target RNA and modulates the Gene Target, (b) is not a Double Stranded RNA
or Double Stranded RNA Product and (c) the manufacture, sale or use of which is covered by a Valid
Claim within the Alnylam Patent Rights.
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Naked Sublicense means a license for Double Stranded RNA that includes rights to the Isis Patent
Rights that is not a license in connection with (a) a Development Collaboration or (b) a Bona Fide
Drug Discovery Collaboration. A series of Naked Sublicenses to the same sublicensee or
related sublicensees will be aggregated to constitute a single Naked Sublicense. For the avoidance
of doubt, where this Agreement grants Alnylam exclusive rights to grant Naked Sublicenses, such
exclusive rights preclude Isis from granting licenses to the Isis Patent Rights to Third Parties
for Double Stranded RNA even though such license grants by Isis would technically be license grants
and not sublicense grants. Licenses that do not include or involve rights to Isis Patents shall not
constitute Naked Sublicenses.
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SCHEDULE 8.2.2
JOINT PRESS RELEASE
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Contacts:
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Alnylam Pharmaceuticals, Inc.
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Kyowa Hakko Kogyo Co., Ltd.
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Cynthia Clayton (Investors)
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Tetsuro Kuga, Corporate Communications Dept.
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617-551-8207
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1-6-1, Ohtemachi, Chiyoda-ku,
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Tokyo, Japan 100-8185
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Adriana Jenkins (Media)
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Tel : +81-3-3282-1903
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Yates Public Relations
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Fax : +81-3-3282-0990
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617-551-8252
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Alnylam and Kyowa Hakko Form Alliance for the Development and Commercialization of ALN-RSV01 in
Asia
-ALN-RSV01, Alnylams Lead RNAi Therapeutic, is in Phase II Clinical Development for Treatment of
Respiratory Syncytial Virus (RSV) Infection -
CAMBRIDGE, Mass., USA and TOKYO, Japan, June 19, 2008
Alnylam Pharmaceuticals, Inc. (Nasdaq:
ALNY) and Kyowa Hakko Kogyo Co., Ltd. (TSE: 4151) today announced that they have formed an
exclusive alliance to develop and commercialize ALN-RSV01, an RNAi therapeutic in Phase II clinical
development by Alnylam for the treatment of respiratory syncytial virus (RSV) infection, in Japan
and other major markets in Asia.
Under the terms of the collaboration, Kyowa Hakko will pay Alnylam $15 million in an upfront cash
payment and up to an additional $78 million in development and sales milestone payments. Upon
commercialization, Alnylam will receive double-digit royalties from Kyowa Hakko based on the sales
of ALN-RSV01 in this territory. The partnership also includes additional RSV-specific RNAi
therapeutic compounds that comprise the ALN-RSV program. Alnylam retains all development and
commercialization rights worldwide excluding Asia.
We are excited to have formed this new alliance with Kyowa Hakko, a Japanese biotechnology company
with a strong commitment to bringing innovative new drugs to the marketplace, said John
Maraganore, Ph.D., Chief Executive Officer at Alnylam. This new collaboration is yet another
example of Alnylams commitment to work with leading biotechnology and pharmaceutical companies to
advance RNAi therapeutics to patients on a global basis. This is an important partnership on our
companys lead clinical program in an important pharmaceutical market and also our third
significant
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alliance formed this year. We will provide an update on our near-term partnership goals and
revised financial guidance at our upcoming second quarter conference call.
We have been watching the progress Alnylam has made with their ALN-RSV01 program since last year
and are very excited to partner with this program at this time. We are looking forward to working
with Alnylam, the most scientifically advanced company in the field of RNAi, in the development and
commercialization of ALN-RSV01 in Japan and other major markets in Asia, said Yuzuru Matsuda,
Ph.D., Chief Executive Officer at Kyowa Hakko. There is a significant need for novel medicines to
effectively treat patients with RSV, a leading cause of serious infections in both pediatric and
adult patients. We are excited to have the opportunity in delivering the benefit of this novel
medicine to the patients in Asia through the partnership with Alnylam.
Earlier this year, Alnylam achieved human proof of concept for ALN-RSV01 in the Phase II GEMINI
study, where intranasally administered ALN-RSV01 demonstrated statistically significant anti-viral
efficacy with a 38 percent relative reduction in RSV infection rate and a 95 percent increase in
the number of infection-free subjects as compared with placebo. In addition, Alnylam has initiated
a Phase II clinical trial to assess the safety and tolerability of aerosolized ALN-RSV01 versus
placebo in adult lung transplant patients naturally infected with RSV. As a secondary objective,
this trial will also aim to evaluate the anti-viral activity of ALN-RSV01. The data from this
study, in combination with the previous Phase II GEMINI trial and multiple Phase I trials, will
comprise a comprehensive safety and efficacy data set with which Alnylam expects to further advance
its overall ALN-RSV development program.
About RNA Interference (RNAi )
RNAi (RNA interference) is a revolution in biology, representing a breakthrough in understanding
how genes are turned on and off in cells, and a completely new approach to drug discovery and
development. Its discovery has been heralded as a major scientific breakthrough that happens once
every decade or so, and represents one of the most promising and rapidly advancing frontiers in
biology and drug discovery today which was awarded the 2006 Nobel Prize for Physiology or Medicine.
RNAi is a natural process of gene silencing that occurs in organisms ranging from plants to
mammals. By harnessing the natural biological process of RNAi occurring in our cells, the creation
of a major new class of medicines, known as RNAi therapeutics, is on the horizon. RNAi
therapeutics target the cause of diseases by potently silencing specific messenger RNAs (mRNAs),
thereby preventing disease-causing proteins from being made. RNAi therapeutics have the potential
to treat disease and help patients in a fundamentally new way.
About Alnylam Pharmaceuticals
Alnylam is a biopharmaceutical company developing novel therapeutics based on RNA interference, or
RNAi. The company is applying its therapeutic expertise in RNAi to address significant medical
needs, many of which cannot effectively be addressed with small molecules or antibodies, the
current major classes of drugs. Alnylam is leading the translation of RNAi as a new class of
innovative medicines with peer-reviewed research efforts published in the worlds top scientific
journals including
Nature
,
Nature Medicine
, and
Cell
. The company is leveraging these capabilities
to build a broad pipeline of RNAi therapeutics; its most advanced program is in Phase II human
clinical trials for the treatment of respiratory syncytial virus (RSV) infection. In addition, the
company is developing RNAi therapeutics for the treatment of a wide range of disease areas,
including hypercholesterolemia, liver
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cancers, and Huntingtons disease. The companys leadership position in fundamental patents,
technology, and know-how relating to RNAi has enabled it to form major alliances with leading
companies including Medtronic, Novartis, Biogen Idec, Roche, Takeda, and Kyowa Hakko Kagyo. To
reflect its outlook for key scientific, clinical, and business initiatives, Alnylam has established
RNAi 2010
which includes the companys plan to significantly expand the scope of delivery
solutions for RNAi therapeutics, have four or more programs in clinical development, and to form
four or more new major business collaborations, all by the end of 2010. Alnylam is a joint owner
of Regulus Therapeutics LLC, a joint venture focused on the discovery, development, and
commercialization of microRNA therapeutics. Founded in 2002, Alnylam maintains headquarters in
Cambridge, Massachusetts. For more information, visit www.alnylam.com.
About Kyowa Hakko
Kyowa Hakko(TSE:4151) is a biotechnology-based company focused on pharmaceutical operations
engaged in the research and development, manufacturing, and marketing of prescription drugs. Kyowa
Hakko is marketing medications for a wide range of diseases, including allergy, hypertension,
angina pectoris, and cancer. With the aim of penetrating the global market, Kyowa Hakko has
overseas development bases in the U.S. (Kyowa Pharmaceutical, Inc. and BioWa, Inc.) and in the U.K.
(Kyowa Hakko U.K. Ltd.). In the U.S., the U.K., and China, they are pushing ahead with the clinical
development of new drug candidates as well as the therapeutic antibody business based on Kyowa
Hakkos proprietary technology that enhances the activity of antibodies.
Last October, Kyowa Hakko announced that the Kyowa Hakko group and the Kirin group entered into an
agreement to strategic alliance. Through this strategic alliance, the two groups will endeavor to
build a global leader in the research and development-driven life sciences business based in Japan,
which is centered on pharmaceutical operations with strengths in biotechnology. The new company
Kyowa Hakko Kirin Co., Ltd. will start operating on Oct. 1, 2008.
For more information on Kyowa Hakko, visit
http://www.kyowa.co.jp/eng/index.htm
Alnylam Forward-Looking Statements
Various statements in this release concerning Alnylams future expectations, plans and prospects,
constitute forward-looking statements for the purposes of the safe harbor provisions under The
Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those
indicated by these forward-looking statements as a result of various important factors, including
risks related to: Alnylams approach to discover and develop novel drugs, which is unproven and may
never lead to marketable products; obtaining, maintaining and protecting intellectual property;
Alnylams ability to enforce its patents against infringers and to defend its patent portfolio
against challenges from third parties; Alnylams ability to obtain additional funding to support
its business activities; Alnylams ability to realize future milestones and royalties; Alnylams
dependence on third parties for development, manufacture, marketing, sales and distribution of
products; obtaining regulatory approval for products; competition from others using technology
similar to Alnylams and others developing products for similar uses; Alnylams dependence on
collaborators; and Alnylams short operating history; as well as those risks more fully discussed
in the Risk Factors section of its most recent quarterly report on Form 10-Q on file with the
Securities and Exchange Commission. In addition, any forward-looking statements represent
Alnylams views only as of today and should not be relied upon as representing its views as of any
subsequent date. Alnylam does not assume any obligation to update any forward-looking statements.
95
AMENDMENT AGREEMENT
RE: License and Collaboration Agreement
THIS AMENDMENT AGREEMENT (this
Amendment Agreement
) is made as of the 1
st
day
of February 2010 (the
Amendment Effective Date
) by and between:
ALNYLAM PHARMACEUTICALS, INC., a corporation organized and existing under
the laws of Delaware (Alnylam) and
KYOWA HAKKO KIRIN CO., LTD., formerly named Kyowa Hakko Kogyo Co., Ltd., a
corporation duly organized and existing under the laws of Japan (hereinafter
referred to as the
Kyowa Hakko
)
RECITALS:
WHEREAS, Alnylam and Kyowa Hakko executed a License and Collaboration Agreement effective as of
June 19,2008 (the
LCA
) and Supply Agreement
effective as of August 31, 2009 (the
Supply Agreement
) in connection with their collaboration and development of therapeutic
products targeting respiratory syncytial virus (
RSV
) that function through RNA
interference, including the proprietary Alnylam product know as ALN-RSV01;
WHEREAS, under the LCA, the Alnylam proprietary product known as ALN-RSV01 is the Lead Product;
WHEREAS, Kyowa Hakko is primarily interested in Development for the Kyowa Hakko Territory of
therapeutic products targeting RSV for the treatment of [**];
WHEREAS, Alnylam intends to Develop ALN-RSV01 primarily for adult patients and to Develop the
Alnylam proprietary product targeting RSV known as ALN-RSV02 for pediatric patients;
WHEREAS, Kyowa Hakko and Alnylam have accordingly agreed to categorize ALN-[**] as the Lead Product
instead of ALN-[**], and to make such other changes to the LCA as set forth herein;
NOW, THEREFORE, the parties hereto hereby agree as follows, intending to be legally bound:
SECTION 1.
DEFINITIONS OF THIS AMENDMENT AGREEMENT
1.01
Definitions
Except where specifically defined herein, capitalized terms used herein and not otherwise defined
herein shall have the meanings ascribed to them in the LCA or, as applicable, the Supply Agreement.
SECTION 2.
AMENDMENTS
Notwithstanding anything to the contrary in the provisions of the LCA, the LCA shall be and hereby
is amended as follows:
2.01
Lead Product
8
Section 1.64 of the LCA is deleted in its entirety and replaced with the following:
1.64 Lead Product
means Alnylams proprietary product known as ALN-[**],
which is a chemically-modified version of ALN-[**] and described on
Schedule
1.64
.
2.02
Licensed Product
Section 1.65 of the LCA is deleted in its entirety and replaced with the following:
1.65 Licensed Product
means, (a) subject to Section 2.9, the Lead
Product, and (b) ALN-[**].
2.03
Additional Definition
A new Section 1.112 is added to the LCA to read as follows:
1.112 ALN-RSV01
means Alnylams proprietary product known as ALN-RSV01,
which is described on Schedule 1.112.
2.04
Product Descriptions
Schedule 1.64 of the LCA is renamed as Schedule 1.112 and a new Schedule 1.64 in the form
attached to this Amendment Agreement as Attachment 1 is added to the LCA.
2.05
Clarifications
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(a)
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Commencing on the Amendment Effective Date, (i) all references in the Supply
Agreement to Licensed Product or to defined terms that are based on the term
Licensed Product are deemed to refer to both ALN-[**] and ALN-[**], but (ii) for
purposes of events that occurred prior to the Amendment Effective Date, such references
will continue to refer to ALN-[**] and not ALN-[**].
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(b)
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(i) At any time prior to exercising its rights under Section 2.05(c), Kyowa
Hakko may commence Development of ALN-[**] in addition to the Lead Product (or a
Replacement Product). Kyowa Hakko shall notify Alnylam in writing of its intention to
Develop ALN-[**] before starting such Development. Such notice will be deemed to be a
Successor Product Option Notice for ALN-[**], ALN-[**] will be deemed a Successor
Product, and the Parties will follow the procedures and requirements set forth in
Section 2.10(b) of the LCA to negotiate the license terms applicable to ALN-[**]
including, but not limited to, milestones payable by Kyowa Hakko. Kyowa Hakko shall
notify Alnylam promptly in writing if at any time after delivery to Alnylam of such
Successor Product Option Notice Kyowa Hakko elects to cease Development of one (1) of
the Licensed Products. Effective as of the date of such Development termination
notice, (A) Kyowa Hakkos rights under the LCA with regard to the Licensed Product for
which it ceased Development will terminate, (B) if the remaining Licensed Product is
ALN-[**]or its Replacement Product, then such Licensed Product will continue to be the
Lead Product (or a
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Replacement Product, as the case may be), and (C) if the remaining Licensed Product
is ALN-RSV01, then ALN-[**] will be deemed a Replacement Product.
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(ii)
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Notwithstanding anything to the contrary in the LCA, the Parties intend that
(A) the amounts payable for the first Licensed Product to reach a milestone will be the
amount applicable to such milestone as set forth in Article 7 of the LCA; and (B) the
amount payable for the second Licensed Product to meet a milestone will be the amount
for such milestone negotiated in accordance with Section 2.05(b)(i), above. The
Parties intend that provisions of this Section 2.05(b)(ii) will apply regardless of
whether the Licensed Product reaching the applicable milestone is classified as the
Lead Product, a Replacement Product or a Successor Product.
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(iii)
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During any period in which Kyowa Hakko is Developing and/or Commercializing
both ALN-[**] (or a Replacement Product) and ALN-[**], then Section 2.4(a) of the LCA
will be deemed to read in its entirety as follows:
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Kyowa Hakko will use Commercially Reasonable Efforts to (i) Develop at least one
Licensed Product for Regulatory Approval and Commercialization initially in Japan
and subsequently in each other country in the Kyowa Hakko Territory and (ii) perform
the Development activities under the Development Plan; provided, however, that Kyowa
Hakko shall have no obligation to Develop any Licensed Product for Regulatory
Approval and Commercialization in any country in the Kyowa Hakko Territory other
than Japan prior to Regulatory Approval of such Licensed Product in Japan.
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(c)
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Provided that Kyowa Hakkos rights under the LCA with respect to ALN-[**]have
not terminated, Kyowa Hakko may at any time elect to cease Development of the Lead
Product (or a Replacement Product) and commence Development of ALN-[**] instead. Kyowa
Hakko shall notify Alnylam in writing of its intention to Develop ALN-[**] and to cease
development of the Lead Product (or a Replacement Product) before starting Development
of ALN-[**] Effective as of the date of such notice, (i) ALN-[**] will be deemed to be
a Replacement Product, and (ii) Kyowa Hakkos rights under the LCA with regard to
ALN-[**](or its Replacement Product) will terminate, but Kyowa Hakkos rights to obtain
rights to Successor Products under Section 2.10 of the LCA will remain unchanged.
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SECTION
3.
REPRESENTATIONS AND WARRANTIES
3.01
Representations and Warranties
Alnylam and Kyowa Hakko each represents and warrants to the other as follows:
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(a)
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As of the Amendment Effective Date, it has full right, power and authority to
enter into this Amendment Agreement and to perform its respective obligations under
this Amendment Agreement.
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(b)
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The execution and delivery of this Amendment Agreement by such Party and the
performance of such Partys obligations hereunder (i) do not conflict with or
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10
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violate any requirement of applicable Law existing as of the Amendment Effective
Date applicable to such Party, and (ii) do not conflict with, violate, breach or
constitute a default under any contractual obligations of such Party or any of its
Affiliates existing as of the Amendment Effective Date.
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(c)
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As of the Amendment Effective Date, this Amendment Agreement is a legal and
valid obligation binding upon it and is enforceable against it in accordance with its
terms.
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(d)
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Nothing in this Amendment Agreement will affect the Parties representations
and warranties set forth in the LCA or the Supply Agreement.
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SECTION
4.
GENERAL PROVISIONS
4.01
Effectiveness
Except as expressly provided in this Amendment Agreement, all terms and conditions of the
LCA shall remain in full force and effect.
4.02
Governing Law
This Amendment Agreement shall be governed by and interpreted in accordance with the laws of
New York, notwithstanding any provisions of New York law governing conflicts of laws to the
contrary.
11
IN WITNESS WHEREOF, the parties hereto have caused this Amendment Agreement to be executed by their
respective duly authorized signatories as of the date and year first written above.
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ALNYLAM PHARMACEUTICALS, INC.
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KYOWA HAKKO KIRIN CO., LTD.
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By
Name:
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/s/ John Maraganore
John Maraganore
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By
Name:
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/s/ Hideki Okawara
Hideki Okawara, Ph.D.
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Title:
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CEO
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Title:
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Director, Business Development Department
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12
Attachment 1
New Schedule 1.64 to LCA
13
SCHEDULE 1.64
ALN-[**]
[**]
14
Execution Copy
SECOND AMENDMENT AGREEMENT
RE: License and Collaboration Agreement
THIS SECOND AMENDMENT AGREEMENT (this
Second Amendment Agreement
) is made as of the
3
rd
day of June 2010 (the
Second Amendment Effective Date
) by and between:
ALNYLAM PHARMACEUTICALS, INC., a corporation organized and existing under the
laws of Delaware (
Alnylam
) and
KYOWA HAKKO KIRIN CO., LTD., formerly named Kyowa Hakko Kogyo Co., Ltd., a
corporation duly organized and existing under the laws of Japan (hereinafter
referred to as the
Kyowa Hakko
)
This Second Amendment Agreement amends the License and Collaboration Agreement between Alnylam
and Kyowa Hakko dated June 19, 2008 (the Agreement). Capitalized terms used herein and not
defined shall have the meanings ascribed to such terms in the Agreement.
Alnylam and Kyowa Hakko hereby agree to amend the Agreement as follows:
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1.
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Throughout the Agreement, except for Section 1.53 and 3.2, the term Joint Steering
Committee will be replaced with the term Joint Development Committee and the term JSC
will be replaced by the term JDC.
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2.
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Section 1.53 of the Agreement is deleted in its entirety
and replaced with the following : Joint Steering Committee or JSC means the joint steering committee as
more fully described in Section 3.1.5.
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3.
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The first sentence of Section 3.1.1 shall be deleted and replaced by the following
sentence: The Collaboration shall establish a subcommittee of the JSC, called the Joint
Development Committee (the JDC) comprised of no less than [**] named representatives of
Kyowa Hakko and no less than [**] named representatives of Alnylam.
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4.
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The last sentence of Section 3.1.3 shall be deleted and replaced by the following
sentences: Alternatively, the JDC may meet by means of teleconference, videoconference or
other similar communications equipment [**] per Calendar Quarter, but at least [**]
meetings per year shall be conducted in person. Alnylam and Kyowa Hakko have agreed that
representatives of Cubist may be invited as observers to meetings of the JDC, provided,
however, that such representatives of Cubist shall have no voting or decision making
authority in the JDC.
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5.
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A new Section 3.1.5 would be added containing the following language:
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1
Execution Copy
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3.1.5
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Joint Steering Committee
. The Parties hereby establish a Joint
Steering Committee to facilitate the Collaboration as follows:
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(a)
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Composition of the Joint Steering Committee
. The Collaboration shall
be conducted under the direction of a joint steering committee (the JSC) comprised
of no less than [**] named representatives of Kyowa Hakko and no less than [**] named
representatives of Alnylam. Each Party shall appoint its respective representatives
to the JSC from time to time, and may substitute one or more of its representatives,
in its sole discretion, effective upon notice to the other Party of such change. Each
Party shall have at least one JSC representative who is a senior employee (director
level or above), and all JSC representatives have appropriate expertise and ongoing
familiarity with the Collaboration. Additional representatives or consultants may
from time to time, by mutual consent of the Parties, be invited to attend JSC
meetings, subject to such representatives and consultants written agreement to
comply with the requirements of Section 8.1. Moreover, Alnylam and Kyowa Hakko have
agreed that representatives of Cubist may be invited as observers to meetings of the
JSC, provided, however, that such representatives of Cubist shall have no voting or
decision making authority in the JSC. All proceedings for the JSC shall take place in
English. Each Party shall bear its own expenses relating to attendance at such
meetings by its representatives.
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(b)
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JSC Chairperson
. The JSC Chairperson shall rotate every twelve
(12) months between Alnylam and Kyowa Hakko. The initial JSC Chairperson shall be a
representative of Alnylam. The JSC Chairpersons responsibilities shall include (a)
scheduling [**] meeting per year, to take place in person; (b) setting agenda for the
meeting with solicited input from other members; (c) confirming and delivering minutes
to the JSC for review and final approval; and (d) conducting effective meetings,
including ensuring that objectives for each meeting are set and achieved.
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(c)
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Meetings
. The first JSC shall meet in accordance with a schedule
established by mutual written agreement of the Parties, but no less frequently than
[**] per year, with the location for such meetings alternating between Alnylam and
Kyowa Hakko facilities (or such other locations as are determined by the JSC).
Alternatively, the JSC may meet by means of teleconference, videoconference or other
similar communications equipment as needed, but at least [**] meeting per year shall
be conducted in person.
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(d)
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JSC Responsibilities
. The JSC shall have the following
responsibilities with respect to the Collaboration:
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(i)
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Establish strong lines of communication between the two parties
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(ii)
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Review the efforts both parties teams have made on the
RSV program and give directions to subcommittee(s).
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2
Execution Copy
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(iii)
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Resolve any dispute subcommittee(s) were not able to resolve, if any
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For purposes of clarity, the JSC shall not have the authority to modify the terms of
this Agreement.
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6.
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All other terms of the Agreement shall remain in full force and effect.
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3
Execution Copy
IN WITNESS WHEREOF, the parties hereto have caused this Amendment Agreement to be executed by
their respective duly authorized signatories as of the date and year first written above.
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ALNYLAM PHARMACEUTICALS, INC.
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KYOWA HAKKO KIRIN CO., LTD.
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By
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/s/ Barry Greene
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By
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/s/ Tamao Watanabe
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Name:
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Barry Greene
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Name:
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Tamao Watanabe
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Title:
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President and Chief Operating Officer
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Title:
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Director, Business Development Department
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4