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TABLE OF CONTENTS 2

As filed with the Securities and Exchange Commission on July 18, 2018.

Registration Statement No. 333-        


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

FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

ARIDIS PHARMACEUTICALS, INC.
(Exact name of registrant as specified in its charter)

Delaware
(State or other jurisdiction of
incorporation or organization)
  2834
(Primary Standard Industrial
Classification Code Number)
  47-2641188
(I.R.S. Employer
Identification Number)

5941 Optical Ct.
San Jose, California 95138
(408) 385-1742
(Address and telephone number of registrant's principal executive offices)

Dr. Vu L. Truong
Chief Executive Officer
Aridis Pharmaceuticals, Inc.
5941 Optical Ct.
San Jose, California 95138
(408) 385-1742
(Name, address, including zip code, and telephone number, including area code, of agent for service)

Copies to:

Jeffrey J. Fessler, Esq.
Sheppard, Mullin, Richter & Hampton LLP
30 Rockefeller Plaza
New York, New York 10112-0015
(212) 653-8700

 

David Peinsipp
Charles S. Kim, Esq.
Andrew S. Williamson, Esq.
Kristin VanderPas, Esq.
Cooley LLP
101 California Street, 5 th  Floor
San Francisco, California 94111
(415) 693-2000

Approximate date of commencement of proposed sale to the public:
As soon as practicable after the effective date of this registration statement becomes effective.

           If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933 check the following box:     o

           If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.     o

           If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.     o

           If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.     o

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

Large accelerated filer  o   Accelerated filer  o   Non-accelerated filer  ý
(Do not check if a
smaller reporting company)
  Smaller reporting company  o

Emerging growth company  ý

           If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided to Section 7(a)(2)(B) of the Securities Act.     o

CALCULATION OF REGISTRATION FEE

       
 
Title of Each Class of Securities
to be Registered

  Proposed Maximum
Aggregate Offering
Price(1)

  Amount of
Registration Fee(2)

 

Common Stock, par value $0.0001 per share

  $34,500,000   $4,296

 

(1)
Estimated solely for the purpose of computing the amount of the registration fee pursuant to Rule 457(o) under the Securities Act of 1933, as amended. Includes shares of common stock that the underwriters have the option to purchase to cover over-allotments, if any.

(2)
Calculated pursuant to Rule 457(o) based on an estimate of the proposed maximum aggregate offering price of the securities registered hereunder to be sold by the registrant.

            The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

   


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The information in this prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell nor does it seek an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

SUBJECT TO COMPLETION DATED JULY 18, 2018

PRELIMINARY PROSPECTUS

            Shares

Common Stock

LOGO



         This is the initial public offering of our common stock. We are offering all of the shares of common stock offered by this prospectus. No public market currently exists for our stock. We expect the initial public offering price of our shares of common stock will be between $            and $            per share.

         We have applied to list our shares of common stock for trading on The Nasdaq Capital Market under the symbol "ARDS."

         We are an "emerging growth company" as that term is used in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act, and, as such, elect to comply with certain reduced public company reporting requirements for future filings.

         Investing in our common stock involves a high degree of risk. See "Risk Factors" beginning on page 13.

         Neither the Securities and Exchange Commission, or SEC, nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.



 
  Per Share   Total  

Public offering price

  $     $    

Underwriting discounts and commissions (1)

 
$
 
$
 

Proceeds to us, before expenses

 
$
 
$
 

(1)
We refer you to "Underwriting" beginning on page 183 of this prospectus for additional information regarding underwriting compensation.

         We have granted a 30-day option to the representative of the underwriters to purchase up to                         additional shares of common stock solely to cover over-allotments, if any.

         The underwriters are offering the common stock as set forth under "Underwriting." Delivery of the shares will be made on or about                        , 2018.

Cantor

Maxim Group LLC   Northland Capital Markets

   

         The date of this prospectus is                        , 2018


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TABLE OF CONTENTS

 
  Page  

Prospectus Summary

    1  

Risk Factors

    13  

Cautionary Note Concerning Forward-Looking Statements

    69  

Industry and Market Data

    70  

Use of Proceeds

    71  

Dividend Policy

    72  

Capitalization

    73  

Dilution

    75  

Selected Consolidated Financial Data

    78  

Management's Discussion and Analysis of Financial Condition and Results of Operations

    81  

Business

    98  

Management

    153  

Executive and Director Compensation

    160  

Certain Relationships and Related Person Transactions

    165  

Principal Stockholders

    167  

Description of Capital Stock

    170  

Shares Eligible for Future Sale

    176  

Material U.S. Federal Income Tax Consequences to Non-U.S. Holders of our Common Stock

    178  

Underwriting

    183  

Legal Matters

    190  

Experts

    190  

Where You Can Find More Information

    190  

Index to Financial Statements

    F-1  

         You should rely only on the information contained in this prospectus. We have not authorized anyone to provide any information or to make any representations other than those contained in this prospectus or in any free writing prospectus prepared by or on behalf of us or to which we have referred you. We take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give to you. The information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or any sale of our common stock.

         You should rely only on the information contained in this prospectus. No dealer, salesperson or other person is authorized to give information that is not contained in this prospectus. This prospectus is not an offer to sell nor is it seeking an offer to buy these securities in any jurisdiction where the offer or sale is not permitted. The information in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or of any sale of these securities.

         Through and including                        , 2018 (the 25 th day after the commencement of this offering), all dealers effecting transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to a dealer's obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.


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PROSPECTUS SUMMARY

         The following information is a summary of the prospectus and does not contain all of the information you should consider before investing in our common stock. You should read the entire prospectus carefully, including the matters set forth under "Risk Factors," "Management's Discussion and Analysis of Financial Condition and Results of Operations," and our consolidated financial statements and the notes relating to the consolidated financial statements, included elsewhere in this prospectus. Unless the context requires otherwise, references to "Aridis," "Company," "we," "us" or "our" refer to Aridis Pharmaceuticals, Inc., a Delaware corporation and its subsidiaries.

Overview

        We are a late-stage biopharmaceutical company focused on the discovery and development of targeted immunotherapy using fully human monoclonal antibodies, or mAbs, to treat life-threatening infections. mAbs represent an innovative treatment approach that harnesses the human immune system to fight infections and are designed to overcome the deficiencies associated with current therapies, such as rise in drug resistance, short duration of response, negative impact on the human microbiome, and lack of differentiation among the treatment alternatives. The majority of our product candidates are derived by employing our differentiated antibody discovery platform called MabIgX. Our proprietary product pipeline is comprised of fully human mAbs targeting specific pathogens associated with life-threatening bacterial infections, primarily hospital-acquired pneumonia, or HAP, and ventilator-associated pneumonia, or VAP. Two of our product candidates have exhibited promising preclinical data, and clinical data are available from two completed studies. Our lead product candidate, AR-301 targets the alpha toxin produced by gram-positive bacteria Staphylococcus aureus , or S. aureus, a common pathogen associated with HAP and VAP.

    AR-301 (Salvecin, or tosatoxumab ) is a fully human immunoglobulin 1, or IgG1, mAb targeting HAP and VAP S. aureus alphatoxin. We are developing AR-301 initially as an adjunctive immunotherapy in combination with standard of care, or SOC, antibiotics to treat acute pneumonia caused by S. aureus infection. This program is differentiated in its focus on therapeutic treatment of established pneumonia. We have recently completed a randomized, double-blind, placebo-controlled Phase 2a trial and we expect to initiate a Phase 3 pivotal trial in the second half of 2018 and announce interim data in the second half of 2019. AR-301 has been granted Fast-Track designation by the FDA, orphan drug designation in the European Union, or EU, and we have filed for orphan drug designation in the U.S.

    AR-105 (Aerucin) is a fully human IgG1 mAb targeting Pseudomonas aeruginosa , or P. aeruginosa . We are developing AR-105 initially as an adjunctive immunotherapy with SOC antibiotics to treat acute pneumonia caused by P. aeruginosa infection. We initiated a global Phase 2 trial in the second quarter of 2017 and expect to report interim data in the first half of 2019. AR-105 has been granted Fast-Track designation by the FDA.

    AR-101 (Aerumab) is a fully human immunoglobulin M, or IgM, mAb targeting P. aeruginosa serotype O11. We have completed a Phase 1 trial, a Phase 2a trial and we plan to initiate a Phase 2/3 pivotal trial in the second half of 2019. AR-101 has been granted orphan drug designation in the U.S. and in the EU.

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    AR-401 is our mAb discovery program aimed at treating infections caused by Acinetobacter baumannii . We used our MabIgX technology to identify novel targets and select several fully human mAb candidates. We intend to select a development candidate for additional preclinical studies.

    AR-201 is a fully human IgG1 mAb that neutralizes diverse clinical isolates of respiratory syncytial virus, or RSV. In in vivo preclinical studies, AR-201 has shown to be 12-fold more potent than Synagis in a head-to-head comparison study, a currently marketed drug for pediatric RSV, and to bind to RSV strains that are resistant to Synagis.

    AR-501 (Panaecin) is a broad spectrum small molecule anti-infective we are developing in addition to our targeted mAb product candidates. This product candidate is currently in late preclinical studies and is funded by the Cystic Fibrosis Foundation through a Phase 1/2a trial. We expect to file the Investigational New Drug, or IND, application and initiate a Phase 1/2a trial in healthy adults and cystic fibrosis patients in the second half of 2018.

Our Pipeline

        Our proprietary pipeline is comprised of the six wholly-owned product candidates highlighted below.


Figure 1
Our Product Pipeline

GRAPHIC

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Strategy

        Our goal is to become a global leader in anti-infective immunotherapy by discovering, developing and commercializing best-in-class mAbs with the potential to significantly improve upon SOC treatments for life-threatening infections. Key elements of our strategy are as follows:

    Efficiently advance our product candidates to worldwide approval and commercialization taking advantage of what we believe to be a favorable regulatory environment.

    Seek favorable regulatory designations for our product candidates, including Fast-Track Designation, orphan drug designation, Qualified Infectious Disease Product and Breakthrough Therapy designations.

    Demonstrate pharmacoeconomic benefits of our product candidates.

    Implement a targeted commercialization strategy.

    Employ our MabIgX antibody discovery platform to expand our product pipeline.

    Continue to pursue traditional financing and non-dilutive financing, such as grant funding and strategic collaborations.

Market Opportunities

        The current small molecule antibiotics market is crowded, highly competitive, and lacking in product differentiation due to the use of non-inferiority trial designs. No new class of antibiotic has been introduced to the market within the last two decades. The drug resistance and adverse impact on the human microbiome, particularly the gut microbial flora, as well as safety concerns brought about by frequent use of broad spectrum antibiotics have increased the need for targeted, narrow spectrum anti-infectives that are designed to specifically attack the invading bacterial pathogen or its toxins. The ability to identify the infection-causing agent has significantly improved in recent years because of the availability and proliferation of rapid diagnostic tests, which allows for pathogen identification within hours of sample collection. Physicians have increasing means to quickly identify the specific pathogen responsible for the infection, which we believe will lead to prescription of a targeted anti-infective, rather than a broad-spectrum antibiotic.

        Unlike antibiotics, mAbs have a more predictable and attractive safety profile and are designed to kill via an immunological mechanism of action that is highly differentiated and targets only the infecting pathogen or its toxins. mAbs are generally effective against antibiotic resistant bacteria because of the difference in mechanism of action as compared to that of antibiotics and their resistance mechanisms. mAbs also have a dosing frequency of once or twice a month and may require only a single administration for treatment of hospital acquired pneumonia. mAbs may offer significant product differentiation from antibiotics, substantially less market competition, and higher barriers to entry.

S. aureus

        We are initially focused on respiratory infections in the ICU settings. In the U.S., there are approximately 628,000 cases of HAP and VAP caused by hospital treated Gram negative bacteria and methicillin-resistant Staphylococcus aureus , or MRSA (Decision Resources Group (DRG) — Disease Landscape and Forecast Reports, 2016). HAP due to methicillin-resistant Staphylococcus aureus infections results in substantial loss of life with an annual worldwide incidence of

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approximately 200,000 patients (Decision Resources, 2016 data) and mortality rates as high as 50% depending on the patient population and treatment regimen (Methicillin-Resistant Staphylococcus Aureus, Decision Resources, 2016). Mechanical ventilation for VAP patients costs over $30 billion annually in the U.S. Infections due to MRSA represent a high-value segment of the overall antibiotics market. According to this report, the worldwide market for existing therapies for MRSA infections was over $800 million in 2015. Moreover, MRSA infections are associated with significantly longer hospital stays, repeated hospitalizations and increased healthcare costs. Currently, the median hospital stay of a patient with VAP is 29 days, and the average length of ICU stay is 19 days. The median total hospitalization costs for a VAP patient is approximately $198,000. Current SOC antibiotics for MRSA pneumonia is dominated by five antibiotics Linezolid, Daptomycin, Vancomycin, Ceftaroline, and Tigecycline, which combined have approximately 90% market share. There is a significant need for new anti-MRSA agents given the S. aureus resistance rate of 40% to 50%. Additionally, it is estimated that there is an approximately $6 billion annual healthcare cost burden attributable to S. aureus nosocomial pneumonia. The annual addressable patient population of our AR-301 in HAP and VAP is approximately 395,000 the United States, Europe, and Japan.

P. aeruginosa

        Pseudomonas infection is caused by strains of bacteria found widely in the environment. P. aeruginosa is one of the most common gram-negative bacteria that is associated with a number of human infections. Drugs targeting gram-negative bacteria must cross both the inner and outer membranes of the bacterial cell, as compared to those directed against gram-positive bacteria, which must only cross one cell membrane. As a result, gram-negative bacteria tend to be more resistant to antibiotics and the body's own immune system. As is the case with HAP caused by S. aureus , there is substantial mortality associated with HAP caused by P. aeruginosa and an annual worldwide incidence of approximately 450,000 patients (Gram Negative Infections, Decision Resources, 2009). This report estimated the worldwide market for existing therapies for HAP due to gram-negative infections to be $1.1 billion in 2013 and projected it to increase to $1.4 billion by 2018. Additionally, it is estimated that there is an approximately $7 billion annual healthcare cost burden attributable to P. aeruginosa nosocomial pneumonia. The annual addressable patient population in the United States, Europe, and Japan of our AR-105 and AR-101 mAb candidates in HAP and VAP is estimated to be 478,000, and 95,600, respectively.

Cystic Fibrosis with Pseudomonas aeruginosa Infection

        There are more than 70,000 patients with cystic fibrosis worldwide. 80% of these patients present with chronic polymicrobial infections, particularly P. aeruginosa infection. We believe the medical need and market potential for an anti-infective therapeutic that can be given to cystic fibrosis patients chronically is substantial. The current market for inhaled antimicrobials for cystic fibrosis, based on recent combined sales figures for TOBI (tobramycin) and Cayston (aztreonam), is approximately $600 million worldwide. Existing therapies often lead to a temporary improvement in bacterial load, but ultimately a majority of cystic fibrosis patients succumb to respiratory failure due to P. aeruginosa infection.

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Risks Relating to Our Business

        We are a late-stage biopharmaceutical company, and our business and ability to execute our business strategy are subject to a number of risks of which you should be aware before you decide to buy our common stock. In particular, you should consider the risks discussed in detail in the section entitled "Risk Factors" including but not limited to:

    If we fail to successfully complete clinical trials, fail to obtain regulatory approval or fail to successfully commercialize our product candidates, our business would be harmed and the value of our securities would decline.

    We, or our collaborators, may face delays in completing our clinical trials, and may not be able to complete them at all.

    If we encounter difficulties enrolling patients in our clinical trials, our clinical trials could be delayed or otherwise adversely affected.

    Regulatory authorities may not approve our product candidates even if they meet safety and efficacy endpoints in clinical trials.

    We expect to continue to incur increasing net losses for the foreseeable future, and we may never achieve or maintain profitability.

    Available cash resources may be insufficient to provide for our working capital needs for the next twelve months. In the event such cash resources are insufficient to provide for our working capital requirements, we will need to raise additional capital to continue as a going concern.

    We will require substantial additional capital in the future. If additional capital is not available, we will have to delay, reduce or cease operations.

    We compete in an industry characterized by extensive research and development efforts and rapid technological progress. New discoveries or commercial developments by our competitors could render our potential products obsolete or non-competitive.

    Our competitors may develop and market products that are less expensive, more effective, safer or reach the market sooner than our product candidates, which may diminish or eliminate the commercial success of any products we may commercialize.

    The biopharmaceutical industry is subject to significant regulation and oversight in the U.S., in addition to approval of products for sale and marketing.

    We have identified certain material weaknesses in our internal control over financial reporting.

    If we are unable to protect our proprietary rights or to defend against infringement claims, we may not be able to compete effectively or operate profitably.

Implications of Being an Emerging Growth Company

        As a company with less than $1.07 billion in revenues during our last fiscal year, we qualify as an emerging growth company as defined in the Jumpstart Our Business Startups Act, or the JOBS Act, enacted in 2012. As an emerging growth company, we expect to take advantage of reduced

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reporting requirements that are otherwise applicable to public companies. These provisions include, but are not limited to:

    being permitted to present only two years of audited financial statements, in addition to any required unaudited interim financial statements, with correspondingly reduced "Management's Discussion and Analysis of Financial Condition and Results of Operations" disclosure, in this prospectus;

    not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, as amended;

    reduced disclosure obligations regarding executive compensation in our periodic reports, proxy statements and registration statements;

    exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved; and

    the ability to adopt new accounting standards based on private company deadlines.

        We may use these provisions until the last day of our fiscal year following the fifth anniversary of the completion of this offering. However, if certain events occur prior to the end of such five-year period, including if we become a "large accelerated filer," our annual gross revenues exceed $1.07 billion or we issue more than $1.0 billion of non-convertible debt in any three-year period, we will cease to be an emerging growth company prior to the end of such five-year period.

        We have elected to take advantage of certain of the reduced disclosure obligations in the registration statement of which this prospectus is a part and may elect to take advantage of other reduced reporting requirements in future filings. As a result, the information that we provide to our shareholders may be different than you might receive from other public reporting companies in which you hold equity interests.

        The JOBS Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards. We have irrevocably elected not to avail ourselves of this exemption and, therefore, we will be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies.

        To the extent that we qualify as a "smaller reporting company," as such term is defined in Rule 12b-2 under the Securities Exchange Act of 1934, after we cease to qualify as an emerging growth company, certain of the exemptions available to us as an emerging growth company may continue to be available to us as a smaller reporting company, including: (1) not being required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes Oxley Act; (2) scaled executive compensation disclosures; and (3) the requirement to provide only two years of audited financial statements, instead of three years.

Corporate Information

        We were formed under the name "Aridis, LLC" in the State of California on April 24, 2003 as a limited liability company. On August 30, 2004, we changed our name to "Aridis Pharmaceuticals, LLC." On May 21, 2014, we converted into a Delaware corporation named "Aridis Pharmaceuticals, Inc." Our fiscal year end is December 31. Our principal executive offices

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are located at 5941 Optical Court, San Jose, California 95138. Our telephone number is (408) 385-1742. Our website address is www.aridispharma.com . The information contained on, or that can be accessed through, our website is not a part of this prospectus. We have included our website address in this prospectus solely as an inactive textual reference.

        We have proprietary rights to a number of trademarks used in this prospectus which are important to our business. Solely for convenience, the trademarks and trade names in this prospectus are referred to without the ® and TM symbols, but such references should not be construed as any indicator that their respective owners will not assert, to the fullest extent under applicable law, their rights thereto. All other trademarks, trade names and service marks appearing in this prospectus are the property of their respective owners.

Presentation of Financial Information

        Solely for your convenience, this prospectus contains translations of certain euro amounts into U.S. dollar amounts and pounds sterling into U.S. dollar amounts at specified exchange rates. All translations from euros to U.S. dollars and from U.S. dollars to euros in this prospectus were made at a rate of €             to $1.00, the noon buying rate in The City of New York for cable transfers in euros per U.S. dollar as certified for customs purposes by the Federal Reserve Bank of New York on                        , 2018. All translations from pounds sterling to U.S. dollars and from U.S. dollars to pounds sterling in this prospectus were made at a rate of £        to $1.00, the noon buying rate in The City of New York for cable transfers in pounds sterling per U.S. dollar as certified for customs purposes by the Federal Reserve Bank of New York on            , 2018. No representation is made that the euro, pounds sterling or U.S. dollar amounts referred to herein could have been or could be converted into U.S. dollars, euros or pounds sterling, as the case may be, at any particular rate or at all.

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THE OFFERING

Common stock offered by us

              shares

Common stock to be outstanding immediately after this offering

 

            shares (or            shares if the underwriters exercise their over-allotment option in full)

Over-allotment option

 

The underwriters have an option for a period of 30 days to purchase up to            additional shares of our common stock at the initial public offering price to cover over-allotments, if any.

Use of proceeds

 

We estimate that the net proceeds from this offering will be approximately $            million, or approximately $            million if the underwriters exercise their over-allotment option in full, at an assumed initial public offering price of $            per share, the midpoint of the range set forth on the cover page of this prospectus, after deducting the underwriting discounts and commissions and estimated offering expenses payable by us. We intend to use the net proceeds to fund our planned clinical trials, manufacturing and process development, analytical testing, regulatory expenses and for general corporate purposes, including working capital. See "Use of Proceeds" for a more complete description of the intended use of proceeds from this offering.

Risk Factors

 

You should read the "Risk Factors" section starting on page 13 for a discussion of factors to consider carefully before deciding to invest in shares of our common stock.

Proposed Nasdaq Capital Market symbol

 

We have applied to list of our common stock on The Nasdaq Capital Market under the symbol "ARDS."

        The number of shares of our common stock that will be outstanding after this offering is based on 37,263,883 shares of our common stock outstanding as of June 30, 2018, and excludes:

    4,942,873 shares of our common stock issuable upon the exercise of options to purchase shares of our common stock outstanding as of June 30, 2018, with a weighted-average exercise price of $1.82 per share;

    3,897,482 shares of our common stock issuable upon the exercise of warrants to purchase common stock outstanding as of June 30, 2018, with a weighted-average exercise price of $2.73 per share;

    8,725,289 shares of our common stock issuable upon the exercise of warrants to purchase Series A convertible preferred stock outstanding as of June 30, 2018 with a weighted average exercise price of $2.26 per share; and

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    359,445 shares of our common stock reserved for future issuance under our 2014 Equity Incentive Plan, or the 2014 Plan.

        Unless otherwise indicated, all information in this prospectus assumes:

    the automatic conversion of all outstanding shares of our Series A convertible preferred into an aggregate of 36,196,193 shares of our common stock upon the closing of this offering;

    a one-for-            reverse stock split of our common stock to be effected before the closing of this offering;

    the automatic conversion of all outstanding preferred stock warrants into warrants to purchase 8,725,289 shares of common stock upon the closing of this offering;

    no exercise of the outstanding options or warrants described above; and

    no exercise by the underwriters of their option to purchase up to an additional            shares of our common stock to cover over-allotments, if any.

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Summary Consolidated Financial Data

         The following tables summarize our consolidated financial data. We have derived the summary consolidated statement of operations data for the year ended December 31, 2017 and 2016 from our audited consolidated financial statements included elsewhere in this prospectus. We have derived the summary consolidated statement of operations data for the three months ended March 31, 2018 and 2017 and our balance sheet data as of March 31, 2018, from our unaudited interim consolidated financial statements included elsewhere in this prospectus. The unaudited interim consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements and reflect, in the opinion of management, all adjustments of a normal, recurring nature that are necessary for a fair presentation of the unaudited interim consolidated financial statements. Our historical results are not necessarily indicative of the results that may be expected in the future and the results in the three months ended March 31, 2018 are not necessarily indicative of results to be expected for the full year or any other period. The following consolidated statement of operations data should be read in conjunction with the section titled "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our consolidated financial statements and related notes included elsewhere in this prospectus.

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Consolidated Statements of Operations Data:
(In thousands, except share and per share data)

 
  Year Ended
December 31,
  Three Months Ended
March 31,
 
 
  2017   2016   2018   2017  
 
   
   
  (unaudited)
 

Revenue:

                         

Contract revenue

  $   $ 2,068   $   $  

Collaboration revenue

    771              

Grant revenue

    89     201     322     22  

Revenue

    860     2,269     322     22  

Operating expenses:

                         

Cost of contract revenue

        1,927          

Research and development

    17,438     6,261     6,626     4,818  

General and administrative         

    3,160     1,965     1,066     1,027  

Total operating expenses

    20,598     10,153     7,692     5,845  

Loss from operations

    (19,738 )   (7,884 )   (7,370 )   (5,823 )

Other expense:

                         

Interest and other income (expense), net

    234     (366 )   74     25  

Change in fair value of warrant liability

    (5,152 )   (172 )   (38 )   (2,414 )

Net loss

  $ (24,656 ) $ (8,422 ) $ (7,334 ) $ (8,212 )

Preferred dividends

  $ (2,793 ) $ (465 ) $ (817 ) $ (534 )

Net loss available to common stockholders

  $ (27,449 ) $ (8,887 ) $ (8,151 ) $ (8,746 )

Weighted-average shares used to compute net loss per share available to common stockholders, basic and diluted

    1,067,690     1,067,690     1,067,690     1,067,690  

Net loss per share available to common stockholders, basic and diluted

  $ (25.71 ) $ (8.33 ) $ (7.63 ) $ (8.19 )

Weighted-average shares used to compute pro forma net loss per share available to common stockholders, basic and diluted (1)

    32,753,060           37,263,883        

Pro forma net loss per share available to common stockholders, basic and diluted (1)

  $ (0.84 )       $ (0.22 )      

(1)
Assumes the weighted-average shares used to compute net loss per share attributable to common stockholders, basic and diluted of 1,067,690 shares, and gives effect to the conversion of all Series A convertible preferred stock on a one for one basis utilizing the weighted-average method into an aggregate of 31,685,370 shares of common stock for the year ended December 31, 2017 and 36,196,193 shares of common stock for the three months ended March 31, 2018.

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Consolidated Balance Sheet Data:
(In thousands)

 
  As of March 31, 2018  
 
  Actual   Pro Forma(1)   Pro Forma,
As Adjusted(2)(3)
 
 
  (unaudited)  

Cash and cash equivalents

  $ 20,387   $ 20,387   $               

Working capital

    14,125     14,125        

Total assets

    22,590     22,590        

Total liabilities

    18,802     6,896        

Convertible preferred stock

    74,202            

Stockholders' equity (deficit)

  $ (70,414 ) $ 15,694   $    

(1)
Gives effect to (i) the automatic conversion of our Series A convertible preferred stock into an aggregate 36,196,193 shares of common stock and (ii) the automatic conversion of all outstanding preferred stock warrants into warrants to purchase 8,725,289 shares of our common stock, including the resultant reclassification of our preferred stock warrant liability to additional paid-in capital, a component of total stockholders' equity (deficit) in connection with such conversion, upon the closing of this offering.

(2)
Gives effect to (i) the items described in footnote (1) above and (ii) the issuance and sale of shares of common stock in this offering assuming an initial offering public offering price of $            per share, the midpoint of the range set forth on the cover page of this prospectus, after deducting the estimated underwriting discounts and commissions and our estimated offering expenses.

(3)
Each $1.00 increase (decrease) in the assumed initial public offering price of $            per share, the midpoint of the range listed on the cover page of this prospectus, would increase (decrease) the pro forma as adjusted amount of each of cash and cash equivalents, working capital, total assets and total stockholders' equity (deficit) by approximately $            , assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting underwriting discounts and commissions. Similarly, each increase (decrease) of 1.0 million shares in the number of shares offered by us at the assumed initial public offering price per share, the midpoint of the price range listed on the cover page of this prospectus, would increase (decrease) the pro forma as adjusted amount of each of cash and cash equivalents, working capital, total assets and total stockholders' equity (deficit) by approximately $            , assuming that the initial public offering price, as set forth on the cover page of this prospectus, remains the same and after deducting estimated underwriting discounts and commissions.

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RISK FACTORS

         An investment in our common stock involves a high degree of risk. You should give careful consideration to the following risk factors, in addition to the other information included in this prospectus, including our financial statements and related notes, before deciding whether to invest in shares of our common stock. The occurrence of any of the adverse developments described in the following risk factors could materially and adversely harm our business, financial condition, results of operations or prospects. In that case, the trading price of our common stock could decline, and you may lose all or part of your investment.

Risks Relating to Clinical Development and Commercialization of Our Product Candidates

If we fail to successfully complete clinical trials, fail to obtain regulatory approval or fail to successfully commercialize our product candidates, our business would be harmed and the value of our securities would decline.

        We must be evaluated in light of the uncertainties and complexities affecting a pre-commercial biopharmaceutical company. We have not completed clinical development for any of our product candidates. Our three lead product candidates are AR-301, AR-105 and AR-101. We expect to initiate a Phase 3 pivotal trial of AR-301 in VAP patients in the second half of 2018, while AR-105 is currently in Phase 2 clinical testing, and AR-101 is ready for phase 2/3 pivotal testing. We are clinically testing AR-105 as a well controlled Phase 2 trial; however, we have not yet had discussions with the FDA and the EMA regarding the status, and they may not agree. We cannot assure you that our planned clinical development for our product candidates will be completed in a timely manner, or at all, or that we, or any future partner, will be able to obtain approval for our product candidates from the FDA or any foreign regulatory authority.

        Regulatory agencies, including the FDA must approve our product candidates before they can be marketed or sold. The approval process is lengthy, requires significant capital expenditures, and is uncertain as to outcome. Our ability to obtain regulatory approval of any product candidate depends on, among other things, completion of additional clinical trials, whether our clinical trials demonstrate statistically significant efficacy with safety issues that do not potentially outweigh the therapeutic benefit of the product candidates, and whether the regulatory agencies agree that the data from our future clinical trials are sufficient to support approval for any of our product candidates. The final results of our current and future clinical trials may not meet FDA or other regulatory agencies' requirements to approve a product candidate for marketing, and the regulatory agencies may otherwise determine that our manufacturing processes or facilities are insufficient to support approval. We, and our current and potential future collaborators, may need to conduct more clinical trials than we currently anticipate. Even if we do receive FDA or other regulatory agency approval, we or our collaborators may not be successful in commercializing approved product candidates. If any of these events occur, our business could be materially harmed and the value of our securities would decline.

We, or our collaborators, may face delays in completing our clinical trials, and may not be able to complete them at all.

        Clinical trials necessary to support an application for approval to market any of our product candidates have not been completed. Our, or our collaborators', current and future clinical trials

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may be delayed, unsuccessful, or terminated as a result of many factors, including, but not limited to:

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        If we fail to raise the full amount of the net proceeds in this offering, the planned AR-301 Phase 3 pivotal trial may remain an 80% power study rather than 90% power study, which would reduce the probability that we reach statistical significance, and may negatively affect the approval process for AR-301. If the Cystic Fibrosis Foundation does not continue to provide sufficient level of funding support, we may not be able to complete the Phase 1/2a clinical trial relating to AR-501.

        In addition, we rely on academic institutions, medical institutions, physician practices and CROs to conduct, supervise or monitor some or all aspects of clinical trials involving our product candidates. We have less control over the timing and other aspects of these clinical trials than if we conducted the monitoring and supervision entirely on our own. Third parties may not perform their responsibilities for our clinical trials on our anticipated schedule or consistent with a clinical trial protocol or applicable regulations. We also may rely on CROs to perform our data management and analysis. They may not provide these services as required or in a timely or compliant manner, and we may be held legally responsible for any or all of their performance failures or inadequacies.

        If we or our collaborators experience delays in the completion of, or termination of, any clinical trial of our product candidates, the commercial prospects of our product candidates will be harmed, and our ability to generate product revenues from any of these product candidates will be delayed or eliminated. In addition, any delays in completing our clinical trials will increase our costs, slow our product candidate development and approval process, and jeopardize our ability to commence product sales and generate revenues. Any of these occurrences may harm our business, financial condition and prospects. In addition, many of the factors that cause, or lead to, a delay in the commencement or completion of clinical trials may also lead to the denial of regulatory approval of our product candidates.

If we encounter difficulties enrolling patients in our clinical trials, our clinical trials could be delayed or otherwise adversely affected.

        Clinical trials for our product candidates require us to identify and enroll a large number of patients with the disease under investigation. We may not be able to enroll a sufficient number of patients with required or desired characteristics to conduct our clinical trials in a timely manner, if at all. Patient enrollment is affected by factors including, but not limited to:

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        We have experienced slower enrollment of patients in our smaller clinical trials due to the pace in which clinical sites were being initiated for enrollment and may experience similar difficulties in the future. In addition, AR-301 and AR-101 have been granted orphan drug designation for the treatment of P. aeruginosa and S. aureus in the EU respectively, and the low prevalence of such diseases relative to the total population may make it harder to identify patients to enroll. If we have difficulty enrolling a sufficient number or diversity of patients to conduct our clinical trials as planned, we may need to delay or terminate ongoing or planned clinical trials, either of which would have an adverse effect on our business.

Our product candidates are based on a novel technology, which may raise development issues we may not be able to resolve, regulatory issues that could delay or prevent approval, or personnel issues that may keep us from being able to develop our product candidates.

        Our product candidates are based on our mAb technology and gallium-based anti-infective platforms. There can be no assurance that development problems related to our novel technologies will not arise in the future that will cause significant delays or that we will not able to resolve.

        Regulatory approval of novel product candidates such as ours can be more expensive and take longer than for other, more well-known or extensively studied pharmaceutical or biopharmaceutical product candidates due to our and regulatory agencies' lack of experience with them. Only two mAbs have been approved by the FDA. Synagis which stimulates the immune system to target a viral infection and ZINPLAVA to reduce recurrence of Clostridium difficile infections. The novelty of our platform may lengthen the regulatory review process, require us to conduct additional studies or clinical trials, increase our development costs, lead to changes in regulatory positions and interpretations, delay or prevent approval and commercialization of our product candidates or lead to significant post-approval limitations or restrictions. For example, the FDA could require additional studies that may be difficult or impossible to perform.

        The novel nature of our product candidates also means that fewer people are trained in or experienced with product candidates of this type, which may make it difficult to find, hire and retain capable personnel, particularly for research, development, commercialization and manufacturing positions. For example, study personnel may administer the wrong version of our product candidates or assign study therapy to the wrong treatment group, resulting in potential disqualification of subjects from data analysis. These factors could potentially cause a trial to fail for a reason unrelated to the efficacy of our product candidates. If we are unable to hire and retain the necessary personnel, the rate and success at which we can develop and commercialize product candidates will be limited. Any such events would increase our costs and could delay or prevent our ability to commercialize our product candidates, which could adversely impact our business, financial condition and results of operations.

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If we are unable to successfully develop companion diagnostics for our therapeutic product candidates, or experience significant delays in doing so, we may not realize the full commercial potential of our product candidates.

        We intend to use rapid diagnostic tests of patients' respiratory samples to target our mAb product candidates to those patients we believe are infected with the bacterial agents which our mAb will act against. However, currently there is no commercially available companion diagnostic for AR-101 and AR-401. Therefore, there is a risk that a companion diagnostic for these products are not developed or available to support product launch. The FDA and similar regulatory authorities outside the United States regulate companion diagnostics. Companion diagnostics require separate or coordinated regulatory approval prior to commercialization of the therapeutic product. Changes to applicable regulations could delay our development programs or delay or prevent eventual marketing approval for our product candidates that may have otherwise been approved.

        The FDA's evolving position on the topic of companion diagnostics could affect our clinical development programs that utilize companion diagnostics. In particular, the FDA may limit our ability to use retrospective data, otherwise disagree with our approaches to trial design, biomarker qualification, clinical and analytical validity, and clinical utility, or make us repeat aspects of a trial or initiate new trials.

        Assays that can be used as companion diagnostics are commercially available, but in some cases such as for AR-101, they do not yet have regulatory approval for use as companion diagnostic. We have limited experience in the development of diagnostics and may not be successful in developing necessary diagnostics to pair with those product candidates that require a companion diagnostic.

        Given our limited experience in developing diagnostics, we expect to rely in part on third parties for their design and manufacture. If we, or any third parties that we engage to assist us, are unable to successfully develop companion diagnostics for our product candidates that require such diagnostics, or experience delays in doing so, the development of our product candidates may be adversely affected, our product candidates may not receive marketing approval and we may not realize the full commercial potential of any products that receive marketing approval. As a result, our business could be materially harmed.

Clinical development is a lengthy and expensive process with an uncertain outcome, and results of earlier studies and clinical trials may not be predictive of future trial results.

        Clinical testing is expensive and can take many years to complete, and its outcome is inherently uncertain. Failure can occur at any time during the clinical trial process. The results of preclinical studies and early clinical trials of our product candidates may not be predictive of the design or results of later-stage clinical trials. The results regarding initial tolerability and clinical activity generated to date in clinical trials for our AR-301 and AR-101 product candidates in HAP and VAP patients do not ensure that later clinical trials will demonstrate similar results. While we have observed in exploratory analysis statistically significant improvements in the outcomes of some of our clinical trials, many of the improvements we have seen have not reached statistical significance. Statistical significance is a statistical term that means that an effect is unlikely to have occurred by chance. In order to be approved by the FDA, European Medicines Agency, or EMA,

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or other drug approving authorities, product candidates must demonstrate that their effect on patients' diseases in the trial is statistically significant and clinically meaningful. Product candidates in later stages of clinical trials may fail to show the desired safety and efficacy traits despite having progressed through preclinical studies and initial clinical trials. Early clinical trials frequently enroll patient populations that are different from the patient populations in later trials, resulting in different outcomes in later clinical trials from those in earlier stage clinical trials. In addition, adverse events may not occur in early clinical trials and only emerge in larger, late-stage clinical trials or after commercialization. Companies in the biopharmaceutical industry have suffered significant setbacks in advanced clinical trials due to lack of efficacy or adverse safety profiles, notwithstanding promising results in earlier clinical trials. If later stage clinical trials do not demonstrate efficacy and safety of our product candidates we will not be able to market them and our business will be materially harmed.

We may seek a breakthrough therapy designation for our existing and future product candidates, but we might not receive such designation, and even if we do, such designation may not lead to a faster development or regulatory review or approval process.

        We may seek a breakthrough therapy designation for our existing and future product candidates; however, we cannot assure you our product candidates will meet the criteria for that designation. A breakthrough therapy is defined as a therapy that is intended, alone or in combination with one or more other therapies, to treat a serious condition, and preliminary clinical evidence indicates that the therapy may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints, such as substantial treatment effects observed early in clinical development. For therapies and biologics that have been designated as breakthrough therapies, interaction and communication between the FDA and the sponsor of the trial can help to identify the most efficient path for clinical development while minimizing the number of patients placed in ineffective control regimens. Therapies designated as breakthrough therapies by the FDA may also be eligible for priority review if supported by clinical data at the time the new drug application is submitted to the FDA.

        Designation as a breakthrough therapy is within the discretion of the FDA. Accordingly, even if we believe that one of our product candidates meets the criteria for designation as a breakthrough therapy, the FDA may disagree and instead determine not to make such designation. Even if we receive breakthrough therapy designation, the receipt of such designation for a product candidate may not result in a faster development or regulatory review or approval process compared to drugs considered for approval under conventional FDA procedures and does not assure ultimate approval by the FDA. In addition, even if one or more of our product candidates qualify as breakthrough therapies, the FDA may later decide that the product candidate no longer meets the conditions for qualification or decide that the time period for FDA review or approval will not be shortened.

Designation of our product candidates as qualified infectious disease products is not assured and, in any event, even if granted, may not actually lead to a faster development or regulatory review, and would not assure FDA approval of our product candidates.

        We may seek designation of our existing and future product candidates as qualified infectious disease products, or QIDP. A QIDP is an antibacterial or antifungal drug intended to treat serious

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or life- threatening infections, including those caused by an antibacterial or antifungal resistant pathogen, including novel or emerging infectious pathogens or certain "qualifying pathogens." A product designated as a QIDP for a particular indication will also be granted priority review by the FDA and can qualify for fast track status. Upon the approval of an NDA for a drug product designated by the FDA as a QIDP, the product is granted a period of five years of regulatory exclusivity that is in addition to any other period of regulatory exclusivity for which the product is eligible. The FDA has broad discretion whether or not to grant these designations, so even if we believe a particular product candidate is eligible for such designation or status, the FDA could decide not to grant it. Moreover, even if we do receive such a designation, we may not experience a faster development process, review or approval compared to conventional FDA procedures and there is no assurance that our product candidate, even if determined to be a QIDP, will be approved by the FDA.

Regulatory authorities may not approve our product candidates even if they meet safety and efficacy endpoints in clinical trials.

        The time required to obtain approval by the FDA and comparable foreign authorities is unpredictable but typically takes many years following the commencement of clinical trials and depends upon numerous factors, including the substantial discretion of regulatory authorities. In addition, approval policies, regulations, or the type and amount of clinical data necessary to gain approval may change during the course of a product candidate's clinical development and may vary among jurisdictions. We have discussions with and obtain guidance from regulatory authorities regarding certain aspects of our clinical development activities. These discussions are not binding commitments on the part of regulatory authorities. Under certain circumstances, regulatory authorities may revise or retract previous guidance during the course of our clinical activities or after the completion of our clinical trials. A regulatory authority may also disqualify a clinical trial in whole or in part from consideration in support of approval of a potential product for commercial sale or otherwise deny approval of that product. Prior to regulatory approval, a regulatory authority may elect to obtain advice from outside experts regarding scientific issues and/or marketing applications under a regulatory authority review. In the United States, these outside experts are convened through the FDA's Advisory Committee process, which would report to the FDA and make recommendations that may differ from the views of the FDA. Should an Advisory Committee be convened, it would be expected to lengthen the time for obtaining regulatory approval, if such approval is obtained at all.

        The FDA and foreign regulatory agencies may delay, limit or deny marketing approval for many reasons, including, but not limited to:

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        Our product candidates may not be approved even if they achieve their endpoints in clinical trials. Regulatory agencies, including the FDA, or their advisors may disagree with our trial design and our interpretations of data from preclinical studies and clinical trials. Regulatory agencies also may approve a product candidate for fewer or more limited indications than requested or may grant approval subject to the performance of post-marketing studies. In addition, regulatory agencies may not approve the labeling claims that are necessary or desirable for the successful commercialization of our product candidates. We have not obtained regulatory approval for any product candidate, and it is possible that none of our existing product candidates or any product candidates we may seek to develop in the future will ever obtain regulatory approval.

        Any delay in or failure to receive or maintain approval for any of our product candidates could prevent us from ever generating revenues or achieving profitability.

We may be required to suspend, repeat or terminate our clinical trials if they are not conducted in accordance with regulatory requirements, the results are negative or inconclusive, or the trials are not well designed.

        Clinical trials must be conducted in accordance with FDA regulations governing clinical studies, or other applicable foreign government guidelines, and are subject to oversight by the FDA, other foreign governmental agencies and IRBs/Ethic Committees at the medical institutions where the clinical trials are conducted. In addition, clinical trials must be conducted with product candidates produced under current Good Manufacturing Practices, or cGMP, and may require large numbers of test subjects. Clinical trials may be suspended by the FDA, other foreign governmental agencies or us for various reasons, including, but not limited to:

        In addition, changes in regulatory requirements and guidance may occur and we may need to amend clinical trial protocols to reflect these changes. Amendments may require us to resubmit our clinical trial protocols to IRBs for reexamination, which may impact the costs, timing or successful completion of a clinical trial. Due to these and other factors, our product candidates could take longer to gain regulatory approval than we expect or we may never gain approval for

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any product candidates, which could reduce or eliminate our revenue by delaying or terminating the commercialization of our product candidates.

A Fast Track product designation or other designation to facilitate product candidate development may not lead to faster development or regulatory review or approval process, and it does not increase the likelihood that our product candidates will receive marketing approval.

        We have received a Fast Track product designation for AR-301 and AR-101 and we may seek Fast Track designation for other of our current or future product candidates. Receipt of a designation to facilitate product candidate development is within the discretion of the FDA. Accordingly, even if we believe one of our product candidates meets the criteria for a designation, the FDA may disagree. In any event, the receipt of such a designation for a product candidate may not result in a faster development process, review, or approval compared to drugs considered for approval under conventional FDA procedures and does not assure ultimate marketing approval by the FDA. In addition, the FDA may later decide that the products no longer meet the designation conditions.

We may not be able to maintain orphan drug marketing exclusivity for our AR-101 and AR-301 product candidates in the United States and/or the European Union, and orphan drug marketing exclusivity may not be available for any of our other product candidates.

        Under the Orphan Drug Act, the FDA may grant orphan drug designation to a drug or biologic intended to treat a rare disease or condition (with a population of less than 200,000), which is defined as one occurring in a patient population of fewer than 200,000 in the United States, or a patient population greater than 200,000 in the U.S. where there is no reasonable expectation that the cost of developing the drug or biologic will be recovered from sales in the United States. In the EU, following the opinion of the EMA's Committee for Orphan Medicinal Products, the European Commission grants orphan drug designation to a product if (1) it is intended for the diagnosis, prevention or treatment of a life-threatening or chronically debilitating condition; (2) either (a) such condition affects no more than five in 10,000 persons in the EU when the application is made, or (b) the product, without the incentives derived from orphan medicinal product status, would not generate sufficient return in the EU to justify investment; and (3) there exists no satisfactory method of diagnosis, prevention or treatment of such condition authorized for marketing in the EU, or if such a method exists, the product will be of significant benefit to those affected by the condition.

        Generally, if a drug with an orphan drug designation subsequently receives the first marketing approval for the indication for which it has such designation, the drug is entitled to a period of marketing exclusivity, which precludes the FDA or the European Commission and the competent authorities in the EU Member States from approving another marketing application for the same drug (or similar medicinal product in the European Union) for that time period, except in limited circumstances. The applicable period is seven years in the U.S. and 10 years in the EU. The EU exclusivity period can be reduced to six years if a drug no longer meets the criteria for orphan drug designation or if the drug is sufficiently profitable that market exclusivity is no longer justified. Orphan drug exclusivity may be lost if the FDA 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.

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        We have been granted orphan drug designation for our AR-101 and AR-301 drug candidates in the European Union, as well as orphan drug designation for our AR-101 drug candidate in the U.S. Although we may apply for orphan drug designation for other product candidates we may develop in both the U.S. and EU, applicable regulatory authorities may not grant us this designation. In addition, even if such status is obtained for any other product candidate that we may develop, that exclusivity may not effectively protect the candidate from competition because other drugs, such as those with different active ingredients or molecular structures, can be approved for the same condition. Furthermore, even after an orphan drug is approved, the FDA can subsequently approve another drug for the same condition if the FDA concludes that the later drug is clinically superior, in that it is shown to be safer, more effective or makes a major contribution to patient care. In the EU, a marketing authorization may be granted to a similar product during the 10-year period of market exclusivity for the same therapeutic indication at any time if:

        Any inability to secure orphan drug designation or to maintain the exclusivity benefits of this designation could have an adverse impact on our ability to develop and commercialize our product candidates, depending on the extent to which we would be protected by other patents and regulatory exclusivities, and may adversely affect our business, prospects, financial condition and results of operations.

Any product candidate for which we, or our collaborators, obtain marketing approval could be subject to restrictions or withdrawal from the market, and we may be subject to penalties if we fail to comply with regulatory requirements or if we experience unanticipated problems with our products, when and if any of them are approved.

        Any product candidate that we, or our collaborators, obtain marketing approval for, along with the manufacturing processes, post-approval clinical data, labeling, advertising and promotional activities for such product, will be subject to continuing requirements of the FDA and other regulatory authorities. These requirements include submissions of safety and other post-marketing information, reports, facility registration and product listing requirements, cGMP requirements relating to quality control, quality assurance and corresponding maintenance of records and documents, requirements regarding the distribution of samples to physicians and recordkeeping. Even if marketing approval of a product candidate is granted, the approval may be subject to limitations on the indicated uses for which the product may be marketed or to conditions of approval, or contain requirements for costly post-marketing testing and surveillance to monitor the safety or efficacy of the product. The FDA closely regulates the post-approval marketing and promotion of drugs to ensure drugs are marketed only for the approved indications and in accordance with the provisions of the approved labeling. The FDA imposes stringent restrictions

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on manufacturers' communications regarding off-label use. If we market our products outside of their approved indications, we will be subject to enforcement action for off-label marketing.

        In addition, later discovery of previously unknown problems with these products, manufacturers or manufacturing processes, or failure to comply with regulatory requirements, may yield various results, including, but not limited to:

        The FDA's policies may change and additional government regulations may be enacted that could prevent, limit or delay regulatory approval of our product candidates. If we, or our collaborators, are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we, or our collaborators, are not able to maintain regulatory compliance, any marketing approval that was obtained could be lost, which would adversely affect our business, prospects and ability to achieve or sustain profitability.

If we, or our collaborators, are unable to comply with foreign regulatory requirements or obtain foreign regulatory approvals, our ability to develop foreign markets for our products could be impaired.

        Sales of our products outside the U.S. will be subject to foreign regulatory requirements governing clinical trials, marketing approval, manufacturing, product licensing, pricing and reimbursement. These regulatory requirements vary greatly from country to country. As a result, the time required to obtain approvals outside the U.S. may differ from that required to obtain FDA approval and we may not be able to obtain foreign regulatory approvals on a timely basis or at all. Approval by the FDA does not ensure approval by regulatory authorities in other countries, and approval by one foreign regulatory authority does not ensure approval by regulatory authorities in other countries or by the FDA and foreign regulatory authorities could require additional testing. Failure to comply with these regulatory requirements or obtain required approvals could impair our ability to develop foreign markets for our products.

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We are subject to U.S. and certain foreign export and import controls, sanctions, embargoes, anti-corruption laws, and anti-money laundering laws and regulations. Compliance with these legal standards could impair our ability to compete in domestic and international markets. We can face criminal liability and other serious consequences for violations, which can harm our business.

        We are subject to export control and import laws and regulations, including the U.S. Export Administration Regulations, U.S. Customs regulations, various economic and trade sanctions regulations administered by the U.S. Treasury Department's Office of Foreign Assets Controls, the U.S. Foreign Corrupt Practices Act of 1977, as amended, or FCPA, the U.S. domestic bribery statute contained in 18 U.S.C. § 201, the U.S. Travel Act, the USA PATRIOT Act, and other state and national anti-bribery and anti-money laundering laws in the countries in which we conduct activities. Anti-corruption laws are interpreted broadly and prohibit companies and their employees, agents, contractors, and other collaborators from authorizing, promising, offering, or providing, directly or indirectly, improper payments or anything else of value to recipients in the public or private sector. We may engage third parties for clinical trials outside of the United States, to sell our products abroad once we enter a commercialization phase, and/or to obtain necessary permits, licenses, patent registrations, and other regulatory approvals. We have direct or indirect interactions with officials and employees of government agencies or government-affiliated hospitals, universities, and other organizations. We can be held liable for the corrupt or other illegal activities of our employees, agents, contractors, and other collaborators, even if we do not explicitly authorize or have actual knowledge of such activities. Any violations of the laws and regulations described above may result in substantial civil and criminal fines and penalties, imprisonment, the loss of export or import privileges, debarment, tax reassessments, breach of contract and fraud litigation, reputational harm, and other consequences.

Developing product candidates in combination with other therapies may lead to unforeseen side effects or failures in our clinical trials.

        We, and our collaborators, are studying our product candidates in clinical trials in combination with approved therapies, including antibiotics, and we anticipate that if any product candidates are approved for marketing, they will be approved to be used only in combination with other therapies. Our development programs and planned studies carry all the risks inherent in drug development activities, including the risk that they will fail to demonstrate meaningful efficacy or acceptable safety. In addition, our development programs are subject to additional regulatory, commercial, manufacturing and other risks because of the use of other therapies in combination with our product candidates. For example, the other therapies may lead to toxicities that are improperly attributed to our product candidates or the combination of our product candidates with other therapies may result in toxicities that the product candidate or other therapy does not produce when used alone. The other therapies we are using in combination with our product candidates may be removed from the market or become prohibitively expensive and thus be unavailable for testing or commercial use with any of our approved products. Testing product candidates in combination with other therapies may increase the risk of significant adverse effects or test failures. The timing, outcome and cost of developing products to be used in combination with other therapies is difficult to predict and dependent on a number of factors that are outside our reasonable control. If any safety or toxicity issues arise in these clinical trials or with any approved products, or if the other therapies are removed from the market, the products may not be approved, which could prevent us from ever generating revenues or achieving profitability.

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We will need to develop or acquire additional manufacturing and distribution capabilities, or outsource the same to third parties, in order to commercialize any product candidates that obtain marketing approval, and we may encounter unexpected costs or difficulties in doing so.

        If we independently develop and commercialize one or more of our product candidates, we will need to invest in acquiring or building additional capabilities and effectively manage our operations and facilities to successfully pursue and complete future research, development and commercialization efforts. We will require additional investment and validation process development in order to qualify our commercial-scale manufacturing process to manufacture clinical trial materials and commercial material if any of our products are approved for marketing. This investment and validation process development may be expensive and time-consuming. We will require additional personnel with experience in commercial-scale manufacturing, managing of large-scale information technology systems and managing a large-scale distribution system. We will need to add personnel and expand our capabilities, which may strain our existing managerial, operational, regulatory compliance, financial and other resources. To do this effectively, we must:

        We may seek FDA approval for our production process and facilities simultaneously with seeking approval for sale of our product candidates. Should we not complete the development of adequate manufacturing and distribution capabilities, including manufacturing capacity, or fail to receive timely approval of our manufacturing process and facilities, our ability to supply clinical trial materials for planned clinical trials or supply products following regulatory approval for sale could be delayed, which would further delay our clinical trials or the period of time when we would be able to generate revenues from the sale of such products, if we are even able to obtain approval or generate revenues at all.

        Additionally, we may decide to outsource some or all of our manufacturing activities to a third party commercial manufacturing organization, or CMO. Under any agreement with a CMO, we would have less control over the timing and quality of manufacturing than if we were to perform such manufacturing ourselves. A CMO would be manufacturing other pharmaceutical products in the same facilities as our product candidates, increasing the risk of cross product contamination. Further, there is no guarantee that any CMO will continue ongoing operations, causing potential delays in product supply, reduced revenues and other liabilities for us.

        Any such events would increase our costs and could delay or prevent our ability to commercialize our product candidates, which could adversely impact our business, financial condition and results of operations.

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Our product candidates may cause undesirable side effects or have other properties that could delay or prevent their regulatory approval, limit the commercial profile of an approved label, or result in significant negative consequences following marketing approval, if any.

        Undesirable side effects caused by our product candidates could cause us, our collaborators, or regulatory authorities to interrupt, delay or halt clinical trials and could result in a more restrictive label, the delay or denial of regulatory approval by the FDA or other comparable foreign regulatory authorities, or litigation by injured patients, if any. To date, patients treated with AR-301 and AR-101 have experienced AEs related to the study drug, some of which have been serious. Regarding AR-301, few (2.8%) adverse events, or AEs, were deemed related, and no serious adverse events, or SAEs, were deemed to be related to AR-301 treatment. There were six deaths in the trial, none of which were deemed related to AR-301. Regarding AR-101, 12 SAEs were experienced by five subjects. An event of cardiorespiratory arrest was judged as probably related to AR-101 and events of hyperbilirubinemia and cholestasis, although pre-existent, were deemed possibly related. In both cases, the causality assessment by the investigators accounted for the fact that a contribution by AR-101 to the AE could not be excluded with certainty although other probable causes were acknowledged. The other SAEs were deemed unrelated.

        Because our product candidates are intended to assist the immune system, our clinical trials could reveal an unacceptable severity and prevalence of side effects, including, but not limited to, adverse immune responses that lead to previously unobserved complications. As a result of any side effects, our clinical trials could be suspended or terminated and the FDA or comparable foreign regulatory authorities could order us to cease further development, or deny approval, of our product candidates for any or all targeted indications. The drug-related side effects could affect patient recruitment or the ability of enrolled patients to complete the trial or result in potential product liability claims. Any of these occurrences may harm our business, financial condition and prospects significantly.

        Additionally, if one or more of our product candidates receives marketing approval, and we, our collaborators, or others later identify undesirable side effects caused by such products, a number of potentially significant negative consequences could result, including, but not limited to:

        In addition, we cannot assure you that the bacteria which our mAbs target will not in the future develop a resistance to our mAbs.

        Any of these events could prevent us from achieving or maintaining market acceptance of the particular product candidate, if approved, and could significantly harm our business, results of operations and prospects.

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If we cannot conduct the non-clinical testing required by regulatory authorities to demonstrate an acceptable toxicity profile for our product candidates in non-clinical studies, we will not be able to initiate or continue clinical trials or obtain approval for our product candidates.

        In order to move a product candidate into human clinical trials, we must first demonstrate an acceptable toxicity profile in preclinical testing. Furthermore, in order to obtain approval, we must also demonstrate safety in various non-clinical tests. We may not have conducted or may not conduct the types of non-clinical testing required by regulatory authorities, or future non-clinical tests may indicate that our product candidates are not safe for use. Preclinical and non-clinical testing is expensive, time-consuming and has an uncertain outcome. In addition, success in initial non-clinical testing does not ensure that later non-clinical testing will be successful. We may experience numerous unforeseen events during, or as a result of, the non-clinical testing process, which could delay or prevent our ability to develop or commercialize our product candidates, including, but not limited to:

        Any such events would increase our costs and could delay or prevent our ability to commercialize our product candidates, which could adversely impact our business, financial condition and results of operations.

Because we have multiple product candidates in our clinical pipeline and are considering a variety of target indications, we may expend our limited resources to pursue a particular product candidate or indication and fail to capitalize on product candidates or indications that may be more profitable or for which there is a greater likelihood of success.

        Because we have limited financial and managerial resources, we must focus our research and development efforts on those product candidates and specific indications that we believe are the most promising. As a result, we may forego or delay our pursuit of opportunities with other product candidates or other indications that later prove to have greater commercial potential. Our resource allocation decisions may cause us to fail to capitalize on viable commercial products or profitable market opportunities. We may in the future spend our resources on other research programs and product candidates for specific indications that ultimately do not yield any commercially viable products. Furthermore, if we do not accurately evaluate the commercial potential or target market for a particular product candidate, we may relinquish valuable rights to that product candidate through collaboration, licensing or other royalty arrangements in cases in which it would have been more advantageous for us to retain sole development and commercialization rights.

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If we are unable to establish sales and marketing capabilities or enter into agreements with third parties to sell and market our product candidates, we may not be successful in commercializing our product candidates if and when they are approved.

        We do not have a sales and marketing infrastructure or any experience in the sales, marketing or distribution of pharmaceutical products. We may seek additional third-party collaborators for the commercialization of our other product candidates. In the future, we may choose to build a focused sales and marketing infrastructure to market or co-promote some of our product candidates if and when they are approved, which would be expensive and time-consuming. Alternatively, we may elect to outsource these functions to third parties. Either approach carries significant risks. For example, recruiting and training a sales force is expensive and time-consuming and, if done improperly, could delay a product launch and result in limited sales. If the commercial launch of a product candidate for which we recruit a sales force and establish marketing capabilities is delayed or does not occur for any reason, we would have prematurely or unnecessarily incurred these commercialization expenses. This may be costly, and our investment would be lost if we cannot retain or reposition our sales and marketing personnel. Outsourcing sales and marketing capabilities will depend on our ability to enter into and maintain agreements with other companies having sales, marketing and distribution capabilities, the ability of such companies to successfully market and sell our product candidates, and our ability to enter into such agreements on terms favorable to us.

        Factors that may inhibit our efforts to commercialize our products on our own include, but are not limited to:

        Entry into agreements with third parties to sell and market our product candidates will subject us to a number of risks, including, but not limited to, the following:

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The availability and amount of reimbursement for our product candidates, if approved, and the manner in which government and private payors may reimburse for any potential products, are uncertain.

        Obtaining coverage and reimbursement approval for a product from a government or other third-party payor is a time-consuming and costly process that could require us to provide supporting scientific, clinical and cost effectiveness data for the use of our products to the payor. There may be significant delays in obtaining such coverage and reimbursement for newly approved products, and coverage may be more limited than the purposes for which the product is approved by the FDA or similar regulatory authorities outside of the United States. Moreover, eligibility for coverage and reimbursement does not imply that a product will be paid for in all cases or at a rate that covers our costs, including research, development, intellectual property, manufacture, sale and distribution expenses. Reimbursement rates may vary according to the use of the product and the clinical setting in which it is used, may be based on reimbursement levels already set for lower cost products and may be incorporated into existing payments for other services. Net prices for products 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 product from countries where they may be sold at lower prices than in the United States.

        There is significant uncertainty related to the insurance coverage and reimbursement of newly approved products. Third-party payors often rely upon Medicare coverage policy and payment limitations in setting their own reimbursement policies, but also have their own methods and approval process apart from Medicare coverage and reimbursement determinations. It is difficult to predict at this time what third party payors will decide with respect to the coverage and reimbursement for our product candidates. Our inability to promptly obtain coverage and adequate reimbursement rates from both government-funded and private payors for any approved products that we develop could have a material adverse effect on our operating results, our ability to raise capital needed to commercialize products and our overall financial condition.

        Reimbursement may impact the demand for, and/or the price of, any product for which we obtain marketing approval. Assuming we obtain coverage for a given product by a third-party payor, the resulting reimbursement payment rates may not be adequate or may require co-payments that patients find unacceptably high. Patients who are prescribed medications for the treatment of their conditions, and their prescribing physicians, generally rely on third-party payors to reimburse all or part of the costs associated with those medications. Patients are unlikely to use our products unless coverage is provided and reimbursement is adequate to cover all or a significant portion of the cost of our products. Therefore, coverage and adequate reimbursement is critical to new product acceptance. Coverage decisions may depend upon clinical and economic standards that disfavor new drug products when more established or lower cost therapeutic alternatives are already available or subsequently become available.

        The U.S. government, state legislatures and foreign governmental entities have shown significant interest in implementing cost containment programs to limit the growth of government-paid healthcare costs, including price controls, restrictions on reimbursement and coverage and requirements for substitution of generic products for branded prescription drugs.

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Adoption of government controls and measures, and tightening of restrictive policies in jurisdictions with existing controls and measures, could exclude or limit our products from coverage and limit payments for pharmaceuticals.

        In addition, we expect that the increased emphasis on managed care and cost containment measures in the U.S. by third-party payors and government authorities to continue and will place pressure on pharmaceutical pricing and coverage. Coverage policies and third-party reimbursement rates may change at any time. Even if favorable coverage and reimbursement status is attained for one or more drug products for which we receive regulatory approval, less favorable coverage policies and reimbursement rates may be implemented in the future.

Failure to attract and retain key personnel could impede our ability to develop our products and to obtain new collaborations or other sources of funding.

        Because of the specialized scientific nature of our business and the unique properties of our antibody platform, our success is highly dependent upon our ability to attract and retain qualified scientific and technical personnel, consultants and advisors. We depend greatly on our founders Dr. Vu Truong, our Chief Executive Officer, Chief Scientific Officer and a Director, and Dr. Eric Patzer, our Executive Chairman. We will also need to recruit a significant number of additional personnel in order to achieve our operating goals and financial reporting obligations. In order to pursue our product development and marketing and sales plans, we will need to hire additional qualified scientific personnel to perform research and development, as well as personnel with expertise in clinical testing, government regulation, manufacturing, marketing and sales, which may strain our existing managerial, operational, regulatory compliance, financial and other resources. We also rely on consultants and advisors to assist in formulating our research and development strategy and adhering to complex regulatory requirements. We face competition for qualified individuals from numerous pharmaceutical and biotechnology companies, universities and other research institutions. There can be no assurance that we will be able to attract and retain such individuals on acceptable terms, if at all. The failure to attract and retain qualified personnel, consultants and advisors could have a material adverse effect on our business, financial condition and results of operations.

We may expend our limited resources to pursue a particular product candidate or indication and fail to capitalize on product candidates or indications that may be more profitable or for which there is a greater likelihood of success.

        Because we have limited financial and managerial resources, we focus on research programs and product candidates for the indications that we believe are the most scientifically and commercially promising. Our resource allocation decisions may cause us to fail to capitalize on viable scientific or commercial products or profitable market opportunities. In addition, we may spend valuable time and managerial and financial resources on research programs and product candidates for specific indications that ultimately do not yield any scientifically or commercially viable products. If we do not accurately evaluate the scientific and commercial potential or target market for a particular product candidate, we may relinquish valuable rights to that product candidate through collaboration, licensing or other royalty arrangements in situations where it would have been more advantageous for us to retain sole rights to development and commercialization.

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Risks Relating to Our Financial Position and Need for Additional Capital

We expect to continue to incur increasing net losses for the foreseeable future, and we may never achieve or maintain profitability.

        We are a clinical-stage biopharmaceutical company with a limited operating history. Investment in biopharmaceutical product development is highly speculative because it entails substantial upfront capital expenditures and significant risk that any potential product candidate will fail to demonstrate adequate effect or an acceptable safety profile, gain regulatory approval and become commercially viable. We have no products approved for commercial sale and have not generated any revenue from product sales to date, and we continue to incur significant research and development and other expenses related to our ongoing operations. As a result, we are not profitable and have incurred losses in each period since our inception. For the year ended December 31, 2017, we reported a net loss of approximately $27.5 million. For the three months ended March 31, 2018, we reported a net loss of approximately $8.2 million. As of March 31, 2018, we had an accumulated deficit of $55.8 million.

        To become and remain profitable, we or our partners must succeed in developing our product candidates, obtaining regulatory approval for them, and manufacturing, marketing and selling those products for which we or our partners may obtain regulatory approval. We or they may not succeed in these activities, and we may never generate revenue from product sales that is significant enough to achieve profitability. Because of the numerous risks and uncertainties associated with biopharmaceutical product development and commercialization, we are unable to accurately predict the timing or amount of future expenses or when, or if, we will be able to achieve or maintain profitability. Currently, we have no products approved for commercial sale, and to date we have not generated any product revenue. We have financed our operations primarily through the sale of equity securities, upfront payments pursuant to collaboration agreements, government grants and capital lease and equipment financing. The size of our future net losses will depend, in part, on the rate of growth or contraction of our expenses and the level and rate of growth, if any, of our revenues. Our ability to achieve profitability is dependent on our ability, alone or with others, to complete the development of our products successfully, obtain the required regulatory approvals, manufacture and market our proposed products successfully or have such products manufactured and marketed by others, and gain market acceptance for such products. There can be no assurance as to whether or when we will achieve profitability.

Available cash resources may be insufficient to provide for our working capital needs for the next twelve months. In the event such cash resources are insufficient to provide for our working capital requirements, we will need to raise additional capital to continue as a going concern.

        Our recurring losses from operations raise substantial doubt about our ability to continue as a going concern. The accompanying consolidated interim financial statements have been prepared on a going concern basis that contemplates the realization of assets and discharge of liabilities in their normal course of business. We have suffered recurring losses from operations since inception and negative cash flows from operating activities during the three months ended March 31, 2018 and years ended December 31, 2017 and 2016. We expect to incur additional operating losses in the foreseeable future as we continue our product development programs. Our ability to continue as a going concern will require us to obtain additional funding. We believe that the net proceeds from this offering, together with our existing cash and cash equivalents and, will allow us to fund

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our operating plan through at least the next twelve months. We have based these estimates, however, on assumptions that may prove to be wrong, and we could spend our available financial resources much faster than we currently expect and need to raise additional funds sooner than we anticipate. If we are unable to raise capital when needed or on acceptable terms, we would be forced to delay, reduce or eliminate our research and development programs and commercialization efforts.

We will require substantial additional capital in the future. If additional capital is not available, we will have to delay, reduce or cease operations.

        Developing pharmaceutical products, including conducting preclinical studies and clinical trials, is expensive. Development of our product candidates will require substantial additional funds to conduct research, development and clinical trials necessary to bring such product candidates to market and to establish manufacturing, marketing and distribution capabilities. We expect our development expenses to substantially increase in connection with our ongoing activities, particularly as we advance our clinical programs. Our future capital requirements will depend on many factors, including, among others:

        We anticipate that we will continue to generate significant losses for the next several years as we incur expenses to complete our clinical trial programs for our product candidates, build

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commercial capabilities, develop our pipeline and expand our corporate infrastructure. We believe that the net proceeds from this offering, together with our existing cash and cash equivalents, will allow us to fund our operating plan for at least the next twelve months from the date of this prospectus. However, our operating plan may change as a result of factors currently unknown to us. Changing circumstances may cause us to consume capital faster or slower than we currently anticipate or to alter our operations. We have based these estimates on assumptions that may prove to be wrong, and we could utilize our available financial resources sooner than we currently expect.

        There can be no assurance that our revenue and expense forecasts will prove to be accurate, and any change in the foregoing assumptions could require us to obtain additional financing earlier than anticipated. There is a risk of delay or failure at any stage of developing a product candidate, and the time required and costs involved in successfully accomplishing our objectives cannot be accurately predicted. Actual drug research and development costs could substantially exceed budgeted amounts, which could force us to delay, reduce the scope of or eliminate one or more of our research or development programs. Additionally, if the Cystic Fibrosis Foundation does not continue to provide sufficient level of funding support, we may not be able to complete the Phase 1/2a clinical trial relating to AR-501.

        We may never be able to generate a sufficient amount of product revenue to cover our expenses. Until we do, we expect to seek additional funding through public or private equity or debt financings, collaborative relationships, capital lease transactions or other available financing transactions. However, there can be no assurance that additional financing will be available on acceptable terms, if at all, and such financings could be dilutive to existing security holders. Moreover, in the event that additional funds are obtained through arrangements with collaborators, such arrangements may require us to relinquish rights to certain of our technologies, product candidates or products that we would otherwise seek to develop or commercialize ourselves.

        If adequate funds are not available, we may be required to delay, reduce the scope of or eliminate one or more of our research or development programs. Our failure to obtain adequate financing when needed and on acceptable terms would have a material adverse effect on our business, financial condition and results of operations.

Risks Relating to Manufacturing Activities

We have no experience manufacturing our product candidates at commercial scale, and there can be no assurance that our product candidates can be manufactured in compliance with regulations at a cost or in quantities necessary to make them commercially viable. There can be no assurance that any contract manufacturing facilities will be acceptable for licensure by regulatory authorities or that we can contract to build acceptable facilities.

        We have no experience in commercial-scale manufacturing of mAbs. We may develop our manufacturing capacity in part by building manufacturing facilities. This activity would require substantial additional funds and we would need to hire and train significant numbers of qualified employees to staff these facilities. We may not be able to develop commercial-scale manufacturing facilities that are adequate to produce materials for additional later-stage clinical trials or commercial use. We currently rely on CMOs for bulk product manufacturing and sterile fill and finish of our products, and these contractors currently manufacture our product candidates at a scale

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that is not adequate for commercial supply. Failure to find and maintain satisfactory commercial-scale manufacturing contractors could impair our ability to supply product for clinical and commercial needs. Additionally, we may decide to outsource some or all of our bulk product manufacturing activities to a third party CMO. Failure of any of these contractors to maintain compliance with cGMPs and other regulatory and legal requirements could result in government actions that would limit or eliminate clinical trial and commercial product supply. Under any agreement with a CMO, we would have less control over the timing and quality of manufacturing than if we were perform such manufacturing ourselves. A CMO would be manufacturing other pharmaceutical products in the same facilities as our product candidates, increasing the risk of cross product contamination. Further, there is no guarantee that any CMO will continue ongoing operations, causing potential delays in product supply, reduced revenues and other liabilities for us.

        The equipment and facilities employed in the manufacture of pharmaceuticals are subject to stringent qualification requirements by regulatory agencies, including validation of equipment, systems and processes. We may be subject to lengthy delays and expense in conducting validation studies, if we can meet the requirements at all.

        If we are unable to manufacture or contract for a sufficient supply of our product candidates on acceptable terms, or if we encounter delays or difficulties in our manufacturing processes or our relationships with other manufacturers, our preclinical and clinical testing schedule would be delayed. This in turn would delay the submission of product candidates for regulatory approval and thereby delay the market introduction and subsequent sales of any products that receive regulatory approval, which would have a material adverse effect on our business, financial condition and results of operations. Furthermore, we or our contract manufacturers must supply all necessary documentation in support of our regulatory approval applications on a timely basis and must adhere to cGMP regulations enforced by the FDA and other regulatory bodies through their facilities inspection programs. If these facilities cannot pass a pre-approval plant inspection, the approval by the FDA or other regulatory bodies of the products will not be granted. If the FDA or a comparable foreign regulatory authority does not approve our facilities and processes for the manufacture of our product candidates or if they withdraw any such approval in the future, we may need to correct the issues or find alternative manufacturing facilities, which would significantly impact our ability to develop, obtain regulatory approval for or market our product candidates, if approved.

Our contract manufacturers are subject to significant regulation with respect to manufacturing of our products.

        All entities involved in the preparation of a product candidate for clinical trials or commercial sale, including our contract manufacturing organizations used for bulk product manufacturing and filling and finishing of our bulk product, are subject to extensive regulation. Components of a finished product approved for commercial sale or used in late-stage clinical trials must be manufactured in accordance with cGMP. These regulations govern manufacturing processes and procedures, including record keeping, and the implementation and operation of quality systems to control and assure the quality of investigational products and products approved for sale. The facilities and quality systems of some or all of our third-party contractors must pass a pre-approval inspection for compliance with the applicable regulations as a condition of any regulatory approval of our product candidates. In addition, the regulatory authorities may, at any time, audit or inspect

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a manufacturing facility involved with the preparation of our product candidates or the associated quality systems for compliance with the regulations applicable to the activities being conducted. The regulatory authorities also may, at any time following approval of a product for sale, audit the manufacturing facilities of our third-party contractors or raw material suppliers. If any such inspection or audit identifies a failure to comply with applicable regulations or if a violation of our product specifications or applicable regulations occurs independent of such an inspection or audit, the relevant regulatory authority may require remedial measures that may be costly and time-consuming to implement and that may include the temporary or permanent suspension of a clinical trial or commercial sales or the temporary or permanent closure of a facility. Our third-party contractors or raw material suppliers may refuse to implement remedial measures required by regulatory authorities. Any failure to comply with applicable manufacturing regulations or failure to implement required remedial measures imposed upon third parties with whom we contract could materially harm our business.

We rely on relationships with third-party contract manufacturers and raw material suppliers, which limits our ability to control the availability of, and manufacturing costs for, our product candidates.

        Problems with any of our contract manufacturers' or raw material suppliers' facilities or processes, could prevent or delay the production of adequate supplies of finished products. This could delay clinical trials or delay and reduce commercial sales and materially harm our business. Any prolonged delay or interruption in the operations of our collaborators' facilities or contract manufacturers' facilities could result in cancellation of shipments, loss of components in the process of being manufactured or a shortfall in availability of a product candidate or products. A number of factors could cause interruptions, including, but not limited to:

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        Because manufacturing processes are complex and are subject to a lengthy regulatory approval process, alternative qualified production capacity and sufficiently trained or qualified personnel may not be available on a timely or cost-effective basis or at all. Difficulties or delays in our contract manufacturers' production of drug substances could delay our clinical trials, increase our costs, damage our reputation and cause us to lose revenue and market share if we are unable to timely meet market demand for any products that are approved for sale.

        The manufacturing process for our product candidates has several components that are sourced from a single manufacturer. If we utilize an alternative manufacturer or alternative component, we may be required to demonstrate comparability of the drug product before releasing the product for clinical use and we may not be to find an alternative supplier. For example, the stoppers used to seal the vials of our products are made by a single supplier using a proprietary formula and process. Any change to the stopper would require us to carry out lengthy studies to verify that our product remains stable with the replacement stopper. The loss of any of our current suppliers could result in manufacturing delays for the component substitution, and we may need to accept changes in terms or price from our existing supplier in order to avoid such delays.

        Further, if our contract manufacturers are not in compliance with regulatory requirements at any stage, including post-marketing approval, we may be fined, forced to remove a product from the market and/or experience other adverse consequences, including delays, which could materially harm our business.

We use and generate hazardous materials in our business and must comply with environmental laws and regulations, which can be expensive.

        Our research, development and manufacturing involves the controlled use of hazardous materials, chemicals, various active microorganisms and volatile organic compounds, and we may incur significant costs as a result of the need to comply with numerous laws and regulations. For example, as a pharmacologically-active material, any residual impurities in process-waste streams must be disposed of as hazardous waste. We are subject to laws and regulations enforced by the FDA, the Drug Enforcement Agency, foreign health authorities and other regulatory requirements, including the Occupational Safety and Health Act, the Toxic Substances Control Act, the Resource Conservation and Recovery Act, and other current and potential federal, state, local and foreign laws and regulations governing the use, manufacture, storage, handling and disposal of our products, materials used to develop and manufacture our product candidates, and resulting waste products. Although we believe that our safety procedures for handling and disposing of such materials, and for killing any unused microorganisms before disposing of them, comply with the standards prescribed by state and federal regulations, the risk of accidental contamination or injury from these materials cannot be completely eliminated. In the event of such an accident, we could be held liable for any damages that result and any such liability could exceed our resources.

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During the course of the product life cycle we will make process changes to scale up manufacturing to commercial manufacture or transfer the production to alternate sites or contract manufacturers. Our ability to successfully implement these changes will depend on our ability to demonstrate, to the satisfaction of the FDA and other regulatory agencies that the product made by the new process or at the new site is comparable to the original product.

        In the event that manufacturing process changes are necessary for the further development of a product candidate, we may not be able to reach agreement with regulatory agencies on the criteria for demonstrating comparability to the original product, which would require us to repeat clinical studies performed with the original product. This could result in lengthy delays in implementing the new process or site and consequent delays in regulatory approval and commercial sales of product derived from the new process. If we reach agreement with regulatory agencies on the criteria for establishing comparability, we may not be able to meet these criteria or may suffer lengthy delays in meeting these criteria. This may result in significant lost sales due to inability to meet commercial demand with the original product. Furthermore, studies to demonstrate comparability, or any other studies on the new process or site such as validation studies, may uncover findings that result in regulatory agencies delaying or refusing to approve the new process or site.

Risks Relating to Our Joint Venture Agreement

If our joint venture with Hepalink is not successful or if we fail to realize the benefits we anticipate from such joint venture, we may not be able to capitalize on the full market potential of our products in China, Hong Kong, Macau and Taiwan.

        On February 11, 2018, we entered into a Joint Venture Contract, or the JV Agreement, with Shenzhen Hepalink Pharmaceutical Group Co., Ltd., a People's Republic of China company, or Hepalink, pursuant to which we formed a Joint Venture company named Shenzen Arimab BioPharmaceuticals Co., Ltd., or SABC, a People's Republic of China Company, develop, manufacture, import and distribute AR-101 and AR-301 in China, Hong Kong, Macau and Taiwan, collectively, referred to as the Territory. The Joint Venture received regulatory approval in China and SABC was formed on July 2, 2018.

        Hepalink contributed the equivalent of $6.0 million in renminbi, the official currency of the People's Republic of China, and owns 51% of the capital of SABC and we contributed (i) $1.0 million in cash and (ii) a license to AR-101 and AR-301 pursuant to a Technology License and Collaboration Agreement between us and SABC and we own 49% of the capital of SABC. In addition, Hepalink will provide SABC with clinical and regulatory personnel services for clinical and regulatory review, application and filing procedures in the Territory and we will provide clinical and regulatory personnel services to assist in coordination of the execution of the clinical study in China and also with CMC personnel services for drug supply and manufacturing planning. Upon the completion certain milestone events, which could occur as early as January 2019 and includes obtaining approval for a phase III clinical trial in mainland China, Hepalink will be obligated to contribute an equivalent of $9.0 million in renminbi in exchange for additional equity in SABC. If and to the extent these milestone events occur and Hepalink contributes additional capital to SABC, our 49% ownership stake in SABC will be diminished in proportion to such investment.

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        While SABC is obligated to use its commercially best efforts to commercialize our products and product candidates in the Territory, we have limited contractual rights to direct its activities. Hepalink has the majority of the voting equity in SABC, and has the right to designate three of five board seats. Therefore, Hepalink may have a greater influence in the commercialization efforts and other operations of SABC. In general, our joint venture with Hepalink subjects us to a number of related risks including that:

        While we believe that our board representation, voting rights and other contractual rights with respect to SABC serve to mitigate some of these risks, we may have disagreements with the other directors and Hepalink that could impair our ability to influence SABC to act in a manner that we believe is in the best interests of our company. Upon the completion of certain milestone events, Hepalink will become obligated to acquire additional shares of SABC, the proceeds of which would be received by SABC in exchange for newly issued shares. We may not be able to access the funds for our own operations.

        The laws of the People's Republic of China, which govern SABC's management and operations, may not offer the same protections afforded to minority stockholders under the Delaware General Corporation Law. Consequently, SABC may make business decisions that are not in our best interests as minority equityholders.

Risks Relating to Competitive Factors

We compete in an industry characterized by extensive research and development efforts and rapid technological progress. New discoveries or commercial developments by our competitors could render our potential products obsolete or non-competitive.

        New developments occur and are expected to continue to occur at a rapid pace in our industry, and there can be no assurance that discoveries or commercial developments by our competitors will not render some or all of our potential products obsolete or non-competitive, which could have a material adverse effect on our business, financial condition and results of operations. New data from commercial and clinical-stage products continue to emerge and it is

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possible that these data may alter current standards of care, completely precluding us from further developing our product candidates or preventing us from getting them approved by regulatory agencies. Further, it is possible that we may initiate a clinical trial or trials for our product candidates, only to find that data from competing products make it impossible for us to complete enrollment in these trials, resulting in our inability to file for marketing approval with regulatory agencies. Even if these products are approved for marketing in a particular indication or indications, they may have limited sales due to particularly intense competition in these markets.

        We expect to compete with fully integrated and well-established pharmaceutical and biotechnology companies in the near- and long-term. Most of these companies have substantially greater financial, research and development, manufacturing and marketing experience and resources than we do and represent substantial long-term competition for us. Such companies may succeed in discovering and developing pharmaceutical products more rapidly than we do or pharmaceutical products that are safer, more effective or less costly than any that we may develop. Such companies also may be more successful than we are in manufacturing, sales and marketing. Smaller companies may also prove to be significant competitors, particularly through collaborative arrangements with large pharmaceutical and established biotechnology companies. Academic institutions, governmental agencies and other public and private research organizations also conduct clinical trials, seek patent protection and establish collaborative arrangements for the development of product candidates.

        We expect competition among products will be based on product efficacy and safety, the timing and scope of regulatory approvals, availability of supply, marketing and sales capabilities, reimbursement coverage, price and patent position. There can be no assurance that our competitors will not develop safer and more effective products, commercialize products earlier than we do, or obtain patent protection or intellectual property rights that limit our ability to commercialize our products.

        There can be no assurance that our issued patents or pending patent applications, if issued, will not be challenged, invalidated or circumvented or that the rights granted thereunder will provide us with proprietary protection or a competitive advantage.

Our competitors may develop and market products that are less expensive, more effective, safer or reach the market sooner than our product candidates, which may diminish or eliminate the commercial success of any products we may commercialize.

        The biopharmaceutical industry is highly competitive. There are many public and private biopharmaceutical companies, public and private universities and research organizations actively engaged in the discovery and research and development of products for infectious disease. Several companies are developing mAbs to treat infections, including Merck & Co., Medimmune, LLC (AstraZeneca), Arsanis, Inc., and Alopexx Enterprises, LLC.

        There is no assurance, however, that another company will not discover how to successfully develop these antibodies for competing indications.

        Among current antimicrobial therapies, antibiotics, particularly those administered by inhalation, can be competitors to our products especially Panaecin for lung infections. TOBI, an inhaled antibiotic (tobramycin) has the longest treatment history, although Cayston (inhaled aztreonam) was recently approved for lung infections in cystic fibrosis patients. There are

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antibiotics being developed for gram-positive or gram-negative bacterial infections that could impact the use of standard of care antibiotics in hospitals. These therapies could impact both the clinical results and use of our products being developed for hospital acquired pneumonia.

        Many of our competitors, either alone or with their strategic collaborators, have substantially greater financial, technical and human resources than we do and significantly greater experience in the discovery and development of drugs, obtaining FDA and other regulatory approvals, and the commercialization of those products. Accordingly, our competitors may be more successful in obtaining approval for drugs and achieving widespread market acceptance. Our competitors' drugs may be more effective, or more effectively marketed and sold, than any drug we may commercialize and may render our product candidates obsolete or non-competitive before we can recover the significant expenses of developing and commercializing any of our product candidates. We anticipate that we will face intense and increasing competition as new drugs enter the market and advanced technologies become available.

        We also compete with other clinical-stage companies and institutions for clinical trial participants, which could reduce our ability to recruit participants for our clinical trials. Delay in recruiting clinical trial participants could adversely affect our ability to bring a product to market prior to our competitors. Further, research and discoveries by others may result in breakthroughs that render our product candidates obsolete even before they begin to generate any revenue.

        In addition, our competitors may obtain patent protection or FDA approval and commercialize products more rapidly than we do, which may impact future sales of any of our product candidates that receive marketing approval. If the FDA approves the commercial sale of any of our product candidates, we will also be competing with respect to marketing capabilities and manufacturing efficiency, areas in which we have limited or no experience. We expect competition among products will be based on product efficacy and safety, the timing and scope of regulatory approvals, availability of supply, marketing and sales capabilities, product price, reimbursement coverage by government and private third-party payors, and patent position. Our profitability and financial position will suffer if our products receive regulatory approval, but cannot compete effectively in the marketplace.

        If any of our product candidates are approved and commercialized, we may face competition from biosimilars. The route to market for biosimilars was established with the passage of the Patient Protection and Affordable Care Act, or PPACA, in March 2010, providing 12 years of marketing exclusivity for reference products and an additional six months of exclusivity if pediatric studies are conducted. In the EU, the EMA has issued guidelines for approving products through an abbreviated pathway, and biosimilars have been approved. If a biosimilar version of one of our potential products were approved in the U.S. or EU, it could have a negative effect on sales and gross profits of the potential product and our financial condition.

Even if we achieve market acceptance for our products, we may experience downward pricing pressure on the price of our drugs because of generic and biosimilar competition and social pressure to lower the cost of drugs.

        Several of the FDA approved products for infectious diseases face patent expiration in the next several years. As a result, generic versions and biosimilars of these drugs and biologicals may become available. We expect to face competition from these products, including price-based

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competition. Pressure from government and private reimbursement groups, plus patient awareness and other social activist groups to reduce drug prices may also put downward pressure on the prices of drugs, including our product candidates, if they are commercialized. Also, if a biosimilar to any of our product candidates is approved by regulatory agencies, there will be significant pricing pressure on our products, causing us or our collaborators to reduce the sales price of our products.

Our product candidates may not be accepted in the marketplace; therefore, we may not be able to generate significant revenue, if any.

        Even if our product candidates are approved for sale, physicians and the medical community may not ultimately use them or may use them only in applications more restricted than we expect. Our product candidates, if successfully developed, will compete with a number of traditional products, including antibiotics, and immunotherapies manufactured and marketed by major pharmaceutical and other biotechnology companies. Our product candidates will also compete with new products currently under development by such companies and others. Physicians will prescribe a product only if they determine, based on experience, clinical data, side effect profiles, reimbursement for their patients and other factors, that it is beneficial as compared to other products currently in use. Furthermore, physicians have been prescribing traditional antibiotics for decades and may be resistant to switching to new, less established therapies. Many other factors influence the adoption of new products, including marketing and distribution restrictions, course of treatment, adverse publicity, product pricing, the views of thought leaders in the medical community and reimbursement by government and private third-party payors.

Risks Relating to our Reliance on Third Parties

We rely on third parties to conduct our preclinical studies and our clinical trials and to store and distribute our products for the clinical trials we conduct. If these third parties do not perform as contractually required or expected, we may not be able to obtain regulatory approval for our product candidates, or we may be delayed in doing so.

        We often rely on third parties, such as CROs, medical institutions, academic institutions, clinical investigators and contract laboratories, to conduct our preclinical studies and clinical trials. We are responsible for confirming that our preclinical studies are conducted in accordance with applicable regulations and that each of our clinical trials is conducted in accordance with its general investigational plan and protocol. The FDA requires us to comply with Good Laboratory Practice for conducting and recording the results of our preclinical studies and Good Clinical Practices, or GCP, for conducting, monitoring, recording and reporting the results of clinical trials, to ensure that data and reported results are accurate and that the clinical trial participants are adequately protected. Our reliance on third parties does not relieve us of these responsibilities. If the third parties conducting our clinical trials do not perform their contractual duties or obligations, do not meet expected deadlines, fail to comply with GCP, do not adhere to our clinical trial protocols or otherwise fail to generate reliable clinical data, we may need to enter into new arrangements with alternative third parties and our clinical trials may be more costly than expected or budgeted, extended, delayed or terminated or may need to be repeated, and we may not be able to obtain regulatory approval for or commercialize the product candidate being tested in such trials.

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        Our CROs are not our employees, and we are therefore unable to directly monitor whether or not they devote sufficient time and resources to our clinical and preclinical programs. These CROs may also have relationships with other commercial entities, including our competitors, for whom they may also be conducting clinical trials or other product development activities that could harm our competitive position. If our CROs do not successfully carry out their contractual duties or obligations, fail to meet expected deadlines, or if the quality or accuracy of the clinical data they obtain is compromised due to the failure to adhere to our clinical protocols or regulatory requirements, or for any other reasons, our clinical trials may be extended, delayed or terminated, and we may not be able to obtain regulatory approval for, or successfully commercialize, our therapeutic candidates. If any such event were to occur, our financial results and the commercial prospects for our therapeutic candidates would be harmed, our costs could increase, and our ability to generate revenues could be delayed.

        If any of our relationships with these third-party CROs terminate, we may not be able to enter into arrangements with alternative CROs or to do so on commercially reasonable terms. Further, switching or adding additional CROs involves additional costs and requires management time and focus. In addition, there is a natural transition period when a new CRO commences work. As a result, delays occur, which could materially impact our ability to meet our desired clinical development timelines. Though we carefully manage our relationships with our CROs, there can be no assurance that we will not encounter challenges or delays in the future or that these delays or challenges will not have a material adverse impact on our business, financial condition and prospects.

        In addition, our future clinical trials will require a sufficient number of test subjects to evaluate the safety and effectiveness of our therapeutic candidates. Accordingly, if our CROs fail to comply with these regulations or fail to recruit a sufficient number of patients, we may be required to repeat such clinical trials, which would delay the regulatory approval process.

        We also rely on other third parties to store and distribute our products for the clinical trials that we conduct. Any performance failure on the part of our distributors could delay clinical development or marketing approval of our therapeutic candidates or commercialization of our products, if approved, producing additional losses and depriving us of potential product revenue.

We may explore new strategic collaborations that may never materialize or may fail.

        We may, in the future, periodically explore a variety of new strategic collaborations in an effort to gain access to additional product candidates or resources. At the current time, we cannot predict what form such a strategic collaboration might take. We are likely to face significant competition in seeking appropriate strategic collaborators, and these strategic collaborations can be complicated and time-consuming to negotiate and document. We may not be able to negotiate strategic collaborations on acceptable terms, or at all. We are unable to predict when, if ever, we will enter into any additional strategic collaborations because of the numerous risks and uncertainties associated with establishing strategic collaborations.

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Risks Relating to our Exposure to Litigation

We are exposed to potential product liability or similar claims, and insurance against these claims may not be available to us at a reasonable rate in the future.

        Our business exposes us to potential liability risks that are inherent in the testing, manufacturing and marketing of human therapeutic products. Clinical trials involve the testing of product candidates on human subjects or volunteers under a research plan, and carry a risk of liability for personal injury or death to patients due to unforeseen adverse side effects, improper administration of the product candidate, or other factors. Many of these patients are already seriously ill and are therefore particularly vulnerable to further illness or death.

        Our U.S. clinical trial liability insurance provides for $3 million in coverage with no per occurrence limit below that amount, our Belgium clinical trial liability insurance provides for €3.5 million ($4.2 million) in coverage with a limit of €1 million ($1.2 million) per occurrence, our France clinical trial liability insurance provides for €6 million ($7.2 million) in coverage with a limit of €1 million ($1.2 million) per occurrence, our Spain clinical trial liability insurance provides for €2.5 million ($3.0 million) in coverage with a limit of €0.25 million ($0.3 million) per occurrence and our U.K. clinical trial insurance provides for £5 million ($6.75 million) in coverage with a limit of £5 million ($6.75 million) per occurrence. However, there can be no assurance that we will be able to maintain such insurance or that the amount of such insurance will be adequate to cover claims. We could be materially and adversely affected if we were required to pay damages or incur defense costs in connection with a claim outside the scope of indemnity or insurance coverage, if the indemnity is not performed or enforced in accordance with its terms, or if our liability exceeds the amount of applicable insurance. In addition, there can be no assurance that insurance will continue to be available on terms acceptable to us, if at all, or that if obtained, the insurance coverage will be sufficient to cover any potential claims or liabilities. Similar risks would exist upon the commercialization or marketing of any products by us or our collaborators.

        Regardless of their merit or eventual outcome, product liability claims may result in:

        Should any of these events occur, it could have a material adverse effect on our business and financial condition.

Claims for indemnification by our directors and officers may reduce our available funds to satisfy successful third-party claims against us and may reduce the amount of money available to the Company.

        Our certificate of incorporation provides that we will indemnify our directors to the fullest extent permitted by Delaware law.

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        In addition, as permitted by Section 145 of the Delaware General Corporation Law, our bylaws provide that:

        As a result, if we are required to indemnify one or more of our directors or executive officers, it may reduce our available funds to satisfy successful third-party claims against us, may reduce the amount of money available to us and may have a material adverse effect on our business and financial condition.

Risks Relating to Regulation of Our Industry

The biopharmaceutical industry is subject to significant regulation and oversight in the United States, in addition to approval of products for sale and marketing. We may be subject, directly or indirectly, to federal and state healthcare fraud and abuse laws, transparency, health information privacy and security laws and other healthcare laws and regulations. If we are unable to comply, or have not fully complied, with such laws, we could face substantial penalties.

        Healthcare providers, physicians and third-party payors will play a primary role in the recommendation and prescription of any future product candidates we may develop and any product candidates for which we obtain marketing approval. In addition to FDA restrictions on marketing of biopharmaceutical products, we are exposed, directly, or indirectly, through our customers, to broadly applicable fraud and abuse and other healthcare laws and regulations that may affect the business or financial arrangements and relationships through which we would market, sell and distribute our products. The laws that may affect our ability to operate include, but are not limited to:

        The federal Anti-Kickback Statute which prohibits any person or entity from, among other things, knowingly and willfully offering, paying, soliciting or receiving any remuneration, directly or

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indirectly, overtly or covertly, in cash or in-kind, to induce or reward either the referring of an individual for, or the purchasing, leasing, ordering or arranging for the purchase, lease or order of any health care item or service reimbursable, in whole or in part, under Medicare, Medicaid or any other federally financed healthcare program. The term "remuneration" has been broadly interpreted to include anything of value. This statute has been interpreted to apply to arrangements between pharmaceutical manufacturers on one hand and prescribers, purchasers and formulary managers on the other hand. Although there are a number of statutory exceptions and regulatory safe harbors protecting certain common activities from prosecution, the exceptions and safe harbors are drawn narrowly, and practices that involve remuneration intended to induce prescribing, purchases or recommendations may be subject to scrutiny if they do not qualify for an exception or safe harbor. Our practices may not in all cases meet all of the criteria for safe harbor protection from federal Anti-Kickback Statute liability.

        The federal false claims and civil monetary penalty laws, including the Federal False Claims Act, which imposes significant penalties and can be enforced by private citizens through civil qui tam actions, prohibits any person or entity from, among other things, knowingly presenting, or causing to be presented, a false, fictitious or fraudulent claim for payment to the federal government, or knowingly making, using or causing to be made, a false statement or record material to a false or fraudulent claim to avoid, decrease or conceal an obligation to pay money to the federal government. In addition, a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the Federal False Claims Act. As a result of a modification made by the Fraud Enforcement and Recovery Act of 2009, a claim includes "any request or demand" for money or property presented to the U.S. government. Further, manufacturers can be held liable under the False Claims Act even when they do not submit claims directly to government payors if they are deemed to "cause" the submission of false or fraudulent claims. Criminal prosecution is also possible for making or presenting a false, fictitious or fraudulent claim to the federal government. Several pharmaceutical and other health care companies have been prosecuted under these laws for allegedly providing free product to customers with the expectation that the customers would bill federal programs for the product. Other companies have been prosecuted for causing false claims to be submitted because of marketing of the product for unapproved, and thus non-reimbursable, uses.

        The federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, which, among other things, imposes criminal liability for executing or attempting to execute a scheme to defraud any healthcare benefit program, including private third-party payors, knowingly and willfully embezzling or stealing from a healthcare benefit program, willfully obstructing a criminal investigation of a healthcare offense, and creates federal criminal laws that prohibit knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false, fictitious or fraudulent statements or representations, or making or using any false writing or document knowing the same to contain any materially false, fictitious or fraudulent statement or entry in connection with the delivery of or payment for healthcare benefits, items or services.

        HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009, or HITECH, and its implementing regulations, which impose certain requirements relating to the privacy, security, transmission and breach reporting of individually identifiable health information upon entities subject to the law, such as health plans, healthcare clearinghouses and certain healthcare providers and their respective business associates that perform services for

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them that involve individually identifiable health information. HITECH also created new tiers of civil monetary penalties, amended HIPAA to make civil and criminal penalties directly applicable to business associates, and gave state attorneys general new authority to file civil actions for damages or injunctions in U.S. federal courts to enforce the federal HIPAA laws and seek attorneys' fees and costs associated with pursuing federal civil actions.

        The federal physician payment transparency requirements, sometimes referred to as the "Physician Payments Sunshine Act," and its implementing regulations, which require certain manufacturers of drugs, devices, biologics and medical supplies for which payment is available under Medicare, Medicaid or the Children's Health Insurance Program (with certain exceptions) to report annually to the United States Department of Health and Human Services, or HHS, information related to payments or other transfers of value made to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors) and teaching hospitals, as well as ownership and investment interests held by physicians and their immediate family members.

        State and foreign law equivalents of each of the above federal laws, such as anti-kickback and false claims laws, that may impose similar or more prohibitive restrictions, and may apply to items or services reimbursed by non-governmental third-party payors, including private insurers.

        State laws that require pharmaceutical companies to implement compliance programs, comply with the pharmaceutical industry's voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government, or to track and report gifts, compensation and other remuneration provided to physicians and other healthcare providers, state and local laws that require the registration of pharmaceutical sales representatives, and other federal, state and foreign laws that govern the privacy and security of health information or personally identifiable information in certain circumstances, including state health information privacy and data breach notification laws which govern the collection, use, disclosure, and protection of health-related and other personal information, many of which differ from each other in significant ways and often are not pre-empted by HIPAA, thus requiring additional compliance efforts.

        Because of the breadth of these laws and the narrowness of the safe harbors, it is possible that some of our business activities could be subject to challenge under one or more of these laws. The scope and enforcement of each of these laws is uncertain and subject to rapid change in the current environment of healthcare reform, especially in light of the lack of applicable precedent and regulations. Federal and state enforcement bodies have recently increased their scrutiny of interactions between healthcare companies and healthcare providers, which has led to a number of investigations, prosecutions, convictions and settlements in the healthcare industry.

        Ensuring that our business arrangements with third parties comply with applicable healthcare laws and regulations will likely be costly and time consuming. If our operations are found to be in violation of any of the laws described above or any other governmental regulations that apply to us, we may be subject to penalties, including civil, criminal and administrative penalties, damages, fines, disgorgement, individual imprisonment, exclusion from governmental funded healthcare programs, such as Medicare and Medicaid, contractual damages, reputational harm, diminished profits and future earnings, additional reporting obligations and oversight if we become subject to a corporate integrity agreement or other agreement to resolve allegations of non-compliance with these laws, and the curtailment or restructuring of our operations, any of which could adversely affect our ability to operate our business and our results of operations.

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Our employees may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements, which could have a material adverse effect on our business.

        We are exposed to the risk of employee fraud or other misconduct. Misconduct by employees could include intentional failures to comply with FDA regulations, provide accurate information to the FDA, comply with manufacturing standards we have established, comply with federal and state health-care fraud and abuse laws and regulations, report financial information or data accurately or disclose unauthorized activities to us. In particular, sales, marketing and business arrangements in the healthcare industry are subject to extensive laws and regulations intended to prevent fraud, kickbacks, self-dealing and other abusive practices. These laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commission, customer incentive programs and other business arrangements. Employee misconduct could also involve the improper use of information obtained in the course of clinical trials, which could result in regulatory sanctions and serious harm to our reputation. It is not always possible to identify and deter employee misconduct, and the precautions we take to detect and prevent misconduct may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with such laws or regulations. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business and results of operations, including the imposition of significant civil, criminal, and administrative penalties, damages, fines, disgorgement, individual imprisonment, exclusion from governmental funded healthcare programs, such as Medicare and Medicaid, contractual damages, reputational harm, diminished profits and future earnings, additional reporting obligations and oversight if subject to a corporate integrity agreement or other agreement to resolve allegations of non-compliance with these laws.

Health care reform measures could adversely affect our business.

        In the United States and foreign jurisdictions, there have been, and continue to be, a number of legislative and regulatory changes and proposed changes to the healthcare system that could affect our future results of operations. In particular, there have been and continue to be a number of initiatives at the U.S. federal and state levels that seek to reduce healthcare costs. In 2010, the PPACA was enacted, which includes measures to significantly change the way health care is financed by both governmental and private insurers. Among the provisions of the PPACA of greatest importance to the pharmaceutical and biotechnology industry are the following:

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        Some of the provisions of the PPACA have yet to be implemented, and there have been legal and political challenges to certain aspects of the PPACA. Since January 2017, President Trump has signed two executive orders and other directives designed to delay, circumvent, or loosen certain requirements mandated by the PPACA. Concurrently, Congress has considered legislation that would repeal or repeal and replace all or part of the PPACA. While Congress has not passed repeal legislation two bills affecting the implementation of certain taxes under the PPACA have been signed into law. The Tax Cuts and Jobs Act of 2017 includes a provision repealing, effective January 1, 2019, the tax-based shared responsibility payment imposed by the PPACA on certain individuals who fail to maintain qualifying health coverage for all or part of a year that is commonly referred to as the "individual mandate." Additionally, on January 22, 2018, President Trump signed a continuing resolution on appropriations for fiscal year 2018 that delayed the implementation of certain PPACA-mandated fees, including the so-called "Cadillac" tax on certain high cost employer-sponsored insurance plans, the annual fee imposed on certain health insurance providers based on market share, and the medical device excise tax on non-exempt medical devices. Further, the Bipartisan Budget Act of 2018, or the BBA, among other things, amends the PPACA, effective January 1, 2019, to close the coverage gap in most Medicare drug plans, commonly referred to as the "donut hole." Congress may consider other legislation to repeal or replace elements of the PPACA.

        Many of the details regarding the implementation of the PPACA are yet to be determined, and at this time, the full effect that the PPACA would have on our business remains unclear. In

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particular, there is uncertainty surrounding the applicability of the biosimilars provisions under the PPACA to our product candidates. The FDA has issued several guidance documents, and withdrawn others, but no implementing regulations on biosimilars have been adopted. A number of biosimilar applications have been approved over the past few years. It is not certain that we will receive 12 years of biologics marketing exclusivity for any of our products. The regulations that are ultimately promulgated and their implementation are likely to have considerable impact on the way we conduct our business and may require us to change current strategies. A biosimilar is a biological product that is highly similar to an approved drug notwithstanding minor differences in clinically inactive components, and for which there are no clinically meaningful differences between the biological product and the approved drug in terms of the safety, purity, and potency of the product.

        Additionally, there has been heightened governmental scrutiny in the United States of pharmaceutical pricing practices in light of the rising cost of prescription drugs and biologics. Such scrutiny has resulted in several recent congressional inquiries and proposed and enacted federal and state legislation designed to, among other things, bring more transparency to product pricing, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for products. At the federal level, the Trump administration's budget proposal for fiscal year 2019 contains further drug price control measures that could be enacted during the 2019 budget process or in other future legislation, including, for example, measures to permit Medicare Part D plans to negotiate the price of certain drugs under Medicare Part B, to allow some states to negotiate drug prices under Medicaid, and to eliminate cost sharing for generic drugs for low-income patients. Further, the Trump administration released a "Blueprint" to lower drug prices and reduce out of pocket costs of drugs that contains additional proposals to increase drug manufacturer competition, increase the negotiating power of certain federal healthcare programs, incentivize manufacturers to lower the list price of their products and reduce the out of pocket costs of drug products paid by consumers. HHS has already started the process of soliciting feedback on some of these measures and, at the same, is immediately implementing others under its existing authority. Although a number of these, and other potential, proposals will require authorization through additional legislation to become effective, Congress and the Trump administration have each indicated that it will continue to seek new legislative and/or administrative measures to control drug costs. At the state level, legislatures have become increasingly aggressive in passing legislation and implementing regulations designed to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access, and marketing cost disclosure and transparency measures, and to encourage importation from other countries and bulk purchasing. Legally mandated price controls on payment amounts by third-party payors or other restrictions could harm our business, results of operations, financial condition and prospects. In addition, regional healthcare authorities and individual hospitals are increasingly using bidding procedures to determine what pharmaceutical products and which suppliers will be included in their prescription drug and other healthcare programs. This could reduce ultimate demand for our products or put pressure on our product pricing, which could negatively affect our business, results of operations, financial condition and prospects.

        More recently, on May 30, 2018, the Trickett Wendler, Frank Mongiello, Jordan McLinn, and Matthew Bellina Right to Try Act of 2017 ("Right to Try Act") was signed into law. The law,

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among other things, provides a federal framework for certain patients to access certain investigational new drug products that have completed a Phase I clinical trial and that are undergoing investigation for FDA approval. Under certain circumstances, eligible patients can seek treatment without enrolling in clinical trials and without obtaining FDA permission under the FDA expanded access program.

        In addition, given recent federal and state government initiatives directed at lowering the total cost of healthcare, Congress and state legislatures will likely continue to focus on healthcare reform, the cost of prescription drugs and biologics and the reform of the Medicare and Medicaid programs. While we cannot predict the full outcome of any such legislation, it may result in decreased reimbursement for drugs and biologics, which may further exacerbate industry-wide pressure to reduce prescription drug prices. This could harm our ability to generate revenues. Increases in importation or re-importation of pharmaceutical products from foreign countries into the United States could put competitive pressure on our ability to profitably price our products, which, in turn, could adversely affect our business, results of operations, financial condition and prospects. We might elect not to seek approval for or market our products in foreign jurisdictions in order to minimize the risk of re-importation, which could also reduce the revenue we generate from our product sales. It is also possible that other legislative proposals having similar effects will be adopted.

        Furthermore, regulatory authorities' assessment of the data and results required to demonstrate safety and efficacy can change over time and can be affected by many factors, such as the emergence of new information, including on other products, changing policies and agency funding, staffing and leadership. We cannot be sure whether future changes to the regulatory environment will be favorable or unfavorable to our business prospects. For example, average review times at the FDA for marketing approval applications can be affected by a variety of factors, including budget and funding levels and statutory, regulatory and policy changes.

Risks Relating to Protecting our Intellectual Property

If we are unable to protect our proprietary rights or to defend against infringement claims, we may not be able to compete effectively or operate profitably.

        Our success will depend, in part, on our ability to obtain patents, operate without infringing the proprietary rights of others and maintain trade secrets or other proprietary know-how, both in the United States and other countries. Patent matters in the biotechnology and pharmaceutical industries can be highly uncertain, can involve changes in laws or regulations, and involve complex legal and factual questions. Accordingly, the issuance, validity, breadth and enforceability of our patents and the existence of potentially blocking patent rights of others cannot be predicted with any degree of certainty, either in the United States or in other countries.

        Obtaining, maintaining, and enforcing patents is expensive and time-consuming, and we may not be able to file and prosecute all necessary or desirable patent applications, or maintain, enforce and/or license patents that may issue based on our patent applications, at a reasonable cost or in a timely manner. It is also possible that we will fail to identify patentable aspects of our research and development results before it is too late to obtain patent protection. Moreover, in some circumstances, we may not have the right to control the preparation, filing and prosecution of patent applications, or to maintain the patents, covering technology that we license from or

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license to third parties and are reliant on our licensors or licensees. Further, although we enter into non-disclosure and confidentiality agreements with parties who have access to patentable aspects of our research and development output, such as our employees, corporate collaborators, outside scientific collaborators, contract research organizations, contract manufacturers, consultants, advisors and other third parties, any of these parties may breach these agreements and disclose such results before a patent application is filed, thereby jeopardizing our ability to seek patent protection.

        There can be no assurance that we will discover or develop patentable products or processes or that patents will issue from any of the currently pending patent applications or that claims granted on issued patents will be sufficient to protect our technologies, processes, or adequately cover the actual products we may actually sell. Potential competitors or other researchers in the field may have filed patent applications, been issued patents, published articles or otherwise created prior art that could restrict or block our efforts to obtain additional patents or act as obstacles to our pending patent applications. There also can be no assurance that our issued patents or pending patent applications, if issued, will not be challenged, invalidated, rendered unenforceable or not infringed, or that the rights granted thereunder will provide us with proprietary protection or competitive advantages. We may not be aware of all third-party intellectual property rights potentially relating to our product candidates or their intended uses, and as a result the impact of such third-party intellectual property rights upon the patentability of our own patents and patent applications, as well as the impact of such third-party intellectual property upon our freedom to operate, is highly uncertain. Patent applications in the U.S. and other jurisdictions are typically not published until 18 months after filing or, in some cases, not at all. Therefore, we cannot know with certainty whether we were the first to make the inventions claimed in our patents or pending patent applications, or that we were the first to file for patent protection of such inventions. As a result, the issuance, scope, validity, enforceability and commercial value of our patent rights are highly uncertain. Our patents or pending patent applications may be challenged in the courts or patent offices in the U.S. and abroad. For example, we may be subject to a third party pre-issuance submission of prior art to the U.S. Patent and Trademark Office, or become involved in post-grant review procedures, oppositions, derivations, reexaminations, inter partes review or interference proceedings, in the U.S. or elsewhere, challenging our patent rights or the patent rights of others. An adverse determination in any such challenges may result in loss of exclusivity or in patent claims being narrowed, invalidated, or held unenforceable, in whole or in part, which could limit our ability to stop others from using or commercializing similar or identical technology and products, or limit the duration of the patent protection of our technology and products. In addition, given the amount of time required for the development, testing and regulatory review of new product candidates, patents protecting such candidates might expire before or shortly after such candidates are commercialized. The patent position of biopharmaceutical companies generally is highly uncertain, involves complex legal and factual questions and has in recent years been the subject of much litigation, resulting in court decisions, including Supreme Court decisions, that have increased uncertainties as to the ability to enforce patent rights in the future. In addition, the laws of foreign countries may not protect our rights to the same extent as the laws of the U.S., or vice versa. Our patent rights also depend on our compliance with technology and patent licenses upon which our patent rights are based and upon the validity of assignments of patent rights from consultants and other inventors that were, or are, not employed by us.

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        In addition, competitors may manufacture and sell our potential products in those foreign countries where we have not filed for patent protection or where patent protection may be unavailable, not obtainable or ultimately not enforceable or meaningful. In addition, even where patent protection is obtained, third-party competitors may challenge our patent claims in the various patent offices, for example via opposition in the European Patent Office or reexamination or interference proceedings in the United States Patent and Trademark Office, or USPTO, or find ways to design around our patents by producing competitive non-infringing alternative products. The ability of such competitors to sell such products in the United States or in foreign countries where we have obtained patents is usually governed by the patent laws of the countries in which the product is sold.

        We will incur significant ongoing expenses in maintaining our patent portfolio in addition to maintaining other registered intellectual property such as trademarks and copyrights. Maintaining registered intellectual property such as patents and trademarks requires timely filing certain maintenance documents and paying certain maintenance fees, the failure of which could result in abandonment or cancellation of such registered intellectual property. Should we lack the funds to maintain our patent portfolio or other registered intellectual property, or to enforce our rights against infringers, we could be adversely impacted. Even if we succeed in enforcing one of our patents against a third party in a claim of infringement, any such action could divert the time and attention of management and impair our ability to access additional capital and/or cost us significant funds.

If we cannot meet requirements under our license and sublicense agreements, we could lose the rights to our products, which could have a material adverse effect on our business.

        We depend on licensing and sublicensing agreements with third parties such as the University of Chicago, University of Iowa, Brigham and Women's Hospital, Inc., Brigham Young University, Public Health Service and Kenta Biotech Ltd to maintain the intellectual property rights to certain of our product candidates. These agreements require us to make payments and satisfy performance obligations in order to maintain our rights under these agreements. All of these agreements last either throughout the life of the patents that are the subject of the agreements, or with respect to other licensed technology, for a number of years after the first commercial sale of the relevant product. If we fail to comply with the obligations under our license agreements or use the intellectual property licensed to us in an unauthorized manner, we may be required to pay damages and our licensors may have the right to terminate the license. If our license agreements are terminated, we may not be able to develop, manufacture, market or sell the products covered by our agreements and those being tested or approved in combination with such products. Such an occurrence could materially adversely affect the value of the product candidate being developed under any such agreement and any other product candidates being developed or tested in combination.

        In addition, we are responsible for the cost of filing and prosecuting certain patent applications and maintaining certain issued patents licensed to us. If we do not meet our obligations under our license agreements in a timely manner, or use the intellectual property licensed to us in an unauthorized manner, we could be required to pay damages and we could lose the rights to our proprietary technology if our licensor terminated the license. If our license agreements are terminated, we may not be able to develop, manufacture, market or sell the

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products covered by our agreements and any being tested or approved in combination with such products. Such an occurrence could have a material adverse effect on our business, results of operations and financial condition.

Intellectual property rights do not necessarily address all potential threats to our competitive advantage.

        The degree of future protection afforded by our intellectual property rights is uncertain because intellectual property rights have limitations, and may not adequately protect our business, or permit us to maintain our competitive advantage. The following examples are illustrative:

        Should any of these events occur, they could significantly harm our business, results of operations and prospects.

Patent reform legislation could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our issued patents.

        Changes in either the patent laws or interpretation of the patent laws in the United States and Ex-US could increase the uncertainties and costs. Recent patent reform legislation in the United States and other countries, including the Leahy-Smith America Invents Act, or the Leahy-Smith Act, signed into law in the United States on September 16, 2011, could increase those uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our issued patents. The Leahy-Smith Act includes a number of significant changes to U.S. patent law. These include provisions that affect the way patent applications are prosecuted, redefine prior art and provide more efficient and cost-effective avenues for competitors to challenge the validity of patents. These include allowing third-party

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submission of prior art to the USPTO during patent prosecution and additional procedures to attack the validity of a patent by USPTO administered post-grant proceedings, including post-grant review, inter partes review, and derivation proceedings. After March 2013, under the Leahy-Smith Act, the United States transitioned to a first inventor to file system in which, assuming that the other statutory requirements are met, the first inventor to file a patent application will be entitled to the patent on an invention regardless of whether a third party was the first to invent the claimed invention. However, the Leahy-Smith Act and its implementation could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our issued patents, all of which could have a material adverse effect on our business, financial condition, results of operations and prospects.

        The U.S. Supreme Court has ruled on several patent cases in recent years, either narrowing the scope of patent protection available in certain circumstances or weakening the rights of patent owners in certain situations. Depending on future actions by the U.S. Congress, the U.S. courts, the USPTO and the relevant law-making bodies in other countries, the laws and regulations governing patents could change in unpredictable ways that would weaken our ability to obtain new patents or to enforce our existing patents and patents that we might obtain in the future.

We may be subject to litigation with respect to the ownership and use of intellectual property that will be costly to defend or pursue and uncertain in its outcome.

        Our success also will depend, in part, on our refraining from infringing patents or otherwise violating intellectual property owned or controlled by others. There is a substantial amount of intellectual property litigation in the biotechnology and pharmaceutical industries, and we may become party to, or threatened with, litigation or other adversarial proceedings regarding intellectual property rights with respect to our products candidates, including interference proceedings before the U.S. Patent and Trademark Office. Pharmaceutical companies, biotechnology companies, universities, research institutions and others may have filed patent applications or have received, or may obtain, issued patents in the United States or elsewhere relating to aspects of our technology, and it may not always be clear to industry participants, including us, which patents cover various types of products or methods of use. The coverage of patents is subject to interpretation by the courts, and the interpretation is not always uniform. Third parties may allege that we have infringed or misappropriated their intellectual property. If we were sued for patent infringement, we would need to demonstrate that our product candidates, products or methods either do not infringe the patent claims of the relevant patent or that the patent claims are invalid or unenforceable, and we may not be able to do this. Proving invalidity is difficult. For example, in the United States, proving invalidity requires a showing of clear and convincing evidence to overcome the presumption of validity enjoyed by issued patents. Even if we are successful in these proceedings, we may incur substantial costs and the time and attention of our management and scientific personnel could be diverted in pursuing these proceedings, which could have a material adverse effect on us. In addition, we may not have sufficient resources to bring these actions to a successful conclusion.

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        Litigation or other legal proceedings relating to intellectual property claims, with or without merit, is unpredictable and generally expensive and time consuming and, even if resolved in our favor, is likely to divert significant resources from our core business, including distracting our technical and management personnel from their normal responsibilities. In addition, there could be public announcements of the results of hearings, motions or other interim proceedings or developments and if securities analysts or investors perceive these results to be negative, it could have a substantial adverse effect on the market price of our common stock. Such litigation or proceedings could substantially increase our operating losses and reduce the resources available for development activities or any future sales, marketing or distribution activities. We may not have sufficient financial or other resources to adequately conduct such litigation or proceedings. Some of our competitors may be able to sustain the costs of such litigation or proceedings more effectively than we can because of their greater financial resources and more mature and developed intellectual property portfolios.

        If we are found to infringe a third party's intellectual property rights, we could be forced, including by court order, to cease developing, manufacturing or commercializing the infringing product candidate or product. Alternatively, we may be required to obtain a license from such third party in order to use the infringing technology and continue developing, manufacturing or marketing the infringing product candidate. However, we may not be able to obtain any required license on commercially reasonable terms or at all. Even if we were able to obtain a license, it could be non-exclusive, thereby giving our competitors access to the same technologies licensed to us. In addition, we could be found liable for monetary damages, including treble damages and attorneys' fees if we are found to have willfully infringed a patent. A finding of infringement could prevent us from commercializing our product candidates or force us to cease some of our business operations, which could materially harm our business. Claims that we have misappropriated the confidential information or trade secrets of third parties could have a similar negative impact on our business.

        It is uncertain whether the issuance of any third-party patents will require us to alter our products or processes, obtain licenses, if such licenses are available on commercially reasonable terms, or cease certain activities completely. Some third-party applications or patents may conflict with our issued patents or pending applications. Any such conflict could result in a significant reduction of the scope or value of our issued or licensed patents.

        In addition, if patents issued to other companies contain blocking, dominating or conflicting claims and such claims are ultimately determined to be valid, we may be required to obtain licenses to these patents or to develop or obtain alternative non-infringing technology and cease practicing those activities, including potentially manufacturing or selling any products deemed to infringe those patents. If any licenses are required, there can be no assurance that we will be able to obtain any such licenses on commercially favorable terms, if at all, and if these licenses are not obtained, we might be prevented from pursuing the development and commercialization of certain of our potential products. Our failure to obtain a license to any technology that we may require to commercialize our products on favorable terms may have a material adverse impact on our business, financial condition and results of operations.

        Litigation, which could result in substantial costs to us (even if determined in our favor), may also be necessary to enforce any patents issued or licensed to us or to determine the scope and validity of the proprietary rights of others, or to defend against any accusations from third parties

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that our products or activities are infringing their intellectual property rights. The FDA has only recently published draft guidance documents for implementation of the Biologics Price Competition and Innovation Act, or BPCIA under the PPACA, related to the development of follow-on biologics (biosimilars), and detailed guidance for patent litigation procedures under this act has not yet been provided. If another company files for approval to market a competing follow-on biologic, and/or if such approval is given to such a company, we may be required to promptly initiate patent litigation to prevent the marketing of such biosimilar version of our product prior to the normal expiration of the patent. There can be no assurance that our issued or licensed patents would be held valid by a court of competent jurisdiction or that any follow-on biologic would be found to infringe our patents.

        In addition, if our competitors file or have filed patent applications in the United States that claim technology also claimed by us, we may have to participate in interference proceedings to determine priority of invention. These proceedings, if initiated by the USPTO, could result in substantial costs to us, even if the eventual outcome is favorable to us. Such proceedings can be lengthy, are costly to defend and involve complex questions of law and fact, the outcomes of which are difficult to predict. Moreover, we may have to participate in post-grant proceedings or third-party ex parte or inter partes reexamination proceedings under the USPTO. An adverse outcome with respect to a third-party claim or in an interference proceeding could subject us to significant liabilities, require us to license disputed rights from third parties, or require us to cease using such technology, any of which could have a material adverse effect on our business, financial condition and results of operations.

We may become involved in lawsuits to protect or enforce our patents or other intellectual property, which could be expensive, time consuming and unsuccessful.

        Competitors may infringe our patents, trademarks, copyrights or other intellectual property. To counter infringement or unauthorized use, we may be required to file infringement claims, which can be expensive and time consuming and divert the time and attention of our management and scientific personnel. Any claims we assert against perceived infringers could provoke these parties to assert counterclaims against us alleging that we infringe their patents, in addition to counterclaims asserting that our patents are invalid or unenforceable, or both. In any patent infringement proceeding, there is a risk that a court will decide that a patent of ours is invalid or unenforceable, in whole or in part, and that we do not have the right to stop the other party from using the invention at issue. There is also a risk that, even if the validity of such patents is upheld, the court will construe the patent's claims narrowly or decide that we do not have the right to stop the other party from using the invention at issue on the grounds that our patent claims do not cover the invention. An adverse outcome in a litigation or proceeding involving our patents could limit our ability to assert our patents against those parties or other competitors, and may curtail or preclude our ability to exclude third parties from making and selling similar or competitive products. Any of these occurrences could adversely affect our competitive business position, business prospects and financial condition. Similarly, if we assert trademark infringement claims, a court may determine that the marks we have asserted are invalid or unenforceable, or that the party against whom we have asserted trademark infringement has superior rights to the marks in question. In this case, we could ultimately be forced to cease use of such trademarks.

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        Even if we establish infringement, the court may decide not to grant an injunction against further infringing activity and instead award only monetary damages, which may or may not be an adequate remedy. Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during litigation. There could also be public announcements of the results of hearings, motions or other interim proceedings or developments. If securities analysts or investors perceive these results to be negative, it could have a material adverse effect on the price of shares of our common stock. Moreover, there can be no assurance that we will have sufficient financial or other resources to file and pursue such infringement claims, which typically last for years before they are concluded. Even if we ultimately prevail in such claims, the monetary cost of such litigation and the diversion of the attention of our management and scientific personnel could outweigh any benefit we receive as a result of the proceedings.

We may rely on trade secret and proprietary know-how which can be difficult to trace and enforce and, if we are unable to protect the confidentiality of our trade secrets, our business and competitive position would be harmed.

        We also rely on trade secrets to protect technology, especially where patent protection is not believed to be appropriate or obtainable or where patents have not issued. For example, our manufacturing process involves a number of trade secret steps, processes, and conditions. Trade secrets and know-how can be difficult to protect. We attempt to protect our proprietary technology and processes, in part, with confidentiality agreements and assignment of invention agreements with our employees and confidentiality agreements with our consultants and certain contractors. Despite these efforts, any of these parties may breach the agreements and disclose our proprietary information, including our trade secrets, and we may not be able to obtain adequate remedies for such breaches. Any disclosure, either intentional or unintentional, by our employees, the employees of third parties with whom we share our facilities or third party consultants and vendors that we engage to perform research, clinical studies or manufacturing activities, or misappropriation by third parties (such as through a cybersecurity breach) of our trade secrets or proprietary information could enable competitors to duplicate or surpass our technological achievements, thus eroding our competitive position in our market.

        Enforcing a claim that a party illegally disclosed or misappropriated a trade secret is difficult, expensive and time-consuming, and the outcome is unpredictable. In addition, some courts inside and outside the United States are less willing or unwilling to protect trade secrets. If any of our trade secrets were to be lawfully obtained or independently developed by a competitor or other third party, we would have no right to prevent them from using that technology or information to compete with us. If any of our trade secrets were to be disclosed to or independently developed by a competitor or other third party, our competitive position would be harmed.

        There can be no assurance that these agreements are valid and enforceable, will not be breached, that we would have adequate remedies for any breach, or that our trade secrets will not otherwise become known or be independently discovered by competitors. We may fail in certain circumstances to obtain the necessary confidentiality agreements or assignment of invention agreements, or their scope or term may not be sufficiently broad to protect our interests or transfer adequate rights to us.

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        If our trade secrets or other intellectual property become known to our competitors, it could result in a material adverse effect on our business, financial condition and results of operations. To the extent that we or our consultants or research collaborators use intellectual property owned by others in work for us, disputes may also arise as to the rights to related or resulting know-how and inventions.

The patent protection and patent prosecution for some of our product candidates is dependent or may be dependent in the future on third parties.

        While we normally seek and gain the right to fully prosecute the patents relating to our product candidates, there may be times when platform technology patents or product-specific patents that relate to our product candidates are controlled by our licensors. In addition, our licensors and/or licensees may have back-up rights to prosecute patent applications in the event that we do not do so or choose not to do so, and our licensees may have the right to assume patent prosecution rights after certain milestones are reached. If any of our licensing collaborators fails to appropriately prosecute and maintain patent protection for patents covering any of our product candidates, our ability to develop and commercialize those product candidates may be adversely affected and we may not be able to prevent competitors from making, using and selling competing products.

We may not be able to protect our intellectual property rights throughout the world.

        Patents are of national or regional effect, and filing, prosecuting and defending patents on all of our product candidates throughout the world would be prohibitively expensive. As such, we may not be able to prevent third parties from practicing our inventions in all countries outside the United States, or from selling or importing products made using our inventions in and into the United States or other jurisdictions. Further, the legal systems of certain countries, particularly certain developing countries, do not favor the enforcement of patents and other intellectual property protection, particularly those relating to pharmaceuticals or biologics, which could make it difficult for us to stop the infringement of our patents or marketing of competing products in violation of our proprietary rights generally. In addition, certain developing countries, including China and India, have compulsory licensing laws under which a patent owner may be compelled to grant licenses to third parties. In those countries, we and our licensors may have limited remedies if patents are infringed or if we or our licensors are compelled to grant a license to a third party, which could materially diminish the value of those patents. This could limit our potential revenue opportunities. Accordingly, our efforts to enforce our intellectual property rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop or license.

Patent terms may be inadequate to protect our competitive position on our product candidates for an adequate amount of time.

        Patent rights are of limited duration. Given the amount of time required for the development, testing and regulatory review of new product candidates, patents protecting such candidates might expire before or shortly after such product candidates are commercialized. Even if patents covering our product candidates are obtained, once the patent life has expired for a product, we may be open to competition from biosimilar or generic products. A patent term extension based

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on regulatory delay may be available in the U.S. However, only a single patent can be extended for each marketing approval, and any patent can be extended only once, for a single product. Moreover, the scope of protection during the period of the patent term extension does not extend to the full scope of the claim, but instead only to the scope of the product as approved. Laws governing analogous patent term extensions in foreign jurisdictions vary widely, as do laws governing the ability to obtain multiple patents from a single patent family. Additionally, we may not receive an extension if we fail to apply within applicable deadlines, fail to apply prior to expiration of relevant patents or otherwise fail to satisfy applicable requirements. If we are unable to obtain patent term extension or restoration, or the term of any such extension is less than we request, the period during which we will have the right to exclusively market our product will be shortened and our competitors may obtain approval of competing products following our patent expiration, and our revenue could be reduced, possibly materially.

We may be subject to claims by third parties asserting that our employees or we have misappropriated their intellectual property, or claiming ownership of what we regard as our own intellectual property.

        Some of our employees and our licensors' employees, including our senior management, were previously employed at universities or at other biotechnology or pharmaceutical companies, including our competitors or potential competitors. Some of these employees may have executed proprietary rights, non-disclosure and non-competition agreements, or similar agreements, in connection with such previous employment. Although we try to ensure that our employees do not use the proprietary information or know-how of others in their work for us, we may be subject to claims that we or these employees have used or disclosed intellectual property, including trade secrets or other proprietary information, of any such third party. Litigation may be necessary to defend against such claims. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel or sustain damages. Such intellectual property rights could be awarded to a third party, and we could be required to obtain a license from such third party to commercialize our technology or products. Such a license may not be available on commercially reasonable terms or at all. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management.

        In addition, while we typically require our employees, consultants and contractors who may be involved in the development of intellectual property to execute agreements assigning such intellectual property to us, we may be unsuccessful in executing such an agreement with each party who in fact develops intellectual property that we regard as our own, which may result in claims by or against us related to the ownership of such intellectual property. If we fail in prosecuting or defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights. Even if we are successful in prosecuting or defending against such claims, litigation could result in substantial costs and be a distraction to our senior management and scientific personnel.

Obtaining and maintaining our patent protection depends on compliance with various procedural, document submissions, fee payment and other requirements imposed by governmental patent agencies, and our patent protection could be reduced or eliminated for non-compliance with these requirements.

        Periodic maintenance fees on any issued patent are due to be paid to the USPTO and foreign patent agencies in several stages over the lifetime of the patent. The USPTO and various foreign

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governmental patent agencies require compliance with a number of procedural, documentary, fee payment and other similar provisions during the patent application process. While an inadvertent lapse can in many cases be cured by payment of a late fee or by other means in accordance with the applicable rules, there are situations in which noncompliance can result in abandonment or lapse of the patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. Non-compliance events that could result in abandonment or lapse of a patent or patent application include, but are not limited to, failure to respond to official actions within prescribed time limits, non-payment of fees and failure to properly legalize and submit formal documents. If we fail to maintain the patents and patent applications covering our product candidates, our competitive position would be adversely affected.

Risks Related to Owning our Common Stock

Upon completion of the offering we will be subject to the reporting requirements of federal securities laws, which can be expensive and may divert resources from other projects, thus impairing our ability grow.

        Upon completion of the offering we will be subject to reporting and other obligations under the Securities Exchange Act, of 1934, as amended, or the Exchange Act, including the requirements of Section 404 of the Sarbanes-Oxley Act. Section 404 requires us to conduct an annual management assessment of the effectiveness of our internal controls over financial reporting. These reporting and other obligations place significant demands on our financial resources.

        It may be time consuming, difficult and costly for us to develop and implement the internal controls and reporting procedures required by the Sarbanes-Oxley Act. We will need to hire additional financial reporting, internal controls and other finance personnel in order to develop and implement appropriate internal controls and reporting procedures. If we are unable to comply with the internal controls requirements of the Sarbanes-Oxley Act, then we may not be able to obtain the independent accountant certifications required by such act, which may preclude us from keeping our filings with the SEC current and interfere with the ability of investors to trade our securities and for our shares to be listed on any national securities exchange or quoted on the OTCQB.

An active trading market for our common stock may not develop, and you may not be able to sell your common stock at or above the initial public offering price.

        Prior to the completion of this offering, there has been no public market for our common stock. An active trading market for shares of our common stock may never develop or be sustained following this offering. If an active trading market does not develop, you may have difficulty selling your shares of common stock at an attractive price, or at all. The price for our common stock in this offering will be determined by negotiations between us and the underwriters, and it may not be indicative of prices that will prevail in the open market following this offering. Consequently, you may not be able to sell your common stock at or above the initial public offering price or at any other price or at the time that you would like to sell. An inactive market may also impair our ability to raise capital by selling our common stock, and it may impair our ability to attract and motivate our employees through equity incentive awards and our ability to acquire other companies, products or technologies by using our common stock as consideration.

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The price of our common stock may fluctuate substantially.

        You should consider an investment in our common stock to be risky, and you should invest in our common stock only if you can withstand a significant loss and wide fluctuations in the market value of your investment. Some factors that may cause the market price of our common stock to fluctuate, in addition to the other risks mentioned in this "Risk Factors" section and elsewhere in this prospectus, are:

        In addition, if the market for stocks in our industry or industries related to our industry, or the stock market in general, experiences a loss of investor confidence, the trading price of our

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common stock could decline for reasons unrelated to our business, financial condition and results of operations. If any of the foregoing occurs, it could cause our stock price to fall and may expose us to lawsuits that, even if unsuccessful, could be costly to defend and a distraction to management.

Our management has broad discretion in using the net proceeds from this offering.

        We have stated, in only a general manner, how we intend to use the net proceeds from this offering. See "Use of Proceeds." We cannot, with any assurance, be more specific at this time. We will have broad discretion in the timing of the expenditures and application of proceeds received in this offering. If we fail to apply the net proceeds effectively, we may not be successful in bringing our proposed products to market. You will not have the opportunity to evaluate all of the economic, financial or other information upon which we may base our decisions to use the net proceeds from this offering.

Our principal stockholders and management own a significant percentage of our stock and will be able to exercise significant influence over matters subject to stockholder approval.

        As of June 30, 2018, our executive officers, directors and principal security holders, together with their respective affiliates, owned approximately 25% of our outstanding securities. Upon completion of the offering (if the underwriters exercise their over-allotment option in full) our executive officers, directors and principal security holders, together with their respective affiliates, will own approximately            % of our outstanding securities. Accordingly, this group of security holders will be able to exert a significant degree of influence over our management and affairs and over matters requiring security holder approval, including the election of our Board of Directors, future issuances of our securities, declaration of dividends and approval of other significant corporate transactions. This concentration of ownership could have the effect of delaying or preventing a change-of-control of the Company or otherwise discouraging a potential acquirer from attempting to obtain control of us, which in turn could have a material and adverse effect on the fair market value of our securities. In addition, this significant concentration of share ownership may adversely affect the trading price for our common stock if investors perceive disadvantages in owning stock in a company with such concentrated ownership.

Our ability to use our net operating loss carry-forwards and certain other tax attributes is limited by Sections 382 and 383 of the Internal Revenue Code.

        Net operating loss carryforwards allow companies to use past year net operating losses to offset against future years' profits, if any, to reduce future tax liabilities. Sections 382 and 383 of the Internal Revenue Code of 1986 limit a corporation's ability to utilize its net operating loss carryforwards and certain other tax attributes (including research credits) to offset any future taxable income or tax if the corporation experiences a cumulative ownership change of more than 50% over any rolling three year period. State net operating loss carryforwards (and certain other tax attributes) may be similarly limited. An ownership change can therefore result in significantly greater tax liabilities than a corporation would incur in the absence of such a change and any increased liabilities could adversely affect the corporation's business, results of operations, financial condition and cash flow.

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        Even if an ownership change has not occurred and does not occur as a result of this offering, ownership changes may occur in the future as a result of additional equity offerings or events over which we will have little or no control, including purchases and sales of our equity by our five percent security holders, the emergence of new five percent security holders, redemptions of our securities or certain changes in the ownership of any of our five percent security holders.

U.S. federal income tax reform could adversely affect us.

        On December 22, 2017, President Trump signed into law the "Tax Cuts and Jobs Act," or TCJA, that significantly reforms the Internal Revenue Code of 1986, as amended. The TCJA, among other things, includes changes to U.S. federal tax rates, imposes significant additional limitations on the deductibility of interest, allows for the expensing of capital expenditures, a reduction to the maximum deduction allowed for net operating losses generated in tax years after December 31, 2017, and puts into effect the migration from a "worldwide" system of taxation to a partially territorial system. We do not expect tax reform to have a material impact to our projection of minimal cash taxes or to our net operating losses. Our net deferred tax assets and liabilities will be revalued at the newly enacted U.S. corporate rate, and the impact will be recognized in our tax expense in the year of enactment. Further, any eligibility we may have or may someday have for tax credits associated with the qualified clinical testing expenses arising out of the development of orphan drugs will be reduced to 25% as a result of the TCJA; thus, our net taxable income may be affected. We continue to examine the impact this tax reform legislation may have on our business. The impact of this tax reform on holders of our common stock is uncertain and could be adverse. This prospectus does not discuss any such tax legislation or the manner in which it might affect purchasers of our common stock. We urge our stockholders, including purchasers of common stock in this offering, to consult with their legal and tax advisors with respect to such legislation and the potential tax consequences of investing in our common stock.

You will incur immediate dilution as a result of this offering.

        If you purchase common stock in this offering, you will pay more for your shares than the net tangible book value of your shares. As a result, you will incur immediate dilution of $            per share, representing the difference between the assumed initial public offering price of $            per share (the midpoint of the range on the cover of this prospectus) and our estimated net tangible book value per share as of December 31, 2017 of $            . Accordingly, should we be liquidated at our book value, you would not receive the full amount of your investment.

Future sales and issuances of our common stock or rights to purchase common stock pursuant to our equity incentive plan could result in additional dilution of the percentage ownership of our stockholders and could cause our share price to fall.

        We expect that significant additional capital will be needed in the future to continue our planned operations, including expanding research and development, funding clinical trials, purchasing of capital equipment, hiring new personnel, commercializing our products, and continuing activities as an operating public company. To the extent we raise additional capital by issuing equity securities, our stockholders may experience substantial dilution. We may sell common stock, convertible securities or other equity securities in one or more transactions at

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prices and in a manner we determine from time to time. If we sell common stock, convertible securities or other equity securities in more than one transaction, investors may be materially diluted by subsequent sales. Such sales may also result in material dilution to our existing stockholders, and new investors could gain rights superior to our existing stockholders.

We do not intend to pay cash dividends on our shares of common stock so any returns will be limited to the value of our shares.

        We currently anticipate that we will retain future earnings for the development, operation and expansion of our business and do not anticipate declaring or paying any cash dividends for the foreseeable future. Any return to stockholders will therefore be limited to the increase, if any, of our share price.

We are an "emerging growth company" and will be able to avail ourselves of reduced disclosure requirements applicable to emerging growth companies, which could make our common stock less attractive to investors.

        We are an "emerging growth company," as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act, and we intend to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not "emerging growth companies" including not being required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. In addition, Section 107 of the JOBS Act also provides that an "emerging growth company" can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act, for complying with new or revised accounting standards. In other words, an "emerging growth company" can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We are electing to delay such adoption of new or revised accounting standards, and as a result, we may not comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies. As a result of such election, our financial statements may not be comparable to the financial statements of other public companies. We cannot predict if investors will find our common stock less attractive because we may rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile. We may take advantage of these reporting exemptions until we are no longer an "emerging growth company." We will remain an "emerging growth company" until the earliest of (i) the last day of the fiscal year in which we have total annual gross revenues of $1.07 billion or more; (ii) the last day of our fiscal year following the fifth anniversary of the date of the completion of this offering; (iii) the date on which we have issued more than $1 billion in nonconvertible debt during the previous three years; or (iv) the date on which we are deemed to be a large accelerated filer under the rules of the Securities and Exchange Commission.

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Because we have elected to defer compliance with new or revised accounting standards, our financial statement disclosure may not be comparable to similar companies.

        We have elected to use the extended transition period for complying with new or revised accounting standards under Section 102(b)(1) of the JOBS Act. This allows us to delay the adoption of new or revised accounting standards that have different effective dates for public and private companies until those standards apply to private companies. As a result of our election, our financial statements may not be comparable to companies that comply with public company effective dates.

        Because of this extended transition period, we may be less attractive to investors and it may be difficult for us to raise additional capital as and when we need it. Investors may be unable to compare our business with other companies in our industry if they believe that our financial accounting is not as transparent as other companies in our industry. If we are unable to raise additional capital as and when we need it, our financial condition and results of operations may be materially and adversely affected.

We may be at risk of securities class action litigation.

        We may be at risk of securities class action litigation. This risk is especially relevant for us due to our dependence on positive clinical trial outcomes and regulatory approvals of each of our product candidates. In the past, biotechnology and pharmaceutical companies have experienced significant stock price volatility, particularly when associated with binary events such as clinical trials and product approvals. If we face such litigation, it could result in substantial costs and a diversion of management's attention and resources, which could harm our business and results in a decline in the market price of our common stock.

Our management will be required to devote substantial time to compliance initiatives.

        As a public company, we will incur significant legal, accounting and other expenses that we did not incur as a newly formed entity. The Sarbanes-Oxley Act, as well as rules subsequently implemented by the SEC and The Nasdaq Capital Market, have imposed various new requirements on public companies, including requiring establishment and maintenance of effective disclosure and financial controls and changes in corporate governance practices. Our management and other personnel will need to devote a substantial amount of time to these new compliance initiatives. Moreover, these rules and regulations will increase our legal and financial compliance costs and will make some activities more time consuming and costly. We expect these rules and regulations to make it more difficult and more expensive for us to obtain director and officer liability insurance and we may be required to incur substantial costs to maintain the same or similar coverage.

There is no guarantee that our common stock will be listed on The Nasdaq Capital Market.

        We have applied to have our shares of common stock listed on The Nasdaq Capital Market. Upon completion of this offering, we believe that we will satisfy the listing requirements and expect that our common stock will be listed on The Nasdaq Capital Market. Such listing, however, is not guaranteed. If the application is not approved, we will seek to have our common stock quoted on the OTCQB. Even if such listing is approved, there can be no assurance any broker will

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be interested in trading our common stock. Therefore, it may be difficult to sell any shares you purchase in this offering if you desire or need to sell them. Neither we nor the underwriters can provide any assurance that an active and liquid trading market in our common stock will develop or, if developed, that the market will continue.

Even if we are successful in listing our common stock on The Nasdaq Capital Market, our common stock may be delisted if we fail to comply with continued listing standards.

        If we fail to meet any of the continued listing standards of The Nasdaq Capital Market, our common stock could be delisted from The Nasdaq Capital Market. These continued listing standards include specifically enumerated criteria, such as:

        If we fail to comply with Nasdaq's continued listing standards, we may be delisted and our common stock will trade, if at all, only on the over-the-counter market, such as the OTC Bulletin Board or OTCQX market, and then only if one or more registered broker-dealer market makers comply with quotation requirements. In addition, delisting of our common stock could depress our stock price, substantially limit liquidity of our common stock and materially adversely affect our ability to raise capital on terms acceptable to us, or at all. Finally, delisting of our common stock could result in our common stock becoming a "penny stock" under the Exchange Act.

Upon our dissolution, you may not recoup all or any portion of your investment.

        In the event of a liquidation, dissolution or winding-up of us, whether voluntary or involuntary, the proceeds and/or our assets may not be sufficient to repay the aggregate initial public offering price you paid for shares purchased in this offering. In this event, you could lose some or all of your investment.

We have identified certain material weaknesses in our internal control over financial reporting. Failure to maintain effective internal controls could cause our investors to lose confidence in us and adversely affect the market price of our common stock. If our internal controls are not effective, we may not be able to accurately report our financial results or prevent fraud.

        Effective internal control over financial reporting is necessary for us to provide reliable financial reports in a timely manner. In connection with the preparation of our financial statements for the year ended December 31, 2017 and 2016, we concluded that there were material weaknesses in our internal control over financial reporting. A material weakness is a significant deficiency, or a combination of significant deficiencies, in internal control over financial reporting such that it is reasonably possible that a material misstatement of the annual or interim

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financial statements will not be prevented or detected on a timely basis. We have identified certain material weaknesses in our internal controls resulting from:

        While we have designed and implemented, or expect to implement, measures that we believe address or will address these control weaknesses, we continue to develop our internal controls, processes and reporting systems by, among other things, hiring qualified personnel with expertise to perform specific functions, implementing software systems to manage our revenue and expenses and to allow us to budget, undertaking multi-year financial planning and analyses and designing and implementing improved processes and internal controls, including ongoing senior management review and audit committee oversight. Upon completion of this offering we plan to begin measures to remediate the identified material weakness by hiring financial consultants and expect to hire additional senior accounting staff to complete the remediation by the end of 2018. We expect to incur additional costs to remediate these weaknesses, primarily personnel costs and external consulting fees. We may not be successful in implementing these systems or in developing other internal controls, which may undermine our ability to provide accurate, timely and reliable reports on our financial and operating results. Further, we will not be able to fully assess whether the steps we are taking will remediate the material weaknesses in our internal control over financial reporting until we have completed our implementation efforts and sufficient time passes in order to evaluate their effectiveness. In addition, if we identify additional material weaknesses in our internal control over financial reporting, we may not detect errors on a timely basis and our financial statements may be materially misstated. Moreover, in the future we may engage in business transactions, such as acquisitions, reorganizations or implementation of new information systems that could negatively affect our internal control over financial reporting and result in material weaknesses.

        Our management and independent registered public accounting firm did not perform an evaluation of our internal control over financial reporting during any period in accordance with the provisions of the Sarbanes-Oxley Act. Had we and our independent registered public accounting firm performed an evaluation of our internal control over financial reporting in accordance with the provisions of the Sarbanes-Oxley Act, additional control deficiencies amounting to material weaknesses may have been identified. If we identify new material weaknesses in our internal control over financial reporting, if we are unable to comply with the requirements of Section 404 of the Sarbanes-Oxley Act in a timely manner, if we are unable to assert that our internal control over financial reporting is effective, or if our independent registered public accounting firm is unable to express an opinion as to the effectiveness of our internal control over financial reporting, we may be late with the filing of our periodic reports, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our common stock could be negatively affected. As a result of such failures, we could also become subject to investigations by the stock exchange on which our securities are listed, the SEC, or other regulatory authorities, and become subject to litigation from investors and stockholders, which could harm our reputation, financial condition or divert financial and management resources from our core business.

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Financial reporting obligations of being a public company in the United States are expensive and time-consuming, and our management will be required to devote substantial time to compliance matters.

        As a publicly traded company we will incur significant additional legal, accounting and other expenses that we did not incur as a privately held, company. The obligations of being a public company in the United States require significant expenditures and will place significant demands on our management and other personnel, including costs resulting from public company reporting obligations under the Securities Exchange Act of 1934, as amended, or the Exchange Act, and the rules and regulations regarding corporate governance practices, including those under the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act, or the Dodd-Frank Act, and the listing requirements of the stock exchange on which our securities are listed. These rules require the establishment and maintenance of effective disclosure and financial controls and procedures, internal control over financial reporting and changes in corporate governance practices, among many other complex rules that are often difficult to implement, monitor and maintain compliance with. Moreover, despite recent reforms made possible by the JOBS Act, the reporting requirements, rules, and regulations will make some activities more time-consuming and costly, particularly after we are no longer an "emerging growth company." In addition, we expect these rules and regulations to make it more difficult and more expensive for us to obtain director and officer liability insurance. Our management and other personnel will need to devote a substantial amount of time to ensure that we comply with all of these requirements and to keep pace with new regulations, otherwise we may fall out of compliance and risk becoming subject to litigation or being delisted, among other potential problems.

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CAUTIONARY NOTE CONCERNING FORWARD-LOOKING STATEMENTS

        This prospectus contains forward-looking statements that involve risks and uncertainties. You should not place undue reliance on these forward-looking statements. Our actual results could differ materially from those anticipated in the forward-looking statements for many reasons, including the reasons described in our "Prospectus Summary," "Use of Proceeds," "Risk Factors," "Management Discussion and Analysis of Financial Condition and Result of Operations," and "Business" sections. In some cases, you can identify these forward-looking statements by terms such as "anticipate," "believe," "continue," "could," "depends," "estimate," "expects," "intend," "may," "ongoing," "plan," "potential," "predict," "project," "should," "will," "would" or the negative of those terms or other similar expressions, although not all forward-looking statements contain those words.

        Our operations and business prospects are always subject to risks and uncertainties including, among others:

        The forward-looking statements in this prospectus represent our views as of the date of this prospectus. We anticipate that subsequent events and developments will cause our views to change. However, while we may elect to update these forward-looking statements at some point in the future, we have no current intention of doing so except to the extent required by applicable law. You should, therefore, not rely on these forward-looking statements as representing our views as of any date subsequent to the date of this prospectus.

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INDUSTRY AND MARKET DATA

        This prospectus contains estimates and other statistical data made by independent parties and by us relating to market size and growth and other data about our industry. We obtained the industry and market data in this prospectus from our own research as well as from industry and general publications, surveys and studies conducted by third parties. This data involves a number of assumptions and limitations and contains projections and estimates of the future performance of the industries in which we operate that are subject to a high degree of uncertainty. We caution you not to give undue weight to such projections, assumptions and estimates. Further, industry and general publications, studies and surveys generally state that they have been obtained from sources believed to be reliable, although they do not guarantee the accuracy or completeness of such information. In addition, while we believe that the results and estimates from our internal research are reliable, such results and estimates have not been verified by any independent source.

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USE OF PROCEEDS

        We estimate that the net proceeds from our issuance and sale of            shares of our common stock in this offering will be approximately $             million, assuming an initial public offering price of $            per share, which is the midpoint of the range listed on the cover page of this prospectus, after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. If the underwriters exercise their over-allotment option in full, we estimate that the net proceeds from this offering will be approximately $             million.

        We intend to use the net proceeds to fund our planned clinical trials, manufacturing and process development, analytical testing, regulatory expenses and for general corporate purposes, including working capital. We intend to use the net proceeds from this offering as follows:

        We expect that the application of the proceeds to each of the activities as described above will be sufficient to complete such activities, but there can be no guarantee that we will not require additional funds to complete the activities or that, even if we do receive additional funds, that we will be able to complete the trials at all. Please see "Risk Factors — Risks Relating to Clinical Development and Commercialization of Our Product Candidates."

        In the ordinary course of our business, we expect to from time to time evaluate the acquisition of, investment in or in-license of complementary products, technologies or businesses, and we could use a portion of the net proceeds from this offering for such activities. We currently do not have any agreements, arrangements or commitments with respect to any potential acquisition, investment or license.

        This expected use of net proceeds from this offering represents our intentions based upon our current plans and business conditions. The amounts and timing of our actual expenditures may vary significantly depending on numerous factors, including the status of and results from clinical trials of our product candidates. As a result, our management will retain broad discretion over the allocation of the net proceeds from this offering. We may find it necessary or advisable to use the net proceeds from this offering for other purposes, and we will have broad discretion in the application of net proceeds from this offering. Furthermore, we anticipate that we will need to secure additional funding for the further development of our product candidates or commercially launch our product candidates in the United States.

        Pending our use of the net proceeds from this offering, we intend to invest the net proceeds in a variety of capital preservation investments, including short-term, investment-grade, interest-bearing instruments and U.S. government securities.

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DIVIDEND POLICY

        We have never paid or declared any cash dividends on our common stock, and we do not anticipate paying any cash dividends on our common stock in the foreseeable future. We intend to retain all available funds and any future earnings to fund the development and expansion of our business. Any future determination to pay dividends will be at the discretion of our board of directors and will depend upon a number of factors, including our results of operations, financial condition, future prospects, contractual restrictions, restrictions imposed by applicable law and other factors our board of directors deems relevant.

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CAPITALIZATION

        The following table sets forth our cash and cash equivalents and capitalization as of March 31, 2018:

 
  As of March 31, 2018  
 
  Actual   Pro Forma   Pro Forma,
As Adjusted (1)
 
 
  (unaudited)
  (unaudited)
  (unaudited)
 
 
  (In thousands, except share data)
 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

  $ 20,387   $ 20,387   $  

Convertible preferred stock:

                   

Series A convertible preferred stock, $0.0001 par value; 60,000,000 shares authorized, 36,196,193 shares issued and outstanding, actual; no preferred shares issued or outstanding, pro forma, as adjusted

  $ 74,202   $   $  

Stockholders' equity (deficit):

                   

Common stock, $0.0001 par value; 100,000,000 shares authorized, 1,067,690 shares issued and outstanding, actual; shares issued and outstanding, pro forma, as adjusted

               

Additional paid-in capital

    (14,637 )   71,471        

Accumulated deficit

    (55,777 )   (55,777 )      

Total stockholders' equity (deficit)

    (70,414 )   15,694        

Total capitalization

  $ 3,788   $ 15,694   $           

(1)
A $1.00 increase (decrease) in the assumed initial public offering price of $            per share, which is the midpoint of the range set forth on the cover page of this prospectus, would increase (decrease) each of additional paid-in capital, total stockholders' equity and total capitalization by $             million, assuming the number of shares of common stock offered by

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    us, as set forth on the cover page of this prospectus, remains the same, and after deducting estimated underwriting discounts and commissions. Similarly, each increase (decrease) of 1.0 million shares in the number of shares of common stock offered by us would increase (decrease) additional paid-in-capital, total stockholders' equity (deficit) and total capitalization by approximately $             million, assuming the initial public offering price, as set forth on the cover page of this prospectus, remains the same and after deducting estimated underwriting discounts and commissions. The pro forma as adjusted information discussed above is illustrative only and will be adjusted based on the actual public offering price and other terms of this offering determined at pricing.

        The number of shares of our common stock that will be outstanding after this offering is based on 37,263,883 shares of our common stock outstanding as of June 30, 2018, and excludes:

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DILUTION

        If you invest in our common stock, your ownership interest will be diluted to the extent of the difference between the initial public offering price per share of our common stock and the pro forma as adjusted net tangible book value per share of our common stock immediately after this offering. Dilution results from the fact that the initial public offering price per share is substantially in excess of the book value per share attributable to the existing stockholders for the presently outstanding stock. As of March 31, 2018, our pro forma net tangible book value was $15,694,000, or $0.42 per share of common stock. Pro forma net tangible book value per share represents the amount of our total tangible assets less total liabilities, divided by 37,263,883, the number of shares of common stock outstanding at March 31, 2018, after giving effect to (i) the automatic conversion of all outstanding shares of our Series A convertible preferred stock into an aggregate 36,196,193 shares of common stock and (ii) the automatic conversion of all outstanding preferred stock warrants into warrants to purchase 8,725,289 shares of our common stock, including the resultant reclassification of our preferred stock warrant liability to additional paid-in capital, a component of total stockholders' equity in connection with such conversion, upon the closing of this offering

        After giving effect to the pro forma adjustments set forth above and the sale of shares of our common stock in this offering, assuming an initial public offering price of $            per share, the mid-point of the price range set forth on the cover page of this prospectus, after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us, our pro forma, as adjusted net tangible book value as of December 31, 2017 would have been $             million, or $            per share. This amount represents an immediate increase in pro forma, as adjusted net tangible book value of $            per share to our existing stockholders and an immediate dilution in pro forma, as adjusted net tangible book value of approximately $            per share to new investors purchasing shares of our common stock in this offering. We determine dilution by subtracting the pro forma, as adjusted net tangible book value per share after the offering from the amount of cash that a new investor paid for a share of common stock.

        The following table illustrates this dilution on a per share basis:

Assumed initial public offering price per share

        $    

Pro forma net tangible book value per share as of March 31, 2018

  $ 0.42        

Increase in pro forma net tangible book value per share attributable to this offering

  $          

Pro forma net tangible book value, as adjusted to give effect to this offering

        $    

Dilution in pro forma net tangible book value per share to new investors in this offering

        $    

        If the underwriters exercise their option to purchase additional shares in full, the pro forma, as adjusted net tangible book value per share after giving effect to the offering would be $            per share. This represents an increase in pro forma, as adjusted net tangible book value of $            per share to existing stockholders and dilution in pro forma, as adjusted net tangible book value of $            per share to new investors.

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        A $1.00 increase (decrease) in the assumed initial public offering price of $            , the midpoint of the range set forth on the cover page of this prospectus, would increase (decrease) our pro forma, as adjusted net tangible book value after this offering by $             million and the pro forma, as adjusted net tangible book value per share after this offering by $            per share and would increase (decrease) the dilution per share to new investors in this offering by $            per share, assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same, and after deducting estimated underwriting discounts and commissions. Similarly, each increase (decrease) of 1.0 million shares in the number of shares of common stock offered by us would increase (decrease) the dilution per share to new investors in this offering by $            per share, assuming no change in the assumed initial public offering price, as set forth on the cover page of this prospectus, and after deducting estimated underwriting discounts and commissions. The information discussed above is illustrative only and may change based on the actual initial public offering price and other terms of the offering determined at pricing.

        The following table summarizes, on the pro forma as adjusted basis described above, the total number of shares of common stock purchased from us, the total consideration paid or to be paid, and the average price per share paid or to be paid by existing shareholders and by new investors in this offering at an assumed initial public offering price of $            per share, which is the midpoint of the range set forth on the cover page of this prospectus, before deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us:

 
  Shares Purchased   Total Consideration    
 
 
  Average Price
Per Share
 
 
  Number   Percentage   Amount   Percentage  

Existing shareholders

            % $         % $    

New investors

                          $    

Total

            % $         %      

        A $1.00 increase (decrease) in the assumed initial public offering price of $            per share, which is the midpoint of the range set forth on the cover page of this prospectus, would increase (decrease) the total consideration paid by investors participating in this offering, total consideration paid by all stockholders and the average price per share paid by all stockholders by approximately $             million, $             million and $            million, respectively, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same. Similarly, each increase (decrease) of 1.0 million shares in the number of shares of common stock offered by us would increase (decrease) the total consideration paid by investors participating in this offering, total consideration paid by all stockholders and the average price per share paid by all stockholders by approximately $            million, $            million and $            million, respectively, assuming no change in the assumed initial public offering price.

        The table above assumes no exercise of the underwriters' over-allotment option in this offering. If the underwriters' over-allotment option is exercised in full, the number of common shares held by new investors purchasing common stock in this offering would be increased to        % of the total number of shares of common stock outstanding after this offering, and the number of shares held by existing shareholders would be reduced to        % of the total number of shares of common stock outstanding after this offering.

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        To the extent that stock options or warrants are exercised, new stock options are issued under our equity incentive plan, or we issue additional common stock in the future, there will be further dilution to investors participating in this offering. In addition, we may choose to raise additional capital because of market conditions or strategic considerations, even if we believe that we have sufficient funds for our current or future operating plans. If we raise additional capital through the sale of equity or convertible debt securities, the issuance of these securities could result in further dilution to our shareholders.

        The number of shares of our common stock that will be outstanding after this offering is based on 37,263,883 shares of our common stock outstanding as of June 30, 2018, and excludes:

    4,942,873 shares of our common stock issuable upon the exercise of options to purchase shares of our common stock outstanding as of June 30, 2018, with a weighted-average exercise price of $1.82 per share;

    3,897,482 shares of our common stock issuable upon the exercise of warrants to purchase common stock outstanding as of June 30, 2018, with a weighted-average exercise price of $2.73 per share;

    8,725,289 shares of our common stock issuable upon the exercise of warrants to purchase Series A convertible preferred stock outstanding as of June 30, 2018 with a weighted average exercise price of $2.26 per share; and

    359,445 shares of our common stock reserved for future issuance under our 2014 Equity Incentive Plan, or the 2014 Plan.

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SELECTED CONSOLIDATED FINANCIAL DATA

         The following table summarizes our selected consolidated financial data for the periods and as of the dates indicated. Our selected consolidated statements of operations data for each of the periods ended December 31, 2017 and 2016, and our selected consolidated balance sheet data as of December 31, 2017 and 2016, have been derived from our audited financial statements and their related notes, which are included elsewhere in this prospectus. The unaudited selected consolidated statements of operations data for the three months ended March 31, 2018 and 2017, and the unaudited consolidated balance sheet data as of March 31, 2018, are derived from our unaudited consolidated financial statements, which are included elsewhere in this prospectus. Our unaudited consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements and, in the opinion of management, include all adjustments, consisting of normal recurring adjustments necessary for a fair presentation of our financial condition as of such dates and our results of operations for such periods. Our historical results are not necessarily indicative of the results to be expected for any future periods and our interim results are not necessarily indicative of the results to be expected for the full fiscal year. Our selected consolidated financial data should be read together with the section entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations" and with our consolidated financial statements and their related notes, which are included elsewhere in this prospectus.

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Consolidated Statements of Operations Data
(In thousands, except share and per share data)

 
  Year Ended December 31,   Three Months Ended
March 31
 
 
  2017   2016   2018   2017  
 
   
   
  (unaudited)
  (unaudited)
 

Revenue:

                         

Contract revenue

  $   $ 2,068   $   $  

Collaboration revenue

    771              

Grant revenue

    89     201     322     22  

Revenue

    860     2,269     322     22  

Operating expenses:

                         

Cost of contract revenue

        1,927          

Research and development

    17,438     6,261     6,626     4,818  

General and administrative

    3,160     1,965     1,066     1,027  

Total operating expenses

    20,598     10,153     7,692     5,845  

Loss from operations

    (19,738 )   (7,884 )   (7,370 )   (5,823 )

Other expense:

                         

Interest and other income (expense), net

    234     (366 )   74     25  

Change in fair value of warrant liability

    (5,152 )   (172 )   (38 )   (2,414 )

Net loss

  $ (24,656 ) $ (8,422 ) $ (7,334 ) $ (8,212 )

Preferred dividends

  $ (2,793 ) $ (465 ) $ (817 ) $ (534 )

Net loss available to common stockholders

  $ (27,449 ) $ (8,887 ) $ (8,151 ) $ (8,746 )

Weighted-average shares used to compute net loss per share available to common stockholders, basic and diluted (1)

    1,067,690     1,067,690     1,067,690     1,067,690  

Net loss per share available to common stockholders, basic and diluted (1)

  $ (25.71 ) $ (8.33 ) $ (7.63 ) $ (8.19 )

Weighted-average shares used to compute pro forma net loss per share available to common stockholders, basic and diluted (1)

    32,753,060           37,263,883        

Pro forma net loss per share available to common stockholders, basic and diluted (1)

  $ (0.84 )       $ (0.22 )      

(1)
Assumes the weighted-average shares used to compute net loss per share attributable to common stockholders, basic and diluted of 1,067,690 shares, and gives effect to the conversion of all Series A convertible preferred stock on a one for one basis utilizing the weighted-average method into an aggregate of 31,685,370 shares of common stock for the year ended December 31, 2017 and 36,196,193 shares of common stock for the three months ended March 31, 2018.

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Consolidated Balance Sheet Data
(In thousands)

 
  As of December 31,    
 
 
  As of March 31,
2018
 
 
  2017   2016  
 
   
   
  (unaudited)
 

Cash and cash equivalents

  $ 25,096   $ 22,291   $ 20,387  

Working capital

  $ 22,166   $ 20,012   $ 14,125  

Total assets

  $ 26,478   $ 22,537   $ 22,590  

Total liabilities

  $ 15,042   $ 8,762   $ 18,802  

Convertible preferred stock

  $ 74,202   $ 58,897   $ 74,202  

Total stockholders' deficit

  $ (62,766 ) $ (45,122 ) $ (70,414 )

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

         The following discussion and analysis should be read in conjunction with "Selected Consolidated Financial Data" and our financial statements and related notes included elsewhere in this prospectus. This discussion and analysis and other parts of this prospectus contain forward-looking statements based upon current beliefs, plans and expectations that involve risks, uncertainties and assumptions, such as statements regarding our plans, objectives, expectations, intentions and projections. Our actual results and the timing of selected events could differ materially from those anticipated in these forward-looking statements as a result of several factors, including those set forth under "Risk Factors" and elsewhere in this prospectus. You should carefully read the "Risk Factors" section of this prospectus to gain an understanding of the important factors that could cause actual results to differ materially from our forward-looking statements. Please also see the section entitled "Cautionary Note Concerning Forward-Looking Statements."

Overview

        We are a late-stage biopharmaceutical company focused on the discovery and development of targeted immunotherapy using fully human monoclonal antibodies, or mAbs, to treat life-threatening infections. mAbs represent an innovative treatment approach that harnesses the human immune system to fight infections and are designed to overcome the deficiencies associated with current therapies, such as rise in drug resistance, short duration of response, negative impact on the human microbiome, and lack of differentiation among the treatment alternatives. The majority of our product candidates are derived by employing our differentiated antibody discovery platform called MabIgX. Our proprietary product pipeline is comprised of fully human mAbs targeting specific pathogens associated with life-threatening bacterial infections, primarily hospital-acquired pneumonia, or HAP, and ventilator-associated pneumonia, or VAP. Two of our product candidates have exhibited promising preclinical data and clinical data are available from two completed studies. Our lead product candidate, AR-301, also referred to as Salvecin, targets the alpha toxin produced by gram-positive bacteria Staphylococcus aureus , or S. aureus, a common pathogen associated with HAP and VAP. We have conducted an end-of-Phase 2 meeting with the US Food and Drug Administration, or FDA, and expect to initiate a Phase 3 pivotal trial for AR-301 in the second half of 2018.

        To date, we have devoted substantially all of our resources to research and development efforts relating to our therapeutic candidates, including conducting clinical trials and developing manufacturing capabilities, in-licensing related intellectual property, protecting our intellectual property and providing general and administrative support for these operations. We have generated revenue from our payments under our collaboration strategic research and development contracts and federal awards and grants, as well as awards and grants from not-for-profit entities and fee for service to third party entities. Since our inception, we have funded our operations primarily through these sources and the issuance of convertible preferred stock and debt securities.

        We have incurred losses in most years since our inception. Our net losses were approximately $24.7 million for the year ended December 31, 2017 and $8.4 million for the year ended December 31, 2016 and $7.3 million for the three months ended March 31, 2018. As of March 31, 2018, we had an accumulated deficit of approximately $55.8 million. As of March 31, 2018, we had

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$20.4 million of cash and cash equivalents. Substantially all our net losses have resulted from costs incurred in connection with our research and development programs, clinical trials, intellectual property matters, building our manufacturing capabilities, and from general and administrative costs associated with our operations.

        We have not yet achieved commercialization of our products and have a cumulative net loss from our operations. We will continue to incur net losses for the foreseeable future. Our consolidated financial statements have been prepared assuming that we will continue as a going concern. We will require additional capital to meet our long-term operating requirements. We expect to raise additional capital through the sale of equity and/or debt securities. Historically, our principal sources of cash have included proceeds from grant funding, fees for services performed, issuanes of convertible debt and the sale of our preferred stock. We principal uses of cash have included cash used in operations. We expect that the principal uses of cash in the future will be for continuing operations, funding of research and development including our clinical trials and general working capital requirements.

        We anticipate that our expenses will increase substantially if and as we:

        We expect to continue to incur significant expenses and increasing losses for at least the next several years. Accordingly, we anticipate that we will need to raise additional capital in addition to the net proceeds from this offering in order to obtain regulatory approval for, and the commercialization of our therapeutic candidates. Until such time that we can generate meaningful revenue from product sales, if ever, we expect to finance our operating activities through public or private equity or debt financings, government or other third-party funding and other collaborations, strategic alliances and licensing arrangements or a combination of these

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approaches. If we are unable to obtain funding on a timely basis, we may be required to significantly curtail, delay or discontinue one or more of our research or development programs or the commercialization of any approved therapies or products or be unable to expand our operations or otherwise capitalize on our business opportunities, as desired, which could materially adversely affect our business, financial condition and results of operations.

Financial Overview

Revenue

        Our sources of revenue are grants and contract services provided to third party entities related to research and development activities under specific agreements with such granting authorities and third parties. As there is a contractually agreed upon price, and collectability from the granting authorities or other entities is reasonably assured, revenue for these services are earned according to the terms of the respective agreements, usually as progress is made throughout the term of the agreement or as certain material milestones are met.

        In addition, we have an award agreement with the Cystic Fibrosis Foundation to support funding for the development of our Inhaled Gallium Citrate Anti-Infective program. In addition, we have a collaborative and option agreement with GlaxoSmithKline Biologicals S.A., or GSK, aimed at evaluating improved formulations for a rotavirus vaccine. These agreements contain upfront payments. We recognize revenue from upfront payments ratably over the term of our estimated period of performance under the agreements or as certain milestones are met. In addition to receiving upfront payments, we may also be entitled to milestone and other contingent payments upon achieving predefined objectives or the exercise of options for specified programs by our strategic partners. Such payments are recorded as revenue when we achieve the underlying milestone if there is substantive uncertainty at the date the arrangement is entered into that the event will be achieved. For the year ended December 31, 2017, we recognized approximately $89,000 in revenue pursuant to our Cystic Fibrosis Foundation agreement and we recognized approximately $771,000 in revenue pursuant to our GSK agreement. For the three months ended March 31, 2018, we recognized approximately $322,000 in revenue pursuant to our Cystic Fibrosis Foundation agreement and no revenue pursuant to our GSK agreement. No revenue was recognized on either agreement prior to 2017.

        We expect that any revenue we generate for the foreseeable future will fluctuate from period to period as a result of the timing and amount of milestones and other payments from our agreements.

Cost of Contract Revenue

        Cost of contract revenue includes the costs of research and development personnel, lab supplies, outside research expenses and facility costs and other indirect and overhead costs associated with contract services for third party entities.

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Research and Development Expenses

        We recognize research and development expenses as they are incurred. Our research and development expenses consist primarily of:

        We expense all research and development costs in the periods in which they are incurred. Costs for certain development activities are recognized based on an evaluation of the progress to completion of specific tasks using information and data provided to us by our vendors and clinical sites. Nonrefundable advance payments for goods or services to be received in future periods for use in research and development activities are deferred and capitalized. The capitalized amounts are then expensed as the related goods are delivered and the services are performed.

        From our inception through March 31, 2018, we have incurred approximately $53.3 million in research and development expenses.

 
   
   
   
   
  Period from April 24, 2003
(Inception) to
 
 
  Year Ended
December 31,
  Three Months Ended
March 31,
 
 
  December 31,
2015
  March 31,
2018
 
(In thousands, unaudited)
  2017   2016   2018   2017  

AR-301

  $ 6,429   $ 3,693   $ 943   $ 2,962   $ 6,174   $ 17,239  

AR-105

    8,690     1,805     3,983     1,495     4,770     19,248  

AR-501

    1,434     390     1,428     178     4,396     7,648  

Platform technology and other programs

    885     373     272     183     7,630     9,160  

Total

  $ 17,438   $ 6,261   $ 6,626   $ 4,818   $ 22,970   $ 53,295  

        We plan to increase our research and development expenses for the foreseeable future as we continue to develop our therapeutic programs, and subject to the availability of additional funding, further advance the development of our therapeutic candidates for additional indications and begin to conduct clinical trials. We typically use our employee and infrastructure resources across multiple research and development programs, and accordingly we have not historically allocated resources specifically to our individual clinical programs.

        The process of conducting the necessary clinical research to obtain regulatory approval is costly and time-consuming, and the successful development of our therapeutic candidates is highly uncertain. As a result, we are unable to determine the duration and completion costs of our research and development projects or when and to what extent we will generate revenue from the commercialization and sale of any of our therapeutic candidates.

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General and Administrative Expenses

        General and administrative expenses consist primarily of costs related to executive, finance, corporate development and administrative support functions, including stock-based compensation expenses and benefits for personnel in general and administrative functions. Other significant, general and administrative expenses include rent, accounting and legal services, obtaining and maintaining patents or other intellectual property rights, the cost of various consultants, occupancy costs, insurance premiums and information systems costs.

        We expect that our general and administrative expenses will increase as we operate as a public company, continue to conduct our clinical trials and prepare for commercialization. We believe that these increases will likely include increased costs for director and officer liability insurance, costs related to the hiring of additional personnel to support product commercialization efforts and increased fees for outside consultants, attorneys and accountants. We also expect to incur increased costs to comply with corporate governance, internal controls, investor relations and disclosures, and similar requirements applicable to public companies.

Interest and Other Income (Expense), Net

        Interest and other income (expense), net consists primarily of accrued interest on outstanding convertible debt, amortization of debt discount associated with the issuance of the convertible debt and interest on our line of credit with a financial institution.

Critical Accounting Policies and Estimates

        Our management's discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which we have prepared in accordance with generally accepted accounting principles in the United States, or GAAP. The preparation of our consolidated financial statements requires us 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 our financial statements, as well as the reported expenses during the reported periods. We evaluate these estimates and judgments on an ongoing basis. We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Our actual results may differ from these estimates under different assumptions or conditions.

        We define our critical accounting policies as those accounting principles generally accepted in the United States that require us to make subjective estimates and judgments about matters that are uncertain and are likely to have a material impact on our financial condition and results of operations as well as the specific manner in which we apply those principles. We believe the critical accounting policies used in the preparation of our financial statements that require significant estimates and judgments are as follows:

Use of Estimates

        The preparation of consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported

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amounts of expenses during the reporting period. Such estimates include those related to the evaluation of our ability to continue as a going concern, revenue recognition, long-lived assets, convertible debt, income taxes, assumptions used in the Black-Scholes-Merton, or BSM, model to calculate the fair value of stock-based compensation, Monte Carlo Simulation, or MSM, model to calculate the fair value of warrants, deferred tax asset valuation allowances, valuation of our common and convertible preferred stock, fair value assumptions used in the valuation of warrants issued with convertible notes and convertible preferred stock warrant liabilities, preclinical study and clinical trial accruals and various accrued liabilities. Our actual results could differ from these estimates.

Revenue Recognition

        Revenue is recognized in accordance with the Financial Accounting Standards Board, or FASB Accounting Standards Codification, or ASC 605, Revenue Recognition which requires that four basic criteria must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred and title and the risks and rewards of ownership have been transferred to the client or services have been rendered; (3) the price is fixed or determinable; and (4) collectability is reasonably assured.

        During 2017 and 2016, revenue includes grant awards and contract services entered into with government and or other agencies for specific research and development efforts. We recognize revenue under such awards and contracts as the related qualified research and development expenses are incurred or under the milestone method, up to the limit of the prior approval funding amounts, and when we have determined that we have earned the right to receive the recognized portion according to the terms of the original grant awarded.

        During 2016, all grant revenue was derived from a grant awarded by the National Institute of Health. All contract revenue was derived from a contract with the National Institute of Health and small amounts of fee-for-service contracts with other third parties. We recorded approximately $1,072,000 in grant revenue during the year ended December 31, 2016 for its our contract with the National Institute of Health. The contract ended in late 2016.

        During 2017, all grant revenue was derived from our award agreement with the Cystic Fibrosis Foundation.

        In December 2016, we received an award from the Cystic Fibrosis Foundation for approximately $2,902,000. The agreement contains an upfront payment of $200,000 which is being recognized straight-line over the term of the contract as we believe the upfront fee relates to services performed throughout the contract period and the upfront fee does not represent a substantive milestone within the agreement. Recognition of revenue for the remaining payments under the agreement will be recognized using the milestone method as substantive milestones are met since there is uncertainty as to whether the milestones will be met and our performance will be responsible for achieving the respective milestones. The milestones relate to both preclinical development and regulatory related activities. The agreement also specifies that we are obligated to cumulatively spend on the development program at least an equal amount as it received from the non-profit organization. In the event that we do not spend as much as we received under the agreement, we are obligated to return any overage to the Cystic Fibrosis Foundation.

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        In 2017, we entered into a collaborative research and development agreement with GSK. In accordance with the agreement, we received an upfront fee and annual fees and amounts for development work to be performed as specifically outlined under the agreement. The work to be performed was delineated into three specific research projects. In assessing the appropriate revenue recognition related to a collaboration agreement, we first determined whether the arrangement includes multiple elements, such as the delivery of intellectual property rights and research and development services. The multiple elements were analyzed to determine whether the deliverables could be separated or whether they must be accounted for as a single unit of accounting. We determined that none of the elements had stand-alone value and that the agreement qualifies for treatment as a multiple element arrangement to be accounted for as a single unit of accounting. Amounts received prior to satisfying the revenue recognition criteria are recorded as deferred revenue in our balance sheet. Recognition of revenue under the contract will be based on the terms of the contract and will be recognized under the proportional performance method derived from the completion of certain stages as defined within the contract.

        For the year ended December 31, 2017, approximately $771,000 was recorded as collaboration revenue related to our agreement with GSK. For the three months ended March 31, 2018, no collaboration revenue was recorded under our agreement with GSK.

Research and Development

        Research and development costs are charged to operations as incurred.

Stock-Based Compensation

        We recognize compensation expense for all stock-based awards to employees and directors based on the grant-date estimated fair values, net of an estimated forfeiture rate. We recognize stock-based compensation cost for employees and directors on a straight-line basis over the requisite service period for the award. Stock-based compensation expense is recognized only for those awards that are ultimately expected to vest. We estimate forfeitures based on an analysis of historical employee turnover and will continue to evaluate the appropriateness of the forfeiture rate based on actual forfeiture experience, analysis of employee turnover and other factors. We will revise the forfeiture estimate, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Changes in forfeiture estimates impact stock-based compensation cost in the period in which the change in estimate occurs.

        The BSM option pricing model incorporates various highly sensitive assumptions, including the fair value of our common stock, expected volatility, expected term and risk-free interest rates. The weighted average expected life of options was calculated using the simplified method as prescribed by the SEC's Staff Accounting Bulletin No. 107, or SAB No. 107. This decision was based on the lack of relevant historical data due to our limited historical experience. In addition, due to our limited historical data, the estimated volatility also reflects the application of SAB No. 107, incorporating the historical volatility of comparable companies whose stock prices are publicly available. The risk-free interest rate for the periods within the expected term of the option is based on the U.S. Treasury yield in effect at the time of grant. The dividend yield was zero, as we have never declared or paid dividends and have no plans to do so in the foreseeable future.

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        We account for stock-based compensation arrangements with nonemployees by recording the expense of such services based on the estimated fair value of the common stock at the measurement date. The value of the equity instrument, including adjustment to fair value at each balance sheet date, is charged to earnings over the term of the service agreement.

        Due to the absence of a public market trading for our common stock, it is necessary to estimate the fair value of the common stock underlying our stock-based awards when performing fair value calculations. The estimated fair value of our common stock was determined using methodologies, approaches and assumptions consistent with the American Institute of Certified Public Accountants, or AICPA, Practice Aid: Valuation of Privately-Held-Company Equity Securities Issued as Compensation.

        The same methods were applied to estimate the fair value of member shares in the predecessor LLC. We expect to utilize fair market values as determined by trades in the public markets at such time as our shares trade publicly and an observable market exists.

Fair Value of Common Stock

        To assist our board of directors with the determination of the exercise price of our stock options and the fair value of the common stock underlying the options, we obtained third-party valuations of our common stock as of various dates since we began granting options, with concluded fair values between $0.45 per share and $2.68 per share. Our board of directors considered the fair values of the common stock derived in the third-party valuations as one of the factors it considered when setting the exercise prices for options granted. The valuations were performed in accordance with applicable elements of the AICPA Practice Aid. The AICPA Practice Aid identifies various available methods for allocating enterprise value across classes and series of capital stock to determine the estimated fair value of common stock at each valuation date. In accordance with the AICPA Practice Aid, we considered the following methods:

        Our board of directors also considered a range of objective and subjective factors and assumptions in estimating the fair value of our common stock on the date of grant, including: progress of our research and development efforts; our operating results and financial condition, including our levels of available capital resources; rights and preferences of our common stock compared to the rights and preferences of our other outstanding equity securities; our stage of development and material risks related to our business; our commercial success in regard to our catheter sales; the achievement of enterprise milestones; the valuation of publicly-traded

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companies in the life sciences and biotechnology sectors, as well as recently completed mergers and acquisitions of peer companies; equity market conditions affecting comparable public companies; the likelihood of achieving a liquidity event for the shares of common stock, such as an initial public offering given prevailing market and biotechnology sector conditions; and that the grants involved illiquid securities in a private company. The fair value of our common stock as of December 31, 2017 and 2016 and March 31, 2018 was $2.68 and $1.50 and $2.79, respectively.

        Following the closing of this offering, the fair value of our common stock will be determined based on the closing price of our common stock on The Nasdaq Capital Market on the date immediately prior to the date of grant.

Income Taxes

        We account for income taxes under the liability method. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts expected to be realized.

        We assess all material positions taken in any income tax return, including all significant uncertain positions, in all tax years that are still subject to assessment or challenge by the relevant taxing authorities. Assessing an uncertain tax position begins with the initial determination of the positions sustainability and is measured at the largest amount of benefit that is greater than fifty percent likely of being realized upon ultimate settlement. At each balance sheet date, unresolved uncertain tax positions must be reassessed, and we will determine whether (i) the factors underlying the sustainability assertion have changed and (ii) the amount of the recognized benefit is still appropriate. The recognition and measurement of tax benefits requires significant judgment. Judgments concerning the recognition and measurement of a tax benefit might change as new information becomes available.

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Results of Operations

Comparison of the Three Months Ended March 31, 2018 and 2017

        The following table summarizes our results of operations for the three months ended March 31, 2018 and 2017 (in thousands):

 
  Three Months March 31,  
 
  2018   2017  
 
  (unaudited)
 

Revenue:

             

Contract revenue

  $   $  

Collaboration revenue

         

Grant revenue

    322     22  

Revenue

    322     22  

Operating expenses:

             

Cost of contract revenue

         

Research and development

    6,626     4,818  

General and administrative

    1,066     1,027  

Total operating expenses

    7,692     5,845  

Loss from operations:

    (7,370 )   (5,823 )

Interest and other income (expense), net

    74     25  

Change in fair value of warrant liability

    (38 )   (2,414 )

Net loss

  $ (7,334 ) $ (8,212 )

        Grant Revenue.     Grant revenue increased by approximately $300,000 from $22,000 for the nine months ended March 31, 2017 to $322,000 for the three months ended March 31, 2018 due primarily to triggering a milestone related to the Cystic Fibrosis Foundation ("CF Foundation") award.

        Research and Development Expenses.     Research and development expenses increased by approximately $1,808,000 from $4,818,000 for the three months ended March 31, 2017 to $6,626,000 for the three months ended March 31, 2018 due primarily to increased activity in our Phase 2 Aerucin clinical trial, work performed on Panaecin as part of our award agreement with the CF Foundation, an ongoing toxicology study, manufacturing drugs for current and future trials and an increase in personnel and related expenses.

        General and Administrative Expenses.     General and administrative expenses increased by approximately $39,000 from $1,027,000 for the three months ended March 31, 2017 to $1,066,000 for the three months ended March 31, 2018 due primarily to an increase in professional services, personnel related costs and other administrative expenses partially offset by lower stock-based compensation charges.

        Interest and Other Income (Expense), net.     Interest and other income (expense), net increased by approximately $49,000 from $25,000 for the three months ended March 31, 2017 to $74,000 for the three months ended March 31, 2018 due primarily to a higher interest rate earned on our cash balances.

        Change in Fair Value of Warrant Liability.     Change in fair value of warrant liability for the three months ended March 31, 2018 decreased by approximately $2,376,000 from $2,414,000 for

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the three months ended March 31, 2017 to $38,000 for the three months ended March 31, 2018 due primarily to a smaller increase in the underlying fair value of our Series A convertible preferred stock for the three months ended March 31, 2018.

Comparison of the Year Ended December 31, 2017 and 2016

        The following table summarizes our results of operations for the year ended December 31, 2017 and 2016 (in thousands):

 
  Year Ended
December 31,
 
 
  2017   2016  

Revenue:

             

Contract revenue

  $   $ 2,068  

Collaboration revenue

    771      

 

Grant revenue

    89     201  

Revenue

    860     2,269  

Operating expenses:

             

Cost of contract revenue

        1,927  

Research and development

    17,438     6,261  

General and administrative

    3,160     1,965  

Total operating expenses

    20,598     10,153  

Loss from operations:

    (19,738 )   (7,884 )

Interest and other income (expense), net

    234     (366 )

Change in fair value of warrant liability

    (5,152 )   (172 )

Net loss

  $ (24,656 ) $ (8,422 )

        Contract Revenue.     Contract revenue decreased by approximately $2,068,000 from $2,068,000 for the year ended December 31, 2016 to $0 for the year ended December 31, 2017 due primarily to the completion of our biodefense contract with the NIH at the end of the third quarter of 2016, and the completion of our contract with GSK in 2016.

        Collaboration Revenue.     Collaboration revenue increased by approximately $771,000 from $0 for the year ended December 31, 2016 to $771,000 for the year ended December 31, 2017 due to the triggering of a milestone on our GSK collaboration agreement.

        Grant Revenue.     Grant revenue decreased by approximately $112,000 from $201,000 for the year ended December 31, 2016 to $89,000 for the year ended December 31, 2017 due primarily to the completion of our NIH grant for rotavirus which ended during the middle of 2016.

        Cost of Contract Revenue.     Cost of contract revenue decreased by approximately $1,927,000 from $1,927,000 for the year ended December 31, 2016 to $0 for the year ended December 31, 2017 due to the completion of our biodefense contract with the NIH our contract with GSK in 2016.

        Research and Development Expenses.     Research and development expenses increased by approximately $11,177,000 from $6,261,000 for the year ended December 31, 2016 to $17,438,000 for the year ended December 31, 2017 due primarily to increased activity in our Phase 2 Aerucin

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clinical trial, manufacturing drugs for current and future trials and an increase in personnel and related expenses.

        General and Administrative Expenses.     General and administrative expenses increased by approximately $1,195,000 from $1,965,000 for the year ended December 31, 2016 to $3,160,000 for the year ended December 31, 2017 due primarily to an increase in stock-based compensation charges, professional services, personnel related costs and other administrative expenses.

        Interest and Other Income (Expense), net.     Interest and other income (expense), net for the year ended December 31, 2017 increased by approximately $600,000 from an expense of $366,000 for the year ended December 31, 2016 to income of $234,000 for the year ended December 31, 2017 due primarily to more interest income from a higher average cash balance as compared to amortization of debt discount related to the issuance of common stock warrants attached to the convertible notes which matured in December 2016.

        Change in Fair Value of Warrant Liability.     Change in fair value of warrant liability for the year ended December 31, 2016 increased by approximately $4,980,000 from $172,000 for the year ended December 31, 2016 to $5,152,000 for the year ended December 31, 2017 due to an increase in the underlying fair value of the Company's Series A convertible preferred stock and the issuance of additional preferred warrants during 2017.

Liquidity, Capital Resources and Going Concern

        We have not yet achieved commercialization of its products and has a cumulative net loss from its operations. We will continue to incur net losses for the foreseeable future. Our consolidated financial statements have been prepared assuming that we will continue as a going concern. We will require additional capital to meet our long-term operating requirements. We expect to raise additional capital through the sale of equity and/or debt securities. Historically, our principal sources of cash have included proceeds from grant funding, fees for services performed, issuances of convertible debt and the sale of our preferred stock. Our principal uses of cash have included cash used in operations. We expect that the principal uses of cash in the future will be for continuing operations, funding of research and development including our clinical trials and general working capital requirements.

Cash Flows

        Our net cash flow from operating, investing and financing activities for the periods below were as follows (in thousands):

 
  Three Months March 31,  
 
  2018   2017  
 
  (unaudited)
 

Net cash provided by (used in):

             

Operating activities

  $ (4,437 ) $ (3,307 )

Investing activities

    (272 )    

Financing activities

        4,496  

Net increase/(decrease) in cash and cash equivalents

  $ (4,709 ) $ 1,189  

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        Cash Flows from Operating Activities.     Net cash used in operating activities was approximately $4,437,000 for the three months ended March 31, 2018, which was primarily due to our net loss of $7,334,000. The difference between our net loss and our net cash used in operating activities was due primarily to non-cash expenses and an increase in our liabilities and deferred revenue partially offset by a decrease in prepaid expenses and other assets. Net cash used in operating activities was approximately $3,307,000 for the three months ended March 31, 2017, which was primarily due to our net loss of $8,212,000. The difference between our net loss and our cash used in operating activities was due primarily to non-cash expenses and an increase in our liabilities and deferred revenue partially offset by a decrease in prepaid expenses and other assets.

        Cash Flows from Investing Activities.     Net cash used in investing activities of $272,000 during the three months ended March 31, 2018 was due to the cash paid for equipment purchases. There was no cash used in investing activities during the three months ended March 31, 2017.

        Cash Flows from Financing Activities.     Net cash provided by financing activities of $4,496,000 during the three months ended March 31, 2017 was due to the receipt of cash from a stock subscription agreement entered into during the previous year.

        Our net cash flow from operating, investing and financing activities for the periods below were as follows (in thousands):

 
  Year Ended
December 31,
 
 
  2017   2016  

Net cash provided by (used in):

             

Operating activities

  $ (17,557 ) $ (6,091 )

Investing activities

    (698 )   (15 )

Financing activities

    21,060     25,505  

Net increase in cash and cash equivalents

  $ 2,805   $ 19,399  

        Cash Flows from Operating Activities.     Net cash used in operating activities was approximately $17,557,000 for the year ended December 31, 2017, which was primarily due to our net loss of $24,656,000. The difference between our net loss and our net cash used in operating activities was due primarily to non-cash expenses and a decrease in our accounts receivable and an increase in our liabilities and deferred revenue partially offset by an increase in prepaid expenses and other assets. Net cash used in operating activities was approximately $6,091,000 for the year ended December 31, 2016, which was primarily due to our net loss of $8,422,000. The difference between our net loss and our net cash used in operating activities was due primarily to non-cash expenses and a decrease in our accounts receivable, prepaid expenses and deposits.

        Cash Flows from Investing Activities.     Net cash used in investing activities of $698,000 during the year ended December 31, 2017 was due to the cash paid for equipment purchases. Net cash used in investing activities of $15,000 during the year ended December 31, 2016 was due to the cash paid for an equipment purchase.

        Cash Flows from Financing Activities.     Net cash provided by financing activities of $21,060,000 during the year ended December 31, 2017 was the result of $21,060,000 of stock subscription proceeds and net proceeds received from the issuance of our Series A convertible preferred stock. Net cash provided by financing activities of $25,505,000 during the year ended December 31, 2016

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was the result of $25,805,000 of net proceeds received from the issuance of our Series A convertible preferred stock partially offset by paying off our line of credit in the amount of $300,000.

Future Funding Requirements

        To date, we have generated revenue from grants and contract services performed and the issuance of convertible preferred stock. We do not know when, or if, we will generate any revenue from our development stage therapeutic programs. We do not expect to generate any revenue from sales of our therapeutic candidates unless and until we obtain regulatory approval. At the same time, we expect our expenses to increase in connection with our ongoing development activities, particularly as we continue the research, development and clinical trials of, and seek regulatory approval for, our therapeutic candidates. Upon the closing of this offering, we expect to incur additional costs associated with operating as a public company. In addition, subject to obtaining regulatory approval of any of our therapeutic candidates, we expect to incur significant commercialization expenses for product sales, marketing, manufacturing and distribution. We anticipate that we will need additional funding in connection with our continuing operations. Additionally, if the Cystic Fibrosis Foundation does not continue to provide sufficient level of funding support, we may not be able to complete the Phase 1/2a clinical trial relating to AR-501.

        Based upon our current operating plan, we believe that the net proceeds from this offering, together with our existing cash and cash equivalents, will enable us to fund our operations for at least the 12 months after the date of this prospectus. We intend to use the net proceeds we receive from this offering for clinical trials of our lead programs, working capital, research and development of additional future products or therapies and general corporate purposes. We have based our estimates on assumptions that may prove to be wrong, and we may use our available capital resources sooner than we currently expect. Because of the numerous risks and uncertainties associated with the development and commercialization of our therapeutic candidates, we are unable to estimate the amounts of increased capital outlays and operating expenditures necessary to complete the development of our therapeutic candidates.

        Our future capital requirements will depend on many factors, including:

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        Until such time that we can generate meaningful revenue from the sales of approved therapies and products, if ever, we expect to finance our operating activities through public or private equity or debt financings, government or other third-party funding, and other collaborations, strategic alliances and licensing arrangements or a combination of these approaches. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interests of our common stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our common stockholders. Debt financing, if available, may involve agreements that include conversion discounts or covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we raise additional funds through government or other third-party funding, marketing and distribution arrangements or other collaborations, or strategic alliances or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or to grant licenses on terms that may not be favorable to us.

Off-Balance Sheet Arrangements

        During the periods presented we did not have, nor do we currently have, any off-balance sheet arrangements as defined under the rules of the SEC.

JOBS Act Accounting Election

        The JOBS Act permits an "emerging growth company" such as us to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies. We are choosing to take advantage of this provision and, as a result, we will adopt the extended transition period available under the JOBS Act until the earlier of the date we (i) are no longer an emerging growth company or (ii) affirmatively and irrevocably opt out of the extended transition period provided under the JOBS Act.

Recent Accounting Pronouncements

        In July 2017, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2017-11, Earnings Per Share (Topic 260); Distinguishing Liabilities from Equity (Topic 480); Derivatives and Hedging (Topic 815): (Part I) Accounting for Certain Financial Instruments with Down Round Features; (Part II) Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception ("ASU

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2017-11"). ASU 2017-11 allows companies to exclude a down round feature when determining whether a financial instrument (or embedded conversion feature) is considered indexed to the entity's own stock. As a result, financial instruments (or embedded conversion features) with down round features may no longer be required to be accounted for as derivative liabilities. A company will recognize the value of a down round feature only when it is triggered and the strike price has been adjusted downward. For equity-classified freestanding financial instruments, an entity will treat the value of the effect of the down round as a dividend and a reduction of income available to common shareholders in computing basic earnings per share. For convertible instruments with embedded conversion features containing down round provisions, entities will recognize the value of the down round as a beneficial conversion discount to be amortized to earnings. ASU 2017-11 is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Early adoption is permitted. The guidance in ASU 2017-11 can be applied using a full or modified retrospective approach. We are currently evaluating the impact of adopting this guidance.

        In May 2017, the FASB issued ASU 2017-09, "Compensation — Stock Compensation (Topic 718): Scope of Modification Accounting," to provide clarity and reduce both diversity in practice and cost complexity when applying the guidance in Topic 718 to a change to the terms and conditions of a stock-based payment award. ASU 2017-09 also provides guidance about the types of changes to the terms or conditions of a share-based payment award that require an entity to apply modification accounting in accordance with Topic 718. For all entities, including emerging growth companies, the standard is effective for annual periods beginning after December 15, 2017, and for interim periods therein. Early adoption is permitted. The adoption of this standard did not have a material effect.

        In January 2017, the FASB issued ASU No. 2017-04, "Intangibles — Goodwill and Other: Simplifying the Test for Goodwill Impairment," to simplify the subsequent measurement of goodwill by eliminating Step 2 from the goodwill impairment test. The standard is effective for public entities for annual or any interim goodwill impairment tests in annual reporting periods beginning after December 15, 2019. For all other entities, including emerging growth companies, the standard is effective for annual or any interim goodwill impairment tests in annual reporting periods beginning after December 15, 2021. Early adoption of this standard is permitted. We are currently evaluating the impact of adopting this guidance.

        In August 2016, the FASB issued ASU 2016-15, "Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments." ASU 2016-15 reduces diversity in practice by providing guidance on the classification of certain cash receipts and payments in the statement of cash flows. ASU 2016-15 clarifies that when cash receipts and cash payments have aspects of more than one class of cash flows and cannot be separated, classification will depend on the predominant source or use. ASU 2016-15 is effective on a retrospective basis for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2018, with early adoption permitted. We are currently evaluating the impact of adopting this guidance.

        In April 2016, the FASB issued ASU No. 2016-10, "Revenue from Contract with Customers: Identifying Performance Obligations and Licensing." The amendments in this update clarify the two following aspects (a) contracts with customers to transfer goods and services in exchange for consideration and (b) determining whether an entity's promise to grant a license provides a customer with either a right to use the entity's intellectual property (which is satisfied at a point in

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time) or a right to access the entity's intellectual property (which is satisfied over time). The amendments in this Update are intended to reduce the degree of judgment necessary to comply with Topic 606. The new standard is effective for fiscal years beginning after December 15, 2018. We are currently evaluating the impact of adopting this guidance.

        In March 2016, the FASB issued ASU No. 2016-09, "Improvements to Employee Share-Based Payment Accounting," which is intended to improve the accounting for employee share-based payments. The ASU simplifies several aspects of the accounting for share-based payment award transactions, including; the income tax consequences, classification of awards as either equity or liabilities, and the classification on the statement of cash flows. The new standard is effective for fiscal years beginning after December 15, 2017, and upon adoption, an entity should apply the amendments by means of a cumulative-effect adjustment to the balance sheet at the beginning of the first reporting period in which the guidance is effective. Early adoption is permitted. The adoption of this standard did not have a material effect.

        In February 2016, the FASB issued ASU No. 2016-02, "Leases (Topic 842)." The pronouncement requires the recognition of a liability for lease obligations and a corresponding right-of-use asset on the balance sheet and disclosure of key information about leasing arrangements. This pronouncement is effective for reporting periods beginning after December 15, 2019 using a modified retrospective adoption method. We are currently evaluating the impact of adopting this guidance.

        In May 2014, the FASB issued ASU No. 2014-19, "Revenue from Contracts with Customers." The objective of ASU 2014-19 is to establish a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and will supersede most of the existing revenue recognition guidance, including industry-specific guidance. The core principle of ASU 2014-09 is that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The new guidance is effective for annual reporting periods (including interim periods within those periods) beginning after December 15, 2018. Early adoption is not permitted. The standard permits the use of either a retrospective or modified retrospective (cumulative effect) transition method. We are currently evaluating the impact of adopting this guidance.

Quantitative and Qualitative Disclosure about Market Risk

        We do not believe that our cash and cash equivalents have significant risk of default or illiquidity. While we believe our cash and cash equivalents do not contain excessive risk, we cannot provide absolute assurance that in the future our investments will not be subject to adverse changes in market value. In addition, we maintain significant amounts of cash and cash equivalents at one or more financial institutions that are in excess of federally insured limits.

        Inflation generally affects us by increasing our cost of labor and clinical trial costs. We do not believe that inflation has had a material effect on our results of operations during the periods presented.

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BUSINESS

Overview

        We are a late-stage biopharmaceutical company focused on the discovery and development of targeted immunotherapy using fully human monoclonal antibodies, or mAbs, to treat life-threatening infections. mAbs represent a fundamentally new treatment approach in the infectious disease market and are designed to overcome key issues associated with current therapies, including drug resistance, short duration of response, negative impact on the human microbiome, and lack of differentiation between treatment alternatives. Our proprietary product pipeline is comprised of fully human mAbs targeting specific pathogens associated with life-threatening bacterial infections, primarily hospital-acquired pneumonia, or HAP, and ventilator-associated pneumonia, or VAP. Three of our product candidates have exhibited promising preclinical data and clinical data are available from two completed studies and are in pivotal trial stage. Our lead product candidate, AR-301, also referred to as Salvecin, targets the alpha toxin produced by gram-positive bacteria Staphylococcus aureus , or S. aureus, a common pathogen associated with HAP and VAP. In contrast to other programs targeting S. aureus toxins, we are developing AR-301 as a treatment of pneumonia, rather than prevention of S. aureus colonized patients from progression to pneumonia. We have conducted an end-of-Phase 2 meeting with the US Food and Drug Administration, or FDA, and expect to initiate a Phase 3 pivotal trial for AR-301 in the second half of 2018. In addition, we are developing AR-105, also referred to as Aerucin, and AR-101, also referred to as Aerumab. AR-105 targets gram-negative bacteria Pseudomonas aeruginosa , or P. aeruginosa, and has been granted Fast-Track designation by the FDA. We initiated a global Phase 2 trial for AR-105 in HAP and VAP patients in the second quarter of 2017. AR-101 also targets gram-negative bacteria P. aeruginosa and has been granted orphan drug designation in the U.S. and EU. We plan to initiate a Phase 2/3 pivotal trial for AR-101 in the second half of 2019.

        The majority of candidates from our product pipeline are derived by employing our differentiated antibody discovery platform called MabIgX. This platform is designed to comprehensively screen the B-cell repertoire and isolate human antibody-producing B-cells from individuals who have either successfully overcome an infection by a particular pathogen or have been vaccinated against a particular pathogen. We believe that B-cells from these patients are the ideal source of highly protective and efficacious mAbs which can been administered safely to other patients. MabIgX also allows for rapid, high-throughput screening of B-cells and direct manufacturing of mAbs. As a result, we can significantly reduce time for antibody discovery and manufacturing compared to conventional approaches.

        Our initial clinical indication is for adjunctive therapeutic treatment with standard of care, or SOC, antibiotics for HAP and VAP. Mortality and morbidity associated with HAP and VAP in the intensive care units, or ICU, remain high despite aggressive treatment with SOC antibiotics. Current SOC antibiotics used to treat HAP and VAP typically involve a combination of several broad spectrum antibiotics that are prescribed empirically at the start of treatment. The specific empirical antibiotic regimens that are prescribed vary widely among physicians, and generally resulted in modest clinical benefits due to a number of reasons, including the frequent mismatch of the antibiotics regimen to the etiologic agent and/or infection by an antibiotic resistant strain. Recently, rapid diagnostic tests have been introduced that allow the identification of infection-

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causing agents within hours. These increasingly common tests allow physicians to prescribe a targeted anti-infective drug, rather than a broad-spectrum antibiotic. This evidenced-based treatment approach is designed to remove issues associated with SOC antibiotics treatment practices, and to improve the effectiveness of SOC antibiotics, while not competing directly with antibiotics. In contrast to the lack of differentiation among SOC antibiotics, mAbs are highly differentiated from SOC antibiotics in mechanism of action and pharmacodynamic profile, and thus are well suited to complement antibiotics action and are effective against antibiotic resistant bacteria. To emphasize the benefits of our product candidates as an adjunctive therapy, we design clinical trials based on superiority endpoints.

        HAP and VAP pose serious challenges in the hospital setting, as SOC antibiotics are becoming inadequate in treating infected patients. There are approximately 3,000,000 cases of pneumonia reported in the U.S. per year and approximately 628,000 annual cases of HAP and VAP caused by Gram negative bacteria and MRSA (DRG, 2016). These patients are typically at high risk of mortality, which is compounded by other life-threatening co-morbidities and the rise in antibiotic resistance. Epidemiology studies estimate that the probability of death attributed to S. aureus ranges from 29% to 55% and P. aeruginosa ranges from 24% to 76%. In addition, pneumonia infections can prolong patient stays in ICUs and the use of mechanical ventilation, creating a major economic burden on patients, hospital systems and payors. For example, ICU cost of care for a ventilated pneumonia patient is approximately $10,000 per day, and the duration of ICU stay is typically twice that of a non-ventilated patient (Infection Control and Hospital Epidemiology. 2010, vol. 31, pp. 509-515). The average cost of care per pneumonia patient is approximately $41,250 which increases 86% for HAP/VAP patients to approximately $76,730. We estimate that our three clinical mAb candidates have an addressable market of $25 billion and the potential to address approximately 325,000 HAP and VAP patients in the U.S.

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        Our proprietary pipeline is primarily focused on severe lung infections and is comprised of six wholly-owned product candidates which are highlighted below.


Figure 1
Our Product Pipeline

GRAPHIC

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        To date, we have raised over $60 million in private investments. Furthermore, we have been able to augment our own financial resources by obtaining approximately $40 million of non-dilutive awards and grants, including approximately $32 million from the Department of Health and Human Services, or DHHS, the National Institute of Health, or NIH, and the Biomedical Advanced Research and Development Authority, or BARDA, and approximately $7.5 million from the Department of Defense, PATH/Gates Foundation, the Cystic Fibrosis

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Foundation and other strategic research and development collaborations. We believe that our ability to attract significant financial investments and grant funding underscores the recognized need for new anti-infective products and the strength of our product candidate portfolio.

        We have assembled a senior management team with substantial product development experience and a successful track record of navigating complex drug development and regulatory pathways. Our management team has over 175 years of combined drug development experience from proven biopharmaceutical companies, such as Abgenix, Inc. Aviron, Genentech, Inc., GlaxoSmithKline plc, Celgene Corporation, MedImmune, LLC and Novartis AG among others, and has contributed to the development and launch of products with multi-billions in annual sales.

Strategy

        Our goal is to become a global leader in anti-infective immunotherapy by discovering, developing and commercializing best-in-class mAbs with the potential to significantly improve upon SOC treatments for life-threatening infections. Key elements of our strategy are as follows:

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Market Opportunities

        Our mission is to improve the treatment of infectious diseases, particularly the deficiencies of conventional antibiotics. It is widely recognized that there is a growing problem of antibiotic resistance at a time when the pipeline of antibiotics is dwindling and much of the development activity currently ongoing is devoted to modifications of existing classes of antibiotics. We believe this antibiotic strategy has merely delayed rather than solved the underlying resistance problem as evidenced by the spread of drug resistant bacteria, particularly in the hospital settings. The drug resistance and adverse impact on the human microbiome, particularly the gut microbial flora, brought about by frequent use of broad spectrum antibiotics increased the need for targeted, narrow spectrum anti-infectives that counteract only the etiologic bacterial agent. The ability to identify the infection-causing agent has significantly improved in recent years because of the availability and proliferation of rapid diagnostic tests. These diagnostics have enabled the identification of pathogen profiles within hours of patient sample collection, thus providing physicians with the rapid, precise information necessary to make more informed treatment decisions. Given the identity of the specific pathogen responsible for an infection, we believe the physician is more likely to prescribe a targeted anti-infective, rather than a broad-spectrum antibiotic. Therefore, we believe that the treatment of infectious diseases will see a paradigm shift from broad spectrum antibiotic utilization to narrow, targeted anti-infectives. Such paradigm shift is similar to that observed in oncology starting in the early 2000s, from broad acting chemotherapies to targeted immune-oncology mAbs. Therefore, we believe that the opportunity for application of mAbs in infectious diseases is highly attractive.

        The current small molecule antibiotics market is crowded, highly competitive, and lacking in product differentiation. The lack of antibiotic product differentiation is traced to the usage of

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non-inferiority clinical trial designs that is common practice for most of the antibiotics that have been marketed to date. No new class of antibiotic has been introduced to the market within the last two decades, which further heightens the need for new anti-infectives. In addition to significant market differentiation, mAbs may offer substantially less market competition, and higher barrier to entry. Unlike antibiotics, mAbs have a more predictable and attractive safety profile and are designed to kill via an immunological mechanism of action that is different from the mechanisms of action of all antibiotics and mechanisms of antibiotic resistance. Therefore, so long as it binds to such bacteria or their toxins, mAbs are likely unaffected by the rise in antibiotic resistant bacteria and will remain effective against antibiotic resistant bacteria. mAbs also have a dosing frequency of once or twice a month and may require only a single administration for treatment of hospital acquired pneumonia. Our mAbs will be used as an adjunct therapy in combination with antibiotics, so they will not directly compete with antibiotics. By improving the outcome in terms of mortality and reducing the time to clinical cure and length of hospital and ICU stay, mAbs offer both a medical benefit to the patient and an economic benefit to the hospital. Our clinical study designs utilize superiority in primary end points, which will allow for clear demonstration of measureable clinical benefits and product differentiation.

        We are initially focused on respiratory infections in the ICU settings, particularly bacterial pneumonia caused by agents that have approximate prevalence as shown in Figure 2. In the U.S., there are approximately 628,000 cases of HAP and VAP (DRG 2016). HAP due to methicillin-resistant Staphylococcus aureus , or MRSA, infections results in substantial loss of life with an annual worldwide incidence of approximately 200,000 patients (Decision Resources, 2016 data) and mortality rates as high as 50% depending on the patient population and treatment regimen (Methicillin-Resistant Staphylococcus Aureus, Decision Resources, 2016). Mechanical Ventilation for VAP patients costs over $30 billion annually in the U.S. Infections due to MRSA represent a high-value segment of the overall antibiotics market. According to this report, the worldwide market for existing therapies for MRSA infections was over $800 million in 2015. The progressively aging population is expected to increase the number of MRSA infections that result in HAP. Moreover, MRSA infections are associated with significantly longer hospital stays, repeated hospitalizations and increased healthcare costs. Currently, the median hospital stay of a patient with VAP is 29 days, and the average length of ICU stay is 19 days. The median total hospitalization costs for a VAP patient is approximately $198,000. Current SOC antibiotics for MRSA pneumonia is dominated by five antibiotics Linezolid, Daptomycin, Vancomycin, Ceftaroline and Tigecycline, which combined have approximately 90% market share. There is a significant need for new anti-MRSA agents given the S. aureus resistance rate of 31% to 53%. We believe that the addition of AR-301 to SOC antibiotics has the potential to improve clinical outcome and could be effective in patients with MRSA infections.

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Figure 2
Most Common Bacterial Pathogens in ICU Pneumonia

GRAPHIC


Figure 3
Potential Addressable Patient Population of our mAbs

 
  AR-301
Potential
Addressable
Patient Population
   
   
   
 
 
   
  AR-105
Potential
Addressable
Patient Population
  AR-101
Potential
Addressable
Patient Population
 
 
  Gram (-)
HAP/VAP/HCAP
 
 
  HAP/VAP  
 
  (approximately)
  (approximately)
 
 
  (approximately)
  (approximately)
   
   
 

US

    251,600     872,000     153,950     30,790  

EU

    53,750     666,000     224,800     40,960  

Japan

    90,000     334,000     99,000     19,800  

        Pseudomonas infection is caused by strains of bacteria found widely in the environment. P. aeruginosa is one of the most common gram-negative bacteria that is associated with a number of human infections. Drugs targeting gram-negative bacteria must cross both the inner and outer membranes of the bacterial cell, as compared to those directed against gram-positive bacteria, which must only cross one cell membrane. As a result, gram-negative bacteria tend to be more resistant to antibiotics and the body's own immune system.

        Serious Pseudomonas infections usually occur in people in the hospital and/or with weakened immune systems. Patients in hospitals, especially those on breathing machines, those with devices such as catheters, and patients with wounds from surgery or from burns are potentially at risk for serious, life-threatening infections. Infections of the blood, pneumonia and infections following surgery can lead to severe illness and death. Pseudomonas infections are generally treated with antibiotics. Unfortunately, in hospitalized patients, Pseudomonas infections, such as those caused by many other hospital bacteria, are becoming more difficult to treat because of increasing antibiotic resistance. Multidrug-resistant Pseudomonas can be deadly for patients in critical care.

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Figure 3 shows the potential addressable patient population of our three clinical candidates in the US, Europe and Japan (DRG 2016 epidemiological data). According to the Centers for Disease Control and Prevention, or CDC, an estimated 51,000 healthcare-associated P. aeruginosa infections occur in the U.S. each year. More than 6,000, or 13%, of these are multidrug-resistant, leading to roughly 400 deaths per year. Multidrug-resistant Pseudomonas was given a threat level of "serious threat" in the CDC's report in 2013 titled, Antibiotic Resistance Threats in the United States.

        Cephalosporin and beta lactamases are the most commonly prescribed first line therapy to treat P. aeruginosa pneumonia, but these drugs have a resistance rate of approximately 30%. The lack of new anti-infective agents and the difficulty of developing new anti-infectives to gram-negative pathogens such as P. aeruginosa has been a public health challenge (Gram Negative Infections, Decision Resources, 2009). Unfortunately, many of the new anti-infectives currently in development are modifications of existing antibiotics, which likely will be susceptible to resistance through the same mechanisms as current therapies. The need is especially acute for P. aeruginosa , which harbors multi-drug resistant plasmids and is the target of few new drugs under development. As is the case with HAP caused by S. aureus , there is substantial mortality associated with HAP caused by P. aeruginosa and an annual worldwide incidence of approximately 450,000 patients (Gram Negative Infections, Decision Resources, 2009). This report estimated the worldwide market for existing therapies for HAP due to Gram-negative infections to be $2.0 billion in 2016 and projected it to increase to $3.7 billion by 2026. Additionally, the markets for lung and blood-born infection such as sepsis are characterized by patients who either have a disruption of the normal protective barrier to infection or have an underlying chronic disease such as cystic fibrosis, non-cystic fibrosis bronchiectasis and chronic obstructive pulmonary disease, or COPD, that leaves the lungs and systemic organs in a weakened state and susceptible to infections by P. aeruginosa .

Cystic Fibrosis with Pseudomonas aeruginosa Infection

        There are more than 70,000 patients with cystic fibrosis worldwide. 80% of these patients present with chronic polymicrobial infections, particularly P. aeruginosa infection. We believe the medical need and market potential for an anti-infective therapeutic that can be given to cystic fibrosis patients chronically is substantial. The current market for inhaled antimicrobials for cystic fibrosis, based on recent combined sales figures for TOBI (tobramycin) and Cayston (aztreonam), is approximately $600 million worldwide. Existing therapies such as aminoglycoside antibiotics lead to a temporary improvement in bacterial load, but ultimately 80% to 95% of cystic fibrosis patients succumb to respiratory failure due to chronic P. aeruginosa infection and airway inflammation. P. aeruginosa is the most significant pathogen, with the majority of cystic fibrosis patients becoming chronically infected by the age of 18 years.

Our Product Candidates

        mAbs represent a fundamentally new immunologic approach for treating bacterial infections that can potentially overcome the problems of toxicity and resistance that may occur with traditional antibiotics when they are used long-term in individual patients and pervasively across patient populations. Our product portfolio consists of candidates that have novel mechanisms of action that differ from that of traditional antibiotics and includes five mAb programs, most are discovered using our MabIgX platform technology, and one broad spectrum small molecule anti-infective.

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AR-301

        Our lead product candidate, AR-301 is a fully human mAb of IgG1, for the treatment of lung infections resulting from S. aureus including MRSA strains. We are developing AR-301 as an adjunctive therapy with SOC antibiotics to treat HAP and VAP, which is in contrast to other mAb programs currently under development for prevention of HAP and VAP. AR-301 was discovered by screening the B-cell immune response repertoire generated against S. aureus infection. It has received Fast-Track designation in the U.S., Orphan status in the EU and is ready to advance into a Phase 3 pivotal trial.

        We recently completed a Phase 2a clinical trial with AR-301 plus SOC antibiotics compared to SOC antibiotics alone to treat HAP and VAP caused by S. aureus . AR-301 is targeted against S. aureus alphatoxin, which is a toxin produced by most S. aureus strains to cause destruction of human cells and tissues, and in mouse models is thus effective against S. aureus infections whether or not the bacteria are resistant to conventional antibiotics. We believe AR-301 has the potential to positively impact the outcome of S. aureus infections in patients by improving survival rates and/or shortening the duration of overall hospital stays, the length of time a patient requires mechanical ventilation, or the time a patient spends in the ICU.

Background and Mechanism of Action

        AR-301 was discovered by screening B-cell lymphocytes from a patient with a confirmed S. aureus infection. AR-301 binds to alphatoxin with high affinity and prevents its assembly into an active complex, which prevents alphatoxin-mediated breakdown of cell membranes, or lysis, of erythrocytes, human lung cells and immune cells such as lymphocytes (see Figure 4 below). This prevention of killing of host cells, in turn, may protect the patient from further progression of pneumonia disease and systemic infections caused by S. aureus . During infection and active proliferation, S. aureus is metabolically more virulent, geared toward higher toxin production than during its more sessile colonization stage. In contrast to other programs targeting S. aureus colonization, AR-301 targets the active, disease causing infection stage. There is no commercially available product that specifically neutralizes the pathogenic effects brought about by S. aureus toxins. We believe that this mechanism of action complements the bacterial killing properties of many conventional antibiotics, essentially neutralizing the bacterial toxins left behind following antibiotic-mediated killing. Additional indications for AR-301 may include any S. aureus infection, particularly surgical site infections, blood stream infections, endocarditis, and skin and soft tissue infections such as diabetic ulcers and non-healing wounds.

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Figure 4
AR-301's Mechanism of Action

GRAPHIC

Clinical Development Summary.

        We recently completed a randomized, double-blind, placebo-controlled, active comparator, ascending dose Phase 2a clinical trial to assess the safety, tolerability, pharmacokinetics, efficacy and pharmacodynamics of a single intravenous administration of AR-301 plus SOC in patients with severe pneumonia caused by S. aureus (Francois, B. et al. , 2018. Intensive Care Medicine journal, in-press ). The SOC regimens were the physicians' choice and were based on the individual clinical site's prescribing practice. Forty eight patients were enrolled in the study. Six patients enrolled in the first cohort (1 mg/kg AR-301 plus SOC), eight in the second cohort (3 mg/kg AR-301 plus SOC), ten in the third cohort (10 mg/kg AR-301 plus SOC) and eight in the fourth cohort (20 mg/kg AR-301 plus SOC). An additional 16 patients received placebo plus SOC as an active control. This Phase 2a clinical trial included 31 sites located across Belgium, France, Spain, the United Kingdom, and the U.S. and was designed primarily to address the safety and pharmacokinetics of AR-301. The drug was generally well tolerated. In exploratory analysis of the VAP subgroup of 25 patients, numeric clinical improvement of antibody treated patients over placebo were observed in time to extubation. Additionally, patients treated with AR-301 exhibited trends toward a higher rate of microbiological eradication, and reduction in number of hospital or ICU days.

Phase 2a Safety and Pharmacokinetics.

        Data from the Phase 2a clinical trial suggest that AR-301 was well tolerated as a treatment for severe pneumonia due to S. aureus when used as directed and in addition to antibiotics. Few (2.8%) adverse events, or AEs, and no SAEs were deemed related to AR-301 treatment. A total of 36 SAEs were observed, which are listed as follows: septic shock (3 patients or approximately 6.3% of patients), anaemia (3 patients), bacteraemia (2 patients or approximately 4.2% of patients), sepsis (2 patients), acute respiratory failure (2 patients), hypoxia (2 patients), pancreatic abscess (1 patient or approximately 2.1% of patients), pneumonia (1 patient), carbon dioxide increase (1 patient), gamma-glutamyltransferase increase (1 patient), platelet count increase

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(1 patient), abnormal prothrombin level (1 patient), duodenal ulcer (1 patient), epistaxis (1 patient), hypoventilation (1 patient), pleurisy (1 patient), pulmonary embolism (1 patient), haemodynamic instability (1 patient), hypotension (1 patient), shock haemorrhagic (1 patient), superior vena cava syndrome (1 patient), vena cava thrombosis (1 patient), cardiac arrest (1 patient), coronary artery stenosis (1 patient), ventricular tachycardia (1 patient), multi-organ failure (1 patient), pyrexia (1 patient), hepatic failure (1 patient), hepatocellular injury (1 patient), hypoalbuminaemia (1 patient), malnutrition (1 patient), heparin-induced thrombocytopenia (1 patient), coma (1 patient), peripheral motor neuropathy (1 patient), renal failure acute (1 patient), renal failure chronic (1 patient), renal tubular necrosis (1 patient), post procedural haemorrhage (1 patient) and subdural haematoma (1 patient). Immunogenicity was observed in one subject, with no related adverse event. No significant difference in mortality was observed between groups. There were six deaths in the trial, none of which were deemed related to AR-301. Furthermore, the overall mortality observed (8.5%) in this small sample size study was very low when compared to historic published references. The pharmacokinetic, or PK, profile of AR-301 is consistent with that of a human IgG1mAb, with a plasma half-life of 23 to 31 days, and supports a single-dose administration for the pneumonia indication (Figure 5).


Figure 5
Pharmacokinetics Profile of AR-301

GRAPHIC

Phase 2a clinical Efficacy.

        We assessed multiple endpoints of clinical improvement including time to extubation. Time intubated to day 28 showed a decrease in the length of time patients who were treated with AR-301 plus SOC remained intubated as compared to those receiving placebo and SOC. When the subset of 25 patients with VAP was assessed, a Kaplan-Meyer analysis of time to extubation showed a separation of the group of patients treated with AR-301 plus SOC as compared to those treated with placebo plus SOC (see Figure 6). In the same subgroup of VAP patients, ventilation

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time was reduced numerically for patients in all four active dose groups receiving AR-301 plus SOC compared to those receiving placebo plus SOC. In an exploratory analysis, with all four treated cohorts pooled and compared versus the placebo cohort, statistical significance was achieved at p<0.01. The lack of dose response could be attributed to high variability associated with a small sample size, and/or to the high level of circulating AR-301 mAb as compared to alphatoxin load in infected patients, i.e. even at the lowest dose administered (i.e. one mg/kg) it is estimated that there is more than ten-fold mAbs than the predicted alphatoxin load.


Figure 6
Impact Adjunctive AR-301 Treatment on Mechanical Ventilation Time (VAP subgroup)

Ventilation Days in VAP Patients
(Microbiologically confirmed Intend to
Treat population);
p < 0.01 for Placebo vs. AR-301 (pooled)
  Lower Probability of Ventilation Requirement for
VAP patients (exploratory analysis)

GRAPHIC

        We also determined microbiological outcomes in the overall study population. Eradication or presumed eradication (cured of pneumonia) was observed in 25 (78.1%) patients treated with AR-301 plus SOC and ten (62.5%) of 16 subjects treated with placebo plus SOC. Details of microbiologial outcome by treatment cohort are provided in Figure 7a and the mean time to eradication of S. aureus bacteria also trended shorter in AR-301 treated cohorts as compared to the Placebo cohort (Figure 7b).

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Figure 7a
Summary of Microbiological Outcome by Dose Level

GRAPHIC


Figure 7b
Mean Time to Microbiological Eradication

GRAPHIC

        When clinical cure was assessed based on the sole judgment of the investigator, there was no statistically significant difference between the groups, and the overall cure rate was high compared to historic published references. Over the first 28 days of the study, the length of stay in the ICU and in the hospital both showed a modest decrease in the AR-301 plus SOC groups as compared to placebo plus SOC-treated subjects, however, this difference did not reach statistical significance.

        Although SOC antibiotics were effective, the results suggest that the addition of AR-301 to SOC treatment may increase the rate of microbiological eradication, and may reduce time to eradication, time under mechanical ventilation and overall duration of hospital stay. Time ventilated in the pooled AR-301 treated cohorts (n=20) showed an exploratory p <0.01 reduction in the subset of patients with VAP as compared to the placebo plus SOC cohort (n=5).

Preclinical Summary

         In vitro studies demonstrated the selective binding of AR-301 to alphatoxin as well as the ability of AR-301 to neutralize toxin effects on several cell models. Antigen specificity and alphatoxin binding were confirmed by performing binding assays using purified bacterial toxins from varied sources including bacterial cell supernatants of the most prevalent epidemic MRSA strains worldwide, and bacterial cell supernatants of an extensive panel of MRSA and methicillin sensitive S. aureus , or MSSA, clinical isolates. AR-301 was shown to bind to greater than 95% of all S. aureus clinical isolates tested (more than 110 tested).

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        Preclinical testing in an experimental acute S. aureus pneumonia mouse model and sepsis model showed that AR-301 can be used as prophylactic to prevent infection-associated morbidity and mortality or as a therapeutic when delivered intravenously as a stand-alone treatment. For example, in the prophylactic murine lung infection model (see Figure 8), we evaluated the ability of AR-301 to protect against disease. Groups of 15 mice received an intraperitoneal injection of either isotype control antibody (human IgG1) or AR-301 two hours prior to the time of intranasal infection with bacterial strains of interest and were then monitored over 72 hours for lethal disease. The studies were conducted with three distinct S. aureus strains, including Newman, a methicillin-sensitive clinical isolate that maintains a stable virulence phenotype in the laboratory, USA100, a methicillin-resistant hospital isolate, and USA300/LAC, a methicillin-resistant epidemic clone that is the most widely circulated MRSA strain in the U.S. As demonstrated in Figure 8, AR-301 conferred in a dose-dependent manner significant protection against mortality induced by an acute infection with Newman (A), USA100 (B) and USA300 (C).


Figure 8
Effect of AR-301 in Prophylactic S. aureus Pneumonia Model

GRAPHIC

        In therapeutic mouse pneumonia studies, AR-301 demonstrated protection against death caused by either the MSSA strain Newman (Figure 9A) or the MRSA strain USA100 (Figure 9B), even when AR-301 was applied up to several hours post infection. Overall, protection decreased (mortality increased) in the groups with later antibody application and with duration of the observation period, thereby suggesting that alphatoxin may be essential, particularly during the early stage of pathogenesis. We believe an extrapolation of these findings to human disease implies that treatment with AR-301 early in the course of S. aureus pneumonia has the potential to delay

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disease progression, providing a much-needed window of opportunity to enhance the utility of antimicrobial and supportive therapies.


Figure 9
Effect of AR-301 in Therapeutic S. aureus Pneumonia Model

GRAPHIC

        Administration of AR-301 mediates protection in a therapeutic S. aureus pneumonia model. Mice were treated with AR-301 two hours prior to intranasal infection or four hours, eight hours, and 12 hours post challenge. For both bacterial MSSA (A) and MRSA (B) isolates tested, a significant decrease in 48 hours mortality was observed for antibody applications up to 12 hours post infection. Statistical significance (p<0.05) is indicated in Figure 9 by an asterisk.

        To understand the mechanism by which lethal disease was averted by AR-301, bacterial loads in the lungs of mice treated with isotype control IgG1 or AR-301 were assessed 24 hours post-infection. Treatment of mice with isotype control IgG1 antibody or AR-301 two hours prior to the time of infection at a concentration of ten mg/kg each leads to a marked reduction in S. aureus burden in the lungs. Importantly, this reduction in bacterial load was apparent upon infection with MSSA strain Newman (A) and both hospital-acquired MRSA strain US100 (B) and community-acquired MRSA strain US300 (C). The horizontal bars indicate the mean bacterial load. (see Figure 10). These data support the hypothesis that by neutralizing alphatoxin, AR-301 may mitigate alphatoxin-mediated killing of immune cells, thereby preserving the immune system's natural ability to reduce bacterial burden.

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Figure 10
Effect of AR-301 on Lung Bacterial Load in a S. aureus Pneumonia Model

GRAPHIC

        Collectively, the above preclinical animal infection and treatment studies suggested that treatment with AR-301 resulted in improvement in resolution of disease, and further suggested that neutralizing alphatoxin was necessary and sufficient to confer protection against morbidity and mortality.

        The toxicology program for AR-301 determined that there was no toxicity in the dose-range pilot study and the repeat-dose toxicity study performed in mice. Further, no treatment-related microscopic changes at the injection sites were observed, thereby confirming good local tolerance of AR-301.

Planned Development Activities

        We plan to conduct two pivotal clinical trials in pneumonia patients for regulatory approval in the U.S. and Europe. We had an end of Phase 2 meeting with the FDA in June 2017 on the two proposed primary efficacy endpoints, ventilation time and clinical cure, for these two Phase 3 clinical trials. We also submitted a briefing document and received feedback from a EMA's Scientific Advice experts in January 2018. We are currently in negotiations with the FDA and EMA on these endpoints, or a consolidated single primary endpoint, which may include the components of mortality, ventilation requirements and signs and symptoms of pneumonia. Per discussions with clinical experts in the field, >15% improvement of AR-301 plus SOC over placebo plus SOC on these efficacy outcomes is deemed to be clinically meaningful. The first Phase 3 clinical trial will be a randomized, double-blind, placebo-controlled active comparator AR-301 (20 mg/kg) plus SOC versus placebo plus SOC. We plan to enroll approximately 210 VAP microbiologically evaluable patients at approximately 125 clinical sites in over 15 countries. Assuming a treatment effect of clinical cure of 85% versus 65% in active drug treated patients would provide 90% power to demonstrate a statistically significant result. We also reached agreement with the FDA on the size of the safety database required for approval and we plan to include the following safety endpoints: immunogenicity, adverse events, and standard safety laboratory tests. We expect to enroll the first subject in the second half of 2018, plan to include an interim data readout in the second half of 2019, and complete enrollment by the first half of 2020.

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AR-105

        AR-105 is a broadly active fully human IgG1 mAb targeting P. aeruginosa alginate, a widely distributed cell surface polysaccharide involved in surface adhesion, biofilm formation, and protection against the human immune system. We found that it was expressed in over 90% of P. aeruginosa clinical isolates from pneumonia patients suggesting the potential for broad coverage. In addition, alginate is highly conserved and we have not identified any escape mutants to date. We believe that AR-105 plus combinations of antibiotics may be beneficial to the overall therapeutic efficacy of treatment regimens because P. aeruginosa is a problematic, difficult-to-treat bacterium that often requires a combination of antibiotics to effectively treat.

        An increasing concern with P. aeruginosa infections is the increasing incidence of multi-drug resistant hospital associated lung infections, including HAP and VAP, occurring in patients on mechanical ventilators. It is estimated that the addressable patient population in the United States, EU and Japan combined is approximately 478,000 patients. As a result, we are developing AR-105 plus SOC antibiotics as an adjunctive therapy to treat HAP and VAP. AR-105 was shown to be well tolerated in the recently completed Phase 1 clinical trial in healthy volunteers. We are currently in a global Phase 2 clinical study with this product candidate and project data readout in the first half of 2019.

        Alginate production is a hallmark of chronic P. aeruginosa infection and progressive decline in lung function in patients with cystic fibrosis. As a result, we believe that AR-105 can potentially be developed as a therapy to treat P. aeruginosa infection in cystic fibrosis patients. We plan to explore the mAb utility in this indication in the future.

Background and Mechanism of Action

        AR-105 specifically binds to P. aeruginosa alginate expressed on the cell surface of P. aeruginosa . AR-105 binding activates the C3b component of the complement system, a part of the immune system which binds to the bacterial cell wall in a process called antibody opsonization. The cell surface bound antibody and C3b are then recognized by receptors on the cell surface of immune cells called polymorphonuclear leukocytes, which results in the phagocytosis, or ingestion, and killing of the bacterial cell (see Figure 11).

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Figure 11
Mechanism of Action of AR-105 mAb

GRAPHIC

Clinical Development Summary

        We recently completed an open-label, single ascending dose Phase 1 clinical trial of AR-105 in which all subjects received one intravenous dose of AR-105. The trial consisted of three dose cohorts of AR-105 with safety and pharmacokinetics outcome as shown in Figure 12. Cohort one received two mg/kg of AR-105 (n=five subjects), cohort two received eight mg/kg of AR-105 (n=six subjects), and cohort three received 20 mg/kg of AR-105 (n=five subjects). The dose levels for the study were selected based on animal studies showing prophylactic and therapeutic effects in a pneumonia animal model and toxicological studies. The results showed that AR-105 was well tolerated at all dose levels tested, with no SAEs observed, and a total of 14 AEs that were deemed to be non-remarkable and typical of mAb infusion (e.g. infusion site edema, headache, etc.). Furthermore, the PK profile of AR-105 was found to be consistent with the known PK profiles of IgG1 mAbs.

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Figure 12
Summary of AR-105 Phase 1 Study

A)   Safety summary — No SAEs observed at any dose levels   B)   Pharmacokinetic profile was typical of a non-tissue binding IgG1, with a plasma T 1/2 life ~21 days

GRAPHIC

Preclinical Activity Summary

        In in vitro studies, AR-105 demonstrated the ability to bind to and kill a wide range (greater than 90%) of P. aeruginosa clinical isolates from pneumonia patients through opsonic phagocytosis. These clinical isolates included P. aeruginosa strains with varying levels of antibiotic resistance to TOBI (tobramycin) and Cayston (aztreonam) suggesting that AR-105's activity is independent of the antibiotic resistance status of a given P. aeruginosa strain.

        Several preclinical animal models have demonstrated the protective activity of AR-105 treatment against P. aeruginosa infections. AR-105 prevented both morbidity and mortality resulting from infection when administered intravenously either prophylactically or therapeutically in an acute P. aeruginosa pneumonia mouse model. AR-105 had a synergistic effect when combined with antibiotics tobramycin (Figure 13 Left Panel) or meropenem (Figure 13 Right Panel) in P. aeruginosa infected mice exhibiting severe pneumonia (Figure 13).

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Figure 13
Synergistic Protection of P. aeruginosa Infected Mice Using AR-105 and Antibiotic Tobramycin (left) or Meropenem (right)

GRAPHIC

        In the study depicted above, infected mice were treated with sub-protective dose levels of AR-105 (0.01 and 0.04 mg/kg, once via nasal administration) and either tobramycin or meropenem (1.4 and 0.8 mg/kg, respectively, daily via intravenous administration) separately and in combination, followed by assessment of lung bacterial load (measured as colony forming units, or CFUs) at T=0 and 24 hours post-drug treatments. The combination of AR-105 and tobramycin or meropenem showed lower bacterial load than either treatment individually.

        Therapeutic protection by AR-105 was also demonstrated in a mouse model of sepsis where the infection was initiated by an intraperitoneal injection of P. aeruginosa followed by an intraperitoneal injection with escalating doses of AR-105 four hours later. Treatment with AR-105 resulted in protection from the lethality of the P. aeruginosa infection. Increasing doses of AR-105 resulted in increased protection. Collectively, the results of these preclinical studies demonstrated that AR-105 is highly effective in mice in attenuating pulmonary and septic infections caused by P. aeruginosa .

Planned Development Activities

        We initiated a Phase 2 clinical trial in VAP patients on mechanical ventilation in the second quarter of 2017. This trial is a randomized, double-blind, active comparator trial with a single dose of AR-105 (20 mg/kg) plus SOC antibiotics or placebo plus SOC antibiotics. This study is being conducted at approximately 90 sites in fourteen countries, in the U.S., EU and Asia. This study is

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designed to detect superiority in the primary endpoint of clinical cure rate on day 14 at p-value of 0.05.

AR-101

        AR-101 is a human IgM mAb that we are developing to treat P. aeruginosa , the leading cause of hospital acquired lung infections. AR-101, which we are initially developing as an adjunct therapy for the treatment of HAP and VAP caused by P. aeruginosa serotype O11, binds to the lipopolysaccharide, or LPS, on the cell surface of P. aeruginosa . Serotype O11 is one of the most prevalent P. aeruginosa serotypes in HAP and VAP, representing approximately 23% of cases (Lu et al 2014). It is estimated that the addressable patient population in the U.S., EU and Japan combined is approximately 95,600 patients. AR-101 has been granted orphan drug designation in the U.S. and in the EU. We intend to incorporate a companion diagnostic test based on polymerase chain reaction, or PCR, technology that can rapidly identify P. aeruginosa serotype O11 strains in order to identify those patients most likely to respond to AR-101. We have completed a Phase 1 safety and tolerability trial of single ascending doses of AR-101 in healthy adults and an open-label Phase 2a safety and pharmacokinetics trial of up to three single doses of AR-101 in pneumonia patients. These studies suggested AR-101 to be generally well tolerated in both healthy adults and HAP and VAP patients. Comparison of the per protocol population (n=13) of the Phase 2a study, which excluded four patients from the ITT population (n=17) because they did not complete the treatment regimen, and a contemporaneous control cohort suggested that AR-101 therapy may improve survival, cure rate of the index pneumonia, and time to cure pneumonia.


Figure 14.
AR-101 Mechanism of Action

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Background and Mechanism of Action

        Upon binding, AR-101 mediates the deposition of the human complement to the surface of P. aeruginosa bacteria. This antibody-complement complex leads to improved recognition by the host immune cells, which results in engulfment and killing of the bacteria (Figure 14). AR-101, like IgM antibodies in general, provides several advantages towards more effective bacterial killing. They possess ten binding sites rather than two for IgG, and they are 100 to 1,000 times more effective than IgG at binding and/or activating key enzymes that facilitate the killing of P. aeruginosa . As a result, IgM antibodies are becoming more prevalent as candidates for drug therapies.

Clinical Development Summary

        We have completed two clinical studies of AR-101 to date. We completed a Phase 1 study in healthy volunteers to assess the safety and pharmacokinetic characteristics of AR-101. This randomized, double-blind, placebo-controlled study enrolled 32 volunteers in four antibody treatment cohorts at doses of 0.1, 0.4, 1.2 and 4.0 mg/kg as well as placebo cohort. No SAEs were observed, and no subject was discontinued due to an AE. Reported AEs were mild or moderate in intensity, and all resolved without sequelae, and the incidence of AEs did not increase with the dose. There was no activation of an immune response against AR-101. Pharmacokinetic characteristics that were observed were consistent with the characteristics of a human IgM, with a serum half-life between 70 and 95 hours.

        Subsequently, we completed an open-label Phase 2a study in 18 subjects, which was the first study performed in the target indication of patients with severe bacterial pneumonia caused by P. aeruginosa serotype O11. Treatment consisted of three intravenous infusions of 1.2 mg/kg of AR-101 given over two hours on days one, four and seven for a total dose of 3.6 mg/kg. The 30-day survival rates were 82% and 100% in the intent-to-treat (ITT; 17 subjects) and the per protocol (13 subjects) populations, respectively. Clinical resolution of pneumonia was observed in 76% of patients in the ITT population and 100% of patients in the per protocol population. Microbiological resolution was observed in six subjects, representing 35% of the ITT population and 31% of the per protocol population. The time to resolution of pneumonia was 14 days and nine days in the ITT and per protocol populations, respectively. The time to extubation or cessation of ICU management was 22 days in the ITT and 13 days in the per protocol populations, respectively. Measurements of clinical status improved promptly in parallel with clinical resolution of disease.

        14 SAEs were experienced by six of the subjects. The types of SAEs were: gastrointestinal bleeding (3 patients or approximately 21% of patients), cardiac and respiratory arrest (2 patients or approximately 14% of patients), multi-organ failure (2 patients), hyperbilirubinemia and cholestasis (1 patient or approximately 7% of patients), neutropenia (1 patient), low count of platelets (1 patient), activated partial thromboplastin time (1 patient), prolongation (1 patient), septic shock (1 patient); cholestasis (1 patient) and troponin increase (due to cardiac arrest) (1 patient). An event of cardiorespiratory arrest was judged as probably related to AR-101 and events of hyperbilirubinemia and cholestasis, although pre-existent, were deemed possibly related. In both cases, the investigators assessed that a contribution by AR-101 to the adverse event could not be excluded with certainty but acknowledged other probable causes were acknowledged. The other SAEs were deemed unrelated.

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        In parallel, we also conducted a contemporaneous cohort study of the incidence and outcome of HAP and VAP caused by various P. aeruginosa serotypes in critically ill patients. The data were extracted from the medical files of the patients selected according to eligibility criteria similar to those of our Phase 2a study. Cohort patients infected with P. aeruginosa serotype O11 (14 patients in total) had a lower survival rate, cure rate, and microbiological resolution rate, as well as longer mean times on ventilator and in the ICU as compared to patients in our Phase 2a clinical trial who received a complete treatment of three 1.2 mg/kg doses of AR-101. A summary of the results of the Phase 2a study and the contemporaneous cohort study is shown in Figure 15 below.


Figure 15
AR-101 Phase 2 Trial Comparison of Adjunctive (AR-101 + Antibiotics)
to Cohort (Antibiotics Alone) Groups

 
  AR-101 + Antibiotics
Intent-to-Treat
(n=17)
  AR-101 + Antibiotics
Per Protocol
(n=13)
  Contemporaneous
Cohort
Study Serotype O11
(n=14)

Mortality (%)

  18% (3/17 pts)   0% (0/13 pts)   21% (3/14 pts)

Time to Initial Clinical Resolution of Pneumonia (mean)

 

14 days ± 10 days SD

 

9 days ± 2.9 days SD

 

19 days ± 10 days SD

Initial Clinical Resolution of Pneumonia (%)

 

76% (13/17 pts)

 

100% (13/13 pts)

 

64% (9/14 pts)

Clinical Resolution of Pneumonia on Day 30

 

65% (11/17 pts)

 

85% (11/13 pts)

 

57% (8/14 pts)

Microbiological Resolution on Day 30

 

35% (6/17 pts)

 

31% (4/13 pts)

 

14% (2/14 pts)

Time on Ventilator or Time in ICU*

 

22 days

 

13 days

 

21 days


*
Kaplan-Meier time-to-event estimation of the times where 50% of patients had experienced the event. 'pts' = patients

Preclinical Summary

        AR-101 reacts with a wide range of P. aeruginosa serotype O11 clinical isolates from different hospitals, indicating broad application against infections with this serotype. AR-101 is also capable of stimulating phagocytic immune cells to ingest P. aeruginosa bacterial cells in a dose dependent manner, thereby killing the pathogen. Passive immunization with murine mAb recognizing O-polysaccharides in LPS of P. aeruginosa conferred protection against lethal challenge with live pseudomonas bacteria in several animal models of pneumonia infections. In preclinical studies, AR-101 was found to demonstrate attenuating protection against pulmonary infections caused by P. aeruginosa serotype O11 and exhibited a complementary effect with meropenem, a broad-spectrum antibiotic. Additionally, we had the following observations in preclinical studies of AR-101. AR-101 protected mice in a dose-dependent manner from P. aeruginosa infection after a burn-wound challenge. Doses of five m g/mouse (corresponding to about 0.2 mg/kg body weight) conferred 70% to 100% protection from systemic P. aeruginosa challenge. Administration of decreasing doses resulted in lower survival rates and administration of AR-101 led to rapid clearance of P. aeruginosa from the lung in mice and was associated with milder lung pathology six

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and 24 hours after infection. In addition, AR-101-treated animals had a significantly lower systemic P. aeruginosa bacterial load compared to control animals that received saline. To mimic the adjunctive use of AR-101 in humans, AR-101 was administered in combination with meropenem (used clinically to treat pseudomonal infections) in a modified lung challenge model. When meropenem and AR-101 were administered in combination, significant reductions in lung weight (a surrogate marker for injection-induced inflammation), bacterial load and lung inflammation were observed in infected mice compared to each agent given alone.

Planned Development Activities

        We plan to initiate a double-blind, randomized, placebo-controlled Phase 2/3 clinical trial as an adjunct to SOC antibiotics H2 of 2019. The clinical trial will enroll adult patients with HAP or VAP. As with the prior Phase 2a study, the primary efficacy endpoint in this study will include clinical cure rate. Time to clinical cure was an endpoint that achieved statistical significance in the Phase 2a study ( p =0.005) and will be evaluated in detail in the Phase 2/3 study. We will also assess microbiological endpoints as well as select pharmacoeconomic endpoints and pharmacokinetics.

AR-201

        We have obtained a high affinity anti-RSV F-protein mAb, which we refer to as AR-201. RSV is the leading cause of lower respiratory tract illness in infants and young children worldwide. In premature neonates, RSV infection results in high levels of morbidity. In the U.S. alone, there are more than 234,000 hospitalizations and 14,000 deaths per year attributable to RSV. The only prophylaxis for RSV is Synagis (palivizumab), a humanized murine mAb that targets the RSV glycoprotein F and has been shown to reduce the rate of RSV-associated hospitalization by 50%. Synagis-resistant RSV strains are rising, which emphasize the need for additional anti-RSV products against different epitopes. Tonsils of RSV-infected patients were used as a B-cell source for screening new antibody candidates with improved activity against RSV F-protein.

        Compared to Synagis, AR-201 has higher affinity for F protein (700 pM versus 60 pM) and superior in vitro neutralization activity. AR-201 was found to bind to naturally occurring Synagis-resistant strains. AR-201's epitope is distinct from that of Synagis, and as a result, can potently neutralize Synagis-resistant isolates. Preliminary cotton rat testing demonstrates that AR-201 provides comparable protection to Synagis in this animal model. We intend to develop AR-201 for the prevention of RSV in neonates and in additional high-risk patients. As part of a recent NIH Small Business Innovation Research, or SBIR, award, we are using recombinant approaches to extend the half-life of AR-201 to create a potential for once-a-season dosing, which we believe will provide opportunities for introduction of anti-RSV prophylaxis into worldwide markets that are not served by the existing Synagis product.

AR-401

        AR-401 is our mAb discovery program aimed at treating infections caused by A. baumannii , which is a gram-negative pathogen that is rapidly emerging as a serious threat to patients in hospital care. Its high level of resistance to first-line antibiotic therapies, potential to survive prolonged periods on dry surfaces and ability to form biofilms rapidly on artificial devices, such as catheters and ventilators, have made it particularly virulent. The clinical impact of A. baumannii

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infections can have serious adverse consequences with crude mortality rates reaching 30% in infected ICU patients. Moreover, infection with A. baumannii leads to an increased length of stay at the ICU of an average of 15 extra days. We intend to develop an anti- A. baumannii human mAb to address the unmet medical need for new and effective anti-infectives to treat severe and life-threatening infections caused by this difficult-to-treat bacterium.

        We have made significant progress toward the identification of potential anti-microbial targets on A. baumannii , which we believe will facilitate the development of both active and passive immune-based therapies. We believe our preliminary target identification work on A. baumannii is among the most comprehensive to date. We used a proteomic approach to identify bacterial surface proteins that are accessible to the immune system. We then performed a thorough analysis using multiple bioinformatic tools that reduced the number of identified proteins to eight outer membrane proteins on A. baumannii . Our studies showed that active immunization with each protein reduced mortality in a pneumonia model. Antibodies against these A. baumannii targets were also detected in the majority of A. baumannii infected patient sera. Polyclonal rabbit immune sera raised against these targets mediated protection in the Acinetobacter pneumonia mouse model as shown by a reduction of mortality and clinical score.

        Of the eight surface proteins identified as potential targets for mAbs, three have been previously characterized. The five remaining proteins are of unknown function, potentially representing completely unique and innovative targets. Antibody titers to all eight proteins can be detected in sera of convalescent patients whereas sera from healthy donors from a regional blood bank have only very low or undetectable antibody serum titers to these proteins. An initial study demonstrated that the peripheral blood lymphocytes, or PBL, from patients with a high serum titer can result in hybridoma cell lines that specifically stain A. baumannii cells. Our planned next step for this program is to select a lead therapeutic mAb and advance into in vitro potency testing and in vivo assessment of therapeutic efficacy in an A. baumannii challenge mouse model.

AR-501

        We are developing AR-501 (gallium(III) citrate) as an anti-infective therapy to manage both chronic lung infections in cystic fibrosis patients and acute pneumonia in HAP and VAP patients AR-501 exhibits broad antimicrobial activity against antibiotic resistant gram-negative and gram-positive bacteria in free-living, or planktonic, and biofilm communities, as well as against fungi. We believe AR-501's unique combination of broad spectrum antimicrobial activity against pathogens, lower propensity to develop resistance than inhaled TOBI (tobramycin) and Cayston (aztreonam), and less frequent dosing as compared to SOC, make it an ideal candidate for treatment of chronic polymicrobial infections, such as lung infections in cystic fibrosis patients.

        To enhance delivery to the lungs and provide a simple method of administration, we are developing AR-501 as an inhaled formulation that can be administered conveniently with one of several commercially available liquid nebulization devices. We were recently awarded a development grant from the Cystic Fibrosis Foundation for approximately $3 million to develop an aerosolized formulation of AR-501 to manage bacterial lung infections in cystic fibrosis patients. We have produced, good manufacturing practice, or GMP, clinical bulk drug that is ready for use in human clinical trials, and we have completed good laboratory practice, or GLP, toxicology studies. We believe that the unique characteristics of AR-501, namely broad spectrum activity, lower propensity to develop resistance, and long half-life, may enable cystic fibrosis patients to

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avoid the current need for the intermittent "drug holidays" commonly employed with SOC drugs such as TOBI (tobramycin). The unique characteristics of AR-501 may also benefit patients with other infectious lung diseases such as chronic obstructive pulmonary disease, bronchiectasis, and pneumonia.

Background and Mechanism of Action

        AR-501 is a proprietary formulation of gallium(III) citrate. Trivalent ions of the element gallium (Ga) have biologic activity because Ga(III) chemically mimics the ferric iron ions (Fe(III)) that bacteria and many other microorganisms require for survival. Bacterial iron-binding proteins imperfectly distinguish Ga(III) from Fe(III), functionally starving bacteria of iron and poisoning critical Fe(III)-dependent metabolic pathways. We believe this unique mechanism of action is distinct from those underlying all current antibiotics.

        There is a long history of administering gallium(III) salts to humans. Gallium scans are used as diagnostic tests to identify areas of inflammation, infection, or cancer in the body, and Ganite, a formulation of gallium(III) nitrate, was introduced in 2003 as an FDA-approved intravenous treatment for hypercalcemia secondary to cancer. The anti-infective activity was only recently demonstrated using gallium(III) nitrate in citrate buffer. Our in vitro tests and in vivo animal studies show that gallium(III) citrate exhibits the same antimicrobial activity as gallium(III) nitrate in citrate buffer, demonstrating that Ga(III) ion itself, and not any particular salt form, is responsible for the anti-infective activity.

Clinical Data Summary

        More than 50 published human clinical trials conducted in more than 1,000 cancer patients attest to the safety of systemic Ga(III) compounds and establish a tolerated dose that greatly exceeds the dose at which we project AR-501 will be used. Recently an open-label Phase 1 proof-of-concept clinical trial of Ganite administered intravenously to cystic fibrosis patients showed evidence of an improvement in lung function and reduction of P. aeruginosa burden in the lungs. Investigators at the University of Washington, or UW, and the Cystic Fibrosis Foundation conducted the clinical study, and we analyzed patient samples to determine pharmacokinetics. The aim of the study was to assess the pharmacokinetics, lung distribution, and safety of intravenous Ga(III) in cystic fibrosis patients. This non-randomized Phase 1 study comprised two dosing cohorts (cohort one: n=9 patients, cohort two: n=11 patients). Analysis of subjects' sputum, urine, and plasma showed persistent Ga(III) levels in sputum up to 28 days after a single dose. Encouragingly, a number of patients in both cohorts showed significant reduction in sputum P. aeruginosa and an improvement in steady forced expiratory volume (FEV1) throughout the 28 days. We anticipate that inhaled AR-501 can result in at least 100-fold higher Ga(III) concentration in the lungs. The UW investigators continue to develop Ganite as an intravenous treatment for cystic fibrosis associated lung infections and recently initiated a randomized, double-blind Phase 2 clinical study in cystic fibrosis patients. This study is expected to be completed in the second half of 2018 and may provide additional clinical evidence of the safety and efficacy of Ga(III) in cystic fibrosis patients.

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Preclinical Data Summary

        AR-501 exhibits antimicrobial activity in diverse in vitro and in vivo bacterial infection models. The in vitro activity of Ga(III) salts extends to many gram-negative and some gram-positive bacteria, and in vivo activity has been demonstrated against P. aeruginosa when administered via inhalation and intraperitoneal injection. We showed that persistent exposure of P. aeruginosa to gallium(III) citrate did not change the minimum inhibitory concentration, or MIC, whereas parallel studies demonstrated a greater than eight-fold rise in MIC for the antibiotics tobramycin, vancomycin, or aztreonam. Thus we believe that for mechanistic reasons, bacteria are less likely to develop resistance to Ga(III) compounds than to conventional antibiotics. Pharmacokinetic studies of inhaled AR-501 in mice showed the initial half-life was 0.6 hours and the terminal half-life was 40.0 hours. In preclinical animal lung infection studies, AR-501 at an inhaled dose as low as 3.7 mg/kg is protective against a lethal challenge with P. aeruginosa strain PA103.

        We tested the local effects of inhaled Ga(III) on lung tissues by examining the acute pulmonary toxicity of inhaled gallium(III) nitrate formulated in a citrate buffer in mice. We exposed animals to aerosolized gallium(III) nitrate formulated in a citrate buffer (12.5 mg/mL) for two, four, or six hours in a whole body exposure chamber. Histopathological evaluation revealed no significant changes in lung tissues. Inflammation was observed that reached a maximum at four to eight hours post dosing, but waned beyond eight hours. Mice and subsequently dogs that were administered AR-501 by inhalation once per week for 28 days (five administrations), showed unremarkable clinical chemistry findings, and no significant adverse observations were noted in the lungs or kidneys. The no observed adverse effect level from the GLP toxicology testing has been established.

Planned Development Activities

        Our AR-501 development program includes toxicity testing in two animal species in accordance with GLP requirements to assess the safety of AR-501 administered by inhalation. The program includes GLP toxicology studies in mice and dogs, encompassing both single dose and repeated dose administration of AR-501 by inhalation. We plan to submit an IND to the FDA in which we propose a two-part, double-blind, randomized, placebo-controlled, ascending dose study to evaluate the safety, tolerability, PK, and respiratory lung function measures following the administration of inhaled AR-501 first in normal healthy adults, then in adult cystic fibrosis patients.

Our MAbIgX Fully Human Antibody Discovery Platform

        Our proprietary MabIgX discovery platform enables us to rapidly screen, identify and optimize fully human therapeutic mAb product candidates directly from the B-cells of patients. We have developed a method of selecting rare, potent B-cells isolated either from convalescent individuals who have successfully survived an infection with the pathogen or healthy individuals who have been actively immunized with a vaccine against a target pathogen. These B-cells produce antibodies that are highly relevant for the body's defense against a particular pathogen and which we believe will be highly protective mAb therapeutic product candidates. Our mAb product candidates are of completely human origin, which we believe maximizes the antibodies' protection and effector functions and minimizes the risk of adverse reactions. Our MabIgX technology

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platform does not require the use of recombinant antibody technologies or any genetic engineering steps that can be time consuming and may be protected by third party intellectual property rights.

        We believe our MabIgX drug discovery platform, which enables us to rapidly identify and manufacture naturally occurring fully human antibody product candidates, provides us with the following competitive advantages:

    ability to rapidly screen for rare and potent B-cells to produce differentiated mAb product candidates and expeditiously progress product candidates from target identification to clinical development;

    broad applicability to produce immunologically and clinically relevant product candidates across all relevant immunoglobulin isotypes, including IgG, IgA, IgM and IgE antibodies;

    discovery of mAb product candidates with high efficacy due to recognition of epitopes relevant for humans;

    generation of mAb product candidates that are well tolerated and that have the potential for multiple administrations due to low immunogenicity, or nominal ability to provoke an anti-drug immune response; and

    ability to rapidly progress to clinical manufacturing by avoiding the need for time consuming recombinant antibody engineering processes and production cell lines.

        Our MabIgX technology platform is summarized in Figure 16.


Figure 16.
MabIgX B-cell Discovery and Manufacturing Process Flow

GRAPHIC

        The first step in our process is the selection of immunized or convalescent patients who serve as donors for blood collection. We have collaborations with physicians as well as specialized clinical sites for the selection, recruitment and blood collection of convalescent donors. We also

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have established protocols for the selection of donors and the optimal time for blood collection, both of which depend largely on the targeted infection and the desired isotype of the desired mAb.

        Then we apply classical hybridoma technology, whereby the human B-cells of the donors are isolated, transiently immortalized by infection with Epstein-Barr virus, or EBV, and subsequently fused to the proprietary heteromyeloma cell line LA55 to form stable hybridoma lines. Our technology enables us to overcome one of the major challenges in developing human therapeutic mAbs, which is the inability to easily select and culture antigen-induced mAb-producing human B-cells and to use them to construct continuous mAb-producing cell lines. We have defined the properties of circulating antigen-specific human B-cells recruited through the immune response to polysaccharide and protein antigens, and have optimized their enrichment and propagation in culture for the production of fully human mAbs. After isolation, these highly antigen-specific human B-cells are immortalized employing LA55, which generates stable hybridomas for large scale manufacturing of our fully human mAbs.

        Our technology enables us to isolate and select the most relevant and most effective human antibodies for a specific pathogen. Not all pathogens require the same type of immune effector function, and therefore, our immune system has developed a set of different antibody isotypes with very specific characteristics. For example, high-affinity IgG antibodies are more efficient at neutralizing viruses and preventing infections whereas IgM antibodies can more efficiently attack gram-negative bacteria by targeting the bacterial surface polysaccharides and by activating complement, which leads to a "flagging" of the bacteria, known as opsonization, and ultimately the destruction of the bacteria by the immune system. It is important to isolate antibodies of the proper isotype based on the infection targeted and the desired reaction of the human immune system. Our MabIgX technology enables the isolation of the isotype of an antibody that the human immune system utilizes to combat a particular pathogen and isolate all different isotypes. All those antibodies retain their effector function, which is an important factor in the regulation of an effective immune reaction in the human body (see Figure 17).


Figure 17.
MabIgX Technology Allow For Discovery of all Four Naturally Occurring Antibody Types

GRAPHIC

        After isolation, these highly antigen-specific human B-cells are immortalized employing LA55, which generates stable hybridomas for large scale manufacturing of our fully human mAbs.

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Manufacturing

        We do not own or operate manufacturing facilities for the production of clinical or commercial quantities of our product candidates. We currently have no plans to build our own clinical or commercial scale manufacturing capabilities. To meet our projected needs for commercial manufacturing, commercial manufacturing partners will be engaged which have large bioreactors (greater then 2,000L). Although we rely on contract manufacturers, we have personnel with manufacturing experience to oversee our relationships with contract manufacturers.

        Our MabIgX technology produces a hybridoma cell line that can be used to produce clinical material without any further genetic engineering, which allows us to move rapidly to manufacture clinical material and enter clinical testing. This cell line is used to produce clinical material for our Phase 1 and Phase 2 clinical trials.

        We are developing production cell lines to support late-stage clinical testing and commercialization based on Chinese hamster ovary, or CHO, cell technology which is the most mature and widely used cell culture technology for the manufacture of mAb products.

        We will then identify and utilize a CMO, that has experience using CHO cells to produce both clinical and commercial biotechnology products under current good manufacturing practices, or cGMP, and that can meet global regulatory requirements. The CHO cell product is typically introduced into clinical testing during the pivotal trial stage once comparability with the hybridoma cell product has been established. Our plan is to launch commercial production from the CMO facility and subsequently decide whether we will explore building a Company owned manufacturing facility.

        AR-301.     We have created a new CHO cell line to maximize production quantities and to scale up the manufacturing process. The clinical drug product was manufactured under GMP at 1,000L scale by our contract manufacturing partner Catalent Pharma Solutions (Madison, WI). The manufacturing process will be scaled up to 2,000L scale to support licensure and commercial launch.

        AR-105.     A clinical manufacturing scale cell culture and mAb purification process has been developed. The clinical material was manufactured by our contract manufacturer MassBiologics (Mattapan, MA) at 2,500L scale to support the Phase 2 clinical trial. We have created a new CHO cell line to further maximize production quantities. The CHO line will be used to manufacture clinical trial material for the Phase 3 pivotal trial and support commercial manufacturing.

        AR-101.     A clinical manufacturing scale cell culture and mAb purification process has been developed and transferred to our clinical manufacturers, Sanquin Pharmaceutical Services (Amsterdam, The Netherlands) and Rentschler Biotechnologie GmbH (Laupheim, Germany), to produce AR-101 clinical trial material. Additional clinical material will be needed to support both the Phase 2/3 and Phase 3 clinical trials.

        AR-501.     We have developed a simple manufacturing process to produce pure gallium(III) citrate using gallium(III) nitrate and ammonium citrate. The manufacturing process was transferred to a contract manufacturer, Regis Technologies, Inc. (Morton Grove, IL) and was implemented at a 10kg scale under GMP. The filling of drug product into blow-fill-seal (BFS) ampules under GMP has been completed. We believe this material will be sufficient to support our clinical trial needs.

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Competition

        The biopharmaceutical industry is characterized by rapidly advancing technologies, strong emphasis on proprietary products and significant competition. While we believe that our products, technology, experience and scientific resources provide us with competitive advantages, we face potential competition from many sources, including major pharmaceutical, specialty pharmaceutical and biotechnology companies, academic institutions and government agencies and public and private research institutions. Any product candidates that we successfully develop and commercialize will compete with existing therapies and new therapies that may become available in the future.

        We are initially developing mAbs as an adjunct therapy to be used with SOC antibiotics, which is a unique approach to treating lung infections that does not directly compete with antibiotics. Unlike antibiotics, mAbs enhance the body's ability to kill pathogens via an immunological mechanism. Additionally, in contrast to antibiotics, the dosing frequency of mAbs is once or twice a month and may require only a single administration. Several companies are developing mAbs to treat infections, including Merck & Co., Medimmune, LLC (AstraZeneca), Arsanis, Inc., and Alopexx Enterprises, LLC. Arsanis recently announced that their Phase 2 clinical trial was stopped following interim analysis showing futility. The Arsanis trial was different in indication, study design, and patient population. We do not believe that the outcome of this trial has a material impact on the technical risk of our planned AR-301 Phase 3 clinical trial.

Intellectual Property

        Our success depends, in part, on our ability to obtain, maintain, and enforce patents and other proprietary protections of our commercially important technologies and product candidates, to operate without infringing the proprietary rights of others, and to maintain trade secrets or other proprietary know-how, both in the U.S. and other countries. Our ability to stop third parties from making, using, selling, offering to sell or importing our products will depend on the extent to which we have rights under valid and enforceable patents or trade secrets that protect these activities. We seek to protect proprietary technology, inventions, and improvements that are commercially important to our business by seeking, maintaining, and defending patent rights, whether developed internally or licensed from third parties.

        As of January 26, 2018, our patent estate includes approximately 42 issued patents (approximately 17 of which are in the U.S.) and approximately 24 pending patent applications (approximately four of which are in the U.S.), which we either own or for which we have an exclusive commercial license (either in its entirety or within our field of use), as is more fully described below. Our patent families related to our product candidates are described below.

AR-301: Anti-Staphylococcus aureus HLA alphatoxin mAb

        Our AR-301 patent estate includes a patent family that we own related to AR-301 titled "Human Monoclonal Antibody against S. aureus derived alphatoxin and its use in treating or preventing abscess formation," which has a priority date of August 10, 2009. Issued claims include: composition of matter claims to a human mAb that binds to S. aureus alphatoxin and a cell line producing the antibody. Patents in this family have been issued in Europe, the U.S., China, Israel, Japan and Russia. National patent applications are currently pending in Canada, Korea, India and

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Brazil. Issued patents are expected to expire in 2030, absent any patent term adjustments or extensions. The portfolio is complemented by a patent family in-licensed from University of Chicago and titled "Methods and Compositions related to Immunizing Against Staphylococcal Lung Diseases and Conditions." This patent family includes ten patents, which are granted in jurisdictions including Australia, China, Europe, Japan, Korea, and the U.S., and six patent applications that are pending in Brazil, Canada, China, Hong Kong, Japan and the U.S. Patents in this family are expected to expire in 2028, absent any patent term adjustments or extensions.

AR-105: Anti-Pseudomonas aeruginosa alginate mAb

        Our AR-105 patent estate includes two patent families that have been exclusively in-licensed from the Brigham Women's Hospital (Harvard University). The first family is titled "P.aeruginosa Mucoid Exopolysaccharide Specific Binding Peptides" and it is comprised of three issued U.S. patents that are expected to expire in 2022, absent any patent term adjustments or extensions. The second family is titled "Methods and compositions relating to mannuronic acid specific binding peptides," and it comprises one European patent that is expected to expire in 2025, absent any patent term adjustments or extensions. Claims in these patents include composition of matter, uses and methods of inducing immune response to the alginate epitope. We own a pending provisional application that, if issued, is expected to expire in 2037, absent any patent term adjustments or extensions.

AR-101: Anti-Pseudomonas aeruginosa LPS serotype O11 mAb

        Our AR-101 patent estate includes a patent family, titled "Human Monoclonal Antibody Specific for LPS of serotype IATS 011 Pseudomonas aeruginosa," with issued patents in seven jurisdictions including Canada, Europe, China, India, Israel, Japan, and the U.S. The issued patents include claims directed to certain antibodies, variants or Fab fragments thereof, hybridomas producing the antibodies, as well as nucleic acids encoding the antibodies. In the U.S. issued claims are directed to antibodies with specific variable region sequences that bind LPS of the P. aeruginosa  LPS serotype IATS 011, or with variable region sequences having 85% identity thereto. Similar claims were granted in Europe, Canada, China, Israel, India and Japan. Patents in this family are expected to expire in 2026, absent any patent term adjustments or extensions. Additionally, we also own a U.S. patent covering the O6 serotype of P. aeruginosa  LPS titled "Human Monoclonal Antibody Specific for LPS of Serotype IATS O6 Pseudomonas aeruginosa." This issued US patent is expected to expire in 2026, absent any patent term adjustments or extensions.

AR-501: Gallium citrate

        Our AR-501 patent estate includes three patent families, two of which we own and one of which is in-licensed from the University of Iowa Research Foundation. These patents are directed to Gallium containing formulations for anti-infective indications and methods of using the same. These patent families include granted patents in Australia, Canada, China, Europe, Hong Kong, Japan, Mexico, New Zealand and the U.S. The in-licensed issued patents are expected to expire in 2024 and the patents that we own are expected to expire in 2030, absent any patent term adjustments or extensions.

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AR-201: Anti-Respiratory Syncytical Virus mAb

        Our patent estate for AR-201 comprises a U.S. patent and pending patent applications in Canada, China, Europe, India and the U.S. (divisional) titled "Human Monoclonal Antibody Specific for the F Protein of Respiratory Syncytial Virus (RSV)." Claims in the U.S. patent are directed to methods of producing certain antibodies with specificity to a region of RSV F protein and methods of treating or preventing RSV infections with such antibodies. The U.S. patent is expected to expire in 2034 and — in case of grant-currently pending patent applications are expected to expire in 2035, absent any patent term adjustments or extensions.

AR-401: Anti-Acinetobacter baumannii mAb

        Our patent estate for AR-401 includes a patent family titled "Novel targets of Acinetobacter baumannii " with priority to 2011. This family includes issued patents in Australia, China, Europe and the U.S. Patent applications are pending in Canada, China (divisional), Japan (divisional) and the U.S. (divisional). Claims in these patents and applications include those directed to certain vaccine compositions and to mAb against outer membrane protein targets. Patents in this family are expected to expire in 2032, and any patents that may issue from the pending patent applications are expected to expire in 2032, absent any patent term adjustments or extensions.

        Complementing the product specific patents is a pharmaceutical processing and formulation technology related portfolio comprising five patent families of which one was in-licensed. The patent families consist of eight national patents and patent applications on formulation and delivery technologies. The issued patents have expected expiration ranges between 2022 and 2030, and the pending patent applications are expected to expire between 2022 and 2037, absent any patent term adjustments or extensions. Claims in the patents are directed to formulation, stabilization, and delivery of pharmaceuticals. One of the patent applications was filed in June 2017 as an international application under the Patent Cooperation Treaty (PCT). This international patent application is titled "Method for preparation of quick-dissolving thin films containing bioactive material with enhanced thermal stability," We plan to file national phase applications in 2018.

        We are also actively pursuing additional patent applications in the U.S. and foreign patent jurisdictions for other preclinical product candidates and methods of use, including additional product candidates for infectious disease. In addition, we will pursue patent protection whenever it is deemed sufficiently beneficial for any product or product candidate and related technology we develop and/or acquire in the future.

        The patent positions of biotechnology companies like ours are generally uncertain and involve complex legal, scientific and factual questions. In addition, the coverage claimed in a patent application can be significantly reduced before the patent is issued. Consequently, we do not know whether the product candidates we are developing will gain patent protection or, if patents are issued, whether they will provide significant proprietary protection or will be challenged, circumvented, invalidated, or found to be unenforceable. Because patent applications in the U.S. and certain other jurisdictions are maintained in secrecy for 18 months, and since publication of discoveries in the scientific or patent literature often lags behind actual discoveries, we cannot be certain of the priority of inventions or filing dates covered by pending patent applications. Moreover, we may have to participate in post-grant proceedings, interference proceedings, or

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third-party ex parte or inter partes reexamination proceedings before the U.S. Patent and Trademark Office, or in opposition proceedings in a foreign patent office, any of which could result in substantial cost to us, even if the eventual outcome is favorable to us. There can be no assurance that the patents, if issued, would be held valid and enforceable by a court of competent jurisdiction. An adverse outcome could subject us to significant liabilities to third parties, require disputed rights to be licensed from third parties or require us to cease using specific compounds or technology. To the extent it is prudent, we intend to bring litigation against third parties that we believe are infringing one or more of our patents or other intellectual property rights.

        The term of individual patents depends upon the legal term of the patents in the countries in which they are obtained. In most countries in which we file, the patent term is 20 years from the earliest date of filing a non-provisional patent application. In the U.S., a patent term may be lengthened by patent term adjustment, which compensates a patentee for administrative delays by the U.S. Patent and Trademark Office in granting a patent, or may be shortened if a patent is terminally disclaimed over another patent. Some of our patents currently benefit from patent term adjustment and some of our patents that will be issued in the future may benefit from patent term adjustment.

        The patent term of a patent that covers an FDA-approved product may also be eligible for patent term extension, which permits patent term restoration as compensation for the patent term lost during the FDA regulatory review process. The Drug Price Competition and Patent Term Restoration Act of 1984, or the Hatch-Waxman Act, permits a patent term extension of up to five years beyond the expiration of the patent. The length of the patent term extension is related to the length of time the product is under regulatory review. Patent term extension cannot extend the remaining term of a patent beyond a total of 14 years from the date of product approval and only one patent applicable to an approved product may be extended. Similar provisions are available in Europe and other non-U.S. jurisdictions to extend the term of a patent that covers an approved product. In the future, if and when our product candidates receive FDA approval, we expect to apply for patent-term extensions on patents covering those products.

        To protect our rights to any of our issued patents and proprietary information, we may need to litigate against infringing third parties, or avail ourselves of the courts or participate in hearings to determine the scope and validity of those patents or other proprietary rights. These types of proceedings are often costly and could be very time-consuming to us, and there can be no assurance that the deciding authorities will rule in our favor. An unfavorable decision could allow third-parties to use our technology without being required to pay us licensing fees or may compel us to license needed technologies to avoid infringing third-party patent and proprietary rights. Such a decision could even result in the invalidation or a limitation in the scope of our patents or forfeiture of the rights associated with our patents or pending patent applications.

        We also rely on trade secret protection for our confidential and proprietary information. No assurance can be given that others will not independently develop substantially equivalent proprietary information and techniques or otherwise gain access to our trade secrets or disclose such technology, or that we can meaningfully protect our trade secrets. However, we believe that the substantial costs and resources required to develop technological innovations will help us to protect the competitive advantage of our products.

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        It is our policy to require our employees, consultants, outside scientific collaborators, sponsored researchers and other advisors to execute confidentiality agreements upon the commencement of employment or consulting or collaborative relationships with us. These agreements provide that all confidential information developed or made known to the individual during the course of the individual's relationship with us is to be kept confidential and not disclosed to third parties except in specific circumstances. In the case of employees, the agreements provide that all inventions conceived by the individual shall be and are our exclusive property. There can be no assurance, however, that these agreements will provide meaningful protection or adequate remedies for our trade secrets in the event of unauthorized use or disclosure of such information.

Licensing Agreements

University Licensing Agreements

The University of Chicago — Co-Exclusive Licensing Agreement

        We are party to a co-exclusive licensing agreement, or the UChicago agreement, with The University of Chicago, or UChicago for our AR-301 product candidate, which we entered into in 2017. The UChicago agreement granted to us a worldwide co-exclusive, royalty-bearing license under UChicago's rights in methods relating to certain licensed patents arising from the disclosure entitled, "Vaccine protection against Staphylococcus aureus pneumonia " regarding the work of Professors Juliane Bubeck Wardenburg and Loaf Schneewind. The UChicago agreement also granted to us the right to sublicense. The Company paid UChicago $50,000 upon execution of the UChicago agreement.

        We also are obligated to pay UChicago low single digit percentage royalties on net sales of licensed products, with a minimum royalty required per year once sales begin, and ending when the last-to-expire patent covering such product expires, in addition to certain other milestone and other payments. The aggregate milestone payments under the UChicago agreement are up to $1,550,000.

        The agreement provides that we have certain obligations to conduct further research and development, and are obligated to utilize reasonable efforts to commercialize the UChicago licensed patent rights as licensed products.

        The term of the agreement continues until the expiration of the last to expire patents (which is expected to be in 2031), or until the agreement is earlier terminated. We may terminate the agreement upon 90 days' prior written notice. Additionally, the UChicago Agreement will terminate upon any of the following events:

    We fail to make a payment within 30 days written notice of default;

    A breach of the agreement occurs that has not been cured in 30 days;

    We become insolvent, make an assignment for the benefit of creditors, or if a petition for bankruptcy is filed;

    We are dissolved or liquidated; and

    If we fail to commence a Phase 3 clinical trial relating to AR-301 prior to June 13, 2022.

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The Brigham and Women's Hospital, Inc. — Exclusive Patent License Agreement

        We are party to an exclusive licensing agreement, or the BWH Agreement, with The Brigham and Women's Hospital, Inc., or BWH, a non-profit corporation for our AR-105 product candidate, which we entered into in 2010. This agreement granted to us an exclusive, royalty-bearing license under its and Beth Israel Deaconess Medical Center's, or BIDMC, rights in methods and composition relating to specific binding peptides to P. aeruginosa mucoid exopolysaccharide to make, use and sell products and processes for the treatment of pseudomonas infections in humans that are covered by such patent rights worldwide. The BWH Agreement also granted to us the right to sublicense. BWH and BIDMC retained the non-transferrable right to use such patent rights for academic and research purposes, and also to certain pre-existing rights of the U.S. government. The Company paid BWH $141,600 within one year of execution of the BWH Agreement.

        We are obligated to pay BWH low single digit percentage royalties on net sales from our and our sublicensee's sale of any commercialized licensed product or process, with a minimum royalty required per year once sales begin, and certain other milestone and other payments. We are responsible for diligently prosecuting and maintaining the licensed patent rights, at our sole cost and expense. The aggregate milestone payments under the BWH Agreement are up to $860,000.

        The agreement provides that we have certain obligations to conduct further research and development, and are obligated to utilize reasonable efforts to commercialize, either directly or through a sublicensee, the licensed BWH patent rights as licensed products or processes.

        The term of the agreement continues until all patents and filed patent applications, included within the licensed BWH patents, have expired (which is expected to be in 2025) or been abandoned, or until the agreement is earlier terminated. We may terminate the agreement on prior written notice to BWH. The Company has the right to terminate the agreement upon 90 days written notice. Additionally, the BWH Agreement will terminate upon any of the following events:

    We fail to make a payment within 30 days written notice of default;

    We fail to maintain the insurance requirements as defined in the BWH Agreement;

    We become insolvent, make an assignment for the benefit of creditors, or if we file a petition for bankruptcy;

    A breach of the agreement occurs that has not been cured in 60 days; and

    Substantially all of our assets are seized or attached in a final, unappealed or unappealable order in conjunction with any action brought against it by a third-party creditor, such that we are unable to perform our continuing obligations thereunder.

The University of Iowa Research Foundation — Exclusive Patent License Agreement

        We are party to an exclusive licensing agreement, or the UIRF agreement, with The University of Iowa Research Foundation, or UIRF, relating to our AR-501 product candidate, which we entered into in 2010. The agreement granted to us is an exclusive, royalty-bearing license under its rights in methods relating to gallium containing compounds for the treatment of infections to make, use and sell products that are covered by such patent rights worldwide. The

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UIRF agreement also granted to us the right to sublicense. UIRF retained the right and ability to grant right to use such patent rights for academic and research purposes, and also to certain pre-existing rights of the U.S. government including the rights of United States Department of Veterans Affairs. The Company paid $25,000 to UIRF in connection with entering into the UIRF agreement.

        We also are obligated to pay UIRF low single digit percentage royalties on net sales from our and our sublicensee's sale of any commercialized licensed product or process, and certain other milestone and other payments. The aggregate milestone payments under the UIRF agreement are up to $712,500. We are responsible for diligently prosecuting and maintaining the licensed UIRF patent rights, at our sole cost and expense.

        The UIRF agreement provides that we have certain obligations to conduct further research and development, and are obligated to utilize reasonable efforts to commercialize, either directly or through a sublicensee, the licensed UIRF patent rights as licensed products or processes.

        The term of the agreement continues until the expiration of the last to expire patents (which is expected to be in 2034), or until the agreement is earlier terminated. We may terminate the agreement on 90 days prior written notice to UIRF. Each party has the right to terminate the agreement for the other party's uncured material breach of obligations under the agreement.

        Additionally, the UIRF Agreement will terminate upon any of the following events:

    We fail to make a payment upon 45 days written notice of default; or

    We are involved in liquidation or bankruptcy proceedings unless the remaining party agrees not to terminate.

Brigham Young University — Exclusive Patent License Agreement

        We are party to an exclusive licensing agreement, or the BYU Agreement, with Brigham Young University, or BYU. This agreement granted to us an exclusive, royalty-bearing license under BYU's rights in stabilization of biological agents methods relating to human vaccines to make, use and sell products that are covered by such patent rights worldwide. The agreement also granted to us the right to sublicense. BYU and the Church of Jesus Christ of Latter-day Saints and the Church Education System retained the right and ability to use such patent rights for academic and ecclesiastical purposes and also to purchase products using such patents rights at a discounted price.

        We also are obligated to pay BYU low single digit percentage royalties on the Adjusted Gross Sales as defined in the BYU Agreement, and certain other payments. The aggregate milestone payments under the BYU Agreement are up to $400,000. BYU is responsible for diligently prosecuting and maintaining the licensed BYU patent rights and we will reimburse them for one-third of their costs.

        The agreement provides that we have certain obligations to conduct further research and development, and are obligated to utilize reasonable efforts to commercialize, either directly or through a sublicensee, the licensed BYU patent rights as licensed products or processes.

        The term of the BYU Agreement continues until the expiration of the last to expire patents (which is expected to be in 2022), or until the agreement is earlier terminated. We may terminate

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the agreement on prior written notice to BYU. Each party has the right to terminate the agreement for the other party's uncured material breach of obligations under the agreement. Additionally, the BYU Agreement will terminate upon any of the following events:

    We are placed in the hands of a receiver or make a general assignment for the benefit of creditors, such that we are unable to perform our obligations under the agreement; or

    Substantially all of our assets or our successor-in interest are seized or attached in a final, unappealed or unappealable order in conjunction with any action brought against us by a third party creditor, such that we are unable to perform our continuing obligations hereunder.

Public Health Service Licensing Agreements

NIH — Exclusive and Non-Exclusive Patent License Agreement

        We are party to an exclusive and non-exclusive licensing agreement, or the NIH Agreement, with the NIH on July 11 th , 2005 relating to roatvirus vaccine development. This agreement granted to us an exclusive, royalty-bearing license in Europe, Canada, and the U.S. and non-exclusive rights worldwide under its rights in a human rotavirus vaccine based on their human-bovine rotavirus reassortants to make, use and sell products and processes that are covered by such patent rights. The NIH Agreement also granted to us the right to sublicense.

        Our license under this agreement is subject to the U.S. government's retained rights under a non-exclusive, worldwide, royalty-free license for the practice of all inventions licensed under the Public Health Service, or PHS, patent rights, by or on behalf of the U.S. government and on behalf of any foreign government or international organization pursuant to any existing or future treaty or agreement to which the U.S. government is a signatory. For purposes of encouraging basic research, the U.S. government also reserves the right to grant or require us to grant to a third party on reasonable terms a non-exclusive, non-transferable license to make and use the licensed products or licensed processes for research purpose only, but subject to PHS consulting with us in the event such third party is a commercial entity. Under certain exceptional and enumerated circumstances, the U.S. government may require us to grant a sublicense to a responsible third party applicant, on terms that are reasonable under the circumstances. The PHS takes responsibility for all aspects of the preparation, filing, prosecution and maintenance of any and all patent applications or patents included in the licensed PHS patent rights, subject to our payment of certain patent-related expenses.

        We also are obligated to pay PHS low single digit percentage royalties on net sales from our and our sublicensee's sale of any commercialized licensed product or process with a minimum royalty required per year, and certain other payments. The aggregate milestone payments under the BYU Agreement are up to $850,000. PHS is responsible for diligently prosecuting and maintaining the licensed PHS patent rights, and we reimburse them for a portion of their costs.

        The agreement provides that we have certain obligations to conduct further research and development, and are obligated to utilize reasonable efforts to commercialize, either directly or through a sublicensee, the licensed PHS patent rights as licensed products or processes.

        The term of the NIH Agreement continues until expiration of all royalty obligations, included within the licensed PHS patents, or until the agreement is earlier terminated. We may terminate

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the agreement upon 60 days prior written notice to PHS. Each party has the right to terminate the agreement for the other party's uncured material breach of obligations under the agreement. In addition, the NIH Agreement will terminate upon any of the following events:

    We become insolvent or involved in a bankruptcy petition;

    We do not meet certain obligations of the NIH Agreement;

    Public health and safety require the termination of the NIH Agreement; or

    We do not satisfy certain federal regulation public use requirements.

Cystic Fibrosis Foundation Agreement

        In December 2016, we received an award for up to $2.9 million from the Cystic Fibrosis Foundation to advance research on potential drugs utilizing inhaled gallium citrate anti-infective. Under the award agreement, the Cystic Fibrosis Foundation will make payments to us as certain milestones are met. The award agreement also contains a provision whereby if we spend less on developing a potential drug utilizing inhaled gallium citrate anti-infective than we actually receive under this award agreement, we will be required to return the excess portion of the award to the Cystic Fibrosis Foundation.

        In the event that development efforts are successful and we commercialized a drug from these related development efforts, we may be subject to pay to Cystic Fibrosis Foundation a one-time amount equal to the awarded amount. Such amount shall be paid in as few as three and not more than five annual installments.

        In addition to the amount payable above, we will pay to Cystic Fibrosis Foundation a one-time amount equal to the amount of funding from Cystic Fibrosis Foundation under the agreement, within 60 days after the end of the first calendar year during which aggregate net sales of compounds containing gallium citrate or gallium nitrate in citrate buffer as an active ingredient exceed $100 million.

        In the event that we license rights to the product in the field to a third-party, sell the product, or consummate a change of control transaction prior to the first commercial sale, we shall pay to the Cystic Fibrosis Foundation an amount equal to two times the actual awarded amount under the agreement, if the change of control transaction occurs prior to the completion of the first Phase 2b (or equivalent) clinical study with respect to the product; and four times the actual awarded amount if the change of control transaction occurs after the completion of the Phase 2b clinical trial specified above. The payment shall be made within sixty days after the closing of such a transaction.

Program for Appropriate Technology in Health and PATH Vaccine Solutions

        We granted the Program for Appropriate Technology in Health, or PATH, a global non-profit organization, and the PATH Vaccine Solutions a non-exclusive license, with right to sublicense formulations, for use with the measles, rotavirus, live-attenuated influenza, pneumococcal and enteric vaccines only for sale in developing countries.

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        We have also agreed to provide rotavirus vaccines to public sector purchasers in developing countries at a preferential price relative to private sector purchasers in developing countries where the rotavirus vaccine utilizing the enabling formulation technology is offered for sale.

Corporate Licensing Arrangements

Kenta Biotech Ltd.

        We are a party to an asset purchase agreement with Kenta Biotech Ltd., or Kenta, a for profit corporation duly incorporated in Schlieren (Canton of Zurich, Switzerland). The asset purchase agreement contains a licensing arrangement based upon the worldwide out-licensing or net sales of certain of Kenta's physical assets, contracts and technology. Pursuant to such agreement, we were obligated to pay Kenta a fixed purchase price, which was fully paid during 2013 and 2014, and are obligated to pay a declining scale of royalties on gross licensing revenues from either out-licensing of the assets or net sales revenues actually received by us up to a maximum of $50,000,000.

        The agreement also assigned and transferred certain of Kenta's physical assets, contracts and technology to us. The physical assets included all physical assets owned or controlled by Kenta, including but not limited to cell lines, genes, antibodies, diagnostic assays and related documentation, which were related to Kenta's MabIgX technology platform for hybridoma generation and its mAb targeting S. aureus , P. aeruginosa , A. baumannii and RSV. The technology included all intellectual property, including but not limited to patents, patent applications, trademarks, knowhow, trade secrets, regulatory filings, clinical trials, clinical trial information, all supporting documentation and all other related intellectual property which are related to Kenta's MabIgX technology platform for hybridoma generation and its mAb targeting S. aureus , P. aeruginosa , A . baumannii and RSV. The contracts included the contracts and agreements (including all rights and obligations thereunder), whether oral or written, which Kenta has concluded and which pertain to the assets. The contracts were primarily related to the ongoing clinical trial of AR-301.

Emergent Product Development Gaithersburg Inc.

        We are party to a license agreement, or the Emergent Agreement, with Emergent Product Development Gaithersburg Inc., or Emergent, which we entered into in 2010. We granted Emergent an exclusive, perpetual, royalty-bearing license to use certain of our patents and related know how for the prevention or treatment of infection or illness caused by biodefense pathogens. We also granted a non-exclusive, royalty-bearing license to use certain of our patents and related know how for the prevention or treatment of tularemia and viral hemorrhagic fever indications. Both exclusive and non-exclusive licenses grants Emergent the opportunity to Exploit Licensed Products as defined in the Emergent Agreement in all of the countries of the world. There are currently no commercialized Exploit Licensed Products using this technology.

        Emergent is obligated to pay us low single digit percentage royalties on net sales from their and their sublicensee's sale of any commercialized licensed product, and certain other payments. The aggregate milestone payments that we are entitled to pursuant to the Emergent Agreement are up to $2,750,000.

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        The term of the Emergent Agreement continues until expiration of all royalty obligations or until the agreement is earlier terminated. Emergent may terminate the agreement upon 60 days prior written notice. In addition, the Emergent Agreement terminates in the event the parties mutually agree to terminate the agreement.

Joint Venture

Joint Venture with Shenzhen Hepalink Pharmaceutical Group Co., Ltd.

        On February 11, 2018, we entered into a Joint Venture Contract, or the JV Agreement, with Shenzhen Hepalink Pharmaceutical Group Co., Ltd., a People's Republic of China company, or Hepalink, pursuant to which we formed a joint venture company named Shenzen Arimab BioPharmaceuticals Co., Ltd., or SABC, a People's Republic of China Company, to develop, manufacture, import and distribute AR-101 and AR-301 in China, Hong Kong, Macau and Taiwan, collectively, referred to as the Territory. SABC was formed on July 2, 2018 after receiving the required regulatory approval in China.

        Hepalink contributed the equivalent of $6.0 million in renmimbi, the official currency of the People's Republic of China, and owns 51% of the capital of SABC and we contributed (i) $1.0 million in cash and (ii) a license to AR-101 and AR-301 pursuant to a Technology License and Collaboration Agreement between us and SABC, and we own 49% of the capital of SABC. In addition, Hepalink will provide SABC with clinical and regulatory personnel services for clinical and regulatory review, application and filing procedures in the Territory and we will provide clinical and regulatory personnel services to assist in coordination of the execution of the clinical study in China and also with CMC personnel services for drug supply and manufacturing planning. Upon the completion of certain milestone events, including obtaining approval for a phase III clinical trial in mainland China, Hepalink will be obligated to contribute an equivalent of $9.0 million in renmimbi in exchange for additional equity in SABC. Following such additional contribution, our ownership interest in SABC will be proportionately reduced.

        Pursurant to the Technology License and Collaboration Agreement, we granted an exclusive license to AR-101 and AR-301 in the Territory. At any time during the Term, SABC may, at its convenience, terminate the agreement in its entirety with ninety days' prior written notice to us, and we may terminate the agreement in its entirety with ninety days' prior written notice to SABC in the event that SABC has not complied with its obligation to use commercially reasonably efforts to develop or commercialize a product in accordance with the terms of the agreement and the breach has not been remedied at the end of a sixty day period as set forth in the breach notice. We may also immediately terminate this agreement in its entirety in the event that Hepalink does not make the additional equity investment in the Company of no less than $9.0 million in accordance with the Joint Venture Contract, or if SABC materially breached its confidentiality obligations under the agreement, or in the event of a change of control of SABC.

        The Board of Directors of SABC shall consist of five directors, of which Hepalink shall appoint three members and we shall appoint 2 members. The term of office for each director shall be for four years. The Chief Executive Officer and Chief Financial Officer of SABC will be approved by unanimous consent of the Board of Directors of SABC. The term of SABC shall be 20 years from the date of formation.

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        The JV Agreement will terminate and SABC will be dissolved in the event that:

    The term expires and is not extended;

    The parties decide to terminate the JV Agreement;

    A party fails to contribute funds for the capital it subscribed for and such failure exceeds six months;

    A party is involved in liquidation or bankruptcy proceedings unless the remaining party agrees not to terminate;

    A party fails to obtain approval of a resolution requiring the unanimous vote of the Board and such party notifies the other party that such failure will materially adversely affect SABC and cannot be resolved;

    A force majeure event prevails for a period in excess of six months;

    A breach of the agreement occurs and has not been cured in 60 days; or

    Either we or SABC terminates the Technology License and Collaboration Agreement in accordance with its terms.

Collaboration Agreements

Collaboration Agreement with GlaxoSmithKline

        We have a collaborative and option agreement with GlaxoSmithKline Biologicals S.A., or GSK, aimed at evaluating improved formulations for a rotavirus vaccine. GSK has until at least January 2019 to exercise its option, at which point we would negotiate certain licenses wherein GSK would license certain of our patents and related know how relating to rotavirus in order to research, develop, market and commercialize a rotavirus vaccine. While the collaboration is active, our main focus and the significant portion of our capital deployment is on our other projects. As such, the aforementioned collaboration is not viewed to be critical to our business plan. If phase 1 of this collaboration is initiated, GSK would fund 80% of the collabarotion funding. We also would be due a license initiation fee of up to $600,000 and $100,000 upon successful completion of a phase I clinical trial.

Government Regulation

        We operate in a highly regulated industry that is subject to significant federal, state, local and foreign regulation. Our present and future business has been, and will continue to be, subject to a variety of laws including, the Federal Food, Drug, and Cosmetic Act, or FDC Act, and the Public Health Service Act, among others.

        The FDC Act and other federal and state statutes and regulations govern the testing, manufacture, safety, effectiveness, labeling, storage, record keeping, approval, advertising and promotion of our products. As a result of these laws and regulations, product development and product approval processes are very expensive and time-consuming.

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FDA Approval Process

        In the United States, pharmaceutical products, including biologics, are subject to extensive regulation by the FDA. The FDC Act and other federal and state statutes and regulations, govern, among other things, the research, development, testing, manufacture, storage, recordkeeping, approval, labeling, promotion and marketing, distribution, post-approval monitoring and reporting, sampling, and import and export of pharmaceutical products. Failure to comply with applicable U.S. requirements may subject a company to a variety of administrative or judicial sanctions, such as FDA refusal to approve pending new drug applications, or NDAs, or biologic license applications, or BLAs, warning letters, product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, civil penalties, and criminal prosecution.

        Pharmaceutical product development in the United States typically involves preclinical laboratory and animal tests, the submission to the FDA of an IND, which must become effective before clinical testing may commence, and adequate and well-controlled clinical trials to establish the safety and effectiveness of the drug or biologic for each indication for which FDA approval is sought. Satisfaction of FDA pre-market approval requirements typically takes many years and the actual time required may vary substantially based upon the type, complexity and novelty of the product or disease.

        Preclinical tests include laboratory evaluation as well as animal trials to assess the characteristics and potential pharmacology and toxicity of the product. The conduct of the preclinical tests must comply with federal regulations and requirements including good laboratory practices. The results of preclinical testing are submitted to the FDA as part of an IND along with other information, including information about product chemistry, manufacturing and controls, and a proposed clinical trial protocol. Long term preclinical tests, such as animal tests of reproductive toxicity and carcinogenicity, may continue after the IND is submitted.

        A 30-day waiting period after the submission of each IND is required prior to the commencement of clinical testing in humans. If the FDA has not objected to the IND within this 30-day period, the clinical trial proposed in the IND may begin.

        Clinical trials involve the administration of the investigational drug to healthy volunteers or patients under the supervision of a qualified investigator. Clinical trials must be conducted in compliance with federal regulations and good clinical practices, or GCP, as well as under protocols detailing the objectives of the trial, the parameters to be used in monitoring safety and the effectiveness criteria to be evaluated. Each protocol involving testing on U.S. patients and subsequent protocol amendments must be submitted to the FDA as part of the IND.

        The FDA may order the temporary or permanent discontinuation of a clinical trial at any time or impose other sanctions if it believes that the clinical trial is not being conducted in accordance with FDA requirements or presents an unacceptable risk to the clinical trial patients. The clinical trial protocol and informed consent information for patients in clinical trials must also be submitted to an institutional review board, or IRB, for approval. An IRB may also require the clinical trial at the site to be halted, either temporarily or permanently, for failure to comply with the IRB's requirements, or may impose other conditions.

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        Clinical trials to support NDAs or BLAs, which are applications for marketing approval, are typically conducted in three sequential Phases, but the Phases may overlap. In Phase 1, the initial introduction of the investigational drug candidate into healthy human subjects or patients, the investigational drug is tested to assess metabolism, pharmacokinetics, pharmacological actions, side effects associated with increasing doses and, if possible, early evidence on effectiveness. Phase 2 usually involves trials in a limited patient population, to determine the effectiveness of the investigational drug for a particular indication or indications, dosage tolerance and optimum dosage, and identify common adverse effects and safety risks. In the case of product candidates for severe or life-threatening diseases such as pneumonia, the initial human testing is often conducted in patients rather than in healthy volunteers.

        If an investigational drug demonstrates evidence of effectiveness and an acceptable safety profile in Phase 2 evaluations, Phase 3 clinical trials are undertaken to obtain additional information about clinical efficacy and safety in a larger number of patients, typically at geographically dispersed clinical trial sites, to permit the FDA to evaluate the overall benefit-risk relationship of the investigational drug and to provide adequate information for its labeling.

        After completion of the required clinical testing, an NDA or, in the case of a biologic, a BLA, is prepared and submitted to the FDA. FDA approval of the marketing application is required before marketing of the product may begin in the United States. The marketing application must include the results of all preclinical, clinical and other testing and a compilation of data relating to the product's pharmacology, chemistry, manufacture, and controls.

        The FDA has 60 days from its receipt of an NDA or BLA to determine whether the application will be accepted for filing based on the agency's threshold determination that it is sufficiently complete to permit substantive review. Once the submission is accepted for filing, the FDA begins an in-depth review. The FDA has agreed to certain performance goals in the review of marketing applications. Most such applications for non-priority drug products are reviewed within ten months. The review process may be extended by the FDA for three additional months to consider new information submitted during the review 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. Before approving a marketing application, the FDA will typically inspect one or more clinical sites to assure compliance with GCP.

        Additionally, the FDA will inspect the facility or the facilities at which the drug product is manufactured. The FDA will not approve the NDA or, in the case of a biologic, the BLA unless compliance with cGMPs is satisfactory and the marketing application contains data that provide substantial evidence that the product is safe and effective in the indication studied. Manufacturers of biologics also must comply with FDA's general biological product standards.

        After the FDA evaluates the NDA or BLA and the manufacturing facilities, it issues an approval letter or a complete response letter. A complete response letter outlines the deficiencies in the submission and may require substantial additional testing or information in order for the FDA to reconsider the application. If and when those deficiencies have been addressed in a

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resubmission of the marketing application, the FDA will re-initiate review. If the FDA is satisfied that the deficiencies have been addressed, the agency will issue an approval letter. The FDA has committed to reviewing such resubmissions in two or six months depending on the type of information included. It is not unusual for the FDA to issue a complete response letter because it believes that the drug product is not safe enough or effective enough or because it does not believe that the data submitted are reliable or conclusive.

        An approval letter authorizes commercial marketing of the drug product with specific prescribing information for specific indications. As a condition of approval of the marketing application, the FDA may require substantial post-approval testing and surveillance to monitor the drug product's safety or efficacy and may impose other conditions, including labeling restrictions, which can materially affect the product's potential market and profitability. Once granted, product approvals may be withdrawn if compliance with regulatory standards is not maintained or problems are identified following initial marketing.

Orphan Drug Act in the United States

        The Orphan Drug Act provides incentives to manufacturers to develop and market drugs for rare diseases and conditions affecting fewer than 200,000 persons in the U.S. at the time of application for orphan drug designation. Orphan drug designation must be requested before submitting a BLA. Orphan drug designation does not convey any advantage in, or shorten the duration of, the regulatory review and approval process. If a product that has orphan drug designation subsequently receives the first FDA approval for the disease for which it has such designation, the holder of the approval is entitled to a seven-year exclusive marketing period in the U.S. for that product except in very limited circumstances. For example, a drug that the FDA considers to be clinically superior to, or different from, another approved orphan drug, even though for the same indication, may also obtain approval in the U.S. during the seven-year exclusive marketing period. In addition, holders of exclusivity for orphan drugs are expected to assure the availability of sufficient quantities of their orphan drugs to meet the needs of patients. Failure to do so could result in the withdrawal of marketing exclusivity for the drug.

Orphan Designation and Exclusivity in the European Union

        Products authorized as "orphan medicinal products" in the EU are entitled to certain exclusivity benefits. In accordance with Article 3 of Regulation (EC) No. 141/2000 of the European Parliament and of the Council of 16 December 1999 on orphan medicinal products, a medicinal product may be designated as an orphan medicinal product if: (1) it is intended for the diagnosis, prevention or treatment of a life-threatening or chronically debilitating condition; (2) either (a) such condition affects no more than five in 10,000 persons in the European Union when the application is made, or (b) the product, without the incentives derived from orphan medicinal product status, would not generate sufficient return in the European Union to justify investment; and (3) there exists no satisfactory method of diagnosis, prevention or treatment of such condition authorized for marketing in the EU, or if such a method exists, the product will be of significant benefit to those affected by the condition.

        An application for orphan drug designation must be submitted before the application for marketing authorization. Orphan drug designation does not convey any advantage in, or shorten the duration of, the regulatory review and approval process.

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        Products authorized in the EU as orphan medicinal products are entitled to 10 years of market exclusivity. The 10-year market exclusivity may be reduced to six years if, at the end of the fifth year, it is established that the product no longer meets the criteria for orphan designation, for example, if the product is sufficiently profitable not to justify maintenance of market exclusivity. Additionally, marketing authorization may be granted to a similar product during the 10-year period of market exclusivity for the same therapeutic indication at any time if:

    The second applicant can establish in its application that its product, although similar to the orphan medicinal product already authorized, is safer, more effective or otherwise clinically superior;

    The holder of the marketing authorization for the original orphan medicinal product consents to a second orphan medicinal product application; or

    The holder of the marketing authorization for the original orphan medicinal product cannot supply enough orphan medicinal product.

Other Regulatory Requirements

        Once a NDA or BLA is approved, a product will be subject to certain post-approval requirements. For instance, the FDA closely regulates the post-approval marketing and promotion of therapeutic products, including standards and regulations for direct-to-consumer advertising, off-label promotion, industry-sponsored scientific and educational activities and promotional activities involving the internet.

        Biologics may be marketed only for the approved indications and in accordance with the provisions of the approved labeling. Changes to some of the conditions established in an approved application, including changes in indications, labeling, or manufacturing processes or facilities, require submission and FDA approval of a new BLA or BLA supplement, before the change can be implemented. A BLA supplement for a new indication typically requires clinical data similar to that in the original application, and the FDA uses the same procedures and actions in reviewing BLA supplements as it does in reviewing BLAs. We cannot be certain that the FDA or any other regulatory agency will grant approval for our product candidates for any other indications or any other product candidate for any indication on a timely basis, if at all.

        Adverse event reporting and submission of periodic reports is required following FDA approval of a BLA. The FDA also may require post-marketing testing, known as Phase 4 testing, risk evaluation and mitigation strategies, and surveillance to monitor the effects of an approved product or place conditions on an approval that could restrict the distribution or use of the product. In addition, quality control as well as product manufacturing, packaging, and labeling procedures must continue to conform to cGMPs after approval. Manufacturers and certain of their subcontractors are required to register their establishments with the FDA and certain state agencies, and are subject to periodic unannounced inspections by the FDA during which the agency inspects manufacturing facilities to assess compliance with cGMPs. Accordingly, manufacturers must continue to expend time, money and effort in the areas of production and quality control to maintain compliance with cGMPs. Regulatory authorities may withdraw product approvals or request product recalls if a company fails to comply with regulatory standards, if it encounters problems following initial marketing, or if previously unrecognized problems are subsequently discovered.

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Companion Diagnostic Review and Approval

        Some of our product candidates currently rely upon the use of a companion microbial diagnostic test to select patients who are infected with either S. aureus, P. aeruginosa, or A. baumannii bacteria and in the future we may utilize other biomarkers as companion diagnostic tests for our other product candidates. Approval of our product candidates may require FDA approval of a Premarket Approval Application, or PMA, for a reproducible, validated diagnostic test to be used with our mAb product candidates.

        The PMA process is costly, lengthy, and uncertain, although the PMA review for the microbial tests is not currently planned to occur concurrently with the development and review of a BLA for our product candidates. The receipt and timing of PMA approval may have a significant effect on the receipt and timing of commercial approval for our product candidates. Human diagnostic products are subject to pervasive and ongoing regulatory obligations, including the submission of medical device reports, adherence to the Quality Systems Regulation, recordkeeping and product labeling, as enforced by the FDA and comparable state authorities.

U.S. Foreign Corrupt Practices Act

        The U.S. Foreign Corrupt Practices Act, to which we are subject, prohibits corporations and individuals from engaging in certain activities to obtain or retain business or to influence a person working in an official capacity. It is illegal to pay, offer to pay or authorize the payment of anything of value to any foreign government official, government staff member, political party or political candidate in an attempt to obtain or retain business or to otherwise influence a person working in an official capacity.

Federal and State Fraud and Abuse Laws

        Healthcare providers, physicians and third-party payors play a primary role in the recommendation and prescription of drug and biologic product candidates which obtain marketing approval. In addition to FDA restrictions on marketing of pharmaceutical products, pharmaceutical manufacturers are exposed, directly, or indirectly, through customers, to broadly applicable fraud and abuse and other healthcare laws and regulations that may affect the business or financial arrangements and relationships through which a pharmaceutical manufacturer can market, sell and distribute drug and biologic products. These laws include, but are not limited to:

        The federal Anti-Kickback Statute which prohibits, any person or entity from, among other things, knowingly and willfully offering, paying, soliciting, or receiving any remuneration, directly or indirectly, overtly or covertly, in cash or in-kind, to induce or reward either the referring of an individual for, or the purchasing, leasing, ordering, or arranging for the purchase, lease, or order of any healthcare item or service reimbursable, in whole or in part, under Medicare, Medicaid, or any other federally financed healthcare program. The term "remuneration" has been broadly interpreted to include anything of value. This statute has been interpreted to apply to arrangements between pharmaceutical manufacturers on one hand and prescribers, purchasers, and formulary managers on the other hand. Although there are a number of statutory exceptions and regulatory safe harbors protecting certain common activities from prosecution, the exceptions and safe harbors are drawn narrowly, and practices that involve remuneration intended to induce

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prescribing, purchases, or recommendations may be subject to scrutiny if they do not qualify for an exception or safe harbor.

        The federal false claims and civil monetary penalty laws, including the Federal False Claims Act, which imposes significant penalties and can be enforced by private citizens through civil qui tam actions, prohibits any person or entity from, among other things, knowingly presenting, or causing to be presented, a false, fictitious or fraudulent claim for payment to the federal government, or knowingly making, using or causing to be made, a false statement or record material to a false or fraudulent claim to avoid, decrease or conceal an obligation to pay money to the federal government. In addition, a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the Federal False Claims Act. As a result of a modification made by the Federal Fraud Enforcement and Recovery Act of 2009, a claim includes "any request or demand" for money or property presented to the U.S. government. In addition, manufacturers can be held liable under the False Claims Act even when they do not submit claims directly to government payors if they are deemed to "cause" the submission of false or fraudulent claims. Criminal prosecution is also possible for making or presenting a false, fictitious or fraudulent claim to the federal government. Recently, several pharmaceutical and other healthcare companies have been prosecuted under these laws for allegedly providing free product to customers with certain expectation that the customers would bill federal programs for the product. Other companies have been prosecuted for causing false claims to be submitted because of the company's marketing of the product for unapproved, and thus non-reimbursable, uses.

        The federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, which, among other things, imposes criminal liability for executing or attempting to execute a scheme to defraud any healthcare benefit program, including private third-party payors, knowingly and willfully embezzling or stealing from a healthcare benefit program, willfully obstructing a criminal investigation of a healthcare offense, and creates federal criminal laws that prohibit knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false, fictitious or fraudulent statements or representations, or making or using any false writing or document knowing the same to contain any materially false, fictitious or fraudulent statement or entry in connection with the delivery of, or payment for, benefits, items or services.

        HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009, or HITECH, and its implementing regulations, which impose certain requirements relating to the privacy, security, transmission and breach reporting of individually identifiable health information upon entities subject to the law, such as health plans, healthcare clearinghouses and certain healthcare providers and their respective business associates that perform services for them that involve individually identifiable health information. HITECH also created new tiers of civil monetary penalties, amended HIPAA to make civil and criminal penalties directly applicable to business associates, and gave state attorneys general new authority to file civil actions for damages or injunctions in U.S. federal courts to enforce the federal HIPAA laws and seek attorneys' fees and costs associated with pursuing federal civil actions.

        The federal physician payment transparency requirements, sometimes referred to as the "Physician Payments Sunshine Act," and its implementing regulations, which require certain manufacturers of drugs, devices, biologics and medical supplies for which payment is available under Medicare, Medicaid or the Children's Health Insurance Program (with certain exceptions)

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to report annually to the United States Department of Health and Human Services, or HHS, information related to payments or other transfers of value made to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors) and teaching hospitals, as well as ownership and investment interests held by physicians and their immediate family members.

        State and foreign law equivalents of each of the above federal laws, such as anti-kickback and false claims laws, that may impose similar or more prohibitive restrictions, and may apply to items or services reimbursed by non-governmental third-party payors, including private insurers.

        State laws that require pharmaceutical companies to implement compliance programs, comply with the pharmaceutical industry's voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government, or to track and report gifts, compensation and other remuneration provided to physicians and other healthcare providers, state and local laws that require the registration of pharmaceutical sales representatives, and other federal, state and foreign laws that govern the privacy and security of health information or personally identifiable information in certain circumstances, including state health information privacy and data breach notification laws which govern the collection, use, disclosure, and protection of health-related and other personal information, many of which differ from each other in significant ways and often are not pre-empted by HIPAA, thus requiring additional compliance efforts.

        Because of the breadth of these laws and the narrowness of the safe harbors, it is possible that some business activities can be subject to challenge under one or more of such laws. The scope and enforcement of each of these laws is uncertain and subject to rapid change in the current environment of healthcare reform, especially in light of the lack of applicable precedent and regulations. Federal and state enforcement bodies have recently increased their scrutiny of interactions between healthcare companies and healthcare providers, which has led to a number of investigations, prosecutions, convictions and settlements in the healthcare industry.

        Ensuring that business arrangements with third parties comply with applicable healthcare laws and regulations is costly and time consuming. If business operations are found to be in violation of any of the laws described above or any other applicable governmental regulations a pharmaceutical manufacturer may be subject to penalties, including civil, criminal and administrative penalties, damages, fines, disgorgement, individual imprisonment, exclusion from governmental funded healthcare programs, such as Medicare and Medicaid, contractual damages, reputational harm, diminished profits and future earnings, additional reporting obligations and oversight if subject to a corporate integrity agreement or other agreement to resolve allegations of non-compliance with these laws, and curtailment or restructuring of operations, any of which could adversely affect a pharmaceutical manufacturer's ability to operate its business and the results of its operations.

Healthcare Reform in the United States

        In the United States, there have been, and continue to be, a number of legislative and regulatory changes and proposed changes to the healthcare system that could affect the future results of pharmaceutical manufactures' operations. In particular, there have been and continue to be a number of initiatives at the federal and state levels that seek to reduce healthcare costs. Most recently, the Patient Protection and Affordable Care Act, or PPACA, was enacted in March 2010, which includes measures to significantly change the way healthcare is financed by both

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governmental and private insurers. Among the provisions of the PPACA of greatest importance to the pharmaceutical and biotechnology industry are the following:

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

    implementation of the federal physician payment transparency requirements, sometimes referred to as the "Physician Payments Sunshine Act";

    a licensure framework for follow-on biologic products;

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

    establishment of a Center for Medicare Innovation at the Centers for Medicare & Medicaid Services to test innovative payment and service delivery models to lower Medicare and Medicaid spending, potentially including prescription drug spending;

    an increase in the statutory minimum rebates a manufacturer must pay under the Medicaid Drug Rebate Program, to 23.1% and 13% of the average manufacturer price for most branded and generic drugs, respectively and capped the total rebate amount for innovator drugs at 100% of the Average Manufacturer Price, or AMP;

    a new methodology by which rebates owed by manufacturers under the Medicaid Drug Rebate Program are calculated for certain drugs and biologics, including our product candidates, that are inhaled, infused, instilled, implanted or injected;

    extension of manufacturers' Medicaid rebate liability to covered drugs dispensed to individuals who are enrolled in Medicaid managed care organizations;

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

    a new Medicare Part D coverage gap discount program, in which manufacturers must agree to offer 50% (and 70% commencing January 1, 2019) point-of-sale discounts off negotiated prices of applicable brand drugs to eligible beneficiaries during their coverage gap period, as a condition for the manufacturer's outpatient drugs to be covered under Medicare Part D; and

    expansion of the entities eligible for discounts under the Public Health program.

        Some of the provisions of the PPACA have yet to be implemented, and there have been legal and political challenges to certain aspects of the PPACA. Since January 2017, President Trump has signed two executive orders and other directives designed to delay, circumvent, or loosen certain requirements mandated by the PPACA. Concurrently, Congress has considered legislation that would repeal or repeal and replace all or part of the PPACA. While Congress has not passed repeal legislation, two bills affecting the implementation of certain taxes under the PPACA have been signed into law. The Tax Cuts and Jobs Act of 2017 includes a provision repealing, effective January 1, 2019, the tax-based shared responsibility payment imposed by the PPACA on certain

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individuals who fail to maintain qualifying health coverage for all or part of a year that is commonly referred to as the "individual mandate." Additionally, on January 22, 2018, Trump signed a continuing resolution on appropriations for fiscal year 2018 that delayed the implementation of certain PPACA-mandated fees, including the so-called "Cadillac" tax on certain high cost employer-sponsored insurance plans, the annual fee imposed on certain health insurance providers based on market share, and the medical device excise tax on non-exempt medical devices. Further, the Bipartisan Budget Act of 2018, or the BBA, among other things, amends the PPACA, effective January 1, 2019, to close the coverage gap in most Medicare drug plans, commonly referred to as the "donut hole". Congress may consider other legislation to repeal or replace elements of the PPACA.

        Many of the details regarding the implementation of the PPACA are yet to be determined, and at this time, the full effect that the PPACA would have on a pharmaceutical manufacturer remains unclear. In particular, there is uncertainty surrounding the applicability of the biosimilars provisions under the PPACA. The FDA has issued several guidance documents, and withdrew others, but no implementing regulations on biosimilars have been adopted. A number of biosimilar applications have been approved over the past few years. The regulations that are ultimately promulgated and their implementation are likely to have considerable impact on the way pharmaceutical manufacturers conduct their business and may require changes to current strategies. A biosimilar is a biological product that is highly similar to an approved drug notwithstanding minor differences in clinically inactive components, and for which there are no clinically meaningful differences between the biological product and the approved drug in terms of the safety, purity, and potency of the product.

        Additionally, there has been heightened governmental scrutiny in the United States of pharmaceutical pricing practices in light of the rising cost of prescription drugs and biologics. Such scrutiny has resulted in several recent congressional inquiries and proposed and enacted federal and state legislation designed to, among other things, bring more transparency to product pricing, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for products. At the federal level, the Trump administration's budget proposal for fiscal year 2019 contains further drug price control measures that could be enacted during the 2019 budget process or in other future legislation, including, for example, measures to permit Medicare Part D plans to negotiate the price of certain drugs under Medicare Part B, to allow some states to negotiate drug prices under Medicaid, and to eliminate cost sharing for generic drugs for low-income patients. Further, the Trump administration released a "Blueprint" to lower drug prices and reduce out of pocket costs of drugs that contains additional proposals to increase drug manufacturer competition, increase the negotiating power of certain federal healthcare programs, incentivize manufacturers to lower the list price of their products and reduce the out of pocket costs of drug products paid by consumers. HHS has already started the process of soliciting feedback on some of these measures and, at the same, is immediately implementing others under its existing authority. Although a number of these, and other potential, proposals will require authorization through additional legislation to become effective, Congress and the Trump administration have each indicated that it will continue to seek new legislative and/or administrative measures to control drug costs. At the state level, legislatures have become increasingly aggressive in passing legislation and implementing regulations designed to control pharmaceutical and biological product pricing, including price or patient reimbursement

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constraints, discounts, restrictions on certain product access, and marketing cost disclosure and transparency measures, and to encourage importation from other countries and bulk purchasing. Legally mandated price controls on payment amounts by third-party payors or other restrictions could harm a pharmaceutical manufacturer's business, results of operations, financial condition and prospects. In addition, regional healthcare authorities and individual hospitals are increasingly using bidding procedures to determine what pharmaceutical products and which suppliers will be included in their prescription drug and other healthcare programs. This could reduce ultimate demand for certain products or put pressure product pricing, which could negatively affect a pharmaceutical manufacturer's business, results of operations, financial condition and prospects.

        More recently on May 30, 2018, the Trickett Wendler, Frank Mongiello, Jordan McLinn, and Matthew Bellina Right to Try Act of 2017 ("Right to Try Act") was signed into law. The law, among other things, provides a federal framework for certain patients to access certain investigational new drug products that have completed a Phase I clinical trial and that are undergoing investigation for FDA approval. Under certain circumstances, eligible patients can seek treatment without enrolling in clinical trials and without obtaining FDA permission under an FDA expanded access program.

        In addition, given recent federal and state government initiatives directed at lowering the total cost of healthcare, Congress and state legislatures will likely continue to focus on healthcare reform, the cost of prescription drugs and biologics and the reform of the Medicare and Medicaid programs. While no one cannot predict the full outcome of any such legislation, it may result in decreased reimbursement for drugs and biologics, which may further exacerbate industry-wide pressure to reduce prescription drug prices. This could harm a pharmaceutical manufacturer's ability to generate revenue. Increases in importation or re-importation of pharmaceutical products from foreign countries into the United States could put competitive pressure on a pharmaceutical manufacturer's ability to profitably price products, which, in turn, could adversely affect business, results of operations, financial condition and prospects. A pharmaceutical manufacturer might elect not to seek approval for or market products in foreign jurisdictions in order to minimize the risk of re-importation, which could also reduce the revenue generated from product sales. It is also possible that other legislative proposals having similar effects will be adopted.

        Furthermore, regulatory authorities' assessment of the data and results required to demonstrate safety and efficacy can change over time and can be affected by many factors, such as the emergence of new information, including on other products, changing policies and agency funding, staffing and leadership. No one can be sure whether future changes to the regulatory environment will be favorable or unfavorable to business prospects. For example, average review times at the FDA for marketing approval applications can be affected by a variety of factors, including budget and funding levels and statutory, regulatory and policy changes.

Regulation in the European Union

        Biologics are also subject to extensive regulation outside of the U.S. In the EU, for example, there is a centralized approval procedure that authorizes marketing of a product in all countries of the EU, which includes most major countries in Europe. If this procedure is not used, approval in one country of the European Union can be used to obtain approval in another country of the EU under two simplified application processes, the mutual recognition procedure or the decentralized procedure, both of which rely on the principle of mutual recognition. After receiving regulatory

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approval through any of the European registration procedures, pricing and reimbursement approvals are also required in most countries.

Other Regulations

        We are also subject to numerous federal, state and local laws relating to such matters as safe working conditions, manufacturing practices, environmental protection, fire hazard control, and disposal of hazardous or potentially hazardous substances and biological materials. We may incur significant costs to comply with such laws and regulations now or in the future.

Reimbursement

        Obtaining coverage and reimbursement approval for a product from a government or other third-party payor is a time-consuming and costly process that can require the provision of supporting scientific, clinical and cost effectiveness data for the use of drug or biologic products to the payor. There may be significant delays in obtaining such coverage and reimbursement for newly approved products, and coverage may be more limited than the purposes for which the product is approved by the FDA or similar regulatory authorities outside of the United States. Moreover, eligibility for coverage and reimbursement does not imply that a product will be paid for in all cases or at a rate that covers operating costs, including research, development, intellectual property, manufacture, sale and distribution expenses. Reimbursement rates may vary according to the use of the product and the clinical setting in which it is used, may be based on reimbursement levels already set for lower cost products and may be incorporated into existing payments for other services. Net prices for products 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 product from countries where they may be sold at lower prices than in the U.S.

        There is significant uncertainty related to the insurance coverage and reimbursement of newly approved products. Third-party payors often rely upon Medicare coverage policy and payment limitations in setting their own reimbursement policies, but also have their own methods and approval process apart from Medicare coverage and reimbursement determinations. It is difficult to predict what third party payors will decide with respect to coverage and reimbursement for new drug and biologic product candidates. An inability to promptly obtain coverage and adequate reimbursement rates from both government-funded and private payors for any approved products could have a material adverse effect on a pharmaceutical manufacturer's operating results, ability to raise capital needed to commercialize products and overall financial condition.

        Reimbursement may impact the demand for, and/or the price of, any product which obtains marketing approval. Even if coverage is obtained for a given product by a third-party payor, the resulting reimbursement payment rates may not be adequate or may require co-payments that patients find unacceptably high. Patients who are prescribed medications for the treatment of their conditions, and their prescribing physicians, generally rely on third-party payors to reimburse all or part of the costs associated with those medications. Patients are unlikely to use products unless coverage is provided and reimbursement is adequate to cover all or a significant portion of the cost of the products. Therefore, coverage and adequate reimbursement is critical to new product acceptance. Coverage decisions may depend upon clinical and economic standards that disfavor

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new drug products when more established or lower cost therapeutic alternatives are already available or subsequently become available.

        The U.S. government, state legislatures and foreign governmental entities have shown significant interest in implementing cost containment programs to limit the growth of government-paid healthcare costs, including price controls, restrictions on reimbursement and coverage and requirements for substitution of generic products for branded prescription drugs. Adoption of government controls and measures, and tightening of restrictive policies in jurisdictions with existing controls and measures, could exclude or limit our products from coverage and limit payments for pharmaceuticals.

        In addition, it is expected that the increased emphasis on managed care and cost containment measures in the United States by third-party payors and government authorities will continue and place further pressure on pharmaceutical pricing and coverage. Coverage policies and third-party reimbursement rates may change at any time. Even if favorable coverage and reimbursement status is attained for one or more drug products that gain regulatory approval, less favorable coverage policies and reimbursement rates may be implemented in the future.

Employees

        As of March 31, 2018, we had 25 full time employees, five part-time employees and several consultants. None of our employees are covered by a collective bargaining agreement. We consider our relationship with our employees to be good.

Facilities

        Our corporate headquarters are located in San Jose, California, where we lease approximately 4,500 gross square feet of office and laboratory space under a lease that can be terminated with 90 days' notice.

        We believe that our facilities are adequate to meet our current needs, and that suitable additional alternative spaces will be available in the future on commercially reasonable terms, if required.

Legal Proceedings

        We are not currently a party to any legal proceedings. From time to time, we may be involved in legal proceedings or subject to claims incident to the ordinary course of business. Regardless of the outcome, such proceedings or claims can have an adverse impact on us because of defense and settlement costs, diversion of resources and other factors, and there can be no assurances that favorable outcomes will be obtained.

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MANAGEMENT

Executive Officers and Directors

        Set forth below is certain information with respect to the individuals who are our directors and executive officers as of June 30, 2018:

Name
  Age   Position(s)
Eric Patzer, Ph.D.      69   Executive Chairman of the Board of Directors
Isaac Blech     68   Vice Chairman of the Board of Directors
Vu Truong, Ph.D.      54   Chief Executive Officer, Chief Scientific Officer and Director
Fred Kurland     68   Chief Financial Officer
Wolfgang Dummer     52   Chief Medical Officer
Robert K. Coughlin     49   Director
Craig Gibbs, Ph.D.      55   Director
John Hamilton     73   Director
Robert R. Ruffolo, Ph.D.      68   Director
Shawn Lu     50   Director

        Eric Patzer, Ph.D, Executive Chairman of the Board of Directors (Class III).     Dr. Patzer is one of our co-founders. He was appointed Chairman in May 2014 and served as President from 2003 through 2014. Prior to that, he was VP of Development at Aviron Inc. from 1996 to 2002. Prior to that, he was VP of Product Development at Genentech from 1981 to 1996. Dr. Patzer received his B.S. in Mechanical Engineering from the Pennsylvania State University and his Ph.D. in Microbiology from University of Virginia. We believe that Dr. Patzer possesses specific attributes that qualify him to serve as a member of our board of directors, including his experience in managing projects through the entire development process to regulatory approval, his longevity in the industry, and his intimate knowledge of our company, as he is a founder.

        Isaac Blech, Vice Chairman of the Board of Directors (Class II).     Mr. Blech was appointed to the board of directors and as our Vice Chairman in December 2015 pursuant to a verbal agreement between us and Mr. Blech. Mr. Blech is the co-founder and vice chairman of Sapience Therapeutics Inc., which he has been at since 2015. Mr. Blech is the co-founder and vice chairman of Elucida Oncology Inc., which he has been at since 2013. Mr. Blech is the co-founder and vice chairman at Centrexion Therapeutics Corp., which he has been at since 2011. Mr. Blech is also the co-founder and vice chairman at Cerecor Inc., which he has been at since 2011. Mr. Blech currently serves as a director for Marina Biotech Inc., Diffusion Pharmaceuticals Inc., Edge Therapeutics Inc., SpendSmart Networks Inc., ContraFect Corp. and InspireMD Inc. Mr. Blech is a successful founder and investor in the biotechnology industry. Over the past thirty five years, he has established multiple successful biotechnology companies. These include Celgene Corporation, ICOS Corporation, Nova Pharmaceutical Corporation, Pathogenesis Corporation and Genetics Systems Corporation. Mr. Blech earned a B.A. in Hebrew from Baruch College in 1975. We believe that Mr. Blech's business experience and ties to the investment community qualify him to serve as a member of our board of directors.

        Vu Truong, Ph.D, Chief Executive Officer, Chief Scientific Officer and Director (Class III).     Dr. Truong is one of our co-founders and our Chief Executive Officer and Chief Scientific Officer. He has served as our Chief Executive Officer, Chief Scientific Officer and head of R&D since

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2003. He has more than 15 years of experience in biopharmaceutical drug development, having held positions of increasing responsibilities at Transform Pharmaceuticals Inc., GeneMedicine Inc., Aviron Inc. and MedImmune (sold to AstraZeneca). He received his Ph.D. in Pharmacology and Molecular Sciences at the Johns Hopkins University School of Medicine and his B.A. in Biochemistry from Brandeis University. We believe that Dr. Truong possesses specific attributes that qualify him to serve as a member of our board of directors, including his depth of scientific, operating, strategic, transactional, and senior management experience in our industry, his longevity in the industry, and his intimate knowledge of our company, as he is a founder.

        Fred Kurland, Chief Financial Officer.     Mr. Kurland has served as our Chief Financial Officer since July 2015 and served on our board of directors from August 2014 through July 2015. He is a seasoned financial executive with 35 years of experience in the pharmaceutical industry. Prior to joining us he was the Vice President, Finance, Chief Financial Officer and Secretary of XOMA Corporation from December 2008 through March 2015. Between 2002 and 2008 Mr. Kurland served as Chief Financial Officer of Bayhill Therapeutics, Inc., Corcept Therapeutics Inc. and Genitope Corp. From 1998 to 2002, he served as Senior Vice President and Chief Financial Officer of Aviron, which was acquired by MedImmune in 2001. From 1996 to 1998, Mr. Kurland was Vice President and Chief Financial Officer of Protein Design Labs, Inc., an antibody design company, and from 1995 to 1996, he served as Vice President and Chief Financial Officer of Applied Immune Sciences, Inc. He also held a number of financial management positions at Syntex Corporation, a pharmaceutical company acquired by Roche, including Vice President and Controller between 1991 and 1995. Mr. Kurland received his J.D. and M.B.A. from the University of Chicago and his B.S. in Business and Economics from Lehigh University.

        Wolfgang Dummer, M.D., Ph.D, Chief Medical Officer.     Dr. Dummer was hired as our Chief Medical Officer in March 2018. Dr. Dummer has more than 20 years of clinical trial and drug development experience, most recently as an independent executive consultant for various biotechnology companies since January 2017. From January 2012 to December 2016, he was Vice President of Clinical Development at BioMarin Pharmaceutical Inc., where he led the clinical development and approval of Vimizim (elosulfase alpha), now BioMarin's leading marketed compound. For 11 years prior, he held various senior roles in Clinical Research and Development at Genentech, Inc. He also spent three years studying at the Scripps Research Institute in La Jolla, California. Dr. Dummer has authored and co-authored more than 50 peer-reviewed journal articles, and is a board-certified clinical dermatologist and allergist/immunologist. He earned his Doktor der Medizin from the Technical University of Munich Medical School.

        Robert K. Coughlin, Director (Class II).     Mr. Coughlin was appointed to our board of directors in May 2014. Since September 2007, he has been the President and Chief Executive Officer of the Massachusetts Biotechnology Council, an association of more than 600 biotechnology companies, universities and academic institutions. He has spent his career in both the public and private sectors, most recently serving as Undersecretary of Economic Development within Governor Deval Patrick's administration from January 2007 to August 2007. Prior to that, he was elected as State Representative to the 11 th  Norfolk, Massachusetts district for three terms. He has held senior executive positions in the environmental services industry, capital management, and venture capital. He received his B.S. in Marine Engineering from the Massachusetts Maritime Academy. He has also been a lieutenant in the U.S. Naval Reserve since 1991. We believe that Mr. Coughlin possesses specific attributes that qualify him to serve as a member of our board of

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directors, including his experience in the industry, his familiarity with the Massachusetts life sciences centers and his advocacy for research and the biotechnology community.

        Craig Gibbs, Ph.D. Director (Class I).     Dr. Gibbs was appointed to our board of directors in April 2015. Since September 2015, Dr. Gibbs has been the Chief Business Officer at Forty Seven Inc. Dr. Gibbs served on the Board of Directors of Tobira Therapeutics from May 2013 to September 2016 and is an advisor to several biotechnology companies and venture capital firms. From 1992 to 2013, Dr. Gibbs worked for Gilead Sciences in a variety of leadership positions spanning Research, Corporate Development and, most recently, Vice President of Commercial Strategy/Commercial Planning and Operations. Prior to Gilead, Dr. Gibbs served as a Scientist in the Department of Protein Engineering at Genentech, Inc. He received his B.Sc. in Biochemistry from Massey University and his Ph.D. in Molecular Biology from the University of Glasgow in Scotland and his M.B.A. from Golden Gate University. We believe that Dr. Gibbs possesses specific attributes that qualify him to serve as a member of our board of directors, including extensive experience in the biotechnology industry and technical expertise in drug discovery and development.

        John Hamilton, Director (Class II).     Mr. Hamilton was appointed to our board of directors in June 2015. He served as a director and audit chair of three companies including Vermillion Inc. from 2008 to 2013, Anesiva, Inc. during 2009 and Encompass Funds from 2012 to 2015. From 1997 until his retirement in 2007, Mr. Hamilton served as Vice President and Chief Financial Officer of Depomed, Inc., a specialty pharmaceutical company focused on enhancing pharmaceutical products. Prior to that, he was the Vice President and Chief Financial Officer at Glyko Inc. from May 1992 to September 1996 and the Manager of Financial Planning and Analysis and then Treasurer at Chiron Corp. from September 1987 to May 1992. Mr. Hamilton began his career in international banking with The Philadelphia National Bank and Crocker National Bank. Mr. Hamilton sits on the regional Board of Directors of the Association of Bioscience Financial Officers and is past-president of the Treasurers Club of San Francisco. Mr. Hamilton received his M.B.A. from the University of Chicago and B.A. in International Relations from the University of Pennsylvania. We believe that Mr. Hamilton possesses specific attributes that qualify him to serve as a member of our board of directors, including the depth of his financial, accounting and operating experience.

        Robert R. Ruffolo, Jr., Ph.D., Director (Class II).     Dr. Ruffolo was appointed to our board of directors in April 2017. He has provided management, director and consulting services since 2008 as the President of Ruffolo Consulting LLC. Dr. Ruffolo currently serves on the Board of Directors of Diffusion Pharmaceuticals Inc. He served as the President of Research and Development and as the Corporate Senior Vice President of Wyeth Pharmaceuticals (now Pfizer) from 2000 through 2008. In these roles, he managed an R&D organization of 9,000 scientists with an annual budget in excess of $3 billion. From 2000 to 2002 he served as an Executive Vice President at Wyeth, where he was responsible for Pharmaceutical Research and Development. Prior to joining Wyeth, Dr. Ruffolo spent 17 years at SmithKline Beecham Pharmaceuticals PLC (now GlaxoSmithKline) where he was Senior Vice President and Director of Biological Sciences, Worldwide from 1984 to 2000. Before joining SmithKline Beecham, Dr. Ruffolo spent six years at Eli Lilly Co. from 1978 to 1984 where he was a Senior Pharmacologist. Dr. Ruffolo currently serves on the boards of directors of Sigilon Therapeutics Inc., Sapience Therapeutics Inc., Elucida Oncology Inc., and Trevena Inc. He received his B.S. in Pharmacy from The Ohio State University

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and his Ph.D. in Pharmacology from The Ohio State University. We believe that Dr. Ruffolo possesses specific attributes that qualify him to serve as a member of our board of directors, including his extensive experience in the pharmaceutical industry and technical and management expertise in drug discovery and development.

        Shawn Lu, Director (Class I).     Mr. Lu was appointed to our board of directors in December 2016. Mr. Lu has been the Executive Director and Chief Financial Officer of Hepalink USA, Inc. since April 2014. Prior to that, he was the Area Manager at BMO Bank of Montreal from September 2013 to April 2014 and Residential Mortgage Manager at The Toronto-Dominion Bank from January 2001 to September 2013. Mr. Lu currently serves as a director for Resverlogix Corp., Quest PharmaTech Inc. and Cantex Pharmaceuticals Inc. Prior to that, he was the Chief Financial Officer and Vice President of Corporate Finance of Shenzhen Hepalink Pharmaceutical Group Co. Ltd. from September 1999 to September 2000 and VP of Corporate Finance of Shenzhen FuTianXin Investment Co. Ltd. from February 1998 to August 1999. He received his B.S. in Engineering from Wuhan University of Transportation Technology and his M.B.A. from the Zhongnan University of Economics. We believe that Mr. Lu possesses specific attributes that qualify him to serve as a member of our board of directors, including his experience in the pharmaceutical industry and the depth of his financial, accounting and operating experience.

Other Involvement in Certain Legal Proceedings

        None of our directors or executive officers has been involved in any bankruptcy or criminal proceedings, nor have there been any judgments or injunctions brought against any of our directors or executive officers during the last ten years that we consider material to the evaluation of the ability and integrity of any director or executive officer.

Board Composition and Election of Directors

        Our board of directors currently consists of eight directors and we will have eight directors upon completion of this offering. Holders of common stock have no cumulative voting rights in any election of directors.

        The directors shall be classified with respect to the time for which they shall severally hold office by dividing them into three classes, Class I, Class II and Class III, each consisting as nearly as possible of one-third of the whole board. All directors shall hold office until their successors are elected and qualified, or until their earlier death, resignation, disqualification or removal. Class I Directors shall be elected for a term of one year; Class II Directors shall be elected for a term of two years; and Class III Directors shall be elected for a term of three years; and at each annual stockholders' meeting thereafter, successors to the directors whose terms shall expire that year shall be elected to hold office for a term of three years, so that the term of office of one class of directors shall expire in each year. Except in the event of vacancies in the board, directors shall be elected by a plurality of the votes cast at annual meetings of stockholders, and each director so elected shall hold office until the annual meeting at which their term expires and until his successor is duly elected and qualified, or until his earlier resignation or removal.

Director Independence

        Our board of directors has undertaken a review of the independence of each director. Based on information provided by each director concerning his background, employment and affiliations,

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our board of directors has determined that Messrs. Coughlin, Ruffolo, Gibbs, Lu and Hamilton do not have a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director and that each of these directors is "independent" as that term is defined under the listing standards of The Nasdaq Capital Market. In making these determinations, our board of directors considered the current and prior relationships that each non-employee director has with our company and all other facts and circumstances our board of directors deemed relevant in determining their independence, including the beneficial ownership of our capital stock by each non-employee director, and the transactions involving them described in the section titled "Certain Relationships and Related Party Transactions."

Board Committees

        Our board of directors has established an audit committee, a compensation committee, and a corporate governance/nominating committee, each of which operates under a charter that has been approved by our board of directors.

        Our board of directors has determined that all of the members of the audit committee, the compensation committee and the nominating and corporate governance committee are independent as defined under the applicable rules of The Nasdaq Capital Market, including, in the case of all of the members of our audit committee, the independence requirements contemplated by Rule 10A-3 under the Exchange Act. In making such determination, the board of directors considered the relationships that each director has with our company and all other facts and circumstances that the board of directors deemed relevant in determining director independence, including the beneficial ownership of our capital stock by each director.

        There are no family relationships among any of our directors or executive officers.

        Audit Committee.     Our audit committee is comprised of John Hamilton, Robert Coughlin and Craig Gibbs. Our board of directors has determined that John Hamilton is an audit committee financial expert, as defined by the rules of the SEC, and satisfies the financial sophistication requirements of applicable rules of The Nasdaq Capital Market. Mr. Hamilton is the chair of the audit committee.

        Our audit committee is authorized to, among other things:

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        Compensation Committee.     Our compensation committee is comprised of Robert Coughlin, Craig Gibbs and John Hamilton. Mr. Coughlin is the chair of the compensation committee.

        Our compensation committee is authorized to:

        Corporate Governance/Nominating Committee.     Our corporate governance/nominating committee is comprised of Craig Gibbs, Robert Coughlin and John Hamilton. Mr. Gibbs is the chair of the corporate governance/nominating committee.

        Our nominating and governance committee is authorized to:

Code of Business Conduct and Ethics

        Our board of directors has adopted a written Code of Business Conduct and Ethics applicable to our employees, officers and directors, including those officers responsible for financial reporting. The Code of Business Conduct and Ethics will be available on our website at www.aridispharma.com upon the completion of this offering. We expect that any amendments to the code, or any waivers of its requirements, will be disclosed on our website.

Director Compensation

        Directors who are employees do not receive any fees or other non-equity compensation for their service on our board of directors. Our board of directors has granted equity awards from time to time to our non-employee directors as compensation for their service as directors. We also reimburse our non-employee directors for their reasonable out-of-pocket costs and travel expenses

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in connection with their attendance at board of directors and committee meetings. Directors are also entitled to the protection provided by the indemnification provisions in our current certificate of incorporation and bylaws, as well as the certificate of incorporation that will become effective immediately prior to completion of this offering. None of our non-employee directors received cash compensation in 2017.

2018 Option Grants

        On January 26, 2018, we issued to Vu Truong the following stock options pursuant to our 2014 Equity Incentive Plan, which we refer to as our 2014 Plan: 750,000 options with an exercise price of $2.65 and a vesting commencement date of December 5, 2017, and which vest in equal monthly installments over 48 months.

        On March 29, 2018, we issued to Fred Kurland the following stock options pursuant to our 2014 Plan: (1) 42,624 fully-vested options with an exercise price of $2.68 and (2) 25,575 options with an exercise price of $2.68 and a vesting commencement date of March 6, 2018, and which vest in equal monthly installments over 12 months. Additionally, on the same date, we granted 360,000 options to Wolfgang Dummer pursuant to our 2014 Plan, with an exercise price of $2.68 and a vesting commencement date of March 1, 2018, and which vest in equal monthly installments over 48 months.

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EXECUTIVE AND DIRECTOR COMPENSATION

Summary Compensation Table

        The following table sets forth the compensation paid or accrued during the fiscal year ended December 31, 2017 to our Chief Executive Officer, Executive Chairman and Senior Vice President, Clinical, who were our named executive officers as of December 31, 2017.

Name and Principal Position
  Year   Salary
($)
  Bonus
($)
  Option
Awards
($)(1)
  Total
($)
 

Vu Truong, Ph.D. 

  2017     350,000     140,000     0     490,000  

Chief Executive Officer and Chief Scientific Officer

                             

Eric Patzer, Ph.D. 

 

2017

   
275,000
   
   
519,573
   
794,573
 

Executive Chairman

                             

Alan Cohen, M.D.(2)

 

2017

   
91,800
   
   
519,573

(3)
 
611,373
 

Senior Vice President, Clinical

                             

(1)
Based upon the aggregate grant date fair value calculated in accordance with the Stock Compensation Topic of the Financial Accounting Standards Board Accounting Standards Codification. Our policy and assumptions made in the valuation of share-based payments are contained in Note 10 to our December 31, 2017 consolidated financial statements.

(2)
Dr. Cohen's employment with us began on July 1, 2017.

(3)
$422,153 of such option awards were forfeited on March 26, 2018, in connection with a change in Dr. Cohen's employment arrangement as described below under "Employment Agreements."

Employment Agreements

        We do not have formal employment agreements with any of our named executive officers. We have entered into offer letter agreements and confidentiality and invention assignment agreements with each of our named executive officers. Each named executive officer's employment is at will, and none of the offer letters provide for a specific term or severance on a termination or change of control. Under the terms of our standard confidential information and invention assignment agreement, each executive has agreed (i) not to solicit our employees or consultants during his employment and for a period of one year after the termination of his employment, (ii) to protect our confidential and proprietary information, and (iii) to assign to us related intellectual property developed during the course of his employment. Each named executive officer is also eligible to participate in our standard employee benefit plans.

        The following are descriptions of our offer letter agreements with our named executive officers. We currently expect to enter into formal employment agreements, the terms of which we have not finalized, with our named executive officers prior to, or upon consummation of, this offering.

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Vu Truong, Ph.D.

        We entered into an offer letter agreement and confidential information and invention assignment agreement with Dr. Truong, our Chief Executive Officer and Chief Scientific Officer, on October 1, 2005. We paid Dr. Truong an annual base salary of $350,000 for the fiscal year ended December 31, 2017 and a 40% bonus. Dr. Truong's salary for 2018 was increased to $450,000 and his target annual bonus will be 45% of his salary.

Eric Patzer, Ph.D.

        We entered into an offer letter agreement and confidential information and invention assignment agreement with Dr. Patzer, our Executive Chairman, on October 15, 2005. During the year ended December 31, 2017, we paid Dr. Patzer an annual base salary of $275,000.

Alan Cohen, M.D.

        We entered into an offer letter agreement and confidential information and invention assignment agreement with Dr. Cohen, our Senior Vice President, Clinical, on July 1, 2017. During the year ended December 31, 2017, we paid Dr. Cohen a monthly base salary of $15,000 per month. On March 26, 2018, we executed a new offer letter with Dr. Cohen which amends and supercedes his prior agreement with us. Under the terms of the new arrangement, Dr. Cohen will work on an hourly basis at a rate of $175 per hour. In addition, all stock options previously awarded but not yet vested as of March 26, 2018 were cancelled.

Wolfgang Dummer, M.D.,Ph.D.

        We entered into an offer letter agreement and confidential information and invention assignment agreement with Dr. Dummer, our Chief Medical Officer, on February 5, 2018. As part of his agreement, he will be paid a salary of $390,000 and was paid a sign-on cash bonus of $30,000. We also agreed in the offer letter to work with compensation consultants to provide recommendations for annual bonuses and severance packages for all senior executives moving going forward.

Outstanding Equity Awards At Fiscal Year-End

        The following table sets forth information for the named executive officers as of December 31, 2017 regarding the number of shares subject to both exercisable and unexercisable stock options, as well as the exercise prices and expiration dates thereof, as of December 31, 2017. Except for the options set forth in the table below, no other equity awards were held by any our

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named executive officers as of December 31, 2017. All equity awards included below were granted from our 2014 Plan unless otherwise noted below.

 
  Option Awards  
 
  Number of
Securities
Underlying
Unexercised
Options:
Exercisable (#)
  Number of
Securities
Underlying
Unexercised
Options:
Unexercisable (#)
  Option
Exercise Price
($)
  Option
Expiration
Date
 

Dr. Eric Patzer

    500,000         2.05     10/20/2026 (1)

    15,625     234,375     1.50     9/22/2027 (2)

Dr. Vu Truong

   
364,583
   
135,417
   
0.45
   
3/6/2025

(3)

    75,000     75,000     2.02     12/4/2025 (4)

    500,000         2.05     10/20/2026 (5)

Dr. Alan Cohen

   
20,000
   
   
0.45
   
9/5/2024

(6)

    26,042     223,958     1.50     9/22/2027 (7)

(1)
Grant date of October 20, 2016, vesting start date was September 1, 2016 and vested monthly over six months.

(2)
Grant date of September 22, 2017, vesting monthly in equal installments over 48 months, beginning on the grant date.

(3)
Grant date of March 6, 2015, vesting monthly in equal installments over 48 months, beginning on January 1, 2015.

(4)
Grant date of December 4, 2015, vesting monthly in equal installments over 48 months, beginning on the grant date.

(5)
Grant date of October 20, 2016, vesting start date was September 1, 2016 and vested monthly over six months.

(6)
Grant date of September 5, 2014, vesting start date was September 1, 2014 and vested monthly over 12 months.

(7)
Grant date September 22, 2017, vesting monthly in equal installments over 48 months, beginning on July 1, 2017.

401(k) plan

        We maintain a defined contribution employee retirement plan, or 401(k) plan, for our employees, effective as of October 1, 2016. Our named executive officers are eligible to participate in the 401(k) plan on the same basis as our other employees. The 401(k) plan is intended to qualify as a tax-qualified plan under Section 401(k) of the Internal Revenue Code. The 401(k) plan provides that each participant may make pre-tax deferrals from his or her compensation up to the statutory limit, which is $18,500 for calendar year 2018, and other testing limits. Participants that are 50 years or older can also make "catch-up" contributions, which in calendar year 2018 may be up to an additional $6,000 above the statutory limit. Although the 401(k) plan provides for

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discretionary matching and profit sharing contributions, we currently do not make either type of contribution to the 401(k) plan. Participant contributions are held and invested, pursuant to the participant's instructions, by the plan's trustee.

2014 Equity Incentive Plan

        In May 2014, our board of directors approved the 2014 Plan. The 2014 Plan was most recently amended in September 2014. The 2014 Plan will expire on May 24, 2024. Under our 2014 Plan, we may grant incentive stock options, non-qualified stock options and restricted stock awards. As of June 30, 2018, there are 5,500,000 shares of our common stock authorized for issuance under the 2014 Plan.

        In addition, the 2014 Plan contains an "evergreen" provision allowing for an annual increase in the number of shares of our common stock available for issuance under the plan on the first day of each fiscal year beginning with fiscal year 2015. The annual increase in the number of shares shall be equal to the greater of:

    500,000 shares of our common stock; or

    such number of shares as is equal to the number of shares sufficient to cause the option pool to equal 20% of the issued and outstanding common stock of the Company as of such date, provided, however , that if on any calculation date the number of shares equal to 20% of the total issued and outstanding shares of common stock is less than the number of shares of common stock available for issuance under the 2014 Plan, no change will be made to the aggregate number of shares of common stock issuable under the 2014 Plan for that year (such that the aggregate number of shares of common stock available for issuance under the 2014 Plan will never decrease).

        The board of directors has authorized our compensation committee to administer the 2014 Plan. In accordance with the provisions of the plan, the compensation committee will determine the terms of options and other awards. The compensation committee or the independent members of our board of directors will determine:

    which employees, directors and consultants shall be granted options and other awards;

    the number of shares of our common stock subject to options and other awards;

    the exercise price of each option, which generally shall not be less than fair market value on the date of grant;

    the schedule upon which options become exercisable;

    the termination or cancellation provisions applicable to options;

    the terms and conditions of other awards, including conditions for repurchase, termination or cancellation, issue price and repurchase price; and

    all other terms and conditions upon which each award may be granted in accordance with the 2014 Plan.

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        Upon a change of control, the administrator of the 2014 Plan, or the board of directors of any corporation assuming its obligations, may, in its sole discretion, take any one or more of the following actions pursuant to our plan, as to some or all outstanding awards:

    make an appropriate and equitable adjustment in the number and kind of shares reserved for issuance under the 2014 Plan and in the number and option price of shares subject to outstanding options granted under the 2014 Plan, to the end that after such event each optionee's proportionate interest shall be maintained (to the extent possible) as immediately before the occurrence of such event; and

    to the extent feasible, make such other adjustments as may be required under the tax laws so that any Incentive Options previously granted shall not be deemed modified within the meaning of Section 424(h) of the Code; appropriate adjustments shall also be made in the case of outstanding Restricted Stock granted under the Plan.

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CERTAIN RELATIONSHIPS AND RELATED PERSON TRANSACTIONS

        There are no transactions or series of similar transactions, since January 1, 2015 to which we have been a participant in which the amount involved exceeded or will exceed $120,000 and in which any of our director, executive officer, holder of more than 5% of our capital stock, promotor or certain control person or any member of their immediate family had or will have a direct or indirect material interest.

Indemnification Agreements

        In connection with this offering, we will enter into indemnification agreements with each of our directors and executive officers. These indemnification agreements will provide the directors and executive officers with contractual rights to indemnification and expense advancement that are, in some cases, broader than the specific indemnification provisions contained under Delaware law.

Related Person Transaction Policy

        Prior to this offering, we have not had a formal policy regarding approval of transactions with related parties. We expect to adopt a related person transaction policy that sets forth our procedures for the identification, review, consideration and approval or ratification of related person transactions. The policy will become effective immediately upon the execution of the underwriting agreement for this offering. For purposes of our policy only, a related person transaction is a transaction, arrangement or relationship, or any series of similar transactions, arrangements or relationships, in which we and any related person are, were or will be participants in which the amount involved exceeds $120,000. Transactions involving compensation for services provided to us as an employee or director are not covered by this policy. A related person is any executive officer, director or beneficial owner of more than 5% of any class of our voting securities, including any of their immediate family members and any entity owned or controlled by such persons.

        Under the policy, if a transaction has been identified as a related person transaction, including any transaction that was not a related person transaction when originally consummated or any transaction that was not initially identified as a related person transaction prior to consummation, our management must present information regarding the related person transaction to our audit committee, or, if audit committee approval would be inappropriate, to another independent body of our board of directors, for review, consideration and approval or ratification. The presentation must include a description of, among other things, the material facts, the interests, direct and indirect, of the related persons, the benefits to us of the transaction and whether the transaction is on terms that are comparable to the terms available to or from, as the case may be, an unrelated third party or to or from employees generally. Under the policy, we will collect information that we deem reasonably necessary from each director, executive officer and, to the extent feasible, significant shareholder to enable us to identify any existing or potential related-person transactions and to effectuate the terms of the policy. In addition, under our Code of Conduct, our employees and directors will have an affirmative responsibility to disclose any transaction or relationship that reasonably could be expected to give rise to a conflict of interest. In considering related person transactions, our audit committee, or other independent body of our

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board of directors, will take into account the relevant available facts and circumstances including, but not limited to:

        The policy requires that, in determining whether to approve, ratify or reject a related person transaction, our audit committee, or other independent body of our board of directors, must consider, in light of known circumstances, whether the transaction is in, or is not inconsistent with, our best interests and those of our shareholders, as our audit committee, or other independent body of our board of directors, determines in the good faith exercise of its discretion.

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PRINCIPAL STOCKHOLDERS

        The following table sets forth information regarding the beneficial ownership of our common stock as of June 30, 2018 and as adjusted to reflect the sale of our common stock offered by this prospectus, by:

        Beneficial ownership is determined in accordance with the rules of the SEC and includes voting or investment power with respect to the securities. Shares of common stock that may be acquired by an individual or group within 60 days of June 30, 2018, pursuant to the exercise of convertible securities, are deemed to be outstanding for the purpose of computing the percentage ownership of such individual or group, but are not deemed to be outstanding for the purpose of computing the percentage ownership of any other person shown in the table. Percentage of ownership is based on an aggregate of 37,263,883 shares of common stock, assuming the automatic conversion of the Series A convertible preferred stock into an aggregate of 36,196,193 upon the closing of this offering.

        Except as indicated in footnotes to this table, we believe that the stockholders named in this table have sole voting and investment power with respect to all shares of common stock shown to be beneficially owned by them, based on information provided to us by such stockholders. Unless

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otherwise indicated, the address for each director and executive officer listed is: c/o Aridis Pharmaceuticals, Inc., 5941 Optical Ct. #200, San Jose, California 95138.

 
   
  Percentage of
Common
Stock Beneficially
Owned
 
Beneficial Owner
  Number of Shares
Beneficially Owned
  Before
Offering
  After
Offering
 

Directors and Executive Officers

                   

Dr. Eric Patzer (1)

    5,172,107     13.7 %                 

Dr. Vu Truong (2)

    5,787,732     15.1 %      

Robert K. Coughlin (3)

    55,714     *        

Fred Kurland (4)

    129,947     *        

Craig Gibbs (5)

    53,636     *        

John Hamilton (6)

    53,636     *        

Robert Ruffolo (7)

    38,889     *        

Wolfgang Dummer (8)

    37,500     *        

Isaac Blech (9)

    515,487     1.4 %      

Shawn Lu

        *        

All directors and officers as a group (10 persons) (10)

    11,845,008     31.1 %      

Five Percent Stockholders

                   

Hepalink USA, Inc. (11)

    6,876,926     17.8 %      

Healthcare Industry (Cayman) A Co., Limited (12)

    4,122,170     11.0 %      

Pineworld Capital Limited (13)

    3,122,158     8.2 %      

Efung Ruibo Limited (14)

    2,064,657     5.5 %      

*
Less than one percent

(1)
Includes 557,292 stock options which are currently exercisable or exercisable within 60 days of June 30, 2018.

(2)
Includes 1,172,917 stock options which are currently exercisable or exercisable within 60 days of June 30, 2018.

(3)
Includes 55,714 stock options which are currently exercisable.

(4)
Includes 129,947 stock options which are currently exercisable or exercisable within 60 days of June 30, 2018.

(5)
Includes 53,636 stock options which are currently exercisable or exercisable within 60 days of June 30, 2018.

(6)
Includes 53,636 stock options which are currently exercisable or exercisable within 60 days of June 30, 2018.

(7)
Includes 38,889 stock options which are currently exercisable or exercisable within 60 days of June 30, 2018.

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(8)
Includes 37,500 stock options which are currently exercisable or exercisable within 60 days of June 30, 2018.

(9)
Includes 515,847 common stock warrants which are currently exercisable or exercisable within 60 days of June 30, 2018.

(10)
Includes 2,615,378 stock options and common stock warrants which are currently exercisable or exercisable within 60 days of June 30, 2018.

(11)
Includes 1,341,464 warrants to purchase Shares of Series A Convertible Preferred Stock which are currently exercisable. Li Li has voting and dispositive power over such securities. Shawn Lu, our director, is the Executive Director and Chief Financial Officer of Hepalink USA, Inc.

(12)
Includes 370,370 warrants to purchase Shares of Series A Convertible Preferred Stock which are currently exercisable. Sun Feng has voting and dispositive power over such securities.

(13)
Includes 609,756 warrants to purchase Shares of Series A Convertible Preferred Stock which are currently exercisable. Hayden Zhang has voting and dispositive power over such securities.

(14)
Jinqiao Liu has voting and dispositive power over such securities.

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DESCRIPTION OF CAPITAL STOCK

General

        Upon completion of this offering, our authorized capital stock will consist of 100,000,000 shares of common stock, par value $0.0001 per share, and 60,000,000 shares of preferred stock, par value $0.0001 per share. The following description of our capital stock and provisions of our certificate of incorporation and bylaws is only a summary. You should also refer to our certificate of incorporation, a copy of which is incorporated by reference as an exhibit to the registration statement of which this prospectus is a part, and our bylaws, a copy of which is incorporated by reference as an exhibit to the registration statement of which this prospectus is a part.

Common Stock

        As of March 31, 2018, there were 37,263,883 shares of our common stock outstanding and held by over 200 stockholders, assuming the automatic conversion of all outstanding shares of our Series A convertible preferred stock into an aggregate of 36,196,193 shares of our common stock upon the closing of this offering.

        Voting Rights.     Each holder of Common Stock is entitled to one vote for each share of Common Stock on all matters submitted to a vote of the stockholders, including the election of directors. Our certificate of incorporation and bylaws do not provide for cumulative voting. Because of this, the holders of a majority of the shares of Common Stock entitled to vote in any election of directors can elect all of the directors standing for election, subject to the rights of holders of any then outstanding shares of Preferred Stock.

        Dividends.     Subject to preferences that may be applicable to any then outstanding Preferred Stock, the holders of Common Stock are entitled to receive dividends, if any, as may be declared from time to time by our Board of Directors out of legally available funds.

        Liquidation.     In the event of our liquidation, dissolution or winding up or an event of sale (as defined in our certificate of incorporation), holders of Common Stock will be entitled to share ratably in the net assets legally available for distribution to stockholders after the payment of all of our debts and other liabilities, subject to the satisfaction of any liquidation preference granted to the holders of any then outstanding shares of Preferred Stock.

        Rights and Preferences.     Holders of Common Stock have no preemptive, conversion or subscription rights, and there are no redemption or sinking fund provisions applicable to our Common Stock. The rights, preferences and privileges of the holders of Common Stock are subject to, and may be adversely affected by, the rights of the holders of shares of any series of Preferred Stock that we may designate and issue in the future.

Preferred Stock

        We are authorized to issue up to a total of 60,000,000 shares of preferred stock, par value $0.0001 per share, without stockholder approval. The preferred stock, subject to limitations prescribed by Delaware law, may be issued in one or more series, as determined by our board of directors. The board of directors shall have the power to establish the number of shares to be included in each series and to fix the designation, powers, preferences and rights of the shares of

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each series and any of its qualifications, limitations or restrictions. Our board of directors also can increase or decrease the number of shares of any series, but not below the number of shares of that series then outstanding, without any further vote or action by our stockholders. Our board of directors may authorize the issuance of preferred stock with voting or conversion rights that could adversely affect the voting power or other rights of the holders of the common stock. The issuance of preferred stock, while providing flexibility in connection with possible acquisitions and other corporate purposes, could, among other things, have the effect of delaying, deferring or preventing a change in control of our company and may adversely affect the market price of our common stock and the voting and other rights of the holders of our common stock.

Series A Convertible Preferred Stock

        In July 2014, we filed with the Secretary of State of the State of Delaware a certificate of designation for the Series A convertible preferred stock, setting forth the rights, powers, and preferences of the Series A preferred stock. Pursuant to the certificate of designation, we designated 8,828,020 shares as Series A convertible preferred stock. In July 2014 we converted the 8,828,020 common shares on a one for one basis into shares of Series A convertible preferred stock. Each share of Series A preferred stock is entitled to voting rights equivalent to the number of shares of common stock into which each share can be converted. Each of Series A convertible preferred stock is convertible at the holder's option at any time into common stock on a one for one basis and conversion is automatic upon the closing of an underwritten public offering at an issuance price of $4.10 per share. Upon the liquidation, dissolution or winding up of our business, each holder shall be entitled to receive, for each share of Series A preferred stock, out of our assets legally available therefore, a preferential amount in cash equal to $2.05 per share. If upon any such distribution our assets shall be insufficient to pay the holders of the outstanding shares of Series A convertible preferred stock the full amounts to which they are entitled, such holders shall share ratably in any distribution of assets in accordance with the sums which would be payable on such distribution if all sums payable thereon were paid in full. Any remaining assets or funds available for distribution to stockholders shall be distributed among the holders of Series A preferred stock and common stock pro rata based on the number of shares of common stock held by each (assuming conversion of all such Series A convertible preferred stock and convertible common stock, if any, according to their respective terms). Holders of the preferred stock, in preference to the holders of common stock, are entitled to receive dividends, when and if declared by the Board of Directors, but only out of funds legally available. 16,516,606 shares sold at $2.05 per share and 2,033,898 shares sold at $2.95 per share contain price based anti-dilution protection rights. Unless agreed to otherwise, if we issue additional securities at a purchase price less than the purchase price paid by these respective holders, we shall issue additional preferred shares equal to the difference of the number of preferred shares that each respective shareholder would have received if they paid the subsequent lower price, and the number of share each respective shareholder originally received.

Consent of Series A Convertible Preferred Stock Holders

        In connection with this offering, the holders of a majority of the Series A Convertible Preferred Stock approved the mandatory conversion of the Series A Preferred into shares of common stock upon completion of this offering. Upon completion of this offering we shall have no outstanding shares of preferred stock.

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Anti-Takeover Effects of Provisions of Delaware State Law

        We are governed by the provisions of Section 203 of the Delaware General Corporation Law. In general, Section 203 prohibits a public Delaware corporation from engaging in a "business combination" with an "interested stockholder" for a period of three years after the date of the transaction in which the person became an interested stockholder, unless:

        In general, Section 203 defines a "business combination" to include mergers, asset sales and other transactions resulting in financial benefit to a stockholder and an "interested stockholder" as a person who, together with affiliates and associates, owns, or within three years did own, 15% or more of the corporation's outstanding voting stock. These provisions may have the effect of delaying, deferring or preventing changes in control of our company.

        Our certificate of incorporation and our bylaws include a number of provisions that could deter hostile takeovers or delay or prevent changes in control of our board of directors or management team, including the following:

        Board of Directors Vacancies.     Our bylaws authorize only our board of directors to fill vacant directorships, including newly created seats. In addition, the number of directors constituting our board of directors will be permitted to be set only by a resolution adopted by a majority vote of our entire board of directors. These provisions would prevent a stockholder from increasing the size of our board of directors and then gaining control of our board of directors by filling the resulting vacancies with its own nominees. This will make it more difficult to change the composition of our board of directors and will promote continuity of management.

        Classified Board.     Our bylaws provide that our board of directors is classified into three classes of directors. A third party may be discouraged from making a tender offer or otherwise attempting to obtain control of us as it is more difficult and time consuming for stockholders to replace a majority of the directors on a classified board of directors. See the section titled "Management — Classified Board of Directors."

        Stockholder Action; Special Meeting of Stockholders.     Our bylaws provide that any action which may be taken at any annual or special meeting of stockholders, may, if such action has been earlier approved by the Board, be taken without a meeting.

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        As a result, a holder controlling a majority of our capital stock would not be able to amend our bylaws or remove directors without holding a meeting of our stockholders called in accordance with our bylaws unless such action had been earlier approved by the Board. Our bylaws further provide that special meetings of our stockholders may be called only by our board of directors or the chairman of our board of directors, thus prohibiting a stockholder from calling a special meeting. These provisions might delay the ability of our stockholders to force consideration of a proposal or for stockholders controlling a majority of our capital stock to take any action, including the removal of directors.

        Advance Notice Requirements for Stockholder Proposals and Director Nominations.     Our bylaws provide advance notice procedures for stockholders seeking to bring business before our annual meeting of stockholders or to nominate candidates for election as directors at our annual meeting of stockholders. Our bylaws will also specify certain requirements regarding the form and content of a stockholder's notice. These provisions might preclude our stockholders from bringing matters before our annual meeting of stockholders or from making nominations for directors at our annual meeting of stockholders if the proper procedures are not followed. We expect that these provisions may also discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer's own slate of directors or otherwise attempting to obtain control of our company.

        No Cumulative Voting.     The Delaware General Corporation Law provides that stockholders are not entitled to cumulate votes in the election of directors unless a corporation's certificate of incorporation provides otherwise. Our certificate of incorporation does not provide for cumulative voting.

        Issuance of Undesignated Preferred Stock.     Our board of directors will have the authority, without further action by our stockholders, to issue up to 20,000,000 shares of undesignated preferred stock with rights and preferences, including voting rights, designated from time to time by our board of directors. The existence of authorized but unissued shares of preferred stock would enable our board of directors to render more difficult or to discourage an attempt to obtain control of us by means of a merger, tender offer, proxy contest or other means.

Warrants

May 2014 Warrants

        In May 2014, in connection with the May 2014 convertible notes, we issued warrants to purchase shares of common stock in the aggregate value of $3,500,000 at a price and quantity that is dependent on future events. If, prior to the first anniversary date of the warrants, an initial public offering, or IPO, is consummated the exercise price will be the issuance price first offered in the IPO. If an IPO is not consummated prior to the first anniversary date the exercise price will be determined by dividing (a) $40.0 million, by (b) the aggregate number of outstanding shares of common stock on the first anniversary (assuming the full conversion, exercise or exchange of all securities outstanding on the first anniversary convertible into, exercisable or exchangeable for, shares of common stock). Upon the conversion of the May 2014 convertible notes on May 31, 2015, the exercise price of the warrants was set at $4.40 per share. The number of shares issuable upon exercise of the warrants was 795,816.

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        If at any time while these warrants are exercisable a registration statement covering the resale of these warrants are not effective with the SEC and the fair value of one warrant share is greater than the exercise price (at the date of calculation), the warrant holder may, in his sole discretion, exercise all or any part of the warrant in a "cashless" or "net-issue" exercise.

August 2014 Warrants

        On August 12, 2014 we issued warrants to purchase shares of our common stock that are exercisable any time prior to the third anniversary of the date of issuance. The number of shares of common stock issuable upon the exercise of the three year warrants will be equal to $3,250,000 divided by either (i) the per share price at which the common stock is first offered to the public in an underwritten public offering if such underwritten public offering is consummated on or before August 12, 2015 or (ii) if no such offering is consummated on or before August 12, 2015, the quotient obtained by dividing (a) $50 million, by (b) the aggregate number of outstanding shares of common stock on August 12, 2015 (assuming the full conversion, exercise or exchange of all securities outstanding on such date convertible into, exercisable or exchangeable for, shares of common stock, other than the notes issued in our August 12, 2014 private placement). The exercise price is subject to adjustment in certain circumstances. Upon the conversion of the August 2014 convertible notes on August 12, 2015, the exercise price of the warrants was set at $5.03 per share. The number of shares issuable upon exercise of the warrants was 645,723.

        If at any time while these warrants are exercisable a registration statement covering the resale of these warrants are not effective with the SEC and the fair value of one warrant share is greater than the exercise price (at the date of calculation), the warrant holder may, in his sole discretion, exercise all or any part of the warrant in a "cashless" or "net-issue" exercise.

        On August 12, 2017, all August 2014 warrants expired unexercised.

December 2015 Warrants

        In December 2015, in connection with the December 2015 convertible notes offering, the Company issued warrants to purchase shares of common stock in the aggregate value of $3,750,000 at a price and quantity that is dependent on future events. If, prior to the first anniversary date of the warrants, an IPO is consummated the exercise price will be the issuance price first offered in the IPO. If an IPO is not consummated prior to the first anniversary date the exercise price will be determined by dividing (a) $60.0 million, by (b) the aggregate number of outstanding shares of common stock on the first anniversary (assuming the full conversion, exercise or exchange of all securities outstanding on the first anniversary convertible into, exercisable or exchangeable for, shares of common stock). Upon the conversion of the December 2015 convertible notes on December 15, 2016, the exercise price of the warrants was set at $2.35 per share. The number of shares issuable upon exercise of the warrants was 1,594,361.

        If at any time while these warrants are exercisable a registration statement covering the resale of these warrants are not effective with the SEC and the fair value of one warrant share is greater than the exercise price (at the date of calculation), the warrant holder may, in his sole discretion, exercise all or any part of the warrant in a "cashless" or "net-issue" exercise.

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Transfer Agent and Registrar

        The transfer agent and registrar for our common stock is Philadelphia Stock Transfer, Inc. The transfer agent and registrar's address is 2320 Haverford Rd., Suite 230, Ardmore, PA 19003.

Stock Market Listing

        We have applied to list our shares of common stock for listing on The Nasdaq Capital Market under the symbol "ARDS."

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SHARES ELIGIBLE FOR FUTURE SALE

        Prior to this offering, there has been no public market for our common stock, and a liquid trading market for our common stock may not develop or be sustained after this offering. Future sales of substantial amounts of our common stock in the public market, or the anticipation of these sales, could materially and adversely affect market prices prevailing from time to time, and could impair our ability to raise capital through sales of equity or equity-related securities.

        Only a limited number of shares of our common stock will be available for sale in the public market for a period of several months after completion of this offering due to contractual and legal restrictions on resale described below. Nevertheless, sales of a substantial number of shares of our common stock in the public market after such restrictions lapse, or the perception that those sales may occur, could materially and adversely affect the prevailing market price of our common stock. Although we have applied to list our common stock on The Nasdaq Capital Market we cannot assure you that there will be an active market for our common stock.

        Of the shares to be outstanding immediately after the completion of this offering, we expect that the            shares to be sold in this offering will be freely tradable without restriction under the Securities Act unless purchased by our "affiliates," as that term is defined in Rule 144 under the Securities Act. The remaining            shares of our common stock outstanding after this offering will be "restricted securities" under Rule 144, and we expect that            of these restricted securities will be subject to the 180-day lock-up period under the lock-up agreements as described below. These restricted securities may be sold in the public market only if registered or pursuant to an exemption from registration, such as Rule 144 or Rule 701 under the Securities Act.

Rule 144

        In general, under Rule 144 as currently in effect, once we have been subject to the public company reporting requirements of Section 13 or Section 15(d) of the Exchange Act for at least 90 days, a person who is not deemed to have been one of our affiliates for purposes of the Securities Act at any time during the 90 days preceding a sale and who has beneficially owned the shares of our common stock proposed to be sold for at least six months is entitled to sell those shares without complying with the manner of sale, volume limitation or notice provisions of Rule 144, subject to compliance with the public information requirements of Rule 144. If such a person has beneficially owned the shares proposed to be sold for at least one year, including the holding period of any prior owner other than our affiliates, then that person would be entitled to sell those shares without complying with any of the requirements of Rule 144.

        In general, under Rule 144, as currently in effect, our affiliates or persons selling shares of our common stock on behalf of our affiliates are entitled to sell upon expiration of the market standoff agreements and lock-up agreements described above, within any three-month period, a number of shares that does not exceed the greater of:

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        Sales under Rule 144 by our affiliates or persons selling shares of our common stock on behalf of our affiliates are also subject to certain manner of sale provisions and notice requirements and to the availability of current public information about us.

Rule 701

        Rule 701 generally allows a stockholder who purchased shares of our common stock pursuant to a written compensatory plan or contract and who is not deemed to have been an affiliate of ours during the immediately preceding 90 days to sell these shares in reliance upon Rule 144, but without being required to comply with the public information, holding period, volume limitation, or notice provisions of Rule 144. Rule 701 also permits affiliates of ours to sell their Rule 701 shares under Rule 144 without complying with the holding period requirements of Rule 144. All holders of Rule 701 shares, however, are required to wait until 90 days after the date of this prospectus before selling such shares pursuant to Rule 701 and until expiration of the 180-day lock-up period described below.

Lock-Up Agreements

        In connection with this offering, we, our officers and directors, and our other shareholders, have agreed to a 180 day "lock-up" period from the closing of this offering, with respect to the shares that they beneficially own, including shares issuable upon the exercise of convertible securities and options that are currently outstanding or which may be issued. This means that, for a period of 180 days following the closing of this offering, such persons may not offer, sell, pledge or otherwise dispose of these securities without the prior written consent of the underwriters. The 180 day restricted period is subject to extension upon certain events and the terms of the lock-up agreements may be waived at the underwriters' discretion. The lock-up restrictions, specified exceptions and the circumstances under which the 180-day lock-up period may be extended are described in more detail under "Underwriting."

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MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES TO
NON-U.S. HOLDERS OF OUR COMMON STOCK

        The following is a summary of the material U.S. federal income tax consequences to non-U.S. holders (as defined below) of the ownership and disposition of our common stock but does not purport to be a complete analysis of all the potential tax considerations relating thereto. This summary is based upon the provisions of the Internal Revenue Code of 1986, as amended, or the Internal Revenue Code, Treasury regulations promulgated thereunder, administrative rulings and judicial decisions, all as of the date hereof. These authorities may be changed, possibly retroactively, so as to result in U.S. federal income tax consequences different from those set forth below. No ruling on the U.S. federal, state, or local tax considerations relevant to our operations or to the purchase, ownership or disposition of our shares, has been requested from, the Internal Revenue Service, or the IRS, or other tax authority. No assurance can be given that the IRS would not assert, or that a court would not sustain, a position contrary to any of the tax consequences described below.

        This summary also does not address the tax considerations arising under the laws of any non-U.S., state or local jurisdiction, or under U.S. federal gift and estate tax laws, except to the limited extent set forth below. In addition, this discussion does not address tax considerations applicable to an investor's particular circumstances or to investors that may be subject to special tax rules, including, without limitation:

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        In addition, if a partnership or entity classified as a partnership for U.S. federal income tax purposes holds our common stock, the tax treatment of a partner generally will depend on the status of the partner and upon the activities of the partnership. Accordingly, partnerships that hold our common stock, and partners in such partnerships, should consult their tax advisors.

         You are urged to consult your tax advisor with respect to the application of the U.S. federal income tax laws to your particular situation, as well as any tax consequences of the purchase, ownership and disposition of our common stock arising under the U.S. federal estate or gift tax rules or under the laws of any state, local, non-U.S., or other taxing jurisdiction or under any applicable tax treaty.

Non-U.S. Holder Defined

        For purposes of this discussion, you are a non-U.S. holder (other than a partnership) if you are any holder other than:

Distributions

        As described in "Dividend Policy," we have never declared or paid cash dividends on our common stock and do not anticipate paying any dividends on our common stock in the foreseeable future. However, if we do make distributions on our common stock, those payments will constitute dividends for U.S. tax purposes to the extent paid from our current or accumulated earnings and profits, as determined under U.S. federal income tax principles. To the extent those distributions exceed both our current and our accumulated earnings and profits, they will constitute a return of capital and will first reduce your basis in our common stock, but not below zero, and then will be treated as gain from the sale of stock as described below under "— Gain on Disposition of Common Stock."

        Subject to the discussion below on effectively connected income, backup withholding and foreign accounts, any dividend paid to you generally will be subject to U.S. withholding tax either at a rate of 30% of the gross amount of the dividend or such lower rate as may be specified by an

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applicable income tax treaty. In order to receive a reduced treaty rate, you must provide us with an IRS Form W-8BEN, IRS Form W-8BEN-E or other appropriate version of IRS Form W-8 certifying qualification for the reduced rate. A non-U.S. holder of shares of our common stock eligible for a reduced rate of U.S. withholding tax pursuant to an income tax treaty may obtain a refund of any excess amounts withheld by timely filing an appropriate claim for refund with the IRS. If the non-U.S. holder holds the stock through a financial institution or other agent acting on the non-U.S. holder's behalf, the non-U.S. holder will be required to provide appropriate documentation to the agent, which then will be required to provide certification to us or our paying agent, either directly or through other intermediaries.

        Dividends received by you that are effectively connected with your conduct of a U.S. trade or business (and, if required by an applicable income tax treaty, attributable to a permanent establishment maintained by you in the United States) are generally exempt from such withholding tax. In order to obtain this exemption, you must provide us with an IRS Form W-8ECI or other applicable IRS Form W-8 properly certifying such exemption. Such effectively connected dividends, although not subject to withholding tax, are taxed at the same graduated rates applicable to U.S. persons, net of certain deductions and credits. In addition, if you are a corporate non-U.S. holder, dividends you receive that are effectively connected with your conduct of a U.S. trade or business may also be subject to a branch profits tax at a rate of 30% or such lower rate as may be specified by an applicable income tax treaty. You should consult your tax advisor regarding any applicable tax treaties that may provide for different rules.

Gain on Disposition of Common Stock

        Subject to the discussion below regarding backup withholding and foreign accounts, you generally will not be required to pay U.S. federal income tax on any gain realized upon the sale or other disposition of our common stock unless:

        We believe that we are not currently and will not become a USRPHC for U.S. federal income tax purposes, and the remainder of this discussion so assumes. However, because the determination of whether we are a USRPHC depends on the fair market value of our U.S. real property relative to the fair market value of our other business assets, there can be no assurance that we will not become a USRPHC in the future. Even if we become a USRPHC, however, as long as our common stock is regularly traded on an established securities market, such common stock will be treated as U.S. real property interests only if you actually or constructively hold more

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than five percent of such regularly traded common stock at any time during the shorter of the five-year period preceding your disposition of, or your holding period for, our common stock.

        If you are a non-U.S. holder described in the first bullet above, you will be required to pay tax on the net gain derived from the sale under regular graduated U.S. federal income tax rates, and a corporate non-U.S. holder described in the first bullet above also may be subject to the branch profits tax at a 30% rate, or such lower rate as may be specified by an applicable income tax treaty. If you are an individual non-U.S. holder described in the second bullet above, you will be required to pay a flat 30% tax (or such lower rate specified by an applicable income tax treaty) on the gain derived from the sale, which gain may be offset by U.S. source capital losses for the year (provided you have timely filed U.S. federal income tax returns with respect to such losses). You should consult any applicable income tax or other treaties that may provide for different rules.

Federal Estate Tax

        Our common stock beneficially owned by an individual who is not a citizen or resident of the United States (as defined for U.S. federal estate tax purposes) at the time of their death will generally be includable in the decedent's gross estate for U.S. federal estate tax purposes, unless an applicable estate tax treaty provides otherwise. The test for whether an individual is a resident of the United States for U.S. federal estate tax purposes differs from the test used for U.S. federal income tax purposes. Some individuals, therefore, may be non-U.S. holders for U.S. federal income tax purposes, but not for U.S. federal estate tax purposes, and vice versa.

Backup Withholding and Information Reporting

        Generally, we must report annually to the IRS the amount of dividends paid to you, your name and address and the amount of tax withheld, if any. A similar report will be sent to you. Pursuant to applicable income tax treaties or other agreements, the IRS may make these reports available to tax authorities in your country of residence.

        Payments of dividends or of proceeds on the disposition of stock made to you may be subject to information reporting and backup withholding at a current rate of 24% unless you establish an exemption, for example, by properly certifying your non-U.S. status on an IRS Form W-8BEN, IRS Form W-8BEN-E or another appropriate version of IRS Form W-8.

        Backup withholding is not an additional tax; rather, the U.S. federal income tax liability of persons subject to backup withholding will be reduced by the amount of tax withheld. If withholding results in an overpayment of taxes, a refund or credit may generally be obtained from the IRS, provided that the required information is furnished to the IRS in a timely manner.

Foreign Account Tax Compliance

        The Foreign Account Tax Compliance Act, or FATCA, imposes withholding tax at a rate of 30% on dividends on and gross proceeds from the sale or other disposition of our common stock paid to "foreign financial institutions" (as specially defined under these rules), unless such institution enters into an agreement with the U.S. government to withhold on certain payments and to collect and provide to the U.S. tax authorities substantial information regarding the U.S. account holders of such institution (which includes certain equity and debt holders of such

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institution, as well as certain account holders that are foreign entities with U.S. owners) or otherwise establishes an exemption. FATCA also generally imposes a U.S. federal withholding tax of 30% on dividends on and gross proceeds from the sale or other disposition of our common stock paid to a "non-financial foreign entity" (as specially defined for purposes of these rules) unless such entity provides the withholding agent with a certification identifying certain substantial direct and indirect U.S. owners of the entity, certifies that there are none or otherwise establishes an exemption. The withholding provisions under FATCA generally apply to dividends on our common stock, and under current transition rules, are expected to apply with respect to the gross proceeds from the sale or other disposition of our common stock on or after January 1, 2019. An intergovernmental agreement between the United States and an applicable foreign country may modify the requirements described in this paragraph. Non-U.S. holders should consult their own tax advisors regarding the possible implications of this legislation on their investment in our common stock.

         Each prospective investor should consult its own tax advisor regarding the particular U.S. federal, state and local and non-U.S. tax consequences of purchasing, holding and disposing of our common stock, including the consequences of any proposed change in applicable laws.

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UNDERWRITING

Underwriting

        Cantor Fitzgerald & Co. is acting as the sole book running manager of the offering and representative of the underwriters named below. Subject to the terms and conditions stated in the underwriting agreement dated the date of this prospectus, each underwriter named below has severally and not jointly agreed to purchase, and we have agreed to sell to that underwriter, the number of shares set forth opposite the underwriter's name.

Underwriter
  Number
of Shares
 

Cantor Fitzgerald & Co. 

       

Maxim Group LLC

       

Northland Securities, Inc. 

       

Total

       

        The underwriting agreement provides that the obligations of the underwriters to purchase the shares included in this offering are subject to approval of legal matters by counsel and to other conditions. The underwriters are obligated to purchase all the shares (other than those covered by the over-allotment option described below) if they purchase any of the shares.

        Shares sold by the underwriters to the public will initially be offered at the initial public offering price set forth on the cover of this prospectus. Any shares sold by the underwriters to securities dealers may be sold at a discount from the initial public offering price not to exceed $            per share. If all the shares are not sold at the initial offering price, the underwriters may change the offering price and the other selling terms. The representative has advised us that the underwriters do not intend to make sales to discretionary accounts.

Underwriting discounts and commissions

        The following table shows the underwriting discounts and commissions that we are to pay to the underwriters in connection with this offering. These amounts are shown assuming both no exercise and full exercise of the underwriters' over-allotment option.

 
  Paid by the Company  
 
  No Exercise   Full Exercise  

Per share

  $     $    

Total

  $     $    

Indemnification

        We have agreed to indemnify the underwriters against certain liabilities, including liabilities under the Securities Act, or to contribute to payments the underwriters may be required to make because of any of those liabilities.

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Overallotment Option to Purchase Additional Shares

        If the underwriters sell more shares than the total number set forth in the table above, we have granted to the underwriters an option, exercisable for 30 days from the date of this prospectus, to purchase up to            additional shares at the public offering price less the underwriting discount. The underwriters may exercise the option solely for the purpose of covering over-allotments, if any, in connection with this offering. To the extent the option is exercised, each underwriter must purchase a number of additional shares approximately proportionate to that underwriter's initial purchase commitment. Any shares issued or sold under the option will be issued and sold on the same terms and conditions as the other shares that are the subject of this offering.

Lock-Ups

        We, our officers and directors, and our other shareholders have agreed that, for a period of 180 days from the date of this prospectus, we and they will not, without the prior written consent of Cantor Fitzgerald & Co., dispose of or hedge any shares or any securities convertible into or exchangeable for our common stock.

Determination of Offering Price

        Prior to this offering, there has been no public market for our shares. Consequently, the initial public offering price for the shares was determined by negotiations between us and the representative. Among the factors considered in determining the initial public offering price were our results of operations, our current financial condition, our future prospects, our markets, the economic conditions in and future prospects for the industry in which we compete, our management, and currently prevailing general conditions in the equity securities markets, including current market valuations of publicly traded companies considered comparable to our company. We cannot assure you, however, that the price at which the shares will sell in the public market after this offering will not be lower than the initial public offering price or that an active trading market in our shares will develop and continue after this offering.

The Nasdaq Capital Market Listing

        We have applied to have our shares listed on The Nasdaq Capital Market under the symbol "ARDS."

Expenses and Reimbursements

        We estimate that our portion of the total expenses of this offering will be $            . We have agreed to reimburse the underwriters up to $            for expenses related to any filing with, and any clearance of this offering by, the Financial Industry Regulatory Authority (FINRA).

Price Stabilization, Short Positions and Penalty Bids

        In connection with the offering, the underwriters may purchase and sell shares in the open market. Purchases and sales in the open market may include short sales, purchases to cover short

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positions, which may include purchases pursuant to the over-allotment option, and stabilizing purchases.

    Short sales involve secondary market sales by the underwriters of a greater number of shares than they are required to purchase in the offering.

    "Covered" short sales are sales of shares in an amount up to the number of shares represented by the underwriters' over-allotment option.

    "Naked" short sales are sales of shares in an amount in excess of the number of shares represented by the underwriters' over-allotment option.

    Covering transactions involve purchases of shares either pursuant to the underwriters' over-allotment option or in the open market in order to cover short positions.

    To close a naked short position, the underwriters must purchase shares in the open market. A naked short position is more likely to be created if the underwriters are concerned that there may be downward pressure on the price of the shares in the open market after pricing that could adversely affect investors who purchase in the offering.

    To close a covered short position, the underwriters must purchase shares in the open market or must exercise the over-allotment option. In determining the source of shares to close the covered short position, the underwriters will consider, among other things, the price of shares available for purchase in the open market as compared to the price at which they may purchase shares through the over-allotment option.

    Stabilizing transactions involve bids to purchase shares so long as the stabilizing bids do not exceed a specified maximum.

        Purchases to cover short positions and stabilizing purchases, as well as other purchases by the underwriters for their own accounts, may have the effect of preventing or retarding a decline in the market price of the shares. They may also cause the price of the shares to be higher than the price that would otherwise exist in the open market in the absence of these transactions. The underwriters may conduct these transactions on The Nasdaq Capital Market, in the over-the-counter market or otherwise. If the underwriters commence any of these transactions, they may discontinue them at any time.

Electronic Distribution

        In connection with the offering, certain of the underwriters or securities dealers may distribute prospectuses by electronic means, such as e-mail.

Other Relationships

        The underwriters are full service financial institutions engaged in various activities, which may include securities trading, commercial and investment banking, financial advisory, investment management, principal investment, hedging, financing and brokerage activities. The underwriters and their respective affiliates have in the past performed commercial banking, investment banking and advisory services for us from time to time for which they have received customary fees and reimbursement of expenses and may, from time to time, engage in transactions with and perform services for us in the ordinary course of their business for which they may receive customary fees

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and reimbursement of expenses. In the ordinary course of their various business activities, the underwriters and their respective affiliates may make or hold a broad array of investments and actively trade debt and equity securities (or related derivative securities) and financial instruments (which may include bank loans and/or credit default swaps) for their own account and for the accounts of their customers and may at any time hold long and short positions in such securities and instruments. Such investments and securities activities may involve securities and/or instruments of ours or our affiliates. The underwriters and their affiliates may also make investment recommendations and/or publish or express independent research views in respect of such securities or financial instruments and may hold, or recommend to clients that they acquire, long and/or short positions in such securities and instruments.

Sales Outside the United States

        No action has been taken in any jurisdiction (except in the United States) that would permit a public offering of our common stock, or the possession, circulation or distribution of this prospectus or any other material relating to us or our common stock in any jurisdiction where action for that purpose is required. Accordingly, the shares of common stock may not be offered or sold, directly or indirectly, and neither this prospectus nor any other offering material or advertisements in connection with our common stock may be distributed or published, in or from any country or jurisdiction, except in compliance with any applicable rules and regulations of any such country or jurisdiction.

        The underwriters may arrange to sell the common stock offered hereby in certain jurisdictions outside the United States, either directly or through affiliates, where it is permitted to do so.

European Economic Area

        In relation to each Member State of the European Economic Area which has implemented the Prospectus Directive (each, a "Relevant Member State") an offer to the public of our common shares may not be made in that Relevant Member State, except that an offer to the public in that Relevant Member State of our common shares may be made at any time under the following exemptions under the Prospectus Directive:

    (a)
    to any legal entity which is a qualified investor as defined in the Prospectus Directive;

    (b)
    to fewer than 150 natural or legal persons (other than qualified investors as defined in the Prospectus Directive), subject to obtaining the prior consent of the representative for any such offer; or

    (c)
    in any other circumstances falling within Article 3(2) of the Prospectus Directive.

        We provided that no such offer of shares of our common stock shall result in a requirement for the publication by us or any underwriter of a prospectus pursuant to Article 3 of the Prospectus Directive.

        For the purposes of this provision, the expression an "offer to the public" in relation to our common shares in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer and our common shares to be offered so as to enable an investor to decide to purchase our common shares, as the same may be varied in that Member State by any measure implementing the Prospectus Directive in that Member State,

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the expression "Prospectus Directive" means Directive 2003/71/EC (as amended), including by Directive 2010/73/EU, and includes any relevant implementing measure in the Relevant Member State.

        This European Economic Area selling restriction is in addition to any other selling restrictions set out below.

United Kingdom

        In the United Kingdom, this prospectus is only addressed to and directed as qualified investors who are (i) investment professionals falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the Order); or (ii) high net worth entities and other persons to whom it may lawfully be communicated, falling within Article 49(2)(a) to (d) of the Order (all such persons together being referred to as "relevant persons"). Any investment or investment activity to which this prospectus relates is available only to relevant persons and will only be engaged with relevant persons. Any person who is not a relevant person should not act or relay on this prospectus or any of its contents.

Hong Kong

        The shares may not be offered or sold in Hong Kong by means of any document other than (i) in circumstances which do not constitute an offer to the public within the meaning of the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap. 32 of the Laws of Hong Kong) ("Companies (Winding Up and Miscellaneous Provisions) Ordinance") or which do not constitute an invitation to the public within the meaning of the Securities and Futures Ordinance (Cap. 571 of the Laws of Hong Kong) ("Securities and Futures Ordinance"), or (ii) to "professional investors" as defined in the Securities and Futures Ordinance and any rules made thereunder, or (iii) in other circumstances which do not result in the document being a "prospectus" as defined in the Companies (Winding Up and Miscellaneous Provisions) Ordinance, and no advertisement, invitation or document relating to the shares may be issued or may be in the possession of any person for the purpose of issue (in each case whether in Hong Kong or elsewhere), which is directed at, or the contents of which are likely to be accessed or read by, the public in Hong Kong (except if permitted to do so under the securities laws of Hong Kong) other than with respect to shares which are or are intended to be disposed of only to persons outside Hong Kong or only to "professional investors" in Hong Kong as defined in the Securities and Futures Ordinance and any rules made thereunder.

Singapore

        This prospectus has not been registered as a prospectus with the Monetary Authority of Singapore. Accordingly, this prospectus and any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of the shares may not be circulated or distributed, nor may the shares be offered or sold, or be made the subject of an invitation for subscription or purchase, whether directly or indirectly, to persons in Singapore other than (i) to an institutional investor (as defined under Section 4A of the Securities and Futures Act, Chapter 289 of Singapore (the "SFA")) under Section 274 of the SFA, (ii) to a relevant person (as defined in Section 275(2) of the SFA) pursuant to Section 275(1) of the SFA, or any person pursuant to Section 275(1A) of the SFA, and in accordance with the conditions specified in

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Section 275 of the SFA or (iii) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA, in each case subject to conditions set forth in the SFA.

        Where the shares are subscribed or purchased under Section 275 of the SFA by a relevant person which is a corporation (which is not an accredited investor (as defined in Section 4A of the SFA)) the sole business of which is to hold investments and the entire share capital of which is owned by one or more individuals, each of whom is an accredited investor, the securities (as defined in Section 239(1) of the SFA) of that corporation shall not be transferable for 6 months after that corporation has acquired the shares under Section 275 of the SFA except: (1) to an institutional investor under Section 274 of the SFA or to a relevant person (as defined in Section 275(2) of the SFA), (2) where such transfer arises from an offer in that corporation's securities pursuant to Section 275(1A) of the SFA, (3) where no consideration is or will be given for the transfer, (4) where the transfer is by operation of law, (5) as specified in Section 276(7) of the SFA, or (6) as specified in Regulation 32 of the Securities and Futures (Offers of Investments) (Shares and Debentures) Regulations 2005 of Singapore ("Regulation 32").

        Where the shares are subscribed or purchased under Section 275 of the SFA by a relevant person which is a trust (where the trustee is not an accredited investor (as defined in Section 4A of the SFA)) whose sole purpose is to hold investments and each beneficiary of the trust is an accredited investor, the beneficiaries' rights and interest (howsoever described) in that trust shall not be transferable for 6 months after that trust has acquired the shares under Section 275 of the SFA except: (1) to an institutional investor under Section 274 of the SFA or to a relevant person (as defined in Section 275(2) of the SFA), (2) where such transfer arises from an offer that is made on terms that such rights or interest are acquired at a consideration of not less than S$200,000 (or its equivalent in a foreign currency) for each transaction (whether such amount is to be paid for in cash or by exchange of securities or other assets), (3) where no consideration is or will be given for the transfer, (4) where the transfer is by operation of law, (5) as specified in Section 276(7) of the SFA, or (6) as specified in Regulation 32.

Japan

        The securities have not been and will not be registered under the Financial Instruments and Exchange Act of Japan (Act No. 25 of 1948, as amended), or the FIEA. The securities may not be offered or sold, directly or indirectly, in Japan or to or for the benefit of any resident of Japan (including any person resident in Japan or any corporation or other entity organized under the laws of Japan) or to others for reoffering or resale, directly or indirectly, in Japan or to or for the benefit of any resident of Japan, except pursuant to an exemption from the registration requirements of the FIEA and otherwise in compliance with any relevant laws and regulations of Japan.

Canada

        The securities may be sold in Canada only to purchasers purchasing, or deemed to be purchasing, as principal that are accredited investors, as defined in National Instrument 45-106 Prospectus Exemptions or subsection 73.3(1) of the Securities Act (Ontario), and are permitted clients, as defined in National Instrument 31-103 Registration Requirements, Exemptions, and Ongoing Registrant Obligations. Any resale of the securities must be made in accordance with an exemption form, or in a transaction not subject to, the prospectus requirements of applicable

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securities laws. Securities legislation in certain provinces or territories of Canada may provide a purchaser with remedies for rescission or damages if this offering memorandum (including any amendment thereto) contains a misrepresentation, provided that the remedies for rescission or damages are exercised by the purchaser within the time limit prescribed by the securities legislation of the purchaser's province or territory. The purchaser should refer to any applicable provisions of the securities legislation of the purchaser's province or territory of these rights or consult with a legal advisor. Pursuant to section 3A.3 of National Instrument 33-105 Underwriting Conflicts (NI 33-105), the underwriters are not required to comply with the disclosure requirements of NI 33-105 regarding underwriter conflicts of interest in connection with this offering.

Switzerland

        The shares of common stock may not be publicly offered in Switzerland and will not be listed on the SIX Swiss Exchange, or SIX, or on any other stock exchange or regulated trading facility in Switzerland. This document has been prepared without regard to the disclosure standards for issuance prospectuses under art. 652a or art. 1156 of the Swiss Code of Obligations or the disclosure standards for listing prospectuses under art. 27 ff. of the SIX Listing Rules or the listing rules of any other stock exchange or regulated trading facility in Switzerland. Neither this document nor any other offering or marketing material relating to the shares or the offering may be publicly distributed or otherwise made publicly available in Switzerland. Neither this document nor any other offering or marketing material relating to the offering, us, or the shares have been or will be filed with or approved by any Swiss regulatory authority. In particular, this document will not be filed with, and the offer of shares will not be supervised by, the Swiss Financial Market Supervisory Authority FINMA, or FINMA, and the offer of shares has not been and will not be authorized under the Swiss Federal Act on Collective Investment Schemes, or CISA. The investor protection afforded to acquirers of interests in collective investment schemes under the CISA does not extend to acquirers of shares.

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LEGAL MATTERS

        The validity of the issuance of the common stock offered by us in this offering will be passed upon for us by Sheppard, Mullin, Richter & Hampton, LLP New York, New York. Certain matters are being passed on for the underwriters by Cooley LLP, San Francisco, California.


EXPERTS

        Mayer Hoffman McCann P.C., our independent registered public accounting firm, has audited our consolidated balance sheets as of December 31, 2017 and 2016, and the related consolidated statements of operations, changes in convertible preferred stock and stockholders' deficit and cash flows for each of the years ended December 31, 2017 and 2016, as set forth in their report. We have included our consolidated financial statements in this prospectus and in this registration statement in reliance on the report of Mayer Hoffman McCann P.C. given on their authority as experts in accounting and auditing.


WHERE YOU CAN FIND MORE INFORMATION

        We have filed with the SEC a registration statement on Form S-1 under the Securities Act with respect to the common stock offered by this prospectus. This prospectus, which is part of the registration statement, omits certain information, exhibits, schedules and undertakings set forth in the registration statement. For further information pertaining to us and our common stock, reference is made to the registration statement and the exhibits and schedules to the registration statement. Statements contained in this prospectus as to the contents or provisions of any documents referred to in this prospectus are not necessarily complete, and in each instance where a copy of the document has been filed as an exhibit to the registration statement, reference is made to the exhibit for a more complete description of the matters involved.

        You may read and copy all or any portion of the registration statement without charge at the public reference room of the SEC at 100 F Street, N.E., Washington, D.C. 20549. Copies of the registration statement may be obtained from the SEC at prescribed rates from the public reference room of the SEC at such address. You may obtain information regarding the operation of the public reference room by calling 1-800-SEC-0330. In addition, registration statements and certain other filings made with the SEC electronically are publicly available through the SEC's website at https://www.sec.gov . The registration statement, including all exhibits and amendments to the registration statement, has been filed electronically with the SEC.

        Upon completion of this offering, we will become subject to the information and periodic reporting requirements of the Exchange Act and, accordingly, will be required to file annual reports containing financial statements audited by an independent public accounting firm, quarterly reports containing unaudited financial data, current reports, proxy statements and other information with the SEC. You will be able to inspect and copy such periodic reports, proxy statements and other information at the SEC's public reference room, and the website of the SEC referred to above.

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CONSOLIDATED FINANCIAL STATEMENTS

ARIDIS PHARMACEUTICALS, INC.
Index to Consolidated Financial Statements

 
  Page(s)  

Report of Independent Registered Public Accounting Firm

    F-2  

Consolidated Balance Sheets

    F-3  

Consolidated Statements of Operations

    F-4  

Consolidated Statements of Changes in Convertible Preferred Stock and Stockholders' Deficit

    F-5  

Consolidated Statements of Cash Flows

    F-6  

Notes to Consolidated Financial Statements

    F-7  

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of
Aridis Pharmaceuticals, Inc.

Opinion on the Financial Statements

        We have audited the accompanying consolidated balance sheets of Aridis Pharmaceuticals, Inc. ("Company") as of December 31, 2017 and 2016, and the related consolidated statements of operations, changes in convertible preferred stock and stockholders' deficit, and cash flows for each of the two years in the period ended December 31, 2017, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2017 and 2016, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2017, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

        These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

        We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.

        Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ Mayer Hoffman McCann P.C.

We have served as the Company's auditor since 2014.

San Diego, CA
April 19, 2018

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Aridis Pharmaceuticals, Inc.

Consolidated Balance Sheets

(In thousands, except share and per share amounts)

 
  December 31,    
   
 
  March 31,
2018
  Pro Forma
March 31,
2018
 
  2017   2016
 
   
   
  (unaudited)
  (unaudited)

Assets

                     

Current assets:

                     

Cash and cash equivalents

  $ 25,096   $ 22,291   $ 20,387    

Accounts receivable

        67        

Prepaid expenses & other current assets

    244     51     634    

Total current assets

    25,340     22,409     21,021    

Property and equipment, net

    750     39     1,182    

Intangible assets, net

    43     48     42    

Other assets

    345     41     345    

Total assets

  $ 26,478   $ 22,537   $ 22,590    

Liabilities, Convertible Preferred Stock and Stockholders' Deficit

                     

Current liabilities:

                     

Accounts payable

  $ 933   $ 678   $ 3,499    

Accrued liabilities

    2,121     1,719     1,783    

Deferred revenue

    120         797    

Dividends payable

            817    

Total current liabilities

    3,174     2,397     6,896    

Warrant liability

    11,868     6,365     11,906    

Total liabilities

    15,042     8,762     18,802    

Series A convertible preferred stock (par value, $0.0001 per share; shares authorized: 60,000,000, 50,000,000 and 60,000,000, respectively; shares issued and outstanding: 36,196,193, 28,730,005 and 36,196,193, respectively; $74,202, $58,897 and $74,202 aggregate liquidation preference as of December 31, 2017 and 2016 and March 31, 2018, respectively)

    74,202     58,897     74,202    

Total convertible preferred stock

    74,202     58,897     74,202    

Commitments and contingencies (Note 11)

                     

Stockholders' deficit:

   
 
   
 
   
 
 

 

Common stock (par value, $0.0001 per share; shares authorized: 100,000,000, 200,000,000 and 100,000,000, respectively; shares issued and outstanding: 1,067,690, as of December 31, 2017 and 2016 and March 31, 2018)

   
   
   
   

Additional paid-in capital

    (15,140 )   (24,945 )   (14,637 )  

Accumulated deficit

    (47,626 )   (20,177 )   (55,777 )  

Total stockholders' deficit

    (62,766 )   (45,122 )   (70,414 )  

Total liabilities, convertible preferred stock and stockholders' deficit

  $ 26,478   $ 22,537   $ 22,590    

   

See accompanying notes to the consolidated financial statements.

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Aridis Pharmaceuticals, Inc.

Consolidated Statements of Operations

(In thousands, except share and per share amounts)

 
  Year Ended
December 31,
  Three Months Ended
March 31,
 
 
  2017   2016   2018   2017  
 
   
   
  (unaudited)
  (unaudited)
 

Revenue:

                         

Contract revenue

  $   $ 2,068   $   $  

Collaboration revenue

    771              

Grant revenue

    89     201     322     22  

Revenue

    860     2,269     322     22  

Operating expenses:

                         

Cost of contract revenue

        1,927          

Research and development

    17,438     6,261     6,626     4,818  

General and administrative

    3,160     1,965     1,066     1,027  

Total operating expenses

    20,598     10,153     7,692     5,845  

Loss from operations

    (19,738 )   (7,884 )   (7,370 )   (5,823 )

Other expense:

                         

Interest and other income (expense), net

    234     (366 )   74     25  

Change in fair value of warrant liability

    (5,152 )   (172 )   (38 )   (2,414 )

Net loss

  $ (24,656 ) $ (8,422 ) $ (7,334 ) $ (8,212 )

Preferred dividends

  $ (2,793 ) $ (465 ) $ (817 ) $ (534 )

Net loss available to common stockholders

  $ (27,449 ) $ (8,887 ) $ (8,151 ) $ (8,746 )

Weighted-average shares outstanding used in computing net loss available to common stockholders:

                         

Basic

    1,067,690     1,067,690     1,067,690     1,067,690  

Diluted

    1,067,690     1,067,690     1,067,690     1,067,690  

Net loss per common share:

                         

Basic

  $ (23.09 ) $ (7.89 ) $ (6.87 ) $ (7.69 )

Diluted

  $ (23.09 ) $ (7.89 ) $ (6.87 ) $ (7.69 )

Preferred dividends:

                         

Basic

  $ (2.62 ) $ (0.44 ) $ (0.76 ) $ (0.50 )

Diluted

  $ (2.62 ) $ (0.44 ) $ (0.76 ) $ (0.50 )

Net loss per share available to common stockholders:

                         

Basic

  $ (25.71 ) $ (8.33 ) $ (7.63 ) $ (8.19 )

Diluted

  $ (25.71 ) $ (8.33 ) $ (7.63 ) $ (8.19 )

   

See accompanying notes to the consolidated financial statements.

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Aridis Pharmaceuticals, Inc.

Consolidated Statements of Changes in Convertible Preferred Stock and Stockholders' Deficit

(In thousands, except share and per share amounts)

 
  Series A Convertible
Preferred Stock
   
   
   
   
   
   
 
 
   
  Common Stock    
   
   
 
 
   
  Additional
Paid-In
Capital
  Accumulated
Deficit
  Total
Stockholders'
Deficit
 
 
  Shares   Amount    
  Shares   Amount  
 
   
 

Balance at December 31, 2015

    10,364,429   $ 25,911         1,067,690   $   $ (16,644 ) $ (11,290 ) $ (27,934 )

Modification of liquidated preference rights for Series A convertible preferred stock from $2.50 per share to $2.05 per share

        (4,664 )               4,664         4,664  

Issuance of Series A convertible preferred stock at $2.05 per share, net of $3.6 million in issuance costs

    16,516,605     33,859                 (3,559 )       (3,559 )

Stock subscription receivable related to Series A convertible preferred stock issued as of year end

                        (4,496 )       (4,496 )

Issuance of Series A convertible preferred stock upon maturity of convertible notes

    1,594,361     3,269                 482         482  

Series A convertible preferred stock dividends issued

    254,610     522                 (57 )   (465 )   (522 )

Issuance of Series A convertible preferred stock warrants in connection with financings

                        (6,193 )       (6,193 )

Stock-based compensation

                        858         858  

Net Loss

                            (8,422 )   (8,422 )

Balance at December 31, 2016

    28,730,005   $ 58,897         1,067,690   $   $ (24,945 ) $ (20,177 ) $ (45,122 )

Receipt of stock subscription proceeds for stock issued as of the prior year end

                        4,496         4,496  

Issuance of Series A convertible preferred stock at $2.70 to $2.95 per share, net of $1.7 million in issuance costs

    6,516,142     13,358                 3,207         3,207  

Series A convertible preferred stock dividends issued

    950,046     1,947                 846     (2,793 )   (1,947 )

Issuance of Series A convertible preferred stock warrants in connection with financings

                        (352 )       (352 )

Stock-based compensation

                        1,608         1,608  

Net Loss

                            (24,656 )   (24,656 )

Balance at December 31, 2017

    36,196,193   $ 74,202         1,067,690   $   $ (15,140 ) $ (47,626 ) $ (62,766 )

Series A convertible preferred stock dividends accrued

                            (817 )   (817 )

Stock-based compensation

                        503         503  

Net Loss

                            (7,334 )   (7,334 )

Balance at March 31, 2018 (unaudited)

    36,196,193   $ 74,202         1,067,690   $   $ (14,637 ) $ (55,777 ) $ (70,414 )

   

See accompanying notes to the consolidated financial statements.

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Aridis Pharmaceuticals, Inc.

Consolidated Statements of Cash Flows

(In thousands)

 
  Year Ended
December 31,
  Three Months Ended
March 31,
 
 
  2017   2016   2018   2017  
 
   
   
  (unaudited)
  (unaudited)
 

Cash flows from operating activities

                         

Net loss

  $ (24,656 ) $ (8,422 ) $ (7,334 ) $ (8,212 )

Adjustments to reconcile net loss to net cash used in operating activities:

                         

Depreciation and amortization

    62     23     51     5  

Stock-based compensation expense

    1,608     858     503     663  

Amortization of debt discount and debt issuance costs

        369          

Change in fair value of preferred stock warrants

    5,152     172     38     2,414  

Changes in assets and liabilities:

                         

Accounts receivable

    67     454          

Prepaid expenses and other current assets

    (37 )   102     (296 )   (107 )

Other assets

    (304 )   180          

Deferred revenue

    120         678     478  

Payables to related parties

        (146 )        

Accounts payable, accrued liabilities and other

    431     319     1,923     1,452  

Net cash used in operating activities

    (17,557 )   (6,091 )   (4,437 )   (3,307 )

Cash flows from investing activities

                         

Purchase of property and equipment

    (698 )   (15 )   (272 )    

Net cash used in investing activities

    (698 )   (15 )   (272 )    

Cash flows from financing activities

                         

Proceeds from issuance of preferred stock, net of issuance costs

    21,060     25,805         4,496  

Repayment of line of credit

        (300 )        

Net cash provided by financing activities

    21,060     25,505         4,496  

Net increase (decrease) in cash and cash equivalents

    2,805     19,399     (4,709 )   1,189  

Cash and cash equivalents at

                         

Beginning of period

    22,291     2,892     25,096     22,291  

End of period

  $ 25,096   $ 22,291   $ 20,387   $ 23,480  

Supplemental cash flow information

                         

Cash paid for interest

  $   $ 10   $   $  

Cash paid for taxes

  $ 1   $ 8   $   $ 1  

Non-cash investing and financing activities

                         

Change in liquidation value of preferred stock

  $   $ 4,664   $   $  

Issuance of preferred stock upon maturity of convertible notes

  $   $ 3,750   $   $  

Issuance of preferred stock related to a stock subscription agreement

  $   $ 4,496   $   $  

Issuance of common stock warrants attributed to private offerings

  $ 352   $ 6,193   $   $  

Preferred stock dividends issued or accrued

  $ 2,793   $ 465   $ 817   $ 534  

   

See accompanying notes to the consolidated financial statements.

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Table of Contents


Aridis Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements

(Information as of March 31, 2018 and for the periods ended
March 31, 2018 and 2017 are Unaudited)

1. Description of Business and Basis of Presentation

Organization

        Aridis Pharmaceuticals, Inc. (the "Company" or "we" or "our") was established as a California limited liability corporation in 2003. The Company converted to a Delaware C corporation on May 21, 2014. Aridis' principal place of business is in San Jose, California. It is a clinical-stage company focused on developing new breakthrough therapies for infectious diseases and addressing the growing problem of antibiotic resistance. The Company has a deep, diversified portfolio of clinical and pre-clinical stage anti-infective product candidates that are complimented by a fully human monoclonal antibody discovery platform technology. Two of the Company's clinical candidates are at pivotal trial stage. The Company's suite of anti-infective monoclonal antibodies offers opportunities to profoundly alter the current trajectory of increasing antibiotic resistance and improve the health outcome of many of the most serious life-threatening infections particularly in hospital settings.

Basis of Presentation and Consolidation

        The accompanying consolidated financial statements have been prepared in accordance with the United States generally accepted accounting principles, or GAAP. The consolidated financial statements include the accounts of the Company and its two wholly-owned subsidiaries, Aridis Biopharmaceuticals, Inc. and Aridis Pharmaceuticals, C.V. All intercompany balances and transactions have been eliminated in consolidation. The Company operates in one segment. Management uses one measurement of profitability and does not segregate its business for internal reporting.

Liquidity

        The Company has not yet achieved commercialization of its products and has a cumulative net loss from its operations. It will continue to incur net losses for the foreseeable future. The Company's consolidated financial statements have been prepared assuming that it will continue as a going concern. The Company believes that it has sufficient cash to fund operations for at least twelve months beyond the issuance date of the December 31, 2017 financial statements. The Company will require additional capital to meet its long-term operating requirements. It expects to raise additional capital through, among other things, the sale of equity or debt securities. Historically, the Company's principal sources of cash have included proceeds from grant funding, fees for services performed and the sale of its preferred stock. The Company's principal uses of cash have included cash used in operations. The Company expects that the principal uses of cash in the future will be for continuing operations, funding of research and development including its clinical trials and general working capital requirements.

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Aridis Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements (Continued)

(Information as of March 31, 2018 and for the periods ended
March 31, 2018 and 2017 are Unaudited)

2. Summary of Significant Accounting Policies

Use of Estimates

        The preparation of the consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of expenses during the reporting period. Such estimates include those related to the evaluation of our ability to continue as a going concern, revenue recognition, long-lived assets, convertible debt, income taxes, assumptions used in the Black-Scholes-Merton ("BSM") model to calculate the fair value of stock-based compensation, Monte Carlo Simulation ("MSM") model to calculate the fair value of warrants, deferred tax asset valuation allowances, valuation of the Company's common and convertible preferred stock, fair value assumptions used in the valuation of warrants issued with convertible notes and convertible preferred stock warrant liabilities, preclinical study and clinical trial accruals and various accrued liabilities. Actual results could differ from those estimates.

Unaudited Interim Consolidated Financial Information

        The consolidated balance sheet as of March 31, 2018 and the consolidated statements of operations and cash flows for the three months ended March 31, 2018 and 2017 and the consolidated statement of changes in convertible preferred stock and stockholders' deficit for the three months ended March 31, 2018 are unaudited. The unaudited consolidated financial statements have been prepared on a basis consistent with the audited consolidated financial statements and, in the opinion of management, reflect all adjustments (consisting of normal recurring adjustments) considered necessary to fairly state the Company's consolidated financial position as of March 31, 2018 and the results of operations and cash flows for the three months ended March 31, 2018 and 2017. The financial data and other information disclosed in the notes to the consolidated financial statements related to March 31, 2018 and the three months ended March 31, 2018 and 2017 are unaudited.

Concentration of Risk

        The Company's cash and cash equivalents are maintained at financial institutions in the United States of America. Deposits held by these institutions may exceed the amount of insurance provided on such deposits. Most of the Company's customers are located in the United States.

        For the year ended December 31, 2017, two customers accounted for 90% and 10% of total revenue. For the year ended December 31, 2016, one customer accounted for approximately 97% of total revenue. As of December 31, 2017, there was no accounts receivable and as of December 31, 2016, one customer accounted for 100% of accounts receivable. For the three months ended

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Table of Contents


Aridis Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements (Continued)

(Information as of March 31, 2018 and for the periods ended
March 31, 2018 and 2017 are Unaudited)

2. Summary of Significant Accounting Policies (Continued)

March 31, 2018 and 2017, one customer accounted for 100% of total revenue. As of March 31, 2018, one customer accounted for 100% of accounts receivable.

Cash and Cash Equivalents

        The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. Cash equivalents consist primarily of checking account and money market account balances.

Accounts Receivable and Allowance for Doubtful Accounts

        Accounts receivable are recorded at the invoiced amount and do not bear interest. The Company considers the credit worthiness of its customers, but does not require collateral in advance of a sale. The Company evaluates collectability and maintains an allowance for doubtful accounts for estimated losses inherent in its accounts receivable portfolio when necessary. The allowance is based on the Company's best estimate of the amount of losses in the Company's existing accounts receivable, which is based on customer creditworthiness, facts and circumstances specific to outstanding balances, and payment terms. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. As of December 31, 2017 and 2016, and March 31, 2018, there were no allowances for doubtful accounts.

Property and Equipment

        Property and equipment are stated at cost less accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, generally between three and five years. Maintenance and repairs are charged to expense as incurred. When assets are retired or otherwise disposed of, the cost and accumulated depreciation are removed from the balance sheet and any resulting gain or loss is reflected in the consolidated statement of operations and comprehensive loss in the period realized.

Intangible Assets

        Intangible assets are recorded at cost and amortized over the estimated useful life of the asset. Intangible assets consist of licenses with various institutions whereby the Company has rights to use intangible property obtained from such institutions.

Impairment of Long-Lived Assets

        The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability

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Table of Contents


Aridis Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements (Continued)

(Information as of March 31, 2018 and for the periods ended
March 31, 2018 and 2017 are Unaudited)

2. Summary of Significant Accounting Policies (Continued)

is measured by comparison of the carrying amount to the future net cash flows which the assets are expected to generate. If such assets are considered to be impaired, the impairment is measured by the excess of the carrying amount of the assets over fair value less the costs to sell the assets, generally determined using the projected discounted future net cash flows arising from the asset. There have been no such impairments of long-lived assets as of December 31, 2017 and 2016 and March 31, 2018.

Revenue Recognition

        Revenue is recognized in accordance with the Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") 605, Revenue Recognition which requires that four basic criteria must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred and title and the risks and rewards of ownership have been transferred to the client or services have been rendered; (3) the price is fixed or determinable; and (4) collectability is reasonably assured.

        During 2017 and 2016, revenue includes grant awards and contract services entered into with government and other agencies for specific research and development efforts. We recognize revenue under such awards and contracts as the related qualified research and development expenses are incurred or under the milestone method, up to the limit of the prior approval funding amounts, and when we have determined that we have earned the right to receive the recognized portion according to the terms of the original grant awarded.

        During 2016, all grant revenue was derived from a grant awarded by the National Institute of Health. All contract revenue was derived from a contract with the National Institute of Health and small amounts of fee-for-service contracts with other third parties. The Company recorded approximately $1,072,000 during the year ended 2016 for its contract with the National Institute of Health. The contract ended during late 2016.

        In December 2016, the Company received an award from the Cystic Fibrosis Foundation ("CF Foundation") for approximately $2,902,000. The agreement contains an upfront payment of $200,000 which is being recognized straight-line over the term of the contract as we believe the upfront fee relates to services performed throughout the contract period and the upfront fee does not represent a substantive milestone within the agreement. Recognition of revenue for the remaining payments under the agreement will be recognized under the milestone method as substantive milestones are met. The milestones relate to pre-clinical research activities. The agreement also specifies that we are obligated to cumulatively spend on the development program at least an equal amount as it receives from the non-profit organization. In the event that we do not spend as much as we received under the agreement, we are obligated to return any overage to the non-profit organization.

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Table of Contents


Aridis Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements (Continued)

(Information as of March 31, 2018 and for the periods ended
March 31, 2018 and 2017 are Unaudited)

2. Summary of Significant Accounting Policies (Continued)

        For the year ended December 31, 2017, all grant revenue totaling approximately $89,000 was derived from our award agreement with the CF Foundation. For the three months ended March 31, 2018, all grant revenue totaling approximately $322,000 was derived from our award agreement with the CF Foundation.

        In 2017, the Company entered into a collaborative research and development agreement with GlaxoSmithKline plc ("GSK"). In accordance with the agreement, we received an upfront fee and are due annual fees and amounts for development work to be performed as specifically outlined under the agreement. The work to be performed was delineated into three specific research projects. In assessing the appropriate revenue recognition related to a collaboration agreement, we first determined whether the arrangement includes multiple elements, such as the delivery of intellectual property rights and research and development services. The multiple elements were analyzed to determine whether the deliverables could be separated or whether they must be accounted for as a single unit of accounting. Amounts received prior to satisfying the revenue recognition criteria are recorded as deferred revenue in our balance sheet. Recognition of revenue under the contract will be based on the terms of the contract and will be recognized under the proportional performance method derived from the completion of certain stages as defined within the contract.

        For the year ended December 31, 2017, approximately $771,000 was recorded as collaboration revenue related to the Company's agreement with GSK. For the three months ended March 31, 2018, no collaboration revenue was recorded under the Company's agreement with GSK.

Cost of Contract Revenue

        Cost of contract revenue includes the expenses incurred to perform contracted services for third parties which exclude grant related activities. The costs include employee salaries, lab supplies, outsourced activities associated and allocated facilities and employee benefit expenses.

Costs for Collaborative Arrangements

        Costs incurred under collaborative arrangements include personnel costs, laboratory supplies and fees paid to third parties. These amounts are included in research and development in the accompanying consolidated statement of operations. For the year ended December 31, 2017 and 2016, the Company had incurred expenses of approximately $633,000 and $0, respectively, related to its collaborative arrangement. For the three months ended March 31, 2018 and 2017, the company had incurred expenses of approximately $157,000 and $136,000, respectively, related to its collaborative arrangement.

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Table of Contents


Aridis Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements (Continued)

(Information as of March 31, 2018 and for the periods ended
March 31, 2018 and 2017 are Unaudited)

2. Summary of Significant Accounting Policies (Continued)

Research and Development

        Research and development costs are charged to operations as incurred. Research and development expenses consist of salaries and benefits, laboratory supplies, consulting fees and fees paid to third parties.

Stock-Based Compensation

        The Company recognizes compensation expense for all stock-based awards to employees and directors based on the grant-date estimated fair values, net of an estimated forfeiture rate. The Company recognizes stock-based compensation cost for employees and directors on a straight-line basis over the requisite service period for the award. Stock-based compensation expense is recognized only for those awards that are ultimately expected to vest. The Company estimates forfeitures based on an analysis of historical employee turnover and will continue to evaluate the appropriateness of the forfeiture rate based on actual forfeiture experience, analysis of employee turnover and other factors. The Company will revise the forfeiture estimate, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Changes in forfeiture estimates impact stock-based compensation cost in the period in which the change in estimate occurs.

        The BSM option pricing model incorporates various highly sensitive assumptions, including the fair value of the Company's common stock, expected volatility, expected term and risk-free interest rates. The weighted-average expected life of options was calculated using the simplified method as prescribed by the SEC's Staff Accounting Bulletin No. 107 ("SAB No. 107"). This decision was based on the lack of relevant historical data due to the Company's limited historical experience. In addition, due to the Company's limited historical data, the estimated volatility also reflects the application of SAB No. 107, incorporating the historical volatility of comparable companies whose stock prices are publicly available. The risk-free interest rate for the periods within the expected term of the option is based on the U.S. Treasury yield in effect at the time of grant. The dividend yield was zero, as the Company has never declared or paid dividends and has no plans to do so in the foreseeable future.

        The Company accounts for stock-based compensation arrangements with non-employees by recording the expense of such services based on the estimated fair value of the common stock at the measurement date. The value of the equity instrument, including adjustment to fair value at each balance sheet date, is charged to net loss over the term of the service agreement.

        Due to the absence of a public market trading for the Company's common stock, it is necessary to estimate the fair value of the common stock underlying the Company's stock-based awards when performing fair value calculations. The estimated fair value of the Company's common stock was determined using methodologies, approaches and assumptions consistent with

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Table of Contents


Aridis Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements (Continued)

(Information as of March 31, 2018 and for the periods ended
March 31, 2018 and 2017 are Unaudited)

2. Summary of Significant Accounting Policies (Continued)

the American Institute of Certified Public Accountants, or AICPA, Practice Aid: Valuation of Privately-Held-Company Equity Securities Issued as Compensation.

Income Taxes

        The Company accounts for income taxes under the liability method. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts expected to be realized.

        The Company assesses all material positions taken in any income tax return, including all significant uncertain positions, in all tax years that are still subject to assessment or challenge by the relevant taxing authorities. Assessing an uncertain tax position begins with the initial determination of the positions sustainability and is measured at the largest amount of benefit that is greater than fifty percent likely of being realized upon ultimate settlement. At each balance sheet date, unresolved uncertain tax positions must be reassessed, and the Company will determine whether (i) the factors underlying the sustainability assertion have changed and (ii) the amount of the recognized benefit is still appropriate. The recognition and measurement of tax benefits requires significant judgment. Judgments concerning the recognition and measurement of a tax benefit might change as new information becomes available.

Comprehensive Loss

        The Company has no items of comprehensive income or loss other than net loss.

Loss Per Share

        Basic loss per common share is calculated by dividing net loss available to common shareholders for the period by the weighted-average number of common shares outstanding during the period. For diluted loss per share calculation purposes, the net loss available to commons shareholders is adjusted to add back any preferred stock dividends and any interest on convertible debt reflected in the consolidated statement of operations for the respective periods.

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Aridis Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements (Continued)

(Information as of March 31, 2018 and for the periods ended
March 31, 2018 and 2017 are Unaudited)

2. Summary of Significant Accounting Policies (Continued)

        The following potentially dilutive securities were excluded from the computation of diluted net loss per share attributable to common stockholders for the periods presented because including them would have been antidilutive:

 
  Year Ended December 31,   Three Months Ended
March 31,
 
 
  2017   2016   2018   2017  
 
   
   
  (unaudited)
  (unaudited)
 

Convertible preferred stock

    36,196,193     28,730,005     36,196,193     28,730,005  

Stock options to purchase common stock

    3,871,857     2,924,024     4,971,206     3,141,024  

Preferred stock warrants

    8,725,289     8,354,921     8,725,289     8,354,921  

Common stock warrants

    3,897,482     4,543,202     3,897,482     4,543,202  

    52,690,821     44,552,152     53,790,170     44,769,152  

        All of the Company's outstanding preferred stock warrants contain a provision such that if the Company has not yet consummated a firm commitment underwritten initial public offering by August 12, 2019, the number of warrants will increase by 100%.

JOBS Act Accounting Election

        The JOBS Act permits an "emerging growth company" such as us to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies. We are choosing to take advantage of this provision and, as a result, we will adopt the extended transition period available under the JOBS Act until the earlier of the date we (i) are no longer an emerging growth company or (ii) affirmatively and irrevocably opt out of the extended transition period provided under the JOBS Act.

Recent Accounting Pronouncements

        In July 2017, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2017-11, Earnings Per Share (Topic 260); Distinguishing Liabilities from Equity (Topic 480); Derivatives and Hedging (Topic 815): (Part I) Accounting for Certain Financial Instruments with Down Round Features; (Part II) Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception ("ASU 2017-11"). ASU 2017-11 allows companies to exclude a down round feature when determining whether a financial instrument (or embedded conversion feature) is considered indexed to the entity's own stock. As a result, financial instruments (or embedded conversion features) with down round features may no longer be required to be accounted for as derivative

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Aridis Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements (Continued)

(Information as of March 31, 2018 and for the periods ended
March 31, 2018 and 2017 are Unaudited)

2. Summary of Significant Accounting Policies (Continued)

liabilities. A company will recognize the value of a down round feature only when it is triggered and the strike price has been adjusted downward. For equity-classified freestanding financial instruments, an entity will treat the value of the effect of the down round as a dividend and a reduction of income available to common shareholders in computing basic earnings per share. For convertible instruments with embedded conversion features containing down round provisions, entities will recognize the value of the down round as a beneficial conversion discount to be amortized to earnings. ASU 2017-11 is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Early adoption is permitted. The guidance in ASU 2017-11 can be applied using a full or modified retrospective approach. The Company is currently evaluating the impact of adopting this guidance.

        In May 2017, the FASB issued ASU 2017-09, "Compensation — Stock Compensation (Topic 718): Scope of Modification Accounting," to provide clarity and reduce both diversity in practice and cost complexity when applying the guidance in Topic 718 to a change to the terms and conditions of a stock-based payment award. ASU 2017-09 also provides guidance about the types of changes to the terms or conditions of a share-based payment award that require an entity to apply modification accounting in accordance with Topic 718. For all entities, including emerging growth companies, the standard is effective for annual periods beginning after December 15, 2017, and for interim periods therein. Early adoption is permitted. The adoption of this standard did not have a material effect.

        In January 2017, the FASB issued ASU No. 2017-04, "Intangibles—Goodwill and Other: Simplifying the Test for Goodwill Impairment," to simplify the subsequent measurement of goodwill by eliminating Step 2 from the goodwill impairment test. The standard is effective for public entities for annual or any interim goodwill impairment tests in annual reporting periods beginning after December 15, 2019. For all other entities, including emerging growth companies, the standard is effective for annual or any interim goodwill impairment tests in annual reporting periods beginning after December 15, 2021. Early adoption of this standard is permitted. The Company is currently evaluating the impact of adopting this guidance.

        In August 2016, the FASB issued ASU 2016-15, "Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments." ASU 2016-15 reduces diversity in practice by providing guidance on the classification of certain cash receipts and payments in the statement of cash flows. ASU 2016-15 clarifies that when cash receipts and cash payments have aspects of more than one class of cash flows and cannot be separated, classification will depend on the predominant source or use. ASU 2016-15 is effective on a retrospective basis for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2018, with early adoption permitted. The Company is currently evaluating the impact of adopting this guidance.

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Aridis Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements (Continued)

(Information as of March 31, 2018 and for the periods ended
March 31, 2018 and 2017 are Unaudited)

2. Summary of Significant Accounting Policies (Continued)

        In April 2016, the FASB issued ASU No. 2016-10, "Revenue from Contract with Customers: Identifying Performance Obligations and Licensing." The amendments in this Update clarify the two following aspects (a) contracts with customers to transfer goods and services in exchange for consideration and (b) determining whether an entity's promise to grant a license provides a customer with either a right to use the entity's intellectual property (which is satisfied at a point in time) or a right to access the entity's intellectual property (which is satisfied over time). The amendments in this Update are intended to reduce the degree of judgment necessary to comply with Topic 606. The new standard is effective for fiscal years beginning after December 15, 2018. The Company is currently evaluating the impact of adopting this guidance.

        In March 2016, the FASB issued ASU No. 2016-09, "Improvements to Employee Share-Based Payment Accounting," which is intended to improve the accounting for employee share-based payments. The ASU simplifies several aspects of the accounting for share-based payment award transactions, including; the income tax consequences, classification of awards as either equity or liabilities, and the classification on the statement of cash flows. The new standard is effective for fiscal years beginning after December 15, 2017, and upon adoption, an entity should apply the amendments by means of a cumulative-effect adjustment to the balance sheet at the beginning of the first reporting period in which the guidance is effective. Early adoption is permitted. The adoption of this standard did not have a material effect.

        In February 2016, the FASB issued ASU No. 2016-02, "Leases (Topic 842)." The pronouncement requires the recognition of a liability for lease obligations and a corresponding right-of-use asset on the balance sheet and disclosure of key information about leasing arrangements. This pronouncement is effective for reporting periods beginning after December 15, 2019 using a modified retrospective adoption method. The Company is currently evaluating the impact of adopting this guidance.

        In May 2014, the FASB issued ASU No. 2014-19, "Revenue from Contracts with Customers." The objective of ASU 2014-19 is to establish a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and will supersede most of the existing revenue recognition guidance, including industry-specific guidance. The core principle of ASU 2014-09 is that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The new guidance is effective for annual reporting periods (including interim periods within those periods) beginning after December 15, 2018. Early adoption is not permitted. The standard permits the use of either a retrospective or modified retrospective (cumulative effect) transition method. The Company is currently evaluating the impact of adopting this guidance.

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Aridis Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements (Continued)

(Information as of March 31, 2018 and for the periods ended
March 31, 2018 and 2017 are Unaudited)

3. Fair Value Disclosure

        The carrying value of the Company's cash and cash equivalents, prepaid expenses and other current assets, other assets, accounts payable, accrued liabilities, and convertible notes payable approximate fair value due to the short-term nature of these items.

        Fair value is defined as the exchange price that would be received for an asset or an exit price paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs.

        The fair value hierarchy defines a three-level valuation hierarchy for disclosure of fair value measurements as follows:

    Level I   Unadjusted quoted prices in active markets for identical assets or liabilities;    

 

 

Level II

 

Inputs other than quoted prices included within Level I that are observable, unadjusted quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the related assets or liabilities; and

 

 

 

 

Level III

 

Unobservable inputs that are supported by little or no market activity for the related assets or liabilities.

 

 

        The categorization of a financial instrument within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

 
  Fair Value at December 31, 2017  
($ in thousands)
  Total   Level 1   Level 2   Level 3  

Liabilities:

                         

Warrant liability

  $ 11,868   $   $   $ 11,868  

Totals

  $ 11,868   $   $   $ 11,868  

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Aridis Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements (Continued)

(Information as of March 31, 2018 and for the periods ended
March 31, 2018 and 2017 are Unaudited)

3. Fair Value Disclosure (Continued)

 
  Fair Value at December 31, 2016  
($ in thousands)
  Total   Level 1   Level 2   Level 3  

Liabilities:

                         

Warrant liability

  $ 6,365   $   $   $ 6,365  

Totals

  $ 6,365   $   $   $ 6,365  

 

 
  Fair Value at March 31, 2018  
($ in thousands, unaudited)
  Total   Level 1   Level 2   Level 3  

Liabilities:

                         

Dividends payable

  $ 817   $   $   $ 817  

Warrant liability

    11,906             11,906  

Totals

  $ 12,723   $   $   $ 12,723  

        Financial assets or liabilities are considered Level 3 when their fair values are determined using pricing models, discounted cash flow methodologies or similar techniques and at least one significant model assumption or input is unobservable. The preferred stock warrants are measured using the Monte Carlo valuation model which is based, in part, upon inputs for which there is little or no observable market data, requiring the Company to develop its own assumptions. The assumptions used in calculating the estimated fair value of the warrants represent the Company's best estimates; however, these estimates involve inherent uncertainties and the application of management judgment. As a result, if factors change and different assumptions are used, the warrant liability and the change in estimated fair value of the warrants could be materially different.

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Aridis Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements (Continued)

(Information as of March 31, 2018 and for the periods ended
March 31, 2018 and 2017 are Unaudited)

4. Balance Sheet Components

Property and Equipment, net

        Property and equipment, net consist of the following as of December 31, 2017 and 2016 and March 31, 2018 (in thousands):

 
  December 31,    
 
 
  March 31,
2018
 
 
  2017   2016  
 
   
   
  (unaudited)
 

Lab equipment

  $ 940   $ 172   $ 1,422  

Computer equipment and software

    25     25     25  

    965     197     1,447  

Less: Accumulated depreciation

    (215 )   (158 )   (265 )

  $ 750   $ 39   $ 1,182  

        Depreciation expense was approximately $57,000 and $18,000 the year ended December 31, 2017 and 2016, respectively. Depreciation expense was approximately $50,000 and $4,000 for the three months ended March 31, 2018 and 2017, respectively.

Intangible Assets, net

        Intangible assets, net consist of the following (in thousands) as of December 31, 2017 and 2016 and March 31, 2018:

 
  December 31,    
 
 
  March 31,
2018
 
 
  2017   2016  
 
   
   
  (unaudited)
 

Licenses

  $ 81   $ 81   $ 81  

    81     81     81  

Less: Accumulated amortization

    (38 )   (33 )   (39 )

  $ 43   $ 48   $ 42  

        Amortization expense was approximately $5,000 and $5,000 for the year ended December 31, 2017 and 2016, respectively. Amortization expense was approximately $1,000 and $1,000 for the three months ended March 31, 2018 and 2017, respectively.

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Aridis Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements (Continued)

(Information as of March 31, 2018 and for the periods ended
March 31, 2018 and 2017 are Unaudited)

4. Balance Sheet Components (Continued)

        The estimated acquired intangible amortization expense for the next five fiscal years is as follows (in thousands):

 
  Year Ended
December 31,
 

2018 (remaining nine months)

  $ 4  

2019

    5  

2020

    5  

2021

    5  

2022

    5  

Thereafter

    18  

Total

  $ 42  

Licenses

University Licensing Agreements

The University of Chicago — Co-Exclusive Patent License Agreement

        We are party to a co-exclusive licensing agreement with The University of Chicago (UOC), a non-profit university. This agreement granted to us a co-exclusive, royalty-bearing license for staph alpha toxin technology. The UOC agreement also granted to us the right to sublicense. UOC retained the non-transferrable right to use such patent rights for academic and research purposes, and also to certain pre-existing rights of the U.S. government. We paid an upfront fee upon the execution of the agreement and are obligated to pay an annual maintenance fee. We also are obligated to pay UOC low single digit percentage royalties on net sales from our and our sublicensee's sale of any commercialized licensed product or process, and certain other payments, subject to a minimum amount. We are responsible for our pro rata share of patent expenses.

        The agreement provides that we have certain obligations to conduct further research and development, and are obligated to utilize reasonable efforts to commercialize, either directly or through a sublicensee, the licensed UOC patent rights as licensed products or processes.

        The term of the agreement continues until all patents and filed patent applications, included within the licensed UOC patents, have expired or been abandoned, or until the agreement is earlier terminated. We may terminate the agreement on prior written notice to UOC. Each party has the right to terminate the agreement for the other party's uncured material breach of obligations under the agreement.

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Aridis Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements (Continued)

(Information as of March 31, 2018 and for the periods ended
March 31, 2018 and 2017 are Unaudited)

4. Balance Sheet Components (Continued)

The Brigham and Women's Hospital, Inc. — Exclusive Patent License Agreement

        We are party to an exclusive licensing agreement with The Brigham and Women's Hospital, Inc. (BWH), a non-profit corporation. This agreement granted to us an exclusive, royalty-bearing license under its and Beth Israel Deaconess Medical Center's (BIDMC) rights in methods and composition relating to specific binding peptides to P. aeruginosa mucoid exopolysaccharide to make, use and sell products and processes for the treatment of pseudomonas infections in humans that are covered by such patent rights. The BWH agreement also granted to us the right to sublicense. BWH and BIDMC retained the non-transferrable right to use such patent rights for academic and research purposes, and also to certain pre-existing rights of the U.S. government. We also are obligated to pay BWH low single digit percentage royalties on net sales from our and our sublicensee's sale of any commercialized licensed product or process, and certain other payments. We are responsible for diligently prosecuting and maintaining the licensed patent rights, at our sole cost and expense.

        The agreement provides that we have certain obligations to conduct further research and development, and are obligated to utilize reasonable efforts to commercialize, either directly or through a sublicensee, the licensed BWH patent rights as licensed products or processes.

        The term of the agreement continues until all patents and filed patent applications, included within the licensed BWH patents, have expired or been abandoned, or until the agreement is earlier terminated. We may terminate the agreement on prior written notice to BWH. Each party has the right to terminate the agreement for the other party's uncured material breach of obligations under the agreement.

The University of Iowa Research Foundation — Exclusive Patent License Agreement

        We are party to an exclusive licensing agreement with The University of Iowa Research Foundation (UIRF). The UIRF agreement granted to us an exclusive, royalty-bearing license under its rights in methods relating to gallium containing compounds for the treatment of infections to make, use and sell products that are covered by such patent rights. The UIRF agreement also granted to us the right to sublicense. UIRF retained the right and ability to grant right to use such patent rights for academic and research purposes, and also to certain pre-existing rights of the U.S. government including the United States Department of Veterans Affairs. We also are obligated to pay UIRF low single digit percentage royalties on net sales from our and our sublicensee's sale of any commercialized licensed product or process, and certain other payments. We are responsible for diligently prosecuting and maintaining the licensed UIRF patent rights, at our sole cost and expense.

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Aridis Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements (Continued)

(Information as of March 31, 2018 and for the periods ended
March 31, 2018 and 2017 are Unaudited)

4. Balance Sheet Components (Continued)

        The agreement provides that we have certain obligations to conduct further research and development, and are obligated to utilize reasonable efforts to commercialize, either directly or through a sublicensee, the licensed UIRF patent rights as licensed products or processes.

        The term of the agreement continues until the expiration of the last to expire patents, included within the licensed UIRF patents, or until the agreement is earlier terminated. We may terminate the agreement on prior written notice to UIRF. Each party has the right to terminate the agreement for the other party's uncured material breach of obligations under the agreement.

Brigham Young University — Exclusive Patent License Agreement

        We are party to an exclusive licensing agreement with Brigham Young University (BYU). This agreement granted to us an exclusive, royalty-bearing license under its rights in stabilization of biological agents methods relating to human vaccines to make, use and sell products that are covered by such patent rights. The agreement also granted to us the right to sublicense. BYU and the Church of Jesus Christ of Latter-day Saints and the Church Education System retained the right and ability to use such patent rights for academic and ecclesiastical purposes and also to purchase products using such patents rights at a discounted price. We also are obligated to pay BYU low single digit percentage royalties on net sales from our and our sublicensee's sale of any commercialized licensed product, and certain other payments. BYU is responsible for diligently prosecuting and maintaining the licensed BYU patent rights and we reimburse them for one-third of their costs.

        The agreement provides that we have certain obligations to conduct further research and development, and are obligated to utilize reasonable efforts to commercialize, either directly or through a sublicensee, the licensed BYU patent rights as licensed products or processes.

        The term of this agreement continues until the expiration of the last to expire patents, included within the licensed BYU patents, or until the agreement is earlier terminated. We may terminate the agreement on prior written notice to BYU. Each party has the right to terminate the agreement for the other party's uncured material breach of obligations under the agreement.

Public Health Service Licensing Agreement

NIH ("National Institutes of Health") — Exclusive and Non-Exclusive Patent License Agreement

        We are party to an exclusive and non-exclusive licensing agreement with the NIH. This agreement granted to us an exclusive, royalty-bearing license in our exclusive territory and non-exclusive rights in the non-exclusive territory under its rights in a human rotavirus vaccine based on their human-bovine rotavirus reassortants to make, use and sell products and processes that are covered by such patent rights. The agreement also granted to us the right to sublicense.

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Aridis Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements (Continued)

(Information as of March 31, 2018 and for the periods ended
March 31, 2018 and 2017 are Unaudited)

4. Balance Sheet Components (Continued)

        Our license under this agreement is subject to the U.S. government's retained rights under a non-exclusive, worldwide, royalty-free license for the practice of all inventions licensed under the Public Health Service, or PHS, patent rights, by or on behalf of the U.S. government and on behalf of any foreign government or international organization pursuant to any existing or future treaty or agreement to which the U.S. government is a signatory. For purposes of encouraging basic research, the U.S. government also reserves the right to grant or require us to grant to a third party on reasonable terms a non-exclusive, non-transferable license to make and use the licensed products or licensed processes for research purpose only, but subject to PHS consulting with us in the event such third party is a commercial entity. Under certain exceptional and enumerated circumstances, the U.S. government may require us to grant a sublicense to a responsible third party applicant, on terms that are reasonable under the circumstances. The PHS takes responsibility for all aspects of the preparation, filing, prosecution and maintenance of any and all patent applications or patents included in the licensed PHS patent rights, subject to our payment of certain patent-related expenses.

        We also are obligated to pay PHS low single digit percentage royalties on net sales from our and our sublicensee's sale of any commercialized licensed product or process, and certain other payments. PHS is responsible for diligently prosecuting and maintaining the licensed PHS patent rights, and we reimburse them for a portion of their costs.

        The agreement provides that we have certain obligations to conduct further research and development, and are obligated to utilize reasonable efforts to commercialize, either directly or through a sublicensee, the licensed PHS patent rights as licensed products or processes.

        The term of the PHS agreement continues until the expiration of all royalty obligations, included within the licensed PHS patents, or until the agreement is earlier terminated. We may terminate the agreement on prior written notice to PHS. Each party has the right to terminate the agreement for the other party's uncured material breach of obligations under the agreement.

Non-Profit Licensing Agreements

Program for Appropriate Technology in Health and PATH Vaccine Solutions

        We granted the Program for Appropriate Technology in Health (PATH), a global non-profit organization, and the PATH Vaccine Solutions a non-exclusive license, with right to sublicense formulations, for use with the measles, rotavirus, live-attenuated influenza, pneumococcal and enteric vaccines only for sale in developing countries.

        We have also agreed to provide rotavirus vaccines to public sector purchasers in developing countries at a preferential price relative to private sector purchasers in developing countries where the rotavirus vaccine utilizing the enabling formulation technology is offered for sale.

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Aridis Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements (Continued)

(Information as of March 31, 2018 and for the periods ended
March 31, 2018 and 2017 are Unaudited)

4. Balance Sheet Components (Continued)

Corporate Licensing Agreements

Kenta Biotech Ltd.

        We are party to an asset purchase agreement with Kenta Biotech Ltd. (Kenta), a for profit corporation (Aktiengesellschaft) duly incorporated in Schlieren (Canton of Zurich, Switzerland), registered under the identification number CH-035.3.035.876-2. The agreement assigned and transferred certain of Kenta's physical assets, contracts and technology to us. The physical assets included all physical assets owned or controlled by Kenta, including but not limited to cell lines, genes, antibodies, diagnostic assays and related documentation, which were related to Kenta's MabIgX technology platform for hybridoma generation and its mAb targeting S. aureus , P. aeruginosa , A. baumannii and RSV. The technology included all intellectual property, including but not limited to patents, patent applications, trademarks, knowhow, trade secrets, regulatory filings, clinical trials, clinical trial information, all supporting documentation and all other related intellectual property which are related to Kenta's MabIgX technology platform for hybridoma generation and its mAb targeting S. aureus , P. aeruginosa , A . baumannii and RSV. The contracts included the contracts and agreements (including all rights and obligations thereunder), whether oral or written, which Kenta has concluded and which pertain to the assets. The contracts were primarily related to the ongoing clinical trial of AR 301.

        We were obligated to pay Kenta a fixed purchase price, which was fully paid during 2013 and 2014, and a declining scale of low double digit to low single digit percentage royalties on gross licensing revenues from either out licensing of the assets or net sales revenues actually received by us up to a maximum of $50,000,000.

        As of March 31, 2018, no milestones or royalty obligations had been met on these license agreements.

Emergent Product Development Gaithersburg Inc.

        We are party to a license agreement with Emergent Product Development Gaithersburg Inc. (Emergent). We granted Emergent an exclusive, perpetual, royalty-bearing license to use certain of our patents and related know how for the prevention or treatment of infection or illness caused by biodefense pathogens. We also granted a non-exclusive, royalty-bearing license to use certain of our patents and related know how for the prevention or treatment of tularemia and viral hemorrhagic fever indications.

        Emergent is obligated to pay us low single digit percentage royalties on net sales from their and their sublicensee's sale of any commercialized licensed product, and certain other payments. The Company has certain diligence obligations to conduct further research and development, and to exploit licensed products.

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Aridis Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements (Continued)

(Information as of March 31, 2018 and for the periods ended
March 31, 2018 and 2017 are Unaudited)

4. Balance Sheet Components (Continued)

Accrued Liabilities

        Accrued liabilities consist of the following at December 31, 2017 and 2016 and March 31, 2018 (in thousands):

 
  December 31,    
 
 
  March 31,
2018
 
 
  2017   2016  
 
   
   
  (unaudited)
 

Research and development services

  $ 1,713   $ 1,198   $ 1,331  

Payroll related expenses

    207     495     131  

Professional services

    201     20     321  

Other

        6      

  $ 2,121   $ 1,719   $ 1,783  

5. Borrowings

Line of Credit

        In July 2013, the Company entered into a line of credit with Bank of the West whereby the Company can borrow up to $300,000. Under the terms of the line of credit, the Company was required to make interest payments on a monthly basis during any period in which any principal remains outstanding on the loan. The line of credit bears a variable interest rate based on changes in the index of the financial institution's prime rate. The line of credit was guaranteed and collateralized by the Company's assets, and the assets of its two co-founding members. As of December 31, 2015, there was $300,000, outstanding on this line of credit bearing interest at 3.25%. In July 2016, the $300,000 was paid off in full and the line of credit was terminated.

December 2015 Convertible Notes

        In December 2015, the Company issued $3.75 million in convertible notes ("December 2015 convertible notes") with detachable warrants (see note 6) to various investors. The notes bear no interest, unless the loan is in default in which case a 12% interest rate applies, and carry a maturity date of one year from issuance. Under the terms of the notes, in the event the automatic conversion features are not triggered, all of the principal owed is to convert into shares of the Company's Series A convertible preferred stock upon the maturity date. The conversion price is equal to the quotient obtained by dividing (a) the principal amount of the notes plus accrued and unpaid interest thereon through the maturity date by (b) a conversion price equal to the quotient obtained by dividing $60.0 million by the aggregate number of outstanding shares of the

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Aridis Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements (Continued)

(Information as of March 31, 2018 and for the periods ended
March 31, 2018 and 2017 are Unaudited)

5. Borrowings (Continued)

Company's preferred stock, as if converted into common stock, and common stock on the maturity date.

        The notes contain automatic conversion features whereupon the closing of an initial public offering of the Company's securities (an "IPO") consummated on or prior to the maturity date and without any action on the part of the note holder, the entire outstanding principal amount of and any accrued and unpaid interest would automatically convert into a number of shares of common stock equal to the quotient obtained by dividing (i) the outstanding principal amount of the notes plus the accrued and unpaid interest thereon, by (ii) a conversion price equal to seventy (70%) percent of the price at which the Company's common stock is first offered to the public.

        The December 2015 convertible notes were originally recorded at a carrying amount of $3.36 million, net of discount for common stock warrants of approximately $386,000 (see note 6), with an effective interest rate of approximately 11.5%.

        On December 15, 2016, the December 2015 convertible notes matured. Upon maturity, 1,594,361 shares of Series A convertible preferred stock were issued to all holders of the December 2015 convertible notes at a conversion price of $2.35 per share.

6. Warrants to Purchase Common Stock

        In November 2015, an engagement letter was effectuated with the Company's current Vice Chairman of the Board of Directors. Under the terms of the engagement, upon being appointed the Company's Vice Chairman and the closing of a minimum of $25 million in gross proceeds from sales of its Series A convertible preferred stock under a private placement memorandum, the Vice Chairman would receive 1,507,305 common stock warrants. On December 12, 2016, both of the aforementioned conditions had been met and the Company issued 1,507,305 common stock warrants at an exercise price of $2.26 per share.

        The fair value of the warrants was determined using a Monte Carlo simulation method which calculates the estimated value based on running numerous simulations and analyzing the various outcomes. The total fair value of award was approximately $661,000 and will be amortized over the five-year vesting period. For the year ended December 31, 2017 and 2016, the Company recorded stock-based compensation expense of approximately $132,000 and $7,000, respectively, related to these warrants. For the three months ended March 31, 2018 and 2017, the Company recorded stock-based compensation expense of approximately $34,000 and $34,000, respectively, related to these warrants.

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Aridis Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements (Continued)

(Information as of March 31, 2018 and for the periods ended
March 31, 2018 and 2017 are Unaudited)

6. Warrants to Purchase Common Stock (Continued)

        In December 2015, in connection with the December 2015 convertible notes, the Company issued warrants to purchase shares of common stock in the aggregate value of $3.75 million at a price and quantity that is dependent on future events. If, prior to the first anniversary date of the warrants, an IPO is consummated the exercise price will be the issuance price first offered in the IPO. If an IPO is not consummated prior to the first anniversary the exercise price will be determined by dividing (a) $60.0 million, by (b) the aggregate number of outstanding shares of common stock on the first anniversary (assuming the full conversion, exercise or exchange of all securities outstanding on the first anniversary convertible into, exercisable or exchangeable for, shares of common stock). Upon the conversion of the December 2015 convertible notes on December 15, 2016, the exercise price of the warrants was set at approximately $2.35 per share. The number of shares issuable upon exercise of the warrants was 1,594,361.

        The fair value of the warrants was determined using a Monte Carlo simulation method which calculates the estimated value based on running numerous simulations and analyzing the various outcomes. Upon the issuance of the warrants, the Company recorded additional paid-in capital and a discount to the December 2015 convertible notes, of approximately $386,000. The discount is amortized to interest expense over the term of the notes. Amortization expense was approximately $369,000 year ended December 31, 2016.

7. Convertible Preferred Stock and Preferred Stock Warrants

        On August 12, 2016, the Company had 10,364,429 outstanding shares of its Series A convertible preferred stock and reduced the stated value of its Series A convertible preferred stock from $2.50 per share to $2.05 per share. Due to this change, the Company reduced the amount of its Series A convertible preferred stock carrying value by $4.7 million and moved it to the Company's additional paid-in capital account.

        Each share of Series A convertible preferred stock is entitled to voting rights equivalent to the number of shares of common stock into which each share can be converted. Each of Series A convertible preferred stock is convertible at the holders' option at any time into common stock on a one for one basis. Upon the liquidation, dissolution or winding up of the business of the Company, whether voluntary or involuntary, each holder of Series A convertible preferred stock shall be entitled to receive, for each share thereof, out of assets of the Company legally available therefore, a preferential amount in cash equal to (and not more than) $2.05 per share. If upon any such distribution the assets of the Company shall be insufficient to pay the holders of the outstanding shares of Series A convertible preferred stock the full amounts to which they shall be entitled, such holders shall share ratably in any distribution of assets in accordance with the sums which would be payable on such distribution if all sums payable thereon were paid in full. Any remaining assets or funds of the Company available for distribution to stockholders shall be

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Table of Contents


Aridis Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements (Continued)

(Information as of March 31, 2018 and for the periods ended
March 31, 2018 and 2017 are Unaudited)

7. Convertible Preferred Stock and Preferred Stock Warrants (Continued)

distributed among the holders of Series A convertible preferred stock and common stock pro rata based on the number of shares of common stock held by each (assuming conversion of all such Series A convertible preferred stock and convertible common stock, if any, according to their respective terms). Conversion of Series A convertible preferred stock is automatic upon the completion of a firm commitment underwritten initial public offering of the Company's shares of common stock at a price equal to or greater than $4.10 per share. In January 2018, the Company received shareholder consent from a majority of Series A convertible preferred stockholders consenting to the automatic conversion of the Series A convertible preferred stock upon the closing of a firm commitment underwritten initial public offering of the Company's shares of common stock.

        All holders of Series A convertible preferred stock as of June 30, 2016 began accruing a 3% stock dividend beginning on July 1, 2016. Subsequent acquirers began accruing on the date they acquired their respective shares. Accrued dividends shall be payable annually on December 31. On December 31, 2017, 950,046 shares of Series A convertible preferred stock were issued as dividends for the fiscal year 2017. A valuation of the Series A convertible stock was performed by an independent firm and assessed at $2.94 per share on the payment date and was recorded as dividends paid and offset to accumulated deficit in the amount of approximately $2,793,000. On December 31, 2016, 254,610 shares of Series A convertible preferred stock were issued as dividends for the fiscal year 2016. A valuation of the Series A convertible stock was performed by an independent firm and assessed at $1.83 per share on the payment date and was recorded as dividends paid and offset to additional paid-in capital in the amount of approximately $465,000. For the three months ended March 31, 2018, the Company accrued approximately $817,000 as dividends payable for the 271,471 dividend shares that were accrued.

        Of the Series A convertible preferred stock sold during 2016 and 2017, 16,516,606 shares sold at $2.05 per share and 2,033,898 shares sold at $2.95 per share contain price based anti-dilution protection rights. Unless agreed to otherwise, if the Company issues additional securities at a purchase price less than the purchase price paid by these respective holders, the Company shall issue additional preferred shares equal to the difference of the number of preferred shares that each respective shareholder would have received if they paid the subsequent lower price, and the number of share each respective shareholder originally received. The Company reviewed the embedded anti-dilution protection feature included in the Series A convertible preferred stock sold during 2016 pursuant to ASC 480, Distinguishing Liabilities From Equity , and ASC 815, Derivatives and Hedging , and determined that the provisions of ASC 480 did not result in liability classification, the embedded anti-dilution protection feature did not meet the definition of a derivative as there was no market for the Series A convertible preferred stock to be converted into cash and that the embedded anti-dilution protection feature did not require bifurcation.

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Aridis Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements (Continued)

(Information as of March 31, 2018 and for the periods ended
March 31, 2018 and 2017 are Unaudited)

7. Convertible Preferred Stock and Preferred Stock Warrants (Continued)

        The liquidation preference provisions of the Series A convertible preferred stock are considered contingent redemption provisions because there are certain elements that are not solely within the control of the Company, such as a change in control of the Company. Accordingly, the Company has presented the Series A convertible preferred stock within the mezzanine portion of the accompanying consolidated balance sheets at the full liquidation value.

        On August 12, 2016, the Company completed its first and initial closing under a private placement memorandum and sold 7,422,600 shares of its Series A convertible preferred stock at a price of $2.05 per share though a private offering memorandum for total gross proceeds of $15.2 million. In connection with this transaction, investors received 1,855,675 five year warrants exercisable into Series A convertible preferred stock. Also in connection with this first closing, the placement agent received 835,042 five year warrants to purchase Series A convertible preferred stock.

        Immediately following the first closing, certain prior investors were issued ten year warrants exercisable into Series A convertible preferred stock. A total of 2,175,451 warrants were issued to prior investors.

        On December 12, 2016, the Company completed its second closing under a private placement memorandum and sold 6,654,981 shares of its Series A convertible preferred stock at a price of $2.05 per share though a private offering memorandum for total gross proceeds of $13.6 million. In connection with this transaction, investors received 1,663,748 five year warrants exercisable into Series A convertible preferred stock. Also in connection with this second closing, the placement agent received 748,685 five year warrants.

        On December 15, 2016, the Company issued 1,594,361 shares of Series A convertible preferred stock upon the maturity of the December 2016 convertible notes. In addition, all holders of December 2016 convertible notes were issued ten year warrants exercisable into Series A convertible preferred stock. A total of 192,171 warrants were issued to the investors.

        On December 30, 2016, the Company completed its third closing under a private placement memorandum and sold 2,439,024 shares of its Series A convertible preferred stock at a price of $2.05 per share though a private offering memorandum for total gross proceeds of $5.0 million. In connection with this transaction, investors received 609,756 five year warrants exercisable into Series A convertible preferred stock. Also in connection with this third closing, the placement agent received 274,391 five year warrants to purchase Series A convertible preferred stock. The proceeds of $5.0 million from the third closing was received in January 2017. As of December 31, 2016, the transaction was recorded as a stock subscription receivable in the equity section of the Company's balance sheet.

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Table of Contents


Aridis Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements (Continued)

(Information as of March 31, 2018 and for the periods ended
March 31, 2018 and 2017 are Unaudited)

7. Convertible Preferred Stock and Preferred Stock Warrants (Continued)

        From June through August of 2017, the Company sold 6,516,142 shares of Series A convertible preferred stock to various investors at prices ranging from $2.70 to $2.95 per share for total gross proceeds of $18.3 million and net proceeds of $16.6 million after financing costs. On July 12 2017, in conjunction with the sale of its Series A convertible preferred stock to one of the investors, the Company issued 370,370 warrants to purchase its Series A convertible preferred stock. The warrant has a term of five years from the issuance date.

        All preferred stock warrants have an exercise price of $2.26 per share except for the 370,370 warrants issued in July 2017 which have an exercise price of $2.97 per share.

        If by August 12, 2019 the Company has not yet consummated a firm commitment underwritten initial public offering of its common stock, then the number of all outstanding warrants exercisable into Series A convertible preferred stock will increase by 100%.

Warrant Liability

        The Company evaluated the accounting treatment for the Series A convertible preferred stock warrants issued during 2016 and 2017, and the three months ended March 31, 2018 and 2017. The Company concluded pursuant to its evaluation of ASC 480 that due to the contingent liquidation redemption feature in the underlying Series A convertible preferred stock not being solely within the control of the Company, the Series A convertible preferred stock warrants issued were considered a liability. As a result, the Company has recorded the issuance of each Series A convertible preferred stock warrant as a warrant liability and the subsequent changes in fair value to be recorded as a component in other expense. The warrant liability requires the Company to remeasure the value of the underlying warrants and report the effect of the changes on our operations until the warrants are exercised or expire. The primary underlying risk exposure pertaining to the warrants is the change in fair value of the underlying preferred stock for each reporting period. The warrant liability was measured using the Monte Carlo valuation model.

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Table of Contents


Aridis Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements (Continued)

(Information as of March 31, 2018 and for the periods ended
March 31, 2018 and 2017 are Unaudited)

7. Convertible Preferred Stock and Preferred Stock Warrants (Continued)

        The following table (in thousands) summarizes the Company's activity and fair value calculations of its derivative warrants for the year ended December 31, 2017 and the three months ended March 31, 2018:

 
  Warrant
Liability
 

Balance, December 31, 2015

  $  

Issuance of 5-year preferred stock warrants with financing — August 2016 (first closing)

    2,072  

Issuance of 5-year preferred stock warrants with financing — December 2016 (second closing)

    1,785  

Issuance of 5-year preferred stock warrants with financing — December 2016 (third closing)

    663  

Issuance of 10-year preferred stock warrants to prior investors

    1,673  

Change in fair value of warrants

    172  

Balance, December 31, 2016

  $ 6,365  

Issuance of 5-year preferred stock warrants with financing — July 2017

    352  

Change in fair value of warrants

    5,151  

Balance, December 31, 2017

  $ 11,868  

Change in fair value of warrants (unaudited)

    38  

Balance, March 31, 2018 (unaudited)

  $ 11,906  

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Aridis Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements (Continued)

(Information as of March 31, 2018 and for the periods ended
March 31, 2018 and 2017 are Unaudited)

8. Common Stock

        As of December 31, 2017, the Company had reserved the following common stock for future issuance:

Shares reserved for conversion of preferred stock

    36,196,193  

Shares reserved for exercise of outstanding warrants to purchase preferred stock

    8,725,289  

Shares reserved for exercise of outstanding warrants to purchase common stock

    3,897,482  

Shares reserved for exercise of outstanding options to purchase common stock

    3,871,857  

Shares reserved for issuance of future options

    930,461  

    53,621,282  

        As of March 31, 2018, the Company had reserved the following common stock for future issuance (unaudited):

Shares reserved for conversion of preferred stock

    36,196,193  

Shares reserved for exercise of outstanding warrants to purchase preferred stock

    8,725,289  

Shares reserved for exercise of outstanding warrants to purchase common stock

    3,897,482  

Shares reserved for exercise of outstanding options to purchase common stock

    4,762,873  

Shares reserved for issuance of future options

    539,445  

    54,121,282  

        All of the Company's outstanding preferred stock warrants contain a provision such that if the Company has not yet consummated a firm commitment underwritten initial public offering by August 12, 2019, the number of warrants will increase by 100%.

9. Stock-Based Compensation

        In May 2014, the Company adopted and the shareholders approved the 2014 Equity Incentive Plan (the 2014 Plan). Under the 2014 Plan, 1,500,000 shares of the Company's common stock have been reserved for the issuance of stock options to employees, directors, and consultants, under terms and provisions established by the Board of Directors. Under the terms of the 2014 Plan, options may be granted at an exercise price not less than fair market value. For employees holding

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Table of Contents


Aridis Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements (Continued)

(Information as of March 31, 2018 and for the periods ended
March 31, 2018 and 2017 are Unaudited)

9. Stock-Based Compensation (Continued)

more than 10% of the voting rights of all classes of stock, the exercise prices for incentive and nonstatutory stock options may not be less than 110% of fair market value, as determined by the Board of Directors. The terms of options granted under the 2014 Plan may not exceed ten years.

        In addition, the 2014 Plan contains an "evergreen" provision allowing for an annual increase in the number of shares of our common stock available for issuance under the 2014 Plan on the first day of each fiscal year beginning in fiscal year 2015. The annual increase in the number of shares shall be equal to the greater of:

    500,000 shares of our common stock; or

    such number of shares as is equal to the number of shares sufficient to cause the option pool to equal 20% of the issued and outstanding common stock of the Company, provided, however, that if on any calculation date the number of shares equal to 20% of the total issued and outstanding shares of common stock is less than the number of shares of common stock available for issuance under the 2014 Plan, no change will be made to the aggregate number of shares of common stock issuable under the 2014 Plan for that year (such that the aggregate number of shares of common stock available for issuance under the 2014 Plan will never decrease).

        The number of shares, terms, and vesting periods are determined by the Company's Board of Directors or a committee thereof on an option by option basis. Options generally vest ratably over service periods of up to four years and expire ten years from the date of grant.

        The Company estimated the fair value of options using the BSM option valuation model. The fair value of employee options is being amortized on a straight line basis over the requisite service period of the awards. During the year ended December 31, 2017 and 2016, stock-based compensation expense for employees was approximately $1,303,000 and $778,000, respectively, and stock-based compensation expense for employee warrants was approximately $132,000 and $7,000, respectively. During the three months ended March 31, 2018 and 2017, stock-based compensation expense for employee stock options was approximately $471,000 and $630,000, respectively, and stock-based compensation expense for employee warrants was $32,000 and $32,000, respectively.

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Table of Contents


Aridis Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements (Continued)

(Information as of March 31, 2018 and for the periods ended
March 31, 2018 and 2017 are Unaudited)

9. Stock-Based Compensation (Continued)

        The fair value of the employee options granted during the year ended December 31, 2017 and 2016 and the three months ended March 31, 2018 and 2017 were estimated using the following assumptions:

 
  Year Ended December 31,   Three Months Ended March 31,
 
  2017   2016   2018   2017
 
   
   
  (unaudited)
  (unaudited)

Expected term (in years)

  6.25   6.25   6.25   6.25

Expected volatility

  78% - 80%   79% - 80%   79%   80%

Risk-free interest-rate

  1.83% - 2.22%   1.27% - 1.64%   2.22% - 2.62%   2.20%

Dividend yield

  0%   0%   0%   0%

        Stock option activity for the year ended December 31, 2017 and 2016 and the three months ended March 31, 2018 are represented in the following table:

 
   
  Options Outstanding  
 
  Shares
Available
for Grant
  Number of
Shares
  Weighted-
Average
Exercise Price
 

Balance — December 31, 2015

    1,282,494     1,519,824   $ 0.73  

Additional shares reserved

    1,500,000       $  

Options granted

    (1,404,200 )   1,404,200   $ 2.05  

Balance — December 31, 2016

    1,378,294     2,924,024   $ 1.36  

Additional shares reserved

    500,000       $  

Options granted

    (1,019,916 )   1,019,916   $ 1.77  

Options granted

    72,083     (72,083 ) $ 0.72  

Balance — December 31, 2017

    930,461     3,871,857   $ 1.48  

Additional shares reserved (unaudited)

    500,000       $  

Options granted (unaudited)

    (1,232,199 )   1,232,199   $ 2.66  

Options cancelled (unaudited)

    341,183     (341,183 ) $ 1.56  

Balance — March 31, 2018 (unaudited)

    539,445     4,762,873   $ 1.78  

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Table of Contents


Aridis Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements (Continued)

(Information as of March 31, 2018 and for the periods ended
March 31, 2018 and 2017 are Unaudited)

9. Stock-Based Compensation (Continued)

        Further information about the options outstanding and exercisable at March 31, 2018 is as follows:

 
  Options Outstanding and Exercisable at March 31, 2018 (unaudited)  
 
  Exercise
Price
  Number
Outstanding
  Weighted Average
Remaining
Contractual Life
(in years)
  Total Shares
Exercisable
  Weighted Average
Exercise Price
 
    $ 0.45     1,179,862     6.7     1,060,149   $ 0.45  
    $ 1.50     488,667     9.3     123,563   $ 1.50  
    $ 2.02     414,229     7.8     288,598   $ 2.02  
    $ 2.05     1,205,000     8.6     1,106,563   $ 2.05  
    $ 2.65     992,916     9.8     85,203   $ 2.65  
    $ 2.68     482,199     10.0     43,572   $ 2.68  
    $ 1.78     4,762,873     8.5     2,707,648   $ 1.42  

        During the year December 31, 2017 and 2016, the Company granted options to employees to purchase 889,916 and 1,311,000 shares with a weighted-average grant date fair value of $1.84 and $1.01 per share, respectively. During the three months ended March 31, 2018, the Company granted options to employees to purchase 1,232,199 shares with a weighted-average grant date fair value of $1.88 per share.

        As of December 31, 2017 and March 31, 2018 there were total unrecognized compensation costs for employees of approximately $2,056,000 and $3,510,000, respectively, related to these options. These costs are expected to be recognized over a period of approximately 2.8 and 2.7 years, respectively. The aggregate intrinsic value, based on the fair market value of the Company's common stock, of options outstanding and vested as of December 31, 2017 and March 31, 2018 was $4,057,000 and $4,079,000, respectively, and $2,690,000 and $3,205,000, respectively.

        The Company grants options to purchase common stock to consultants in exchange for services during the normal course of business. During the year ended December 31, 2017 and 2016, the Company granted options to consultants to purchase 130,000 and 93,200 shares, respectively. During the three months ended March 31, 2018, the Company did not grant any options to consultants.

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Table of Contents


Aridis Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements (Continued)

(Information as of March 31, 2018 and for the periods ended
March 31, 2018 and 2017 are Unaudited)

9. Stock-Based Compensation (Continued)

        The fair value of the options granted to consultants during the year ended December 31, 2017 and 2016 and the three months ended March 31, 2017 were estimated using the following assumptions:

 
  Year Ended December 31,   Three months Ended March 31,
 
  2017   2016   2018   2017
 
   
   
  (unaudited)
  (unaudited)

Expected term (in years)

  9.2 - 10.0   8.7 - 10.0   N/A   7.4 - 10.0

Expected volatility

  76% - 85%   77% - 82%   N/A   78% - 84%

Risk-free interest-rate

  2.20% - 2.40%   1.49% - 2.45%   N/A   2.22% - 2.40%

Dividend yield

  0%   0%   N/A   0%

        Stock-based compensation expense related to stock options granted to consultants is recognized on a straight-line basis, as the stock options are earned. The Company issued options to non-employees, which generally vest ratably over the time period the Company expects to receive services from the non-employee. The values attributable to these options are amortized over the service period and the unvested portion of these options was remeasured at each vesting date. During the year ended December 31, 2017 and 2016, stock-based compensation expense for consultants was approximately $173,000 and $73,000, respectively. During the three months ended March 31, 2018 and 2017, stock-based compensation expense for consultants was approximately $39,000 and $25,000, respectively.

10. Income Taxes

        On December 22, 2017, the Tax Cuts and Jobs Act of 2017 (the "Tax Act") was signed into law making significant changes to the Internal Revenue Code. Changes include, but are not limited to, a corporate tax rate decrease from 34% to 21% (the "Rate Reduction") effective for tax years beginning after December 31, 2017. The Company reduced deferred tax assets at December 31, 2017 for the effect of the Rate Reduction. The Rate Reduction did not impact the Company's provision for income taxes for 2017 due to the full valuation allowance on deferred tax assets.

        Staff Accounting Bulletin No. 118 ("SAB 118") was issued to address the application of US GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the Act. The Company determined that the $2,572,000 reduction in deferred tax assets resulting from Rate Reduction was both provisional and a reasonable estimate at December 31, 2017. Additionally, the Company is still in the process of analyzing

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Aridis Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements (Continued)

(Information as of March 31, 2018 and for the periods ended
March 31, 2018 and 2017 are Unaudited)

10. Income Taxes (Continued)

certain provisions of the Act including the application of new executive compensation limitation provisions under Internal Revenue Section 162(m). These items are subject to revisions from further analysis of the Tax Act and interpretation of any additional guidance issued by the U.S. Treasury Department, IRS, FASB, and other standard-setting and regulatory bodies.

        The following summarizes the difference (in thousands) between the income tax expense and the amount computed by applying the statutory federal income tax rate of 34% to income before income tax:

 
  December 31,  
 
  2017   2016  

Federal income tax at statutory rate

  $ (8,383 ) $ (2,863 )

State income tax, net of federal benefit

    (1,096 )   (315 )

Effect of reduced corporate tax rates

    2,644      

Foreign tax differential

    1,993     1,022  

Permanent differences

    2,549     374  

Tax credits generated in current year

    (362 )   (55 )

Other

    269     (1 )

Valuation allowance change

    2,386     1,838  

  $   $  

        Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of our deferred tax assets (in thousands) are as follows:

 
  December 31,  
 
  2017   2016  

Net operating loss carryforwards

  $ 5,530   $ 3,240  

Accruals and reserves

    707     1,071  

Research and development credits

    640     184  

Depreciation and amortization

    (4 )   (5 )

Total

    6,873     4,490  

Valuation allowance change

    (6,873 )   (4,490 )

Net deferred tax assets (liabilities)

  $   $  

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Table of Contents


Aridis Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements (Continued)

(Information as of March 31, 2018 and for the periods ended
March 31, 2018 and 2017 are Unaudited)

10. Income Taxes (Continued)

        Based on the available objective evidence, management believes it is more-likely-than-not that the deferred tax assets were not fully realizable as of December 31, 2017 and 2016. Accordingly, the Company has established a full valuation allowance against its deferred tax assets.

        The net change in the valuation allowance for the year ended December 31, 2017 and 2016 was $2,386,000 and $1,838,000, respectively.

        At December 31, 2017, the Company has net operating loss carryforwards of $8,132,000 and $8,140,000 for federal and California state income tax purposes, respectively. The net operating loss begins to expire in 2035 for federal tax and state tax purposes. At December 31, 2016, the Company has research credit carryforwards of $108,000 and $208,000 for federal and California state income tax purposes, respectively. The federal credits begin to expire in 2035 and the state credits can be carried forward indefinitely.

        Utilization of the net operating loss carryforwards and credits may be subject to an annual limitation due to the ownership change limitations provided by the Internal Revenue Code of 1986, as amended (the "Code"), and similar state provisions. Any annual limitation may result in the expiration of net operating losses and credits before utilization.

        The Company is subject to taxation in the United States, California and the Netherlands. The Company remains subject to possible examination by tax authorities in these jurisdictions for tax years dating back to 2014. The Company does not have any pending tax examinations. Following the Company's adoption of ASC 740-10 regarding accounting for uncertainty in income taxes, the Company made a comprehensive review of its portfolio of uncertain tax positions in accordance with the guidance. In this regard, an uncertain tax position represents the Company's expected treatment of a tax position taken in a filed tax return, or planned to be taken in a future tax return, that has not been reflected in measuring income tax expense for financial reporting purposes. As a result of that review, the Company concluded there were no uncertain tax positions and no cumulative effect on retained earnings at the time of adoption.

        The Company recognizes interest and penalties related to income tax matters as a component of income tax expense. As of December 31, 2017, there were no significant accrued interest and penalties related to uncertain tax positions.

11. Commitments and Contingencies

Leases

        The Company leases office and lab space in San Jose, California under an operating lease arrangement which can be terminated at any time with 90 days' notice. The Company recognizes rent expense as incurred. Rent expense was approximately $299,000 and $285,000, for the year

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Table of Contents


Aridis Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements (Continued)

(Information as of March 31, 2018 and for the periods ended
March 31, 2018 and 2017 are Unaudited)

11. Commitments and Contingencies (Continued)

ended December 31, 2017 and 2016 and approximately $77,000 and $74,000 for the three months ended March 31, 2018 and 2017, respectively.

Indemnification

        In the normal course of business, the Company enters into contracts and agreements that contain a variety of representations and warranties and provide for general indemnifications. The Company's exposure under these agreements is unknown because it involves claims that may be made against the Company in the future, but have not yet been made. To date, the Company has not paid any claims or been required to defend any action related to its indemnification obligations. However, the Company may incur charges in the future as a result of these indemnification obligations.

Contingencies

        From time to time, the Company may have certain contingent liabilities that arise in the ordinary course of its business activities. The Company accrues a liability for such matters when it is probable that future expenditures will be made and such expenditures can be reasonably estimated.

        From time to time, the Company may be involved in various legal proceedings, claims and litigation arising in the ordinary course of business. As of December 31, 2017 and March 31, 2018, there were no pending legal proceedings.

Grant Income

        The Company receives various grants that are subject to audit by the grantors or their representatives. Such audits could result in requests for reimbursement for expenditures disallowed under the terms of the grant; however, management believes that these disallowances, if any, would be immaterial.

Cystic Fibrosis Foundation Agreement

        In December 2016, the Company received an award for up to $2,902,097 from the Cystic Fibrosis Foundation to advance research on potential drugs utilizing inhaled gallium citrate anti-infective. Under the award agreement, the Cystic Fibrosis Foundation will make payments to the Company as certain milestones are met. The award agreement also contains a provision whereby if the Company spends less on developing a potential drug utilizing inhaled gallium citrate anti-infective than the Company actually receives under this award agreement, the Company will be required to return the excess portion of the award to the Cystic Fibrosis Foundation. At the end of any reporting period, if the Company determines that the cumulative

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Aridis Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements (Continued)

(Information as of March 31, 2018 and for the periods ended
March 31, 2018 and 2017 are Unaudited)

11. Commitments and Contingencies (Continued)

amount spent on this program is less than the cumulative cash received from the Cystic Fibrosis Foundation, the Company will record the excess amount received as a liability.

        In the event that development efforts are successful and the Company commercialized a drug from these related development efforts, the Company may be subject to pay to Cystic Fibrosis Foundation a one-time amount equal to the awarded amount. Such amount shall be paid in as few as three but not more than five annual installments, as follows: within ninety days of the end of the calendar year in which the First Commercial Sale occurs, and within ninety days of the end of each subsequent calendar year until the amount is paid, Aridis shall pay up to one-third of the amount but not more than 5% of net sales from compounds containing gallium citrate or gallium nitrate citrate as an active ingredient for that calendar year (except that in the fifth installment, if any, the Company shall pay the remaining unpaid portion of the awarded amount).

        In addition to the amount payable above, the Company will pay to Cystic Fibrosis Foundation a one-time amount equal to the amount of funding from Cystic Fibrosis Foundation under the agreement, within sixty days after the end of the first calendar year during which aggregate net sales of compounds containing gallium citrate or gallium nitrate citrate as an active ingredient exceed $100 million.

        In the event that Aridis licenses rights to the product in the field to a third party, sells the product, or consummates a change of control transaction prior to the first commercial sale, Aridis shall pay to Cystic Fibrosis Foundation an amount equal to two times the actual awarded amount under the agreement, if the change of control transaction occurs prior to the completion of the first Phase IIb (or equivalent) clinical study with respect to the product; and four times the actual awarded amount if the change of control transaction occurs after the completion of the Phase IIb clinical trial specified above. The payment shall be made within sixty days after the closing of such a transaction.

Joint Venture Agreement

        In February 2018, the Company entered into a joint venture agreement with Shenzen Hepalink Pharmaceutical Group Co., Ltd., the Company's largest shareholder and a Chinese entity, for developing and commercializing products for infectious diseases. Under the terms of the agreement, the Company is obligated to contribute $1 million and the licensing of its technology for use in the joint venture entity and will initially own 49% of the joint venture entity.

12. 401(k) plan

        We maintain a defined contribution employee retirement plan, or 401(k) plan, for our employees, effective as of October 1, 2016. Our named executive officers are eligible to participate

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Aridis Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements (Continued)

(Information as of March 31, 2018 and for the periods ended
March 31, 2018 and 2017 are Unaudited)

12. 401(k) plan (Continued)

in the 401(k) plan on the same basis as our other employees. The 401(k) plan is intended to qualify as a tax-qualified plan under Section 401(k) of the Internal Revenue Code. The 401(k) plan provides that each participant may make pre-tax deferrals from his or her compensation up to the statutory limit, which is $18,500 for calendar year 2018, and other testing limits. Participants that are 50 years or older can also make "catch-up" contributions, which in calendar year 2018 may be up to an additional $6,000 above the statutory limit. Although the 401(k) plan provides for discretionary matching and profit sharing contributions, we currently do not make either type of contribution to the 401(k) plan. Participant contributions are held and invested, pursuant to the participant's instructions, by the plan's trustee.

13. Subsequent Events

        The Company considers events or transactions that occur after the balance sheet date but prior to the issuance of the financial statements to provide additional evidence relative to certain estimates or to identify matters that require additional disclosure. For its financial statements as of December 31, 2017 and for the year then ended, the Company has completed an evaluation of all subsequent events through April 19, 2018, the date these financial statements were available to be issued, to ensure that the financial statements include appropriate disclosure of events both recognized in the financial statements as of December 31, 2017, and events which occurred subsequently but were not recognized in the financial statements.

14. Subsequent Events (Unaudited)

        In July 2018, the Company reevaluated its cash position and financial projections and concluded that there is substantial doubt about the Company's ability to continue as a going concern for the one-year period following the date that these interim consolidated financial statements were issued. The accompanying interim consolidated financial statements and notes have been prepared assuming that the Company will continue as a going concern. The accompanying interim consolidated financial statements and notes do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the possible inability of the Company to continue as a going concern.

        The joint venture received regulatory approval in China and the joint venture company was formed on July 2, 2018.

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            Shares

Common Stock

LOGO

Aridis Pharmaceuticals, Inc.



PRELIMINARY PROSPECTUS



Cantor

 

Maxim Group LLC       Northland Capital Markets

                    , 2018


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PART II — INFORMATION NOT REQUIRED IN PROSPECTUS

Item 13.    Other Expenses of Issuance and Distribution

        The following table sets forth all expenses, other than the underwriting discounts and commissions, payable by the registrant in connection with the sale of the common stock being registered. All the amounts shown are estimates except the SEC registration fee and the FINRA filing fee.

 
   
 

SEC registration fee

  $ 4,296  

FINRA filing fee

  $ 5,675  

The Nasdaq Capital Market initial listing fee

             *

Transfer agent and registrar fees

             *

Accounting fees and expenses

             *

Legal fees and expenses

             *

Printing and engraving expenses

             *

Miscellaneous

             *

Total

             *

*
To be filed by amendment.

Item 14.    Indemnification of Directors and Officers

        Section 145 of the Delaware General Corporation Law authorizes a court to award, or a corporation's board of directors to grant, indemnity to directors and officers in terms sufficiently broad to permit such indemnification under certain circumstances for liabilities, including reimbursement for expenses incurred, arising under the Securities Act.

        Our certificate of incorporation provides that we will indemnify our directors to the fullest extent permitted by Delaware law.

        In addition, as permitted by Section 145 of the Delaware General Corporation Law our bylaws provide that we will indemnify our directors and executive officers for serving us in those capacities or for serving other business enterprises at our request, to the fullest extent permitted by Delaware law. Delaware law provides that a corporation may indemnify such person if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the corporation and, with respect to any criminal proceeding, had no reasonable cause to believe such person's conduct was unlawful. We may, in our discretion, indemnify other officers, employees and agents in those circumstances where indemnification is permitted by applicable law. We are required to advance expenses, as incurred, to our directors and executive officers in connection with defending a proceeding, except that such directors or executive officers shall undertake to repay such advances if it is ultimately determined that such person is not entitled to indemnification. We will not be obligated pursuant to our bylaws to indemnify any director or executive officer in connection with any proceeding (or part thereof) initiated by such person unless (i) such indemnification is expressly required to be made by law, (ii) the proceeding was authorized by our Board of Directors, (iii) such indemnification is provided by us, in our sole discretion, pursuant to the powers vested in the corporation under

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applicable law or (iv) such indemnification is required to be made pursuant to our restated bylaws. The rights conferred in our bylaws are not exclusive, and we are authorized to enter into indemnification agreements with our directors, officers, employees and agents and to obtain insurance to indemnify such persons. We may not retroactively amend our bylaw provisions to reduce our indemnification obligations to directors, officers, employees and agents. We may, to the fullest extent permitted by the Delaware Law, purchase and maintain insurance on behalf of any officer, director, employee and agent against any liability which may be asserted against such person.

        In any underwriting agreement we enter into in connection with the sale of common stock being registered hereby, the underwriters will agree to indemnify, under certain conditions, us, our directors, our officers and persons who control us, within the meaning of the Securities Act, against certain liabilities.

Item 15.    Recent Sales of Unregistered Securities

        The following sets forth information regarding all unregistered securities sold from May 21, 2014 to July 13, 2018.

Founders Shares and Preferred Stock Issuances

        On May 21, 2014, upon the Company's conversion from an LLC to a C corporation, 8,828,020 shares of common stock were issued to the founders of the Company. On July 28, 2014, these shares were converted, on a one for one basis, into shares of Series A convertible preferred stock. Each share of Series A convertible preferred stock is entitled to voting rights equivalent to the number of shares of common stock into which each share can be converted. The Series A convertible preferred stock is convertible at the holder's option at any time into common stock on a one for one basis. Upon the liquidation, dissolution or winding up of the business of the Company, whether voluntary or involuntary, each holder shall be entitled to receive, for each share thereof, out of assets of the Company legally available therefore, a preferential amount in cash equal to (and not more than) $2.05 per share. Conversion of Series A convertible preferred stock is automatic upon the closing of an underwritten public offering with proceeds equal to or greater than $4.10 per share. Holders of the preferred stock, in preference to the holders of common stock, are entitled to receive dividends, when and if declared by the Board of Directors.

Private Placement I

        On May 31, 2014, we closed a private financing for $3,500,000, which was a private placement of 14 units each consisting of (i) a 8% convertible unsecured term note in the principal amount of $250,000 convertible into shares of our common stock and (ii) a five-year warrant to purchase shares of common stock. In November 2014, we entered into exchange agreements with each holder of the May 2014 notes whereby the May 2014 notes were exchanged for new notes convertible into our Series A Preferred Stock. The new notes matured in May 2015. We issued an aggregate of 839,024 shares of Series A Preferred Stock and $90,000 upon maturity of the notes.

        The exercise price of the warrants is $4.40. The exercise price is subject to adjustment in certain circumstances. The number of shares issuable upon the exercise of a warrant will be equal to the principal debt balance borrowed divided by the applicable exercise price.

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Private Placement II

        On August 12, 2014, we closed a private financing for $3,250,000, which was a private placement of 13 units with each unit consisting of (i) an 8% convertible unsecured term note in the principal amount of $250,000 convertible into shares of our preferred stock and (ii) a three-year warrant to purchase shares of common stock.

        We issued an aggregate of 697,385 shares of Series A convertible preferred stock upon maturity of the notes. The exercise price of the warrants was $5.03 per share. All warrants expired unexercised on August 12, 2017.

Private Placement III

        On December 15, 2015, we closed a private financing for $3,750,000, which was a private placement of 15 units each consisting of an non-interest bearing unsecured term note in the principal amount of $250,000 convertible into shares of our common stock and (ii) a five-year warrant to purchase shares of common stock. We issued an aggregate of 1,594,361 shares of Series A Preferred Stock upon maturity of the notes. The exercise price of the warrants is $2.35. The exercise price is subject to adjustment in certain circumstances. The number of shares issuable upon the exercise of a warrant will be equal to the principal debt balance borrowed divided by the applicable exercise price.

Other Issuances

        In September 2014, we issued a total of 258,000 shares of common stock to consultants as full payment of notes payable to the consultants for services performed in prior periods.

        In September 2014, we issued a total of 839,781 options to purchase shares of our common stock under our 2014 Plan to employees and consultants.

        In December 2014, we issued a total of options to purchase 2,000 shares of our common stock under our 2014 Plan to an employee.

        In March 2015, we issued a total of 702,515 options to purchase shares of our common stock under our 2014 Plan to employees and consultants.

        In May 2015, we issued a total of 9,086 shares of common stock to consultants as payment for services.

        In May 2015, we issued a total of 839,024 shares of Series A convertible preferred stock when the May 2014 convertible notes matured.

        In June 2015, we issued a total of 80,030 options to purchase shares of our common stock under our 2014 Plan to employees and consultants.

        In September 2015, we issued a total of 32,199 options to purchase shares of our common stock under our 2014 Plan to consultants.

        In December 2015, we issued a total of 165,700 options to purchase shares of our common stock under our 2014 Plan to employees and consultants.

        In March 2016, we issued a total of 86,500 options to purchase shares of our common stock under our 2014 Plan to employees and consultants.

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        In July 2016, we issued a total of 92,700 options to purchase shares of our common stock under our 2014 Plan to employees and consultants.

        In August 2016, the Company completed its First Closing under a private placement memorandum and sold 7,422,603 shares of its Series A convertible preferred stock. The investors received one five year warrant exercisable for one-quarter (1/4) of a share of Series A convertible preferred stock at an exercise price of $2.26 per share. If by the third anniversary date of the First Closing, the Company has not yet consummated a firm commitment underwritten initial public offering of its Common Stock, then each Warrant shall become exercisable for one-half (1/2) of a share of common stock. The Warrants shall be exercisable into Series A preferred stock; provided however, that if a prior investor converts shares of Series A preferred stock for any reason, the Warrants issued to him in connection with these shares shall be automatically exercisable into common stock. In addition, a total of 2,175,451 ten year warrants were issued to prior investors as part of the closing. In connection with this First Closing, the placement agent received 835,042 five year warrants to purchase Series A preferred stock.

        In October 2016, we issued a total of 1,225,000 options to purchase shares of our common stock under our 2014 Plan to employees and consultants.

        In December 2016, the Company completed its Second Closing under a private placement memorandum and sold 6,654,981 shares of its Series A convertible preferred stock. The investors received one five year warrant exercisable for one-quarter (1/4) of a share of Series A convertible preferred stock at an exercise price of $2.26 per share. If by the third anniversary date of the First Closing, the Company has not yet consummated a firm commitment underwritten initial public offering of its Common Stock, then each Warrant shall become exercisable for one-half (1/2) of a share of Common Stock. In connection with this Second Closing, the placement agent received 748,685 five year warrants to purchase Series A Preferred Stock. In addition, upon the completion of the Second Closing, the Company's Vice Chairman was awarded 1,507,302 ten year warrants to purchase shares of the Company's common stock.

        In December 2016, the Company completed its Third Closing under a private placement memorandum and sold 2,439,024 shares of its Series A convertible preferred stock. The investors received one five year warrant exercisable for one-quarter (1/4) of a share of Series A convertible preferred stock at an exercise price of $2.26 per share. If by the third anniversary date of the First Closing, the Company has not yet consummated a firm commitment underwritten initial public offering of its common stock, then each warrant shall become exercisable for one-half (1/2) of a share of common stock. . In connection with this Third Closing, the placement agent received 274,391 five year warrants to purchase Series A preferred stock.

        In December 2016, we issued a total of 1,594,361 shares of Series A convertible preferred stock when the December 2015 convertible notes matured.

        In March 2017, we issued a total of 217,000 options to purchase shares of our common stock under our 2014 Plan to employees and consultants.

        In June 2017, we issued a total of 40,000 options to purchase shares of our common stock under our 2014 Plan to employees.

        From June 2017 to August 2017, the Company sold 6,516,142 shares of its Series A convertible preferred stock to various investors.

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        In July 2017, the Company issued to an investor 370,370 five year warrants to purchase its Series A convertible preferred stock.

        In September 2017, we issued a total of 520,000 options to purchase shares of our common stock under our 2014 Plan to employees and consultants.

        In December 2017, we issued a total of 242,916 options to purchase shares of our common stock under our 2014 Plan to employees and consultants.

        In January 2018, we issued a total of 750,000 options to purchase shares of our common stock under our 2014 Plan to an employee.

        In March 2018, we issued a total of 482,199 options to purchase shares of our common stock under our 2014 Plan to employees.

        Unless otherwise stated, the sales of the above securities were deemed to be exempt from registration under the Securities Act in reliance upon Section 4(a)(2) of the Securities Act (or Regulation D promulgated thereunder), or Rule 701 promulgated under Section 3(b) of the Securities Act as transactions by an issuer not involving any public offering or pursuant to benefit plans and contracts relating to compensation as provided under Rule 701. The recipients of the securities in each of these transactions represented their intentions to acquire the securities for investment only and not with a view to or for sale in connection with any distribution thereof, and appropriate legends were placed upon the stock certificates issued in these transactions.

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Item 16.    Exhibits and Financial Statement Schedules

(a)
Exhibits


EXHIBIT INDEX

Exhibit
No.
  Description
  1.1 * Form of Underwriting Agreement
        
  3.1   Certificate of Incorporation of the Registrant
        
  3.2 * Amended and Restated Certificate of Incorporation of the Registrant, to be effective immediately prior to the closing of the Offering
        
  3.3   Amended and Restated Certificate of Designation of Preferences, Rights and Limitations of Series A Convertible Preferred Stock of the Registrant
        
  3.4   Bylaws of the Registrant
        
  4.1   Specimen certificate evidencing shares of common stock.
        
  5.1 * Legal Opinion of Sheppard, Mullin, Richter & Hampton LLP
        
  10.1 @ Aridis Pharmaceuticals, Inc. 2014 Equity Incentive Plan
        
  10.2 # Exclusive and Non-Exclusive Patent License Agreement between the Registrant and the Public Health Service, dated July 11, 2005
        
  10.3 # License and Option Agreement by and between the Registrant and Brigham Young University, dated July 29, 2005
        
  10.4 # License Agreement by and between the Registrant and The University of Iowa Research Foundation, dated October 22, 2010
        
  10.5 # First Amendment to License Agreement, by and between the Registrant and The University of Iowa Research Foundation, dated January 10, 2017
        
  10.6 # Exclusive Patent License Agreement by and between the Registrant and The Brigham and Women's Hospital, Inc., dated November 16, 2010
        
  10.7 # First Amendment to Exclusive Patent License Agreement, by and between the Registrant and The Brigham and Women's Hospital, Inc., dated February 18, 2016
        
  10.8 # Asset Purchase Agreement between the Registrant and Kenta Biotech Ltd., dated May 10, 2013
        
  10.9 # Formulation Development Agreement between the Registrant and PATH Vaccine Solutions, dated June 1, 2007.
        
  10.10 # Agreement between the Registrant and the Cystic Fibrosis Foundation Therapeutics, Inc., dated December 30, 2017.
        
  10.11 # Collaboration and Option Agreement by and between the Registrant and GlaxoSmithKline Biologicals S.A., dated January 15, 2017.
        
  10.12 # Co-exclusive License Agreement between The University of Chicago and the Registrant, dated June 13, 2017.

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Exhibit
No.
  Description
  10.13 # License Agreement by and between the Registrant and Emergent Product Development Gaithersburg, Inc., dated January 6, 2010.
        
  10.14   Joint Venture Contract in respect of Shenzen Arimab BioPharmaceutical Co., Ltd., by and between Shenzen Hepalink Pharmaceutical Group Co. and the Registrant, dated February 11, 2018.
        
  10.15   Technology License and Collaboration Agreement, by and between Shenzen Arimab BioPharmaceutical Co., Ltd. and the Registrant, dated July 2, 2018.
        
  10.16   License and Option Agreement, by and between Brigham Young University and the Registrant, dated July 29, 2005
        
  21.1   Subsidiaries of the Registrant
        
  23.1   Consent of Mayer Hoffman McCann P.C., independent registered public accounting firm.
        
  23.2 * Consent of Sheppard, Mullin, Richter & Hampton LLP (included in Exhibit 5.1).
        
  24.1   Power of Attorney (included on signature page).

*
To be filed by amendment.

@
Denotes management compensation plan or contract.

#
Confidential treatment is being requested for portions of this exhibit. These portions have been omitted from the registration statement and have been filed separately with the Securities and Exchange Commission.

Item 17.    Undertakings

        Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.

        The undersigned registrant hereby undertakes that:

            (1)   For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective.

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            (2)   For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

            (3)   To provide to the underwriters at the closing specified in the Underwriting Agreement, certificates in such denominations and registered in such names as required by the underwriters to permit prompt delivery to each purchaser.

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SIGNATURES

        Pursuant to the requirements of the Securities Act of 1933, as amended, the registrant has duly caused this Registration Statement on Form S-1 to be signed on its behalf by the undersigned, thereunto duly authorized in the City of San Jose, State of California, on the 18 th day of July, 2018.

    ARIDIS PHARMACEUTICALS, INC.

 

 

By:

 

/s/ VU TRUONG

Vu Truong
Chief Executive Officer, Chief Scientific Officer and Director


POWER OF ATTORNEY

        We, the undersigned officers and directors of Aridis Pharmaceuticals, Inc., hereby severally constitute and appoint Vu Truong and Fred Kurland, and each of them singly, our true and lawful attorneys with full power to any of them, and to each of them singly, to sign for us and in our names, in the capacities indicated below, the Registration Statement on Form S-1 filed herewith and any and all pre-effective and post-effective amendments to said registration statement and any subsequent registration statement filed pursuant to Rule 462(b) under the Securities Act of 1933, as amended, and to file the same with all exhibits thereto, and the other documents in connection therewith, with the Securities and Exchange Commission, and generally to do all such things in our name and behalf in our capacities as officers and directors to enable Aridis Pharmaceuticals, Inc. to comply with the provisions of the Securities Act of 1933, as amended, and all requirements of the Securities and Exchange Commission, hereby ratifying and confirming our signatures as they may be signed by our said attorneys, or any of them, to said registration statement and any and all amendments thereto.

        Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement on Form S-1 has been signed by the following persons in the capacities and on the dates indicated below.

Signature
 
Title
 
Date

 

 

 

 

 
/s/ ERIC PATZER

Eric Patzer
  Executive Chairman and Director   July 18, 2018

/s/ VU TRUONG

Vu Truong

 

Chief Executive Officer, Chief Scientific Officer and Director (Principal Executive Officer)

 

July 18, 2018

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Signature
 
Title
 
Date

 

 

 

 

 
/s/ FRED KURLAND

Fred Kurland
  Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)   July 18, 2018

/s/ ROBERT K. COUGHLIN

Robert K. Coughlin

 

Director

 

July 18, 2018

/s/ CRAIG GIBBS

Craig Gibbs

 

Director

 

July 18, 2018

/s/ JOHN HAMILTON

John Hamilton

 

Director

 

July 18, 2018

/s/ SHAWN LU

Shawn Lu

 

Director

 

July 18, 2018

/s/ ISAAC BLECH

Isaac Blech

 

Director

 

July 18, 2018

/s/ ROBERT R. RUFFOLO

Robert R. Ruffolo

 

Director

 

July 18, 2018

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Exhibit 3.1

 

CERTIFICATE OF INCORPORATION

 

OF

 

ARIDIS PHARMACEUTICALS, INC.

 

ARTICLE I

 

The name of the Corporation is Aridis Pharmaceuticals, Inc.

 

ARTICLE II

 

The address of its registered offices in the state of Delaware is 160 Greentree Drive, Suite 101, Dover, DE in the county of Kent.  The name of its Registered Agent at such address is National Registered Agents, Inc.

 

ARTICLE III

 

The purpose of the Corporation shall be to engage in and transact any and all lawful business.

 

ARTICLE IV

 

A.   Number and Class of Shares Authorized; Par Value.

 

The Corporation is authorized to issue the following shares of capital stock:

 

(1) Common Stock. The aggregate number of shares of common stock (referred to in this Certificate of Incorporation as “Common Stock”) which the Corporation shall have authority to issue is 200,000,000 with a par value of $0.0001 per share.

 

(2) Preferred Stock. The aggregate number of shares of preferred stock (referred to in this Certificate of Incorporation as “Preferred Stock”) which the Corporation shall have authority to issue is 20,000,000 with a par value of $.0001 per share.

 

B.   Description of Shares of Preferred Stock.

 

The terms, preferences, limitations and relative rights of the shares of Preferred Stock are as follows:

 

(1) The Board of Directors is expressly authorized at any time and from time to time to provide for the issuance of shares of Preferred Stock in one or more series, with such voting powers, full or limited (including, by way of illustration and not limitation, in excess of one vote per share), or without voting powers, and with such designations, preferences and relative participating, option or other rights, qualifications, limitations or restrictions, as shall be fixed and determined in the resolution or resolutions providing for the issuance thereof adopted by the Board of Directors, and as are not stated and expressed in these Articles of Incorporation or any

 



 

amendment hereto, including (but without limiting the generality of the foregoing) the following:

 

(a) The distinctive designation of such series and the number of shares which shall constitute such series, which number may be increased (except where otherwise provided by the Board of Directors in creating such series) or decreased (but not below the number of shares thereof then outstanding) from time to time by resolution of the Board of Directors; and

 

(b) The rate and manner of payment of dividends payable on shares of such series, including the dividend rate, date of declaration and payment, whether dividends shall be cumulative, and the conditions upon which and the date from which such dividends shall be cumulative; and

 

(c) Whether shares of such series shall be redeemed, the time or times when, and the price or prices at which, shares of such series shall be redeemable, the redemption price, the terms and conditions of redemption, and the sinking fund provisions, if any, for the purchase or redemption of such shares; and

 

(d) The amount payable on shares of such series and the rights of holders of such shares in the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation; and

 

(e) The rights, if any, of the holders of shares of such series to convert such shares into, or exchange such shares for, shares of Common Stock, other securities, or shares of any other class or series of Preferred Stock and the terms and conditions of such conversion or exchange; and

 

(f) The voting rights, if any, and whether full or limited, of the shares of such series, which may include no voting rights, one vote per share, or such higher number of votes per share as may be designated by the Board of Directors; and

 

(g) The preemptive or preferential rights, if any, of the holders of shares of such series to subscribe for, purchase, receive, or otherwise acquire any part of any new or additional issue of stock of any class, whether now or hereafter authorized, or of any bonds, debentures, notes, or other securities of the Corporation, whether or not convertible into shares of stock with the Corporation.

 

(2) Except in respect of the relative rights and preferences that may be provided by the Board of Directors as hereinbefore provided, all shares of Preferred Stock shall be identical, and each share of a series shall be identical in all respects with the other shares of the same series. When payment of the consideration for which shares of Preferred Stock are to be issued shall have been received by the Corporation, such shares shall be deemed to be fully paid and nonassessable.

 

C.   Common Stock Voting Rights.

 

Each record holder of Common Stock shall be entitled to one vote for each share held.

 

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Holders of Common Stock shall have no cumulative voting rights in any election of directors of the Corporation.

 

ARTICLE V

 

The number of directors of this Corporation shall be the number from time to time fixed by or in the manner provided in the by-laws, but at no time shall said number of directors be less than one (1).

 

ARTICLE VI

 

The personal liability of the directors of the Corporation is hereby eliminated to the fullest extent permitted by the Statutes of the State of Delaware, as the same may be amended and supplemented.

 

ARTICLE VII

 

The Corporation shall, to the fullest extent permitted by the Statutes of the State of Delaware, as the same may be amended and supplemented, indemnify any and all persons whom it shall have power to indemnify under said section from and against any and all of the expenses, liabilities, or other matters referred to in or covered by said section, and the indemnification provided for herein shall not be deemed exclusive of any other rights to which those indemnified may be entitled under any Bylaw, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in such person’s official capacity and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be a director, officer, employee, or agent and shall inure to the benefit of the heirs, executors, and administrators of such person.

 

ARTICLE VIII

 

From time to time any of the provisions of this certificate of incorporation may be amended, altered, or repealed, and other provisions authorized by the laws of the State of Delaware at the time in force may be added or inserted in the manner and at the time prescribed by said laws, and all rights at any time conferred upon the stockholders of the Corporation by this certificate of incorporation are granted subject to the provisions of this Article VIII.

 

ARTICLE IX

 

The power to adopt, alter, amend or repeal bylaws shall be vested in the Board of Directors.

 

ARTICLE X

 

The name and mailing address of the incorporator is: Jeffrey Fessler, Sichenzia Ross Friedman Ference LLP, 61 Broadway, 32 nd  Floor, New York, NY 10006

 

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I, the Undersigned, for the purpose of forming a corporation under the laws of the State of Delaware, do make, file and record this Certificate, and do certify that the facts herein stated are true, and I have accordingly hereunto set my hand this 21st day of May 2014.

 

 

 

/s/ Jeffrey Fessler

 

Jeffrey Fessler

 

Sole Incorporator

 

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Exhibit 3.3

 

AMENDED AND RESTATED CERTIFICATE OF DESIGNATION OF PREFERENCES, RIGHTS AND LIMITATIONS OF SERIES A CONVERTIBLE PREFERRED STOCK

 

Pursuant to Section 151 of the General Corporation Law of the State of Delaware (the “DGCL”), the undersigned officer of Aridis Pharmaceuticals, Inc., a Delaware corporation (the “Corporation”), in accordance with the provisions of Section 103 of the DGCL hereby certifies:

 

1. That pursuant to the authority granted to and vested in the Board of Directors of the Corporation (hereinafter called the “Board”) in accordance with the provisions of the Corporation’s Certificate of Incorporation of the Corporation, as amended and restated to date (the “Certificate of Incorporation”), the Board adopted and the Corporation authorized the issuance of shares of the Corporation’s Series A Convertible Preferred Stock (the “Series A Preferred Stock”) and established the voting provisions, designations, preferences and other rights, and the qualifications, limitations and restrictions thereof in a Certificate of Designation filed with the Corporation’s Amended and Restated Certificate of Incorporation dated December 23, 2015, and as amended to date.

 

2. That pursuant to the authority conferred upon the Board by the provisions of the Certificate of Incorporation, and Section 151(g) of the DGCL, on August 12, 2016, the Board adopted the following resolution amending and restating, effective upon the date this Amended and Restated Certificate of Designation is filed in the office of the Secretary of State of the State of Delaware, the provisions of the Certificate of Designation of the Series A Preferred Stock; and that pursuant to Section 242(b) of DGCL, a majority of the holders of the voting stock of the Corporation and a majority of the holders of the Series A Preferred Stock have approved the following resolution:

 

RESOLVED that, pursuant to the authority expressly granted to and vested in the Board by the provisions of the Certificate of Incorporation, the designation and number of shares of Series A Preferred Stock and the voting and other powers, preferences and other rights of the shares of such series and the qualifications, limitations, and restrictions thereof are amended and restated to read in their entirety as follows:

 

Section 1.      Designation and Authorized Shares .  The Corporation shall be authorized to issue fifty million (50,000,000) shares of Series A Convertible Preferred Stock, par value $0.0001 per share (the “Series A Preferred Stock”).

 

Section 2. Stated Value .  Each share of Series A Preferred Stock shall have a stated value of $2.05 per share (the “Stated Value”).

 

Section 3. Dividends .  Holders of Series A Preferred Stock will be entitled to receive, on any outstanding shares of Series A Preferred Stock held by such holders, cumulative dividends, at an annual rate of 3% of the Stated Value (the “Annual Dividend”) in shares of Series A Preferred Stock.  Holders of Series A Preferred Stock will begin accruing dividends starting on the date on which their respective shares of Series A Preferred Stock are issued.  Notwithstanding the above, all holders of Series A Preferred Stock on June 30, 2016 will begin accruing dividends on July 1, 2016 and no dividends will be paid for any period prior to July 1, 2016 for any holders of Series A Preferred Stock.  Accrued dividends shall be payable annually on the last day of the Corporation’s fiscal year (“Payment Date”) commencing on December 31, 2016. If a holder converts any shares of Series A Preferred Stock into shares of common stock of the Corporation, par value $0.0001 per share (the “Common Stock”), in accordance with the provisions of the Certificate of Designation, at the time of conversion, the holder shall also receive shares of Common Stock equal to a pro rata portion of the Annual Dividend that would otherwise be payable on such converted shares of Series A Preferred Stock on the subsequent Payment Date.

 

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Section 4.                                               Liquidation .

 

(a)                                     Upon consummation of any merger or consolidation of the Corporation (or any tender offer, exchange offer, share exchange, reorganization, recapitalization or other scheme or arrangement resulting in a change of control of the Corporation), the sale of all or substantially all of the Corporation’s capital stock or assets, or upon the liquidation, dissolution or winding up of the business of the Corporation, or any bankruptcy or insolvency proceeding (a “Fundamental Transaction”), whether voluntary or involuntary, each holder of Series A Preferred Stock shall be entitled to receive, for each share of Series A Preferred Stock thereof (including shares of Series A Preferred Stock issued or issuable on the date thereof as part of the Annual Dividend), out of assets of the Corporation legally available therefor, a preferential amount equal to the greater of (i) the sum of (a) $2.05 and (b) any declared but unpaid cash dividends on the Series A Preferred Stock or (ii) the value of the number of shares of Common Stock such share of Series A Preferred Stock is convertible into at the time of such Fundamental Transaction (such value to be determined in good faith by the Board of Directors of the Corporation). All preferential amounts to be paid to the holders of Series A Preferred Stock in connection with such Fundamental Transaction shall be paid before the payment or setting apart for payment of any amount for, or the distribution of any assets of the Corporation to, the holders of (i) the Common Stock and (ii) any other preferred stock of the Corporation.  If upon any such distribution the assets of the Corporation shall be insufficient to pay the holders of the outstanding shares of Series A Preferred Stock (or the holders of any class or series of capital stock ranking on parity with the Series A Preferred Stock as to distributions in the event of a liquidation, dissolution or winding up of the Corporation) the full amounts to which they shall be entitled, such holders shall share ratably in any distribution of assets of the Corporation in accordance with the sums which would be payable on such distribution if all sums payable thereon were paid in full.

 

(b)                                                                                       Any distribution in connection with a Fundamental Transaction, shall be made in cash to the extent possible. Whenever any such distribution shall be paid in property other than cash, the value of such distribution shall be the fair market value of such property as determined in good faith by the Board of Directors of the Corporation.

 

Section 5. Voting . Each holder of Series A Preferred Stock shall be entitled to vote on all matters submitted to shareholders of the Corporation and shall be entitled to such number of votes for each share of Series A Preferred Stock owned at the record date for the determination of shareholders entitled to vote on such matter or, if no such record date is established, at the date such vote is taken or the date on which any written consent of shareholders is solicited, equal to the number of shares of Common Stock such shares of Series A Preferred Stock are convertible into at such time.  Except as otherwise required by law, the holders of shares of Series A Preferred Stock shall vote together with the holders of Common Stock on all matters and shall not vote as a separate class.

 

Section 6.                                                Conversion .

 

(a)                                                                                      Optional Conversion. Each holder of Series A Preferred Stock may, from time to time at any time, convert any or all of such holder’s shares of Series A Preferred Stock into fully paid and non-assessable shares of Common Stock in an amount equal to one (1) share of Common Stock for each one (1) share of Series A Preferred Stock surrendered (such rate of conversion, the “Conversion Rate” and such shares of Common Stock, the “Conversion Shares”).

 

(i)                                                                 Conversion Procedure. In order to exercise the conversion privilege under this Section 6(a), the holder of any shares of Series A Preferred Stock to be converted shall

 

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give written notice to the Corporation at its principal office that such holder elects to convert such shares of Series A Preferred Stock or a specified portion thereof into shares of Common Stock as set forth in such notice (the “Conversion Notice”, and such date of delivery of the Conversion Notice to the Corporation, the “Conversion Notice Delivery Date”). Within three (3) business days following the Conversion Notice Delivery Date, the Corporation shall issue and deliver a certificate or certificates representing the Conversion Shares determined pursuant to this Section 6 (the “Share Delivery Date”). In case of conversion under this Section 6 of only a part of the shares of Series A Preferred Stock represented by a certificate surrendered to the Corporation, the Corporation shall issue and deliver a new certificate for the number of shares of Series A Preferred Stock which have not been converted, upon receipt of the original certificate or certificates representing shares of Series A Preferred Stock so converted.

 

If, in the case of any Conversion Notice, such Conversion Shares are not delivered to or as directed by the applicable holder by the Share Delivery Date, the holder shall be entitled to elect by written notice to the Corporation at any time on or before its receipt of such Conversion Shares, to rescind such optional conversion, in which event the Corporation shall promptly return to the holder any shares of Series A Preferred Stock delivered to the Corporation and the holder shall promptly return to the Corporation the Conversion Shares issued to such holder pursuant to the rescinded Conversion Notice. For the avoidance of doubt, Conversion Shares shall be considered delivered if the Company has caused its transfer agent to deliver or is prepared to deliver such Conversion Shares but the Company is unable to do so without further information or delivery instructions from the recipient, agent or broker that the holder submitting the Conversion Notice designates. The Corporation shall pay all documentary, stamp or similar issue or transfer tax due on the issue of shares of Common Stock issuable upon conversion of the Series A Preferred Stock.

 

(ii)                                                               Buy-In. If by the Share Delivery Date, the Corporation fails for any reason to deliver the Conversion Shares, as set forth in the Conversion Notice, and after such Share Delivery Date, the converting holder purchases, in an arm’s length open market transaction or otherwise, shares of Common Stock (the “Covering Shares”) in order to make delivery in satisfaction of a sale of Common Stock by the converting holder (the “Sold Shares”), which delivery such converting holder anticipated to make using the Conversion Shares (a “Buy-In”), the converting holder shall have the right to require the Corporation to pay to the converting holder  the Buy-In Adjustment Amount. The Corporation shall pay the Buy-In Adjustment Amount to the converting holder in immediately available funds immediately upon demand by the converting holder. For purposes of this Certificate of Designation, the term “Buy-In Adjustment Amount” means the amount equal to the excess, if any, of (i) the converting holder’s total purchase price (including brokerage commissions, if any) for the Covering Shares associated with a Buy-In, over (ii) the net proceeds (after brokerage commissions, if any) received by the converting holder from the sale of the Sold Shares.  By way of illustration and not in limitation of the foregoing, if the converting holder purchases shares of Common Stock having a total purchase price (including brokerage commissions) of $11,000 to cover a Buy-In, with respect to shares of Common Stock it sold for net proceeds of $10,000, the Buy-In Adjustment Amount which the Corporation will be required to pay to the converting holder will be $1,000.  For the avoidance of doubt, Conversion Shares shall be considered delivered if the Company has caused its transfer agent to deliver or is prepared to deliver such Conversion Shares but the Company is unable to do so without further information or delivery instructions from the recipient, agent or broker that the holder submitting the Conversion Notice designates.

 

(iii)                                                            Liquidated Damages . If by the Share Delivery Date, the Corporation fails for any reason to deliver the Conversion Shares, as set forth in the Conversion Notice, the Corporation

 

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shall pay to the holder of such Conversion Shares, in cash, as liquidated damages and not as a penalty, for each $1,000 of Series A Preferred Stock being converted, $10 per trading day (increasing to $20 per trading day on the fifth (5 th ) trading day after such liquidated damages begin to accrue) for each trading day after such Share Delivery Date until such certificates are delivered or holder rescinds such conversion, but not to exceed $50 in aggregate for each $1,000 of Series A Preferred Stock being converted.    Nothing herein shall limit a holder’s right to pursue actual damages for the Corporation’s failure to deliver Conversion Shares within the period specified herein and the holder shall have the right to pursue all remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief.  The exercise of any such rights shall not prohibit the holder from seeking to enforce damages pursuant to this Certificate of Designation or under applicable law.  For the avoidance of doubt, Conversion Shares shall be considered delivered if the Company has caused its transfer agent to deliver or is prepared to deliver such Conversion Shares but the Company is unable to do so without further information or delivery instructions from the recipient, agent or broker that the holder submitting the Conversion Notice designates.

 

(b)                                                                                     Mandatory Conversion. Each share of Series A Preferred Stock shall be automatically converted into fully paid and non-assessable shares of Common Stock at the Conversion Rate upon (i) the completion of a firm commitment underwritten initial public offering of the Corporation’s shares of Common Stock at a price per share equal to or greater than $4.10, subject to adjustments from time to time on or after the date hereof pursuant to Section 9, or (ii) an affirmative vote of the holders of at least a majority of the outstanding shares of Series A Preferred Stock.

 

Section 7.                                               Other Provisions .

 

(a)                                      Reservation of Common Stock. The Corporation shall at all times reserve from its authorized Common Stock a sufficient number of shares to provide for conversion of all Series A Preferred Stock from time to time outstanding.

 

(b)                                      Record Holders. The Corporation and its transfer agent, if any, for the Series A Preferred Stock may deem and treat the record holder of any shares of Series A Preferred Stock as reflected on the books and records of the Corporation as the sole true and lawful owner thereof for all purposes, and neither the Corporation nor any such transfer agent shall be affected by any notice to the contrary.

 

Section 8.                                            Restrictions and Limitations .  Except  as expressly  provided  herein  or as  required by law, so long as any shares of Series A Preferred Stock remain outstanding, the Corporation shall not, without the vote or written consent of the holders of at least a majority of  the then outstanding shares of the Series A Preferred Stock, take any action  which  would  adversely and materially affect any of the preferences, limitations or relative rights  of the  Series  A Preferred Stock, including, without limitation, (i) directly or indirectly, entering into, creating, incurring or assuming any new indebtedness for borrowed money or creating a new class of equity that by its terms is expressly senior in right of payment to the Corporation’s obligations to the holders of the Series A Preferred Stock, (ii) incurring any liens on the Corporation’s assets or (iii) repaying, repurchasing, paying cash dividends on or otherwise making distributions in respect of any shares of Common Stock or other securities.

 

Section 9.                                                  Certain Adjustments .  If the Corporation, at any time while the Series A Preferred Stock is outstanding: (A) shall pay a stock dividend or otherwise make a distribution or distributions on shares of its Common Stock or any other equity or equity equivalent securities payable in shares of Common Stock (which, for avoidance of doubt, shall  not include any shares of Common Stock issued by the Corporation pursuant to the Series A Preferred Stock), (B) subdivide outstanding shares of

 

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Common Stock into a larger number of shares, (C) combine (including by way of reverse stock split) outstanding  shares  of Common Stock into a smaller number of shares, or (D) issue by reclassification of shares of the Common Stock any shares of capital stock of the  Corporation (each of (A) through (D), an “Adjustment Event”), then in each case the Conversion Rate shall be proportionately adjusted such that each share of Series A Preferred Stock would be convertible into the same amount and kind of securities as if each share of Series A Preferred Stock had been converted into Common Stock immediately prior to such Adjustment Event. Any adjustment made pursuant to this Section shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or re-classification.

 

Section 10.  Equal Treatment of Holders .  No   consideration   (including   any modification of this Certificate of Designation or related transaction document) shall be offered or paid to any person or entity to amend or consent to a waiver or modification of any provision of this Certificate of Designation or related transaction document unless the same consideration is also offered to all of holders of the outstanding shares of Series A Preferred Stock. For clarification purposes, this provision constitutes a separate right granted to each holder by the Corporation and negotiated separately by each holder, and is intended for the Corporation to treat all holders of the Series A Preferred Stock as a class and shall not in any way be construed as such holders acting in concert or as a group with respect to the purchase, disposition or voting of the Series A Preferred Stock or otherwise.

 

IN WITNESS WHEREOF, the undersigned has executed this Certificate this 12 th  day of August, 2016.

 

 

/s/ Vu Truong

 

Vu Truong, CEO

 

 

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Exhibit 3.4

 

BYLAWS

 

OF

 

ARIDIS PHARMACEUTICALS, INC.

 

A Delaware Corporation

 

ARTICLE I: OFFICES

 

SECTION 1.1 Registered Office.

 

The registered office of Aridis Pharmaceuticals, Inc. (“Corporation”) shall be at Corporation Trust Center, 1209 Orange Street, Wilmington, County of New Castle, Delaware 19801. The registered agent of the corporation in the State of Delaware at such address is The Corporation Trust Company.

 

SECTION 1.2 Principal Office.

 

The principal office for the transaction of the business of the Corporation shall be 5941 Optical Ct. #200, San Jose, CA 95138, or otherwise as set forth in a resolution adopted by the Board.

 

SECTION 1.3 Other Offices.

 

The Corporation may also have an office or offices at such other place or places, either within or without the State of Delaware, as the Board may from time to time determine or as the business of the Corporation may require.

 

ARTICLE II: MEETINGS OF STOCKHOLDERS

 

SECTION 2.1 Place of Meetings.

 

All annual meetings of stockholders and all other meetings of stockholders shall be held either at the principal office of the Corporation or at any other place within or without the State of Delaware that may be designated by the Board pursuant to authority hereinafter granted to the Board.

 

SECTION 2.2 Annual Meetings.

 

Annual meetings of stockholders of the Corporation for the purpose of electing directors and for the transaction of such other business as may properly come before such meetings may be held at such time and place and on such date as the Board shall determine by resolution.

 

SECTION 2.3 Special Meetings.

 

A special meeting of the stockholders for the transaction of any proper business may be called at any time exclusively by the Board or the Chairman.

 

SECTION 2.4 Notice of Meetings.

 

Except as otherwise required by law, notice of each meeting of stockholders, whether annual or special, shall be given not less than ten (10) days nor more than sixty (60) days before the date of the meeting to each stockholder of record entitled to vote at such meeting by delivering a typewritten or printed notice thereof to such stockholder personally, or by depositing such notice in the United States mail, in a postage prepaid envelope, directed to such stockholder at such stockholder’s post office address furnished by such stockholder to the Secretary of the Corporation for such purpose, or, if such stockholder shall not have furnished an address to the Secretary for such purpose, then at such stockholder’s post office address last known to the Secretary, or by transmitting a notice thereof to such stockholder at such address by telegraph,

 



 

cable, wireless or facsimile. Except as otherwise expressly required by law, no publication of any notice of a meeting of stockholders shall be required. Every notice of a meeting of stockholders shall state the place, date and hour of the meeting and, in the case of a special meeting, shall also state the purpose for which the meeting is called. Notice of any meeting of stockholders shall not be required to be given to any stockholder to whom notice may be omitted pursuant to applicable Delaware law or who shall have waived such notice, and such notice shall be deemed waived by any stockholder who shall attend such meeting in person or by proxy, except a stockholder who shall attend such meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Except as otherwise expressly required by law, notice of any adjourned meeting of stockholders need not be given if the time and place thereof are announced at the meeting at which the adjournment is taken.

 

SECTION 2.5 Fixing Date for Determination of Stockholders of Record.

 

In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any other change, conversion or exchange of stock or for the purpose of any other lawful action other than to consent to corporate action in writing without a meeting, the Board may fix, in advance, a record date, which shall not be more than sixty (60) nor less than ten (10) days before the date of such meeting, nor more than sixty (60) days prior to any such other action. If in any case involving the determination of stockholders for any purpose other than notice of or voting at a meeting of stockholders the Board shall not fix such a record date, then the record date for determining stockholders for such purpose shall be the close of business on the day on which the Board shall adopt the resolution relating thereto. A determination of stockholders entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of such meeting; provided, however, that the Board may fix a new record date for the adjourned meeting.

 

SECTION 2.6 Quorum.

 

Except as otherwise required by law, the holders of record of a majority in voting interest of the shares of stock of the Corporation entitled to be voted thereat, present in person or by proxy, shall constitute a quorum for the transaction of business at any meeting of stockholders of the Corporation or any adjournment thereof. Subject to the requirement of a larger percentage vote, if any, contained in the Certificate of Incorporation, these Bylaws or by statute, the stockholders present at a duly called or held meeting at which a quorum is present may continue to do business until adjournment, notwithstanding any withdrawal of stockholders that may leave less than a quorum remaining, if any action taken (other than adjournment) is approved by the vote of at least a majority in voting interest of the shares required to constitute a quorum. In the absence of a quorum at any meeting or any adjournment thereof, a majority in voting interest of the stockholders present in person or by proxy and entitled to vote thereat or, in the absence therefrom of all the stockholders, any officer entitled to preside at, or to act as secretary of, such meeting may adjourn such meeting from time to time. At any such adjourned meeting at which a quorum is present, any business may be transacted that might have been transacted at the meeting as originally called.

 

SECTION 2.7 Voting.

 

(A) Each stockholder shall, at each meeting of stockholders, be entitled to vote, in the manner prescribed by the Corporation’s Certificate of Incorporation, in person or by proxy each share of the stock of the Corporation that has voting rights on the matter in question and that shall have been held by such stockholder and registered in such stockholder’s name on the books of the Corporation:

 

(i) on the date fixed pursuant to Section 2.5 of these Bylaws as the record date for the determination of stockholders entitled to notice of and to vote at such meeting; or

 

(ii) if no such record date shall have been so fixed, then (a) at the close of business on the business day next preceding the day upon which notice of the meeting shall be given or (b) if notice of the meeting shall be waived, at the close of business on the business day next preceding the day upon which the meeting shall

 

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be held.

 

(B) Shares of the Corporation’s own stock belonging to the Corporation or to another corporation, if a majority of the shares entitled to vote in the election of directors in such other corporation is held, directly or indirectly, by the Corporation, shall neither be entitled to vote nor be counted for quorum purposes. Persons holding stock of the Corporation in a fiduciary capacity shall be entitled to vote such stock. Persons whose stock is pledged shall be entitled to vote, unless in the transfer by the pledgor on the books of the Corporation the pledgor shall have expressly empowered the pledgee to vote thereon, in which case only the pledgee, or the pledgee’s proxy, may represent such stock and vote thereon. Stock having voting power standing of record in the names of two or more persons, whether fiduciaries, members of a partnership, joint tenants, tenants in common, tenants by the entirety or otherwise, or with respect to which two or more persons have the same fiduciary relationship, shall be voted in accordance with the provisions of the Delaware General Corporation Law, as the same exists or may hereafter be amended (the “DGCL”).

 

(C) Subject to the provisions of the Corporation’s Certificate of Incorporation, any such voting rights may be exercised by the stockholder entitled thereto in person or by such stockholder’s proxy appointed by an instrument in writing, subscribed by such stockholder or by such stockholder’s attorney thereunto authorized and delivered to the secretary of the meeting. The attendance at any meeting of a stockholder who may theretofore have given a proxy shall not have the effect of revoking the same unless such stockholder shall in writing so notify the secretary of the meeting prior to the voting of the proxy. At any meeting of stockholders at which a quorum is present, all matters, except as otherwise provided in the Certificate of Incorporation, in these Bylaws or by law, shall be decided by the vote of a majority in voting interest of the stockholders present in person or by proxy and entitled to vote thereat and thereon. The vote at any meeting of stockholders on any question need not be by ballot, unless so directed by the chairman of the meeting. On a vote by ballot, each ballot shall be signed by the stockholder voting, or by such stockholder’s proxy, if there be such proxy, and it shall state the number of shares voted.

 

SECTION 2.8 Inspectors of Election.

 

Prior to each meeting of stockholders, the Chairman of such meeting shall appoint an inspector(s) of election to act with respect to any vote. Each inspector of election so appointed shall first subscribe an oath faithfully to execute the duties of an inspector of election at such meeting with strict impartiality and according to the best of such inspector of election’s ability. Such inspector(s) of election shall decide upon the qualification of the voters and shall certify and report the number of shares represented at the meeting and entitled to vote on any question, determine the number of votes entitled to be cast by each share, shall conduct the vote and, when the voting is completed, accept the votes and ascertain and report the number of shares voted respectively for and against each question, and determine, and retain for a reasonable period a record of the disposition of, any challenge made to any determination made by such inspector(s) of election. Reports of inspector(s) of election shall be in writing and subscribed and delivered by them to the Secretary of the Corporation. The inspector(s) of election need not be stockholders of the Corporation, and any officer of the Corporation may be an inspector(s) of election on any question other than a vote for or against a proposal in which such officer shall have a material interest. The inspector(s) of election may appoint or retain other persons or entities to assist the inspector(s) of election in the performance of the duties of the inspector(s) of election.

 

SECTION 2.9 Advance Notice of Stockholder Proposals and Stockholder Nominations.

 

Nominations of persons for election to the board of directors of the Corporation and the proposal of business to be considered by the stockholders may be made at any meeting of stockholders only (a) pursuant to the Corporation’s notice of meeting, (b) by or at the direction of the Board, or (c) by any stockholder of the Corporation who was a stockholder of record at the time of giving of notice provided for in these bylaws, who is entitled to vote at the meeting and who complies with the notice procedures set forth in this Section 2.9.

 

To be timely, a stockholder’s notice shall be delivered to the secretary at the principal executive offices of the Corporation not later than the close of business on the 60th day nor earlier than the close of business on

 

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the 90th day prior to the first anniversary of the preceding year’s annual meeting; provided, however, that in the event that the date of the annual meeting is advanced by more than 30 days or delayed by more than 60 days from such anniversary date or if the Corporation has not previously held an annual meeting, notice by the stockholder to be timely must be so delivered not earlier than the close of business on the 90th day prior to such annual meeting and not later than the close of business on the later of the 60th day prior to such annual meeting or the tenth day following the day on which public announcement of the date of such meeting is first made by the Corporation. In no event shall the public announcement of a postponement or adjournment of an annual meeting to a later date or time commence a new time period for the giving of a stockholder’s notice as described above.

 

Such stockholder’s notice shall set forth (I) as to each person whom the stockholder proposes to nominate for election or reelection as a director (a) all information relating to such person that is required to be disclosed in solicitations of proxies for election of directors in an election contest, or is otherwise required, in each case pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (or any successor thereto) and Rule 14a-11 thereunder (or any successor thereto) (including such person’s written consent to being named in the proxy statement as a nominee and to serving as a director if elected), (b) the name and address of the stockholder who intends to make the nomination and of the person or persons to be nominated, (c) a representation that the stockholder is a holder of record of stock of the Corporation entitled to vote at such meeting and intends to appear in person or by proxy at the meeting and nominate the person or persons specified in the notice; (d) a description of all arrangements or understandings between the stockholder and each nominee and any other person or persons (naming such person or persons) pursuant to which the nomination or nominations are to be made by the stockholder; and (e) such other information regarding each nominee proposed by such stockholder as would be required to be included in a proxy statement filed pursuant to the proxy rules of the United States Securities and Exchange Commission had the nominee been nominated, or intended to be nominated, by the Board, (II) as to any other business that the stockholder proposes to bring before the meeting, a brief description of the business desired to be brought before the meeting, the reasons for conducting such business at the meeting and any material interest in such business of such stockholder and the beneficial owner, if any, on whose behalf the proposal is made; and (III) as to the stockholder giving the notice and the beneficial owner, if any, on whose behalf the nomination or proposal is made (a) the name and address of such stockholder, as they appear on the Corporation’s books, and of such beneficial owner, and (b) the class and number of shares of the corporation which are owned beneficially and of record by such stockholder and such beneficial owner. In addition, the stockholder making such proposal shall promptly provide any other information reasonably requested by the Corporation. Notwithstanding anything in these Bylaws to the contrary, no business shall be conducted at any meeting of the stockholders except in accordance with the procedures set forth in this Section 2.9(A). The Chairman of any such meeting shall direct that any nomination or business not properly brought before the meeting shall not be considered.

 

SECTION 2.10 Action Without Meeting.

 

Any action required to be taken at any annual or special meeting of stockholders of the Corporation, or any action which may be taken at any annual or special meeting of such stockholders, may, if such action has been earlier approved by the Board, be taken without a meeting, without prior notice and without a vote, if a consent in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing.

 

ARTICLE III: BOARD OF DIRECTORS

 

SECTION 3.1 General Powers.

 

Subject to any requirements in the Certificate of Incorporation, these Bylaws, or of the DGCL as to action which must be authorized or approved by the stockholders, any and all corporate powers shall be exercised by or under the authority of, and the business and affairs of the Corporation shall be under the direction of,

 

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the Board to the fullest extent permitted by law. Without limiting the generality of the foregoing, it is hereby expressly declared that the Board shall have the following powers, to wit:

 

(A) to select and remove all the officers, agents and employees of the Corporation, prescribe such powers and duties for them as may not be inconsistent with law, the Certificate of Incorporation or these Bylaws, fix their compensation, and require from them security for faithful service;

 

(B) to conduct, manage and control the affairs and business of the Corporation, and to make such rules and regulations therefor not inconsistent with law, the Certificate of Incorporation or these Bylaws, as it may deem best;

 

(C) to change the location of the registered office of the Corporation in Section 1.1 hereof; to change the principal office and the principal office for the transaction of the business of the Corporation from one location to another as provided in Section 1.2 hereof; to fix and locate from time to time one or more offices of the Corporation within or without the State of Delaware as provided in Section 1.3 hereof; to designate any place within or without the State of Delaware for the holding of any meeting or meetings of stockholders; and to adopt, make and use a corporate seal, and to prescribe the forms of certificates of stock, and to alter the form of such seal and of such certificates from time to time, and in its judgment as it may deem best, provided such seal and such certificate shall at all times comply with the provisions of law;

 

(D) to authorize the issuance of shares of stock of the Corporation from time to time, upon such terms and for such considerations as may be lawful;

 

(E) to borrow money and incur indebtedness for the purposes of the Corporation, and to cause to be executed and delivered therefor, in the corporate name, promissory notes, bonds, debentures, deeds of trust and securities therefor; and

 

(F) by resolution adopted by a majority of the whole Board to designate an executive and other committees of the Board, each consisting of one or more directors, to serve at the pleasure of the Board, and to prescribe the manner in which proceedings of such committee or committees shall be conducted.

 

SECTION 3.2 Number and Term of Office.

 

The Board of Directors shall consist of one or more members, the exact number of which shall initially be fixed by the Incorporator and thereafter from time to time by the Board of Directors (the “Whole Board”).  The directors shall be classified with respect to the time for which they shall severally hold office by dividing them into three classes, Class I, Class II and Class III, each consisting as nearly as possible of one-third of the Whole Board. All directors shall hold office until their successors are elected and qualified, or until their earlier death, resignation, disqualification or removal. Class I Directors shall be elected for a term of one year; Class II Directors shall be elected for a term of two years; and Class III Directors shall be elected for a term of three years; and at each annual stockholders’ meeting thereafter, successors to the directors whose terms shall expire that year shall be elected to hold office for a term of three years, so that the term of office of one class of directors shall expire in each year.   Except as provided in Section 3.6 of this Article, directors shall be elected by a plurality of the votes cast at Annual Meetings of Stockholders, and each director so elected shall hold office until the Annual Meeting at which their term expires and until his successor is duly elected and qualified, or until his earlier resignation or removal.  Any director may resign at any time upon written notice to the Corporation.  Directors need not be stockholders.

 

SECTION 3.3 Chairman of the Board.

 

The Chairman of the Board, when present, shall preside at all meetings of the Board and all meetings of stockholders. The Chairman of the Board shall perform other duties commonly incident to his office and shall also perform such other duties and have such other powers as the Board of Directors shall designate from time to time.

 

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SECTION 3.4 Election of Directors.

 

The directors shall be elected by the stockholders of the Corporation, and at each election, the persons receiving the greater number of votes, up to the number of directors then to be elected, shall be the persons then elected. The election of directors is subject to any provision contained in the Certificate of Incorporation relating thereto, including any provision regarding the rights of holders of preferred stock to elect directors.

 

SECTION 3.5 Resignations.

 

Any director of the Corporation may resign at any time by giving written notice to the Board or to the Secretary of the Corporation. Any such resignation shall take effect at the time specified therein, or, if the time is not specified, it shall take effect immediately upon receipt; and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective.

 

SECTION 3.6 Vacancies.

 

Except as otherwise provided in the Certificate of Incorporation, any vacancy in the Board, whether because of death, resignation, disqualification, an increase in the number of directors, removal, or any other cause, may be filled by vote of the majority of the remaining directors, although less than a quorum. No reduction of the authorized number of directors shall have the effect of removing any director prior to the expiration of such director’s term of office.

 

SECTION 3.7 Place of Meeting.

 

The Board or any committee thereof may hold any of its meetings at such place or places within or without the State of Delaware as the Board or such committee may from time to time by resolution designate or as shall be designated by the person or persons calling the meeting or in the notice or a waiver of notice of any such meeting. Directors may participate in any regular or special meeting of the Board or any committee thereof by means of conference telephone or similar communications equipment pursuant to which all persons participating in the meeting of the Board or such committee can hear each other, and such participation shall constitute presence in person at such meeting.

 

SECTION 3.8 Regular Meetings.

 

Regular meetings of the Board may be held at such times as the Board shall from time to time by resolution determine.

 

SECTION 3.9 Special Meetings.

 

Special meetings of the Board for any purpose or purposes shall be called at any time by the Chairman of the Board or, if the Chairman of the Board is absent or unable or refuses to act, by the Chief Executive Officer or the President, and may also be called by any two members of the Board. Except as otherwise provided by law or by these Bylaws, written notice of the time and place of special meetings shall be delivered personally or by facsimile to each director, or sent to each director by mail, electronic transmission or by other form of written communication, charges prepaid, addressed to such director at such director’s address as it is shown upon the records of the Corporation, or, if it is not so shown on such records and is not readily ascertainable, at the place in which the meetings of the directors are regularly held. In case such notice is mailed, it shall be deposited in the United States mail at least 48 hours prior to the time of the holding of the meeting. In case such notice is delivered personally, by electronic transmission or by facsimile as above provided, it shall be delivered at least 24 hours prior to the time of the holding of the meeting. Such mailing, electronic transmission, delivery or facsimile transmission as above provided shall be due, legal and personal notice to such director. Except where otherwise required by law or by these Bylaws, notice of the purpose of a special meeting need not be given. Notice of any meeting of the Board shall not be required to be given to any director who is present at such meeting, except a director who shall attend such meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened.

 

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SECTION 3.10 Quorum and Manner of Acting.

 

Except as otherwise provided in these Bylaws, the Certificate of Incorporation or by applicable law, the presence of a majority of the authorized number of directors shall be required to constitute a quorum for the transaction of business at any meeting of the Board, and all matters shall be decided at any such meeting, a quorum being present, by the affirmative votes of a majority of the directors present. A meeting at which a quorum is initially present may continue to transact business notwithstanding the withdrawal of directors, provided any action taken is approved by at least a majority of the required quorum for such meeting. In the absence of a quorum, a majority of directors present at any meeting may adjourn the same from time to time until a quorum shall be present. Notice of any adjourned meeting need not be given. The directors shall act only as a Board, and the individual directors shall have no power as such.

 

SECTION 3.11 Action by Unanimous Written Consent.

 

Any action required or permitted to be taken at any meeting of the Board or of any committee thereof may be taken without a meeting if consent in writing is given thereto by all members of the Board or of such committee, as the case may be, and such consent is filed with the minutes of proceedings of the Board or of such committee.

 

SECTION 3.12 Compensation.

 

Directors, whether or not employees of the Corporation or any of its subsidiaries, may receive an annual fee for their services as directors in an amount fixed by resolution of the Board plus other compensation, including options to acquire capital stock of the Corporation, in an amount and of a type fixed by resolution of the Board, and, in addition, a fixed fee, with or without expenses of attendance, may be allowed by resolution of the Board for attendance at each meeting, including each meeting of a committee of the Board. Nothing herein contained shall be construed to preclude any director from serving the Corporation in any other capacity as an officer, agent, employee, or otherwise, and receiving compensation therefor.

 

SECTION 3.13 Committees.

 

The Board may, by resolution passed by a majority of the whole Board, designate one or more committees, each committee to consist of one or more of the directors of the Corporation. Any such committee, to the extent provided in the resolution of the Board and subject to any restrictions or limitations on the delegation of power and authority imposed by applicable law, shall have and may exercise all the powers and authority of the Board in the management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers which may require it. Any such committee shall keep written minutes of its meetings and report the same to the Board at the next regular meeting of the Board. Unless the Board or these Bylaws shall otherwise prescribe the manner of proceedings of any such committee, meetings of such committee may be regularly scheduled in advance and may be called at any time by the chairman of the committee or by any two members thereof; otherwise, the provisions of these Bylaws with respect to notice and conduct of meetings of the Board shall govern.

 

ARTICLE IV: OFFICERS

 

SECTION 4.1 Officers.

 

The officers of the Corporation shall be a Chief Executive Officer, a President, one or more Vice Presidents (the number thereof and their respective titles to be determined by the Board), a Secretary, a Chief Financial Officer, and such other officers as may be appointed at the discretion of the Board in accordance with the provisions of Section 4.3 hereof.

 

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SECTION 4.2 Election.

 

The officers of the Corporation, except such officers as may be appointed or elected in accordance with the provisions of Sections 4.3 or 4.5 hereof, shall be chosen annually by the Board at the first meeting thereof after the annual meeting of stockholders, and each officer shall hold office until such officer shall resign or shall be removed or otherwise disqualified to serve, or until such officer’s successor shall be elected and qualified.

 

SECTION 4.3 Other Officers.

 

In addition to the officers chosen annually by the Board at its first meeting, the Board also may appoint or elect such other officers as the business of the Corporation may require, each of whom shall have such authority and perform such duties as are provided in these Bylaws or as the Board may from time to time specify, and shall hold office until such officer shall resign or shall be removed or otherwise disqualified to serve, or until such officer’s successor shall be elected and qualified.

 

SECTION 4.4 Removal and Resignation.

 

Except as provided by DGCL Section 141(k), any officer may be removed, either with or without cause, by resolution of the Board, at any regular or special meeting of the Board.. Any officer or assistant may resign at any time by giving written notice of his resignation to the Board or the Secretary of the Corporation. Any such resignation shall take effect at the time specified therein, or, if the time is not specified, upon receipt thereof by the Board or the Secretary, as the case may be; and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective.

 

SECTION 4.5 Vacancies.

 

A vacancy in any office because of death, resignation, removal, disqualification or any other cause may be filled by the vote of the majority of the directors present at any meeting in which a quorum is present, or pursuant to Section 3.11 of these Bylaws.

 

SECTION 4.6 Chief Executive Officer.

 

The Chief Executive Officer shall preside at all meetings of the stockholders and at all meetings of the Board of Directors, unless the Chairman of the Board has been appointed and is present. The Chief Executive Officer shall be the chief executive officer of the Corporation and shall, subject to the control of the Board of Directors, have general supervision, direction and control of the business and affairs of the Corporation. The Chief Executive Officer shall also perform such other duties and have such other powers as the Board of Directors may designate from time to time.

 

SECTION 4.7 President.

 

The President shall preside at all meetings of the stockholders and at all meetings of the Board of Directors, unless the Chairman of the Board has been appointed and is present or, in the absence of the Chairman of the Board, the Chief Executive Officer has been appointed and is present. Subject to the provisions of these Bylaws and to the direction of the Board of Directors and Chief Executive Officer, the President shall have the responsibility for the general management and control of the business and affairs of the Corporation and shall perform all duties and have all powers which are commonly incident to the office of President or which are delegated to him by the Board of Directors. The President and CEO shall have the power to sign all stock certificates, contracts and other instruments of the Corporation which are authorized and shall have general supervision and direction of all the other officers, employees and agents of the corporation.

 

SECTION 4.8 Vice President.

 

Each Vice President shall have such powers and perform such duties with respect to the administration of the business and affairs of the Corporation as are commonly incident to their office or as may from time to time be assigned to such Vice President by the Chairman of the Board, or the Board, or the Chief Executive Officer, or the President, or as may be prescribed by these Bylaws. In the absence or disability of the

 

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Chairman of the Board, the Chief Executive Officer and the President, the Vice Presidents in order of their rank as fixed by the Board, or if not ranked, the Vice President designated by the Board, shall perform all of the duties of the Chairman of the Board, and when so acting shall have all the powers of, and be subject to all the restrictions upon, the Chairman of the Board.

 

SECTION 4.9 Secretary.

 

(A) The Secretary shall attend all meetings of the stockholders and of the Board of Directors and shall record all acts and proceedings thereof in the minute book of the Corporation. The Secretary shall give notice in conformity with these Bylaws of all meetings of the stockholders and of all meetings of the Board of Directors and any committee thereof requiring notice. The Secretary shall perform all other duties given him in these Bylaws and other duties commonly incident to his office and shall also perform such other duties and have such other powers as the Board shall designate from time to time.

 

(B) The Secretary shall keep, or cause to be kept, at the principal office of the Corporation or such other place as the Board may order, a book of minutes of all meetings of directors and stockholders, with the time and place of holding, whether regular or special, and if special, how authorized and the notice thereof given, the names of those present at meetings of directors, the number of shares present or represented at meetings of stockholders, and the proceedings thereof.

 

(C) The Secretary shall keep, or cause to be kept, at the principal office of the Corporation’s transfer agent, a share register, or a duplicate share register, showing the name of each stockholder, the number of shares of each class held by such stockholder, the number and date of certificates issued for such shares, and the number and date of cancellation of every certificate surrendered for cancellation.

 

SECTION 4.10 Chief Financial Officer.

 

The Chief Financial Officer shall keep or cause to be kept the books of account of the corporation in a thorough and proper manner and shall render statements of the financial affairs of the corporation in such form and as often as required by the Board of Directors or the Chief Executive Officer. The Chief Financial Officer, subject to the order of the Board, shall have the custody of all funds and securities of the Corporation. The Chief Financial Officer shall perform other duties commonly incident to his office and shall also perform such other duties and have such other powers as the Board or the Chief Executive Officer shall designate from time to time.

 

ARTICLE V: CORPORATE INSTRUMENTS, CHECKS,

 

DRAFTS, BANK ACCOUNTS, ETC.

 

SECTION 5.1 Execution of Corporate Instruments.

 

The Board of Directors may, in its discretion, determine the method and designate the signatory officer or officers, or other person or persons, to execute on behalf of the Corporation the corporate name without limitation, or enter into contracts on behalf of the Corporation, except where otherwise provided by law or these Bylaws, and such execution or signature shall be binding upon the Corporation. Such authority may be general or confined to specific instances, and unless so authorized by the Board or by these Bylaws, no officer, agent, or employee shall have any power or authority to bind the Corporation by any contract or engagement or to pledge its credit or to render it liable for any purpose or in any amount.

 

SECTION 5.2 Checks, Drafts, Etc.

 

All checks, drafts or other orders for payment of money, notes or other evidence of indebtedness, issued in the name of or payable to the Corporation, shall be signed or endorsed by such person or persons and in such manner as, from time to time, shall be determined by resolution of the Board. Each such officer, assistant, agent or attorney shall give such bond, if any, as the Board may require.

 

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SECTION 5.3 Deposits.

 

All funds of the Corporation not otherwise employed shall be deposited from time to time to the credit of the Corporation in such banks, trust companies or other depositories as the Board may select, or as may be selected by any officer or officers, assistant or assistants, agent or agents, or attorney or attorneys of the Corporation to whom such power shall have been delegated by the Board. For the purpose of deposit and for the purpose of collection for the account of the Corporation, the Chairman of the Board, the Chief Executive Officer, the President, any Vice President (or any other officer or officers, assistant or assistants, agent or agents, or attorney or attorneys of the Corporation who shall from time to time be determined by the Board) may endorse, assign and deliver checks, drafts and other orders for the payment of money which are payable to the order of the Corporation.

 

SECTION 5.4 General and Special Bank Accounts.

 

The Board may from time to time authorize the opening and keeping of general and special bank accounts with such banks, trust companies or other depositories as the Board may select or as may be selected by any officer or officers, assistant or assistants, agent or agents, or attorney or attorneys of the Corporation to whom such power shall have been delegated by the Board. The Board may make such special rules and regulations with respect to such bank accounts, not inconsistent with the provisions of these Bylaws, as it may deem expedient.

 

ARTICLE VI: SHARES AND THEIR TRANSFER

 

SECTION 6.1 Certificates for Stock.

 

The corporation is authorized to issue shares of common stock of the corporation in certificated or uncertificated form.   Certificate issued by the company shall be in such form as the Board shall prescribe, certifying the number and class or series of shares of the stock of the Corporation owned by such owner. Within a reasonable time after the issuance of uncertificated stock, the corporation shall send, or cause to be sent, to the record owner certifying the number and class or series of shares of the stock of the Corporation owned by such owner. The certificates representing shares of such stock shall be numbered in the order in which they shall be issued and shall be signed in the name of the Corporation by the Chairman of the Board, the Chief Executive Officer, the President or any Vice President, and by the Secretary. Any or all of the signatures on the certificates may be a facsimile. In case any officer, transfer agent or registrar who has signed, or whose facsimile signature has been placed upon, any such certificate, shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, such certificate may nevertheless be issued by the Corporation with the same effect as though the person who signed such certificate, or whose facsimile signature shall have been placed thereupon, were such an officer, transfer agent or registrar at the date of issue. A record shall be kept of the respective names of the persons, firms or corporations owning the stock represented by such certificates, the number and class or series of shares represented by such certificates, respectively, and the respective dates thereof, and in case of cancellation, the respective dates of cancellation. Every certificate surrendered to the Corporation for exchange or transfer shall be canceled, and no new certificate or certificates shall be issued in exchange for any existing certificate until such existing certificate shall have been so canceled, except in cases provided for in Section 6.4 hereof.

 

SECTION 6.2 Transfers of Stock.

 

Transfers of shares of stock of the Corporation shall be made only on the books of the Corporation by the registered holder thereof, or by such holder’s attorney thereunto authorized by power of attorney duly executed and filed with the Secretary, or with a transfer clerk or a transfer agent appointed as provided in Section 6.3 hereof, and upon surrender of the certificate or certificates for such shares properly endorsed and the payment of all taxes thereon. The person in whose name shares of stock stand on the books of the Corporation shall be deemed the owner thereof for all purposes as regards the Corporation. Whenever any transfer of shares shall be made for collateral security, and not absolutely, such fact shall be so expressed in the entry of transfer if, when the certificate or certificates shall be presented to the Corporation for transfer,

 

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both the transferor and the transferee request the Corporation to do so.

 

SECTION 6.3 Regulations.

 

The Board may make such rules and regulations as it may deem expedient, not inconsistent with these Bylaws, concerning the issue, transfer and registration of certificates for shares of the stock of the Corporation. It may appoint, or authorize any officer or officers to appoint, one or more transfer clerks or one or more transfer agents and one or more registrars, and may require all certificates for stock to bear the signature or signatures of any of them.

 

SECTION 6.4 Lost, Stolen, Destroyed, and Mutilated Certificates.

 

In any case of loss, theft, destruction, or mutilation of any certificate of stock, another may be issued in its place upon proof satisfactory to the Board of such loss, theft, destruction, or mutilation and upon the giving of a bond of indemnity to the Corporation in such form and in such sum as the Board may direct; provided, however, that a new certificate may be issued without requiring any bond when, in the judgment of the Board, it is proper so to do.

 

ARTICLE VII: INDEMNIFICATION

 

SECTION 7.1 Indemnification of Directors and Officers.

 

To the fullest extent permitted by the Delaware General Corporation Law, as the same exists or may hereafter be amended (provided that the effect of any such amendment shall be prospective only) (the “Delaware Law”), a director of the Corporation shall not be liable to the Corporation or its stockholders for monetary damages for breach of his or her fiduciary duty as a director. The Corporation shall indemnify, in the manner and to the fullest extent permitted by the Delaware Law (but in the case of any such amendment, only to the extent that such amendment permits the Corporation to provide broader indemnification rights than permitted prior thereto), any person (or the estate of any person) who is or was a party to, or is threatened to be made a party to, any threatened, pending or completed action, suit or proceeding, whether or not by or in the right of the Corporation, and whether civil, criminal, administrative, investigative or otherwise, by reason of the fact that such person is or was a director or officer of the Corporation, or is or was serving at the request of the Corporation as a director or officer of another corporation, partnership, joint venture, trust or other enterprise. The Corporation may, to the fullest extent permitted by the Delaware Law, purchase and maintain insurance on behalf of any such person against any liability which may be asserted against such person. The Corporation may create a trust fund, grant a security interest or use other means (including without limitation a letter of credit) to ensure the payment of such sums as may become necessary or desirable to effect the indemnification as provided herein. To the fullest extent permitted by the Delaware Law, the indemnification provided herein shall include expenses as incurred (including attorneys’ fees), judgments, fines and amounts paid in settlement and any such expenses shall be paid by the Corporation in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of the person seeking indemnification to repay such amounts if it is ultimately determined that he or she is not entitled to be indemnified. Notwithstanding the foregoing or any other provision of this Section 7.1, no advance shall be made by the Corporation if a determination is reasonably and promptly made by the Board by a majority vote of a quorum of disinterested Directors, or (if such a quorum is not obtainable or, even if obtainable, a quorum of disinterested Directors so directs) by independent legal counsel to the Corporation, that, based upon the facts known to the Board or such counsel at the time such determination is made, (a) the party seeking an advance acted in bad faith or deliberately breached his or her duty to the Corporation or its stockholders, and (b) as a result of such actions by the party seeking an advance, it is more likely than not that it will ultimately be determined that such party is not entitled to indemnification pursuant to the provisions of this Section 7.1. The indemnification provided herein shall not be deemed to limit the right of the Corporation to indemnify any other person for any such expenses to the fullest extent permitted by the Delaware Law, nor shall it be deemed exclusive of any other rights to which any person seeking indemnification from the Corporation may be entitled under any agreement, the Corporation’s Bylaws, vote of stockholders or disinterested directors, or otherwise, both as to action in such person’s official capacity and as to action in

 

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another capacity while holding such office. The Corporation may, but only to the extent that the Board of Directors may (but shall not be obligated to) authorize from time to time, grant rights to indemnification and to the advancement of expenses to any employee or agent of the Corporation to the fullest extent of the provisions of this Section 7.1 as it applies to the indemnification and advancement of expenses of directors and officers of the Corporation.

 

SECTION 7.2 Indemnification of Employees and Agents.

 

Subject to Section 7.1, the Corporation may, but only to the extent that the Board may (but shall not be obligated to) authorize from time to time, grant rights to indemnification and to the advancement of expenses to any employee or agent of the Corporation to the fullest extent of the provisions of this Article VII as they apply to the indemnification and advancement of expenses of directors and officers of the Corporation.

 

SECTION 7.3 Enforcement of Indemnification.

 

The rights to indemnification and the advancement of expenses conferred above shall be contract rights. If a claim under this Article VII is not paid in full by the Corporation within 60 days after written claim has been received by the Corporation, except in the case of a claim for an advancement of expenses, in which case the applicable period shall be 20 days, the indemnitee may at any time thereafter bring suit against the Corporation to recover the unpaid amount of such claim. If successful in whole or in part in any such suit, or in a suit brought by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the indemnitee shall be entitled to be paid also the expenses of prosecuting or defending such suit. In (i) any suit brought by the indemnitee to enforce a right to indemnification hereunder (but not in a suit brought by the indemnitee to enforce a right to an advancement of expenses) it shall be a defense that, and (ii) any suit by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking the Corporation shall be entitled to recover such expenses upon a final adjudication that, the indemnitee has not met any applicable standard for indemnification set forth in the DGCL. Neither the failure of the Corporation (including its Board, independent legal counsel or stockholders) to have made a determination prior to the commencement of such suit that indemnification of the indemnitee is proper in the circumstances because the indemnitee has met the applicable standard of conduct set forth in the DGCL, nor an actual determination by the Corporation (including its Board, independent legal counsel or stockholders) that the indemnitee has not met such applicable standard of conduct, shall either create a presumption that the indemnitee has not met the applicable standard of conduct or, in the case of such a suit brought by the indemnitee, be a defense to such suit. In any suit brought by the indemnitee to enforce a right to indemnification or to an advancement of expenses hereunder, or by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the burden of proving that the indemnitee is not entitled to be indemnified, or to such advancement of expenses, under this Article VII or otherwise shall be on the Corporation.

 

ARTICLE VIII: MISCELLANEOUS

 

SECTION 8.1 Seal.

 

The Board shall adopt a corporate seal, which shall be in the form set forth in a resolution approved by the Board.

 

SECTION 8.2 Waiver of Notices.

 

Whenever notice is required to be given by these Bylaws or the Certificate of Incorporation or by law, the person entitled to said notice may waive such notice in writing, either before or after the time stated therein, and such waiver shall be deemed equivalent to notice.

 

SECTION 8.3 Amendments.

 

Except as otherwise provided herein, by law, or in the Certificate of Incorporation, these Bylaws or any of

 

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them may be altered, amended, repealed or rescinded and new Bylaws may be adopted by the Board or by the stockholders at any annual or special meeting of stockholders, provided that notice of such proposed alteration, amendment, repeal, recession or adoption is given in the notice of such meeting of stockholders.

 

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Ex hibit 4.1

 

PROOF PROOF PROOF PROOF PROOF PROOF PROOF N U M B E R SEE REVERSE FOR CERTAIN DEFINITIONS INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE C o M M o n s T o C K This CerTifies ThaT: PROOF is The owner of FULLY PAID AND NON-ASSESSABLE SHARES OF COMMON STOCK OF $0.0001 PAR VALUE EACH OF Aridis PhArmAceuticAls, inc. transferable on the books of the Corporation in person or by duly authorized attorney upon surrender of this certificate duly endorsed or assigned. This certificate and the shares represented hereby are subject to the laws of the State of Delaware, and to the Certificate of Incorporation and Bylaws of the Corporation, as now or hereafter amended. This certificate is not valid until countersigned by the Transfer Agent. WITNESS the facsimile seal of the Corporation and the facsimile signatures of its duly authorized officers. COUNTERSIGNED: DATED: PHILADELPHIA STOCK TRANSFER, INC. 2320 HAVERFORD RD., SUITE 230, ARDMORE, PA 19003 TRANSFER AGENT BY: AUTHORIZED SIGNATURE CHAIRMAN CHIEF EXECUTIVE OFFICER PROOF PROOF PROOF PROOF PROOF PROOF PROOF CUSIP040334104 SHARES A

 


The following abbreviations, when used in the inscription on the face of this certificate, shall be construed as though they were written out in full according to applicable laws or regulations: TEN COM - as tenants in common TEN ENT - as tenants by the entireties UNIF GIFT MIN ACT - ....................Custodian.................... (Cust) (Minor) JT TEN - as joint tenants with right of survivorship and not as tenants in common under Uniform Gifts to Minors Act ................................................... (State) Additional abbreviations may also be used though not in the above list. For Value Received, hereby sell, assign and transfer unto PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE (PLEASE PRINT OR TYPE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE) Shares of the stock represented by the within Certificate, and do hereby irrevocably constitute and appoint Attorney to transfer the said stock on the books of the within named Corporation with full power of substitution in the premises. Dated NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATSOEVER. Signature(s) Guaranteed By The Signature(s) must be guaranteed by an eligible guarantor institution (Banks, Stockbrokers, Savings and Loan Associations and Credit Unions with membership in an approved Signature Guarantee Medallion Program), pursuant to SEC Rule 17Ad-15. THE CORPORATION WILL FURNISH TO ANY STOCKHOLDER, UPON REQUEST AND WITHOUT CHARGE, A FULL STATEMENT OF THE DESIGNATIONS, RELATIVE RIGHTS, PREFERENCES AND LIMITATIONS OF THE SHARES OF EACH CLASS AND SERIES AUTHORIZED TO BE ISSUED, SO FAR AS THE SAME HAVE BEEN DETERMINED, AND OF THE AUTHORITY, IF ANY, OF THE BOARD TO DIVIDE THE SHARES INTO CLASSES OR SERIES AND TO DETERMINE AND CHANGE THE RELATIVE RIGHTS, PREFERENCES AND LIMITATIONS OF ANY CLASS OR SERIES. SUCH REQUEST MAY BE MADE TO THE SECRETARY OF THE CORPORATION OR TO THE TRANSFER AGENT NAMED ON THIS CERTIFICATE. COLUMBIA PRINTING SERVICES, LLC - www.stockinformation.com

 



Exhibit 10.1

 

ARIDIS PHARMACEUTICALS INC.

 

2014 EQUITY INCENTIVE PLAN

 

1.                                       Purpose of the Plan.

 

This 2014 Equity Incentive Plan (the “ Plan ”) is intended as an incentive, to retain in the employ of and as directors, officers, consultants, advisors and employees to Aridis Pharmaceuticals Inc., a Delaware corporation (the “ Company ”), and any Subsidiary of the Company, within the meaning of Section 424(f) of the United States Internal Revenue Code of 1986, as amended (the “ Code ”), persons of training, experience and ability, to attract new directors, officers, consultants, advisors and employees whose services are considered valuable, to encourage the sense of proprietorship and to stimulate the active interest of such persons in the development and financial success of the Company and its Subsidiaries.

 

It is further intended that certain options granted pursuant to the Plan shall constitute incentive stock options within the meaning of Section 422 of the Code (the “ Incentive Options ”) while certain other options granted pursuant to the Plan shall be nonqualified stock options (the “ Nonqualified Options ”).  Incentive Options and Nonqualified Options are hereinafter referred to collectively as “ Options .”

 

The Company intends that the Plan meet the requirements of Rule 16b-3 (“ Rule 16b-3 ”) promulgated under the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”), and that transactions of the type specified in subparagraphs (c) to (f) inclusive of Rule 16b-3 by officers and directors of the Company pursuant to the Plan will be exempt from the operation of Section 16(b) of the Exchange Act.  Further, the Plan is intended to satisfy the performance-based compensation exception to the limitation on the Company’s tax deductions imposed by Section 162(m) of the Code with respect to those Options for which qualification for such exception is intended.  In all cases, the terms, provisions, conditions and limitations of the Plan shall be construed and interpreted consistent with the Company’s intent as stated in this Section 1.

 

2.                                       Administration of the Plan.

 

The Board of Directors of the Company (the “ Board ”) shall appoint and maintain as administrator of the Plan a Committee (the “ Committee ”) consisting of two or more directors who are (i) “Independent Directors” (as such term is defined under the rules of the NASDAQ Stock Market), (ii) “Non-Employee Directors” (as such term is defined in Rule 16b-3) and (iii) “Outside Directors” (as such term is defined in Section 162(m) of the Code), which shall serve at the pleasure of the Board.  The Committee, subject to Sections 3, 5 and 6 hereof, shall have full power and authority to designate recipients of Options and restricted stock (“ Restricted Stock ”) and to determine the terms and conditions of the respective Option and Restricted Stock agreements (which need not be identical) and to interpret the provisions and supervise the administration of the Plan.  The Committee shall have the authority, without limitation, to designate which Options granted under the Plan shall be Incentive Options and which shall be Nonqualified Options.  To the extent any Option does not qualify as an Incentive Option, it shall constitute a separate Nonqualified Option.

 

Subject to the provisions of the Plan, the Committee shall interpret the Plan and all Options and Restricted Stock granted under the Plan, shall make such rules as it deems necessary for the proper administration of the Plan, shall make all other determinations necessary or advisable for the administration of the Plan and shall correct any defects or supply any omission or reconcile any inconsistency in the Plan or in any Options or Restricted Stock granted under the Plan in the manner and to the extent that the Committee deems desirable to carry into effect the Plan or any Options or Restricted Stock.  The act or determination of a majority of the Committee shall be the act or determination of the Committee and any decision reduced to writing and signed by all of the members of the Committee shall be fully effective as if it had been made by a majority of the Committee at a meeting duly held for such purpose.  Subject to the provisions of the Plan, any action taken or determination made by the Committee pursuant to this and the other Sections of the Plan shall be conclusive on all parties.

 

In the event that for any reason the Committee is unable to act or if the Committee at the time of any grant, award or other acquisition under the Plan does not consist of two or more Non-Employee Directors, or if there shall be no such Committee, or if the Board otherwise determines to administer the Plan, then the Plan shall be

 



 

administered by the Board, and references herein to the Committee (except in the proviso to this sentence) shall be deemed to be references to the Board, and any such grant, award or other acquisition may be approved or ratified in any other manner contemplated by subparagraph (d) of Rule 16b-3; provided , however , that grants to the Company’s Chief Executive Officer or to any of the Company’s other four most highly compensated officers that are intended to qualify as performance-based compensation under Section 162(m) of the Code may only be granted by the Committee.

 

3.                                       Designation of Optionees and Grantees.

 

The persons eligible for participation in the Plan as recipients of Options (the “ Optionees ”) or Restricted Stock (the “ Grantees ” and together with Optionees, the “ Participants ”) shall include directors, officers and employees of, and consultants and advisors to, the Company or any Subsidiary; provided that Incentive Options may only be granted to employees of the Company and any Subsidiary. In selecting Participants, and in determining the number of shares to be covered by each Option or award of Restricted Stock granted to Participants, the Committee may consider any factors it deems relevant, including, without limitation, the office or position held by the Participant or the Participant’s relationship to the Company, the Participant’s degree of responsibility for and contribution to the growth and success of the Company or any Subsidiary, the Participant’s length of service, promotions and potential. A Participant who has been granted an Option or Restricted Stock hereunder may be granted an additional Option or Options, or Restricted Stock if the Committee shall so determine.

 

4.                                       Stock Reserved for the Plan.

 

Subject to adjustment as provided in Section 8 hereof, a total of 1,500,000 shares of the Company’s common stock, par value $0.0001 per share (the “ Stock ”), shall. be subject to the Plan, subject to ongoing annual adjustments starting on January 1, 2015, as provided herein. The shares of Stock subject to the Plan shall consist of unissued shares or treasury shares, and such number of shares of Stock shall be and is hereby reserved for such purpose.  Any of such shares of Stock that may remain unissued and that are not subject to outstanding Options at the termination of the Plan shall cease to be reserved for the purposes of the Plan, but until termination of the Plan the Company shall at all times reserve a sufficient number of shares of Stock to meet the requirements of the Plan.  Should any Option or award of Restricted Stock expire or be canceled prior to its exercise or vesting in full or should the number of shares of Stock to be delivered upon the exercise or vesting in full of an Option or award of Restricted Stock be reduced for any reason, the shares of Stock theretofore subject to such Option or Restricted Stock may be subject to future Options or Restricted Stock under the Plan, except where such reissuance is inconsistent with the provisions of Section 162(m) of the Code where qualification as performance-based compensation under Section 162(m) of the Code is intended.  Notwithstanding the foregoing, on each Calculation Date commencing on January 1, 2015, the aggregate number of shares of Stock that are available for issuance shall automatically be increased by the greater of (i) 500,000 or  (ii)  such number of shares as is equal to the number of shares sufficient to cause the option pool to equal twenty percent (20%) of the issued and outstanding common stock of the Company at such time, provided, however , that if on any Calculation Date the number of shares equal to twenty percent (20%) of the total issued and outstanding shares of Common Stock is less than the number of shares of Common Stock available for issuance under the Plan, no change will be made to the aggregate number of shares of Common Stock issuable under the Plan for that year (such that the aggregate number of shares of Common Stock available for issuance under the Plan will never decrease).  “Calculation Date” means January 1 st  of each year during the term of the Plan.  A total number of shares of Common Stock that may be issued as Incentive Options is equal to 1,500,000 shares of Common Stock and shall increase each January 1 st  beginning on January 1, 2015 by 500,000 shares per year.

 

5.                                       Terms and Conditions of Options.

 

Options granted under the Plan shall be subject to the following conditions and shall contain such additional terms and conditions, not inconsistent with the terms of the Plan, as the Committee shall deem desirable:

 

(a)                                  Option Price .  The purchase price of each share of Stock purchasable under an Incentive Option shall be determined by the Committee at the time of grant, but shall not be less than 100% of the Fair Market Value (as defined below) of such share of Stock on the date the Option is granted; provided , however , that with respect to an Optionee who, at the time such Incentive Option is granted, owns (within the meaning of Section 424(d) of the Code) more than 10% of the total combined voting power of all classes of stock of the Company or of

 

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any Subsidiary, the purchase price per share of Stock shall be at least 110% of the Fair Market Value per share of Stock on the date of grant.  The purchase price of each share of Stock purchasable under a Nonqualified Option shall not be less than 100% of the Fair Market Value of such share of Stock on the date the Option is granted.  The exercise price for each Option shall be subject to adjustment as provided in Section 8 below.  “ Fair Market Value ” means the closing price on the final trading day immediately prior to the grant date of the Stock on the principal securities exchange on which shares of Stock are listed (if the shares of Stock are so listed), or on the NASDAQ Stock Market or OTC Bulletin Board (if the shares of Stock are regularly quoted on the NASDAQ Stock Market or OTC Bulletin Board, as the case may be), or, if not so listed, the mean between the closing bid and asked prices of publicly traded shares of Stock in the over the counter market, or, if such bid and asked prices shall not be available, as reported by any nationally recognized quotation service selected by the Company, or as determined by the Committee in a manner consistent with the provisions of the Code.  Anything in this Section 5(a) to the contrary notwithstanding, in no event shall the purchase price of a share of Stock be less than the minimum price permitted under the rules and policies of any national securities exchange on which the shares of Stock are listed.

 

(b)                                  Option Term .  The term of each Option shall be fixed by the Committee, but no Option shall be exercisable more than ten years after the date such Option is granted and in the case of an Incentive Option granted to an Optionee who, at the time such Incentive Option is granted, owns (within the meaning of Section 424(d) of the Code) more than 10% of the total combined voting power of all classes of stock of the Company or of any Subsidiary, no such Incentive Option shall be exercisable more than five years after the date such Incentive Option is granted.

 

(c)                                   Exercisability .  Subject to Section 5(j) hereof, Options shall be exercisable at such time or times and subject to such terms and conditions as shall be determined by the Committee at the time of grant; provided , however , that in the absence of any Option vesting periods designated by the Committee at the time of grant, Options shall vest and become exercisable as to one-tenth of the total number of shares subject to the Option on each of the three month anniversary of the date of grant; and provided further that no Options shall be exercisable until such time as any vesting limitation required by Section 16 of the Exchange Act, and related rules, shall be satisfied if such limitation shall be required for continued validity of the exemption provided under Rule 16b-3(d)(3).

 

Upon the occurrence of a “Change in Control” (as hereinafter defined), the Committee may accelerate the vesting and exercisability of outstanding Options, in whole or in part, as determined by the Committee in its sole discretion.  In its sole discretion, the Committee may also determine that, upon the occurrence of a Change in Control, each outstanding Option shall terminate within a specified number of days after notice to the Optionee thereunder, and each such Optionee shall receive, with respect to each share of Company Stock subject to such Option, an amount equal to the excess of the Fair Market Value of such shares immediately prior to such Change in Control over the exercise price per share of such Option; such amount shall be payable in cash, in one or more kinds of property (including the property, if any, payable in the transaction) or a combination thereof, as the Committee shall determine in its sole discretion.

 

For purposes of the Plan, unless otherwise defined in an employment agreement between the Company and the relevant Optionee, a Change in Control shall be deemed to have occurred if:

 

(i)                                      a tender offer (or series of related offers) shall be made and consummated for the ownership of 50% or more of the outstanding voting securities of the Company, unless as a result of such tender offer more than 50% of the outstanding voting securities of the surviving or resulting corporation shall be owned in the aggregate by the stockholders of the Company (as of the time immediately prior to the commencement of such offer), any employee benefit plan of the Company or its Subsidiaries, and their affiliates;

 

(ii)                                   the Company shall be merged or consolidated with another corporation, unless as a result of such merger or consolidation more than 50% of the outstanding voting securities of the surviving or resulting corporation shall be owned in the aggregate by the stockholders of the Company (as of the time immediately prior to such transaction), any employee benefit plan of the Company or its Subsidiaries, and their affiliates;

 

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(iii)                                the Company shall sell substantially all of its assets to another corporation that is not wholly owned by the Company, unless as a result of such sale more than 50% of such assets shall be owned in the aggregate by the stockholders of the Company (as of the time immediately prior to such transaction), any employee benefit plan of the Company or its Subsidiaries and their affiliates; or

 

(iv)                               a Person (as defined below) shall acquire 50% or more of the outstanding voting securities of the Company (whether directly, indirectly, beneficially or of record), unless as a result of such acquisition more than 50% of the outstanding voting securities of the surviving or resulting corporation shall be owned in the aggregate by the stockholders of the Company (as of the time immediately prior to the first acquisition of such securities by such Person), any employee benefit plan of the Company or its Subsidiaries, and their affiliates.

 

Notwithstanding the foregoing, if Change of Control is defined in an employment agreement between the Company and the relevant Optionee, then, with respect to such Optionee, Change of Control shall have the meaning ascribed to it in such employment agreement.

 

For purposes of this Section 5(c), ownership of voting securities shall take into account and shall include ownership as determined by applying the provisions of Rule 13d-3(d)(I)(i) (as in effect on the date hereof) under the Exchange Act.  In addition, for such purposes, “Person” shall have the meaning given in Section 3(a)(9) of the Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof; provided , however , that a Person shall not include (A) the Company or any of its Subsidiaries; (B) a trustee or other fiduciary holding securities under an employee benefit plan of the Company or any of its Subsidiaries; (C) an underwriter temporarily holding securities pursuant to an offering of such securities; or (D) a corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportion as their ownership of stock of the Company.

 

(d)                                  Method of Exercise .  Options to the extent then exercisable may be exercised in whole or in part at any time during the option period, by giving written notice to the Company specifying the number of shares of Stock to be purchased, accompanied by payment in full of the purchase price, in cash, or by check or such other instrument as may be acceptable to the Committee.  As determined by the Committee, in its sole discretion, at or after grant, payment in full or in part may be made at the election of the Optionee (i) in the form of Stock owned by the Optionee (based on the Fair Market Value of the Stock which is not the subject of any pledge or security interest, (ii) in the form of shares of Stock withheld by the Company from the shares of Stock otherwise to be received with such withheld shares of Stock having a Fair Market Value equal to the exercise price of the Option, or (iii) by a combination of the foregoing, such Fair Market Value determined by applying the principles set forth in Section 5(a), provided that the combined value of all cash and cash equivalents and the Fair Market Value of any shares surrendered to the Company is at least equal to such exercise price and except with respect to (ii) above, such method of payment will not cause a disqualifying disposition of all or a portion of the Stock received upon exercise of an Incentive Option.  An Optionee shall have the right to dividends and other rights of a stockholder with respect to shares of Stock purchased upon exercise of an Option at such time as the Optionee (i) has given written notice of exercise and has paid in full for such shares, and (ii) has satisfied such conditions that may be imposed by the Company with respect to the withholding of taxes.

 

(e)                                   Non-transferability of Options .  Options are not transferable and may be exercised solely by the Optionee during his lifetime or after his death by the person or persons entitled thereto under his will or the laws of descent and distribution.  The Committee, in its sole discretion, may permit a transfer of a Nonqualified Option to (i) a trust for the benefit of the Optionee, (ii) a member of the Optionee’s immediate family (or a trust for his or her benefit) or (iii) pursuant to a domestic relations order.  Any attempt to transfer, assign, pledge or otherwise dispose of, or to subject to execution, attachment or similar process, any Option contrary to the provisions hereof shall be void and ineffective and shall give no right to the purported transferee.

 

(f)                                    Termination by Death .  Unless otherwise determined by the Committee, if any Optionee’s employment with or service to the Company or any Subsidiary terminates by reason of death, the vested Options may thereafter be exercised, to the extent then exercisable (or on such accelerated basis as the Committee shall determine at or after grant), by the legal representative of the estate or by the legatee of the Optionee under the will of the Optionee, for a period of one (1) year after the date of such death (or, if later, such time as the Option

 

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may be exercised pursuant to Section 14(d) hereof) or until the expiration of the stated term of such Option as provided under the Plan, whichever period is shorter.

 

(g)                                   Termination by Reason of Disability .  Unless otherwise determined by the Committee, if any Optionee’s employment with or service to the Company or any Subsidiary terminates by reason of Disability (as defined below), then any vested Option held by such Optionee may thereafter be exercised, to the extent it was exercisable at the time of termination due to Disability (or on such accelerated basis as the Committee shall determine at or after grant), but may not be exercised after one (1) year after the date of such termination of employment or service (or, if later, such time as the Option may be exercised pursuant to Section 14(d) hereof) or the expiration of the stated term of such Option, whichever period is shorter; provided , however , that, if the Optionee dies within such ninety (90) day period, any unexercised Option held by such Optionee shall thereafter be exercisable to the extent to which it was exercisable at the time of death for a period of one (1) year after the date of such death (or, if later, such time as the Option may be exercised pursuant to Section 14(d) hereof) or for the stated term of such Option, whichever period is shorter.  “Disability” shall mean an Optionee’s total and permanent disability; provided , that if Disability is defined in an employment agreement between the Company and the relevant Optionee, then, with respect to such Optionee, Disability shall have the meaning ascribed to it in such employment agreement

 

(h)                                  Termination by Reason of Retirement .  Unless otherwise determined by the Committee, if any Optionee’s employment with or service to the Company or any Subsidiary terminates by reason of Normal or Early Retirement (as such terms are defined below), any vested Option held by such Optionee may thereafter be exercised to the extent it was exercisable at the time of such Retirement (or on such accelerated basis as the Committee shall determine at or after grant), but may not be exercised after ninety (90) days after the date of such termination of employment or service (or, if later, such time as the Option may be exercised pursuant to Section 14(d) hereof) or the expiration of the stated term of such Option, whichever date is earlier; provided , however , that, if the Optionee dies within such ninety (90) day period, any unexercised Option held by such Optionee shall thereafter be exercisable, to the extent to which it was exercisable at the time of death, for a period of one (1) year after the date of such death (or, if later, such time as the Option may be exercised pursuant to Section 14(d) hereof) or for the stated term of such Option, whichever period is shorter.

 

For purposes of this paragraph (h), “ Normal Retirement ” shall mean retirement from active employment with the Company or any Subsidiary on or after the normal retirement date specified in the applicable Company or Subsidiary policy or if no such policy, age 65, and “ Early Retirement ” shall mean retirement from active employment with the Company or any Subsidiary pursuant to the early retirement provisions of the applicable Company or Subsidiary policy or if no such policy, age 55.

 

(i)                                      Other Terminations .  Unless otherwise determined by the Committee upon grant, if any Optionee’s employment with or service to the Company or any Subsidiary is terminated by such Optionee for any reason other than death, Disability, Normal or Early Retirement or Good Reason (as defined below), the Option shall thereupon terminate, except that the portion of any Option that was exercisable on the date of such termination of employment or service may be exercised for the lesser of ninety (90) days after the date of termination (or, if later, such time as the Option may be exercised pursuant to Section 14(d) hereof) or the balance of such Option’s term, whichever period is shorter.  The transfer of an Optionee from the employ of or service to the Company to the employ of or service to a Subsidiary, or vice versa, or from one Subsidiary to another, shall not be deemed to constitute a termination of employment or service for purposes of the Plan.

 

(i)                                      In the event that the Optionee’s employment or service with the Company or any Subsidiary is terminated by the Company or such Subsidiary for “cause” any unexercised portion of any Option shall immediately terminate in its entirety.  For purposes hereof, unless otherwise defined in an employment agreement between the Company and the relevant Optionee, “Cause” shall exist upon a good-faith determination by the Board, following a hearing before the Board at which an Optionee was given an opportunity to be heard, that such Optionee has been accused of fraud, dishonesty or act detrimental to the interests of the Company or any Subsidiary of Company or that such Optionee has been accused of or convicted of an act of willful and material embezzlement or fraud against the Company or of a felony under any state or federal statute; provided , however , that it is specifically understood that “Cause” shall not include any act

 

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of commission or omission in the good-faith exercise of such Optionee’s business judgment as a director, officer or employee of the Company, as the case may be, or upon the advice of counsel to the Company.  Notwithstanding the foregoing, if Cause is defined in an employment agreement between the Company and the relevant Optionee, then, with respect to such Optionee, Cause shall have the meaning ascribed to it in such employment agreement.

 

(ii)                                   In the event that an Optionee is removed as a director, officer or employee by the Company at any time other than for “Cause” or resigns as a director, officer or employee for “Good Reason” the Option granted to such Optionee may be exercised by the Optionee, to the extent the Option was exercisable on the date such Optionee ceases to be a director, officer or employee.  Such Option may be exercised at any time within ninety (90) days after the date the Optionee ceases to be a director, officer or employee (or, if later, such time as the Option may be exercised pursuant to Section 14(d) hereof), or the date on which the Option otherwise expires by its terms; which ever period is shorter, at which time the Option shall terminate; provided , however , if the Optionee dies before the Options terminate and are no longer exercisable, the terms and provisions of Section 5(f) shall control.  For purposes of this Section 5(i), and unless otherwise defined in an employment agreement between the Company and the relevant Optionee, Good Reason shall exist upon the occurrence of the following:

 

(A)                                a material reduction by Company of Optionee’s duties or responsibilities that Optionee held immediately prior to the assignment;

 

(B)                                a Change of Control resulting in a significant adverse alteration in the status or conditions of Optionee’s participation with the Company or other nature of Optionee’s responsibilities from those in effect prior to such Change of Control, including any significant alteration in Optionee’s responsibilities immediately prior to such Change in Control; and

 

(C)                                the failure by the Company to continue to provide Optionee with benefits substantially similar to those enjoyed by Optionee prior to such failure.

 

Notwithstanding the foregoing, if Good Reason is defined in an employment agreement between the Company and the relevant Optionee, then, with respect to such Optionee, Good Reason shall have the meaning ascribed to it in such employment agreement.

 

(j)                                     Limit on Value of Incentive Option .  The aggregate Fair Market Value, determined as of the date the Incentive Option is granted, of Stock for which Incentive Options are exercisable for the first time by any Optionee during any calendar year under the Plan (and/or any other stock option plans of the Company or any Subsidiary) shall not exceed $100,000.

 

6.                                       Terms and Conditions of Restricted Stock.

 

Restricted Stock may be granted under this Plan aside from, or in association with, any other award and shall be subject to the following conditions and shall contain such additional terms and conditions (including provisions relating to the acceleration of vesting of Restricted Stock upon a Change of Control), not inconsistent with the terms of the Plan, as the Committee shall deem desirable:

 

(a)                                  Grantee rights .  A Grantee shall have no rights to an award of Restricted Stock unless and until Grantee accepts the award within the period prescribed by the Committee and, if the Committee shall deem desirable, makes payment to the Company in cash, or by check or such other instrument as may be acceptable to the Committee.  After acceptance and issuance of a certificate or certificates, as provided for below, the Grantee shall have the rights of a stockholder with respect to Restricted Stock subject to the non-transferability and forfeiture restrictions described in Section 6(d) below.

 

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(b)                                  Issuance of Certificates .  The Company shall issue in the Grantee’s name a certificate or certificates for the shares of Common Stock associated with the award promptly after the Grantee accepts such award.

 

(c)                                   Delivery of Certificates .  Unless otherwise provided, any certificate or certificates issued evidencing shares of Restricted Stock shall not be delivered to the Grantee until such shares are free of any restrictions specified by the Committee at the time of grant.

 

(d)                                  Forfeitability, Non-transferability of Restricted Stock .  Shares of Restricted Stock are forfeitable until the terms of the Restricted Stock grant have been satisfied.  Shares of Restricted Stock are not transferable until the date on which the Committee has specified such restrictions have lapsed.  Unless otherwise provided by the Committee at or after grant, distributions in the form of dividends or otherwise of additional shares or property in respect of shares of Restricted Stock shall be subject to the same restrictions as such shares of Restricted Stock.

 

(e)                                   Change of Control .  Upon the occurrence of a Change in Control as defined in Section 5(c), the Committee may accelerate the vesting of outstanding Restricted Stock, in whole or in part, as determined by the Committee, in its sole discretion.

 

(f)                                    Termination of Employment .  Unless otherwise determined by the Committee at or after grant, in the event the Grantee ceases to be an employee or otherwise associated with the Company for any other reason, all shares of Restricted Stock theretofore awarded to him which are still subject to restrictions shall be forfeited and the Company shall have the right to complete the blank stock power.  The Committee may provide (on or after grant) that restrictions or forfeiture conditions relating to shares of Restricted Stock will be waived in whole or in part in the event of termination resulting from specified causes, and the Committee may in other cases waive in whole or in part restrictions or forfeiture conditions relating to Restricted Stock.

 

7.                                       Term of Plan.

 

No Option or award of Restricted Stock shall be granted pursuant to the Plan on or after the date which is ten years from the effective date of the Plan, but Options and awards of Restricted Stock theretofore granted may extend beyond that date.

 

8.                                       Capital Change of the Company.

 

In the event of any merger, reorganization, consolidation, recapitalization, stock dividend, or other change in corporate structure affecting the Stock, the Committee shall make an appropriate and equitable adjustment in the number and kind of shares reserved for issuance under the Plan and in the number and option price of shares subject to outstanding Options granted under the Plan, to the end that after such event each Optionee’s proportionate interest shall be maintained (to the extent possible) as immediately before the occurrence of such event.  The Committee shall, to the extent feasible, make such other adjustments as may be required under the tax laws so that any Incentive Options previously granted shall not be deemed modified within the meaning of Section 424(h) of the Code.  Appropriate adjustments shall also be made in the case of outstanding Restricted Stock granted under the Plan.

 

The adjustments described above will be made only to the extent consistent with continued qualification of the Option under Section 422 of the Code (in the case of an Incentive Option) and Section 409A of the Code.

 

9.                                       Purchase for Investment/Conditions.

 

Unless the Options and shares covered by the Plan have been registered under the Securities Act of 1933, as amended (the “ Securities Act ”), or the Company has determined that such registration is unnecessary, each person exercising or receiving Options or Restricted Stock under the Plan may be required by the Company to give a representation in writing that he is acquiring the securities for his own account for investment and not with a

 

7



 

view to, or for sale in connection with, the distribution of any part thereof.  The Committee may impose any additional or further restrictions on awards of Options or Restricted Stock as shall be determined by the Committee at the time of award.

 

10.                                Taxes.

 

(a)                                  The Company may make such provisions as it may deem appropriate, consistent with applicable law, in connection with any Options or Restricted Stock granted under the Plan with respect to the withholding of any taxes (including income or employment taxes) or any other tax matters.

 

(b)                                  If any Grantee, in connection with the acquisition of Restricted Stock, makes the election permitted under Section 83(b) of the Code (that is, an election to include in gross income in the year of transfer the amounts specified in Section 83(b)), such Grantee shall notify the Company of the election with the Internal Revenue Service pursuant to regulations issued under the authority of Code Section 83(b).

 

(c)                                   If any Grantee shall make any disposition of shares of Stock issued pursuant to the exercise of an Incentive Option under the circumstances described in Section 421(b) of the Code (relating to certain disqualifying dispositions), such Grantee shall notify the Company of such disposition within ten (10) days hereof.

 

11.                                Effective Date of Plan.

 

The Plan shall be effective on May 21, 2014; provided, however, that if, and only if, certain options are intended to qualify as Incentive Stock Options, the Plan must subsequently be approved by majority vote of the Company’s stockholders no later than  May 21, 2015, and further, that in the event certain Option grants hereunder are intended to qualify as performance-based compensation within the meaning of Section 162(m) of the Code, the requirements as to stockholder approval set forth in Section 162(m) of the Code are satisfied.

 

12.                                Amendment and Termination.

 

The Board may amend, suspend, or terminate the Plan, except that no amendment shall be made that would impair the rights of any Participant under any Option or Restricted Stock theretofore granted without the Participant’s consent, and except that no amendment shall be made which, without the approval of the stockholders of the Company would:

 

(a)                                  increase the number of shares that may be issued under the Plan, except as is provided in Section 8;

 

(b)                                  materially increase the benefits accruing to the Participants under the Plan;

 

(c)                                   materially modify the requirements as to eligibility for participation in the Plan;

 

(d)                                  decrease the exercise price of an Incentive Option to less than 100% of the Fair Market Value per share of Stock on the date of grant thereof or the exercise price of a Nonqualified Option to less than 100% of the Fair Market Value per share of Stock on the date of grant thereof; or

 

(e)                                   extend the term of any Option beyond that provided for in Section 5(b).

 

(f)                                    except as otherwise provided in Sections 5(d) and 8 hereof, reduce the exercise price of outstanding Options or effect repricing through cancellations and immediate re-grants of new Options.

 

Subject to the forgoing, the Committee may amend the terms of any Option theretofore granted, prospectively or retrospectively, but no such amendment shall impair the rights of any Optionee without the Optionee’s consent.

 

8



 

It is the intention of the Board that the Plan comply strictly with the provisions of Section 409A of the Code and Treasury Regulations and other Internal Revenue Service guidance promulgated thereunder (the “ Section 409A Rules ”) and the Committee shall exercise its discretion in granting awards hereunder (and the terms of such awards), accordingly.  The Plan and any grant of an award hereunder may be amended from time to time (without, in the case of an award, the consent of the Participant) as may be necessary or appropriate to comply with the Section 409A Rules.

 

13.                                Government Regulations.

 

The Plan, and the grant and exercise of Options or Restricted Stock hereunder, and the obligation of the Company to sell and deliver shares under such Options and Restricted Stock shall be subject to all applicable laws, rules and regulations, and to such approvals by any governmental agencies, national securities exchanges and interdealer quotation systems as may be required.

 

14.                                General Provisions.

 

(a)                                  Certificates .  All certificates for shares of Stock delivered under the Plan shall be subject to such stop transfer orders and other restrictions as the Committee may deem advisable under the rules, regulations and other requirements of the Securities and Exchange Commission, or other securities commission having jurisdiction, any applicable Federal or state securities law, any stock exchange or interdealer quotation system upon which the Stock is then listed or traded and the Committee may cause a legend or legends to be placed on any such certificates to make appropriate reference to such restrictions.

 

(b)                                  Employment Matters .  Neither the adoption of the Plan nor any grant or award under the Plan shall confer upon any Participant who is an employee of the Company or any Subsidiary any right to continued employment or, in the case of a Participant who is a director, continued service as a director, with the Company or a Subsidiary, as the case may be, nor shall it interfere in any way with the right of the Company or any Subsidiary to terminate the employment of any of its employees, the service of any of its directors or the retention of any of its consultants or advisors at any time.

 

(c)                                   Limitation of Liability .  No member of the Committee, or any officer or employee of the Company acting on behalf of the Committee, shall be personally liable for any action, determination or interpretation taken or made in good faith with respect to the Plan, and all members of the Committee and each and any officer or employee of the Company acting on their behalf shall, to the extent permitted by law, be fully indemnified and protected by the Company in respect of any such action, determination or interpretation.

 

(d)                                  Registration of Stock .  Notwithstanding any other provision in the Plan, no Option may be exercised unless and until the Stock to be issued upon the exercise thereof has been registered under the Securities Act and applicable state securities laws, or are, in the opinion of counsel to the Company, exempt from such registration in the United States.  The Company shall not be under any obligation to register under applicable federal or state securities laws any Stock to be issued upon the exercise of an Option granted hereunder in order to permit the exercise of an Option and the issuance and sale of the Stock subject to such Option, although the Company may in its sole discretion register such Stock at such time as the Company shall determine.  If the Company chooses to comply with such an exemption from registration, the Stock issued under the Plan may, at the direction of the Committee, bear an appropriate restrictive legend restricting the transfer or pledge of the Stock represented thereby, and the Committee may also give appropriate stop transfer instructions with respect to such Stock to the Company’s transfer agent.

 

15.                                Non-Uniform Determinations.

 

The Committee’s determinations under the Plan, including, without limitation, (i) the determination of the Participants to receive awards, (ii) the form, amount and timing of such awards, (iii) the terms and provisions of such awards and (ii) the agreements evidencing the same, need not be uniform and may be made by it selectively among Participants who receive, or who are eligible to receive, awards under the Plan, whether or not such Participants are similarly situated.

 

9



 

16.                                Governing Law.

 

The validity, construction, and effect of the Plan and any rules and regulations relating to the Plan shall be determined in accordance with the internal laws of the State of Delaware, without giving effect to principles of conflicts of laws, and applicable federal law.

 

10




Exhibit 10.2

 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

PUBLIC HEALTH SERVICE

 

PATENT LICENSE AGREEMENT— EXCLUSIVE and NON-EXCLUSIVE

 

COVER PAGE

 

For PHS internal use only:

 

Patent License Application Number:
A-380-2003

 

Serial Number(s) of Licensed Patent(s) and/or Patent Application(s):

 

Country

 

Serial Number

 

Filing Date

 

DHHS ref

USA

 

60/094,425

 

07/28/1998

 

E-015-1998/0-US-01

PCT

 

PCT/U599/17036

 

07/27/1999

 

E-015-1998/0-PCT-02

CA

 

2336875

 

07/27/1999

 

E-015-1998/0-CA-07

EP

 

99938819.2

 

07/27/1999

 

E-015-1998/0-EP-08

USA

 

09/743,338

 

01/04/2001

 

E-015-1998/0-US-10

JP

 

2000-562050

 

07/27R 999

 

E-015-1998/0-JP-09

KR

 

7001236/2001

 

07/27/1999

 

E-015-1998/0-KR-05

AU

 

5322199

 

07/27/1999

 

E-015-1998/0-AU-06

 

Licensee:
Aridis Pharmaceuticals, LLC

 

Cooperative Research and Development Agreement (CRADA) Number (if applicable):

 

Additional Remarks:

 

 

 

Public Benefit(s): Vaccine against Rotavirus infection

 

This Patent License Agreement, hereinafter referred to as the “Agreement”, consists of this Cover Page, an attached Agreement, a Signature Page, Appendix A (List of Patent(s) and/or Patent Application(s)), Appendix B (Fields of Use and Territory and Biological Materials and Documentation), Appendix C (Royalties), Appendix D (Modifications), Appendix E (Benchmarks), Appendix F (Commercial Development Plan) and Appendix G (Plan for Developing Countries).  The Parties to this Agreement are:

 

1)                                      The National Institutes of Health (“ NIH ”), the Centers for Disease Control and Prevention (“ CDC ”), or the Food and Drug Administration (“ FDA ”), hereinafter singly or collectively referred to as “ PHS ”, agencies of the United States Public Health Service within the Department of Health and Human Services (“ DHHS ”); and

 

1



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

2)                                      The person, corporation, or institution identified above and/or on the Signature Page, having offices at the address indicated on the Signature Page, hereinafter referred to as “ Licensee ”.

 

2



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

PHS PATENT LICENSE AGREEMENT— EXCLUSIVE and NON-EXCLUSIVE

 

PHS and Licensee agree as follows:

 

1.                                       BACKGROUND

 

1.01                         In the course of conducting biomedical and behavioral research, PHS investigators made inventions that may have commercial applicability.

 

1.02                         By assignment of rights from PHS employees and other inventors, DHHS , on behalf of the United States Government, owns intellectual property rights claimed in any United States and/or foreign patent applications or patents corresponding to the assigned inventions.  DHHS also owns any tangible embodiments of these inventions actually reduced to practice by PHS .

 

1.03                         The Secretary of DHHS has delegated to PHS the authority to enter into this Agreement for the licensing of rights to these inventions.

 

1.04                         PHS desires to transfer these inventions to the private sector through commercialization licenses to facilitate the commercial development of products and processes for public use and benefit.

 

1.05                         Licensee desires to acquire commercialization rights to certain of these inventions in order to develop processes, methods, and/or marketable products for public use and benefit.

 

2.                                       DEFINITIONS

 

2.01                         Benchmarks ” mean the performance milestones that are set forth in Appendix E.

 

2.02                         Commercial Development Plan ” means the written commercialization plan attached as Appendix F.

 

2.03                         First Commercial Sale ” means the initial transfer by or on behalf of Licensee or its sublicensees of Licensed Product(s) or the initial practice of a Licensed Process(es) by or on behalf of Licensee or its sublicensees in exchange for cash or some equivalent to which value can be assigned for the purpose of determining Net Sales.

 

2.04                         Government ” means the Government of the United States of America.

 

2.05                         Licensed Fields of Use ” means the fields of use identified in Appendix B.

 

2.06                         Licensed Patent Rights ” shall mean:

 

a)                                      Patent applications (including provisional patent applications and PCT patent applications) and/or patents listed in Appendix A, all divisions and continuations of these applications, all patents issuing from such applications, divisions, and continuations, and any reissues, reexaminations, and extensions of all such patents;

 

3



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

b)                                      to the extent that the following contain one or more claims directed to the invention or inventions disclosed in a) above: i) continuations-in-part of a) above; ii) all divisions and continuations of these continuations-in-part; iii) all patents issuing from such continuations-in-part, divisions, and continuations; iv) priority patent application(s) of a) above; and v) any reissues, reexaminations, and extensions of all such patents;

 

c)                                       to the extent that the following contain one or more claims directed to the invention or inventions disclosed in a) above: all counterpart foreign and U.S. patent applications and patents to a) and b) above, including those listed in Appendix A.

 

Licensed Patent Rights shall not include b) or c) above to the extent that they claim new matter that is not the subject matter disclosed in a) above, except to the extent included under an amendment to this Agreement pursuant to a CRADA between Licensee and the PHS investigators.  For any patent rights under b) or c) above having claims to subject matter disclosed in a) above and other claims to subject matter not disclosed in a) above, those claims corresponding to a) above shall be included in the Licensed Patent Rights .

 

2.07                         Licensed Process(es) ” means processes which, in the course of being practiced would be within the scope of one or more claims of the Licensed Patent Rights that have not been held unpatentable, invalid or unenforceable by an unappealed or unappealable judgment of a court of competent jurisdiction, and these same processes when practiced in conjunction with the Biological Materials and their derivatives.

 

2.08                         Licensed Product(s) ” means tangible materials which, in the course of manufacture, use, sale, or importation would be within the scope of one or more claims of the Licensed Patent Rights that have not been held unpatentable, invalid or unenforceable by an unappealed or unappealable judgment of a court of competent jurisdiction and Biological Materials and their derivatives and pharmaceutical formulations made from said Biological Materials and their derivatives.

 

2.09                         Exclusive Licensed Territory ” means the geographical area identified in Appendix B.

 

2.10                         Non-Exclusive Licensed Territory ” means the geographical area identified in Appendix B.

 

2.11                         Licensed Territories ” mean Exclusive Licensed Territory and Non-Exclusive Licensed Territory .

 

2.12                         Net Sales ” means the total gross receipts for sales of Licensed Products or practice of Licensed Processes by or on behalf of Licensee or its sublicensees, and from leasing, renting, or otherwise making Licensed Products available to others without sale or other dispositions, whether invoiced or not, less returns and allowances, packing costs, insurance costs, freight out, taxes or excise duties imposed on the transaction (if separately invoiced), and wholesaler and cash discounts in amounts customary in the trade to the extent actually granted.  No deductions shall be made for commissions paid to individuals, whether they be with independent sales agencies or regularly employed by Licensee , or sublicensees, and on its payroll, or for the cost of collections.

 

4



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

2.13                         Practical Application ” means to manufacture in the case of a composition or product, to practice in the case of a process or method, or to operate in the case of a machine or system; and in each case, under such conditions as to establish that the invention is being utilized and that its benefits are to the extent permitted by law or Government regulations available to the public on reasonable terms.

 

2.14                         Research License ” means a nontransferable, nonexclusive license to make and to use the Licensed Products or Licensed Processes as defined by the Licensed Patent Rights for purposes of research and not for purposes of commercial manufacture or distribution or in lieu of purchase.

 

2.15                         Public Sector ” means the government of a Developing Country , or any entity empowered by the government of a Developing Country to act for said government in matters applicable to this Agreement , organizations within the United Nations system including the World Health Global Organization and UNICEF, and other non-profit agencies which may purchase drugs or vaccines for delivery, manufacture and/or sale in Developing Countries .

 

2.16                         Private Sector ” means all other parties other than the Public Sector .

 

2.17                         Developing Country ” means countries eligible for support from The Global Alliance for Vaccines and Immunization (GAVI) or successor organization, which at the effective date of this Agreement are those countries with a Gross National Product of less than US $1,000 per capita per year, and at the effective date of this Agreement include the countries listed in Appendix G.

 

2.18                         Biological Materials ” means the materials listed in Appendix B, which include human-bovine reassortment rotavirus strains.  For the sake of clarification, some of the Biological Materials may have been generated under a CRADA between PHS and the original commercial developer of this technology, Wyeth Pharmaceuticals, Inc. (“ Wyeth ”) and may be subject to the terms and conditions of L-030-1987/1 and L-008-1989/1, which includes in part Paragraph 12.05 as related to Wyeth of this Agreement .

 

3.                                       GRANT OF RIGHTS

 

3.01                         PHS hereby grants and Licensee accepts, subject to the terms and conditions of this Agreement , an exclusive license under the Licensed Patent Rights and the exclusive rights to use the Biological Materials in the Exclusive Licensed Territory to make and have made, to use and have used, to sell and have sold, to offer to sell, and to import or to export any Licensed Product in the Licensed Fields of Use and to practice and have practiced any Licensed Processes in the Licensed Fields of Use .  During the term of this Agreement , Biological Materials shall not be provided by PHS to any third party except under written agreement prohibiting the practice of the rights granted hereunder in the Exclusive Licensed Territory for commercial purposes.  For clarification, Biological Materials may be provided under Research Licenses as described in Paragraph 5.04.

 

3.02                         PHS hereby grants and Licensee accepts, subject to the terms and conditions of this Agreement , a non-exclusive license under the Licensed Patent Rights and non-exclusive right to use the Biological Materials in the Non-Exclusive Licensed Territory to make and have made, to use and have used, to sell and have sold, to offer to sell, and to import or to export any Licensed Product(s)  in the Licensed Fields of Use

 

5



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

and to practice and have practiced any Licensed Processes in the Licensed Fields of Use .  For the sake of clarification, the Non-Exclusive Licensed Territory includes (without limitation) Australia, Japan, and South Korea, where patents and patent applications under Licensed Patent Rights have been filed or issued.

 

3.03                         PHS hereby grants and Licensee accepts, subject to the terms and conditions of this Agreement , the right to use the relevant documentation and information listed in Appendix B for development of, regulatory licensing of, and otherwise as related to exercise of Licensee’s rights to Licensed Product(s) .

 

3.04                         This Agreement confers no license or rights by implication, estoppel, or otherwise under any patent applications or patents of PHS other than Licensed Patent Rights in the Licensed Territories regardless of whether such patents are dominant or subordinate to Licensed Patent Rights .  To the best of its knowledge, PHS represents that the Licensed Patent Rights and Biological Materials in the Licensed Territories can be exploited without infringing other patents or other intellectual property rights of PHS as of the effective date of this Agreement .

 

4.                                       SUBLICENSING

 

4.01                         Upon written approval by PHS , which approval shall not be unreasonably withheld, Licensee may enter into sublicensing agreements under the Licensed Patent Rights or to the Biological Materials in the Exclusive Licensed Territory or in the Non-Exclusive Licensed Territory if in the latter instance said sublicensing agreement is intended to support expeditious development and commercialization of Licensed Product(s)  and expeditious distribution in developing countries, and if said sublicense is associated with Licensee know-how and added value to the licensed technology.

 

4.02                         Licensee agrees that any sublicenses granted by it shall provide that the obligations to PHS of Paragraphs 5.01-5.04, 8.01, 10.01, 10.02, 12.05, and 13.07-13.09 and the obligations to Wyeth of Paragraph 12.05 of this Agreement shall be binding upon the sublicensee as if it were a party to this Agreement Licensee further agrees to attach copies of these Paragraphs to all sublicense agreements.

 

4.03                         Any sublicenses granted by Licensee shall provide for the termination of the sublicense, or the conversion to a license directly between such sublicensees and PHS, at the option of the sublicensee, upon termination of this Agreement under Article 13.  Such conversion is subject to PHS approval, not to be unreasonably withheld, and contingent upon acceptance by the sublicensee of the remaining provisions of this Agreement .

 

4.04                         Licensee agrees to forward to PHS a copy of each fully executed sublicense agreement postmarked within thirty (30) days of the execution of such agreement.  To the extent permitted by law, PHS agrees to maintain each such sublicense agreement in confidence.

 

5.                                       STATUTORY AND PHS REQUIREMENTS AND RESERVED GOVERNMENT RIGHTS

 

5.01                         a)            PHS reserves on behalf of the Government an irrevocable, nonexclusive, nontransferable, royalty-free license for the practice of all inventions licensed under the Licensed Patent Rights throughout the world by or on behalf of the Government and on behalf of any foreign government or international organization pursuant to any existing or

 

6



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

future treaty or agreement to which the Government is a signatory.  Prior to the First Commercial Sale, Licensee agrees to provide PHS reasonable quantities of Licensed Products or materials made through the Licensed Processes for PHS research use.

 

b)                                      In the event that Licensed Patent Rights are Subject Inventions made under a Cooperative Research and Development Agreement (CRA DA), Licensee grants to the Government , pursuant to 15 U.S.C. 3710a(b)(1)(A), a nonexclusive, nontransferable, irrevocable, paid-up license to practice Licensed Patent Rights or have Licensed Patent Rights practiced throughout the world by or on behalf of the Government .  In the exercise of such license, the Government shall not publicly disclose trade secrets or commercial or financial information that is privileged or confidential within the meaning of 5 U.S.C. 552(b)(4) or which would be considered as such if it had been obtained from a non-Federal party.  Prior to the First Commercial Sale , Licensee agrees to provide PHS reasonable quantities of Licensed Products or materials made through the Licensed Processes for PHS research use.

 

5.02                         Licensee agrees that products used or sold in the United States embodying Licensed Products or produced through use of Licensed Processes shall be manufactured substantially in the United States, unless a written waiver is obtained in advance from PHS .

 

5.03                         Licensee acknowledges that PHS may enter into future Cooperative Research and Development Agreements (CRADAs) under the Federal Technology Transfer Act of 1986 that relate to the subject matter of this Agreement Licensee agrees not to unreasonably deny requests for a Research License from such future collaborators with PHS when acquiring such rights is necessary in order to make a Cooperative Research and Development Agreement (CRADA) project feasible.  Licensee may request an opportunity to join as a party to the proposed Cooperative Research and Development Agreement (CRADA).

 

5.04                         a)                                      In addition to the reserved license of Paragraph 5.01 above, PHS reserves the right to grant nonexclusive Research Licenses directly or to require Licensee to grant nonexclusive Research Licenses on reasonable terms.  The purpose of this Research License is to encourage basic research, whether conducted at an academic or corporate facility.  In order to safeguard the Licensed Patent Rights , however, PHS shall consult with Licensee before granting to commercial entities a Research License in the Exclusive Licensed Territory or providing to them research samples of materials made through the Licensed Processes and shall, prior to providing such license or materials directly, provide Licensee the first opportunity to negotiate with commercial entities to provide them with such license or materials (For clarification, this right of Licensee to have the first opportunity to negotiate applies to Research Licenses for commercial entities only).  If Licensee fails to offer such a Research License to commercial entities upon terms that are reasonable under the circumstances within sixty (60) days of submission of an application for such Research License , PHS may grant the Research License itself, under conditions consistent with this Agreement and with other Research Licenses granted by PHS for similar technologies and similar uses.  In the event that Licensee can provide convincing written evidence to PHS that a commercial entity that has been granted a Research License to Licensed Patent Rights in the Exclusive Licensed Territory is developing the inventions for commercial manufacture or in lieu of purchase if the inventions are available as commercial products, then Licensee can

 

7



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

request that PHS terminate its Research License with such commercial entities, such request not to be unreasonably denied.

 

b)                                      In exceptional circumstances, and in the event that Licensed Patent Rights are Subject Inventions made under a Cooperative Research and Development Agreement (CRADA), the Government , pursuant to 15 U.S.C. 3710a(b)(1)(B), retains the right to require the Licensee to grant to a responsible applicant a nonexclusive, partially exclusive, or exclusive sublicense to use Licensed Patent Rights in Licensee’s field of use in the Exclusive Licensed Territory on terms that are reasonable under the circumstances; or if Licensee fails to grant such a license, the Government retains the right to grant the license itself.

 

The exercise of such rights by the Government shall only be in exceptional circumstances and only if the Government determines (i) the action is necessary to meet health or safety needs that are not reasonably satisfied by Licensee ; (ii) the action is necessary to meet requirements for public use specified by Federal regulations, and such requirements are not reasonably satisfied by the Licensee ; or (iii) the Licensee has failed to comply with an agreement containing provisions described in 15 U.S.C. 3710a(c)(4)(B).  The determination made by the Government under this Article is subject to administrative appeal and judicial review under 35 U.S.C. 203(2).

 

6.                                       ROYALTIES AND REIMBURSEMENT

 

6.01                         Licensee agrees to pay to PHS a noncreditable, nonrefundable license issue royalty as set forth in Appendix C.

 

6.02                         Licensee agrees to pay to PHS a nonrefundable minimum annual royalty as set forth in Appendix C.  The minimum annual royalty is due and payable on January 1 of each calendar year and may be credited against any other royalties (including all amounts listed in Appendix C as earned royalties, benchmark royalties, license issue royalties and sublicense royalties) accruing under Appendix C in that year.  The minimum annual royalty due for the first calendar year of this Agreement may be prorated according to the fraction of the calendar year remaining between the effective date of this Agreement and the next subsequent January 1.

 

6.03                         Licensee agrees to pay PHS earned royalties as set forth in Appendix C.

 

6.04                         Licensee agrees to pay PHS benchmark royalties as set forth in Appendix C.

 

6.05                         Licensee agrees to pay PHS sublicensing royalties as set forth in Appendix C.

 

6.06                         A patent or patent application licensed under this Agreement shall cease to fall within the Licensed Patent Rights for the purpose of computing earned royalty payments in any given country on the earliest of the dates that a) the application has been abandoned and not continued, b) the patent expires or irrevocably lapses, or c) the claim has been held to be invalid or unenforceable by an unappealed or unappealable decision of a court of competent jurisdiction or administrative agency.

 

6.07                         No multiple royalties shall be payable because any Licensed Products or Licensed Processes are covered by more than one of the Licensed Patent Rights .

 

8



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

6.08                         On sales of Licensed Products by Licensee to sublicensees or on sales made in other than an arm’s-length transaction, the value of the Net Sales attributed under this Article 6 to such a transaction shall be that which would have been received in an arm’s-length transaction, based on sales of like quantity and quality products on or about the time of such transaction.

 

6.09                         Within thirty (30) days of the earliest to occur of 1) the second anniversary of the effective date of this Agreement ; 2) upon completion of the first round of financing in which a total of Five (5) million U.S. Dollars in equity investment is received by Licensee; or 3) the completion of a sublicensing agreement in the Exclusive Licensed Territory , Licensee will be obligated to pay PHS patent costs accumulated by them as follows: a) costs associated with the preparation, filing, prosecution, and maintenance of the PRV and PCT applications and Licensed Patent Rights in the Non-Exclusive Licensed Territory listed in Appendix A, said expenses being those incurred by PHS prior to the time that payment by Licensee under this Paragraph 6.09 is obligated and said expenses to be divided by the greater of 1) four (4), or 2) the number of relevant commercialization licenses of record as of the time payment is obligated; and b) one hundred percent (100%) of costs associated with the preparation, filing, prosecution, and maintenance of all patent applications and patents included within the Licensed Patent Rights listed in Appendix A in the Exclusive Licensed Territory .

 

6.10                         With regard to expenses associated with the preparation, filing, prosecution, and maintenance of all patent applications and patents included within the Licensed Patent Rights in the Licensed Territories incurred by PHS on or after the date on which expenses under Paragraph 6.09 become due, PHS , at its sole option, may require Licensee :

 

a)                                      to pay PHS on an annual basis, within sixty (60) days of PHS’s submission of a statement and request for payment, a royalty amount equivalent to all such patent expenses incurred during the previous calendar year(s), said expenses to be calculated in the same way as in Paragraph 6.09; or

 

b)                                      to pay such expenses directly to the law firm employed by PHS to handle such functions, said expenses to be calculated in the same way as in Paragraph 6.09.  However, in such event, PHS and not Licensee shall be the client of such law firm.

 

6.11                         Licensee may elect to surrender its rights in any country of the Licensed Territories under any Licensed Patent Rights upon ninety (90) days written notice to PHS and owe no payment obligation under Paragraph 6.10 for patent-related expenses incurred in that country after ninety (90) days of the effective date of such written notice.

 

7.                                       PATENT FILING, PROSECUTION, AND MAINTENANCE

 

7.01                         Except as otherwise provided in this Article 7, PHS agrees to take responsibility for, but to consult with, the Licensee in the preparation, filing, prosecution, and maintenance of any and all patent applications or patents included in the Licensed Patent Rights , shall furnish copies of relevant patent-related documents to Licensee , and shall provide Licensee sufficient opportunity to comment on any document that PHS intends to file or to cause to be filed with the relevant intellectual property or patent office; Licensee’s comments shall be considered in good faith and suggestions not to be unreasonably

 

9



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

refused.  Regarding Licensed Patent Rights in the Non-Exclusive Licensed Territory , PHS shall also consult with Licensee in the choice of countries in which protection shall be sought, giving good faith consideration to concerns of cost and efficiency.

 

7.02                         Upon PHS’s written request, Licensee shall assume the responsibility for the preparation, filing, prosecution, and maintenance of any and all patent applications or patents included in the Licensed Patent Rights in the Exclusive Licensed Territory and shall on an ongoing basis promptly furnish copies of all patent-related documents to PHS .  In such event, Licensee shall, subject to the prior approval of PHS , select registered patent attorneys or patent agents to provide such services on behalf of Licensee and PHS PHS shall provide appropriate powers of attorney and other documents necessary to undertake such actions to the patent attorneys or patent agents providing such services.  Licensee and its attorneys or agents shall consult with PHS in all aspects of the preparation, filing, prosecution and maintenance of patent applications and patents included within the Licensed Patent Rights in the Exclusive Licensed Territory and shall provide PHS sufficient opportunity to comment on any document that Licensee intends to file or to cause to be filed with the relevant intellectual property or patent office.  PHS’s comments shall be considered in good faith and suggestions not to be unreasonably refused.

 

7.03                         At any time, PHS may provide Licensee with written notice that PHS wishes to assume control of the preparation, filing, prosecution, and maintenance of any and all patent applications or patents included in the Licensed Patent Rights in the Exclusive Licensed Territory .  If PHS elects to assume such responsibilities, Licensee agrees to cooperate fully with PHS , its attorneys, and agents in the preparation, filing, prosecution, and maintenance of any and all patent applications or patents included in the Licensed Patent Rights in the Exclusive Licensed Territory and to provide PHS with complete copies of any and all documents or other materials that PHS deems necessary to undertake such responsibilities.  Licensee shall be responsible for all costs associated with transferring patent prosecution responsibilities to an attorney or agent of PHS’s choice.

 

7.04                         Each party shall promptly inform the other as to all matters that come to its attention that may affect the preparation, filing, prosecution, or maintenance of the Licensed Patent Rights and permit each other to provide comments and suggestions with respect to the preparation, filing, prosecution, and maintenance of Licensed Patent Rights , which comments and suggestions shall be considered by the other party.

 

8.                                       RECORD KEEPING

 

8.01                         Licensee agrees to keep accurate and correct records of Licensed Products made, used, sold, or imported and Licensed Processes practiced under this Agreement appropriate to determine the amount of royalties due PHS .  Such records shall be retained for at least five (5) years following a given reporting period and shall be available during normal business hours for inspection at the expense of PHS by an accountant or other designated auditor selected by PHS for the sole purpose of verifying reports and payments hereunder; any such inspection/audit to be on reasonable notice and not to occur more than once per year.  The accountant or auditor shall only disclose to PHS information relating to the accuracy of reports and payments made under this Agreement .  If an inspection shows an underreporting or underpayment in excess of seven and one half percent (7.5%) for any twelve (12) month period, then Licensee shall reimburse PHS for the cost of the inspection at the time Licensee pays the unreported

 

10


 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

royalties, including any late charges as required by Paragraph 9.08 of this Agreement .  All payments required under this Paragraph shall be due within thirty (30) days of the date PHS provides Licensee notice of the payment due.

 

8.02                         Licensee agrees to have an audit of sales and royalties conducted by an independent auditor at least every five (5) years if annual sales of the Licensed Products or Licensed Processes are over two (2) million dollars.  The audit shall address, at a minimum, the amount of gross sales by or on behalf of Licensee during the audit period, terms of the license as to percentage or fixed royalty to be remitted to the Government , the amount of royalty funds owed to the Government under this Agreement , and whether the royalty amount owed has been paid to the Government and is reflected in the records of the Licensee .  The audit shall also indicate the PHS license number, product, and the time period being audited.  A report certified by the auditor shall be submitted promptly by the auditor directly to PHS on completion.  Licensee shall pay for the entire cost of the audit.

 

9.                                       REPORTS ON PROGRESS, BENCHMARKS, SALES, AND PAYMENTS

 

9.01                         Prior to signing this Agreement , Licensee has provided to PHS the Commercial Development Plan at Appendix F, under which Licensee intends to bring the subject matter of the Licensed Patent Rights and/or Biological Materials to the point of Practical Application .  This Commercial Development Plan is hereby incorporated by reference into this Agreement .  Based on this plan, performance Benchmarks are determined as specified in Appendix E.

 

9.02                         Licensee shall provide written annual reports on its product development progress or efforts to commercialize under the Commercial Development Plan for each of the Licensed Fields of Use within sixty (60) days after December 31 of each calendar year.  These progress reports shall include, but not be limited to: progress on research and development, status of applications for regulatory approvals, manufacturing, sublicensing, marketing, importing, and sales during the preceding calendar year, as well as plans for the present calendar year.  PHS also encourages these reports to include information on any of Licensee’s public service activities that relate to the Licensed Patent Rights and/or Biological Materials .  If reported progress differs from that projected in the Commercial Development Plan and Benchmarks , Licensee shall explain the reasons for such differences.  In any such annual report, Licensee may propose amendments to the Commercial Development Plan , acceptance of which by PHS may not be denied unreasonably.  Licensee agrees to provide any additional information reasonably required by PHS to evaluate Licensee’s performance under this Agreement Licensee may amend the Benchmarks at any time upon written consent by PHS PHS shall not unreasonably withhold approval of any request of Licensee to extend the time periods of this schedule if such request is supported by a reasonable showing by Licensee of diligence in its performance under the Commercial Development Plan and toward bringing the Licensed Products to the point of Practical Application as defined in 37 CFR 404.3(d).  Licensee shall amend the Commercial Development Plan and Benchmarks at the request of PHS to address any Licensed Fields of Use not specifically addressed in the plan originally submitted.

 

9.03                         Licensee shall report to PHS the dates for achieving Benchmarks specified in Appendix E and the First Commercial Sale in each country in the Licensed Territories within thirty (30) days of such occurrences.

 

11



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

9.04                         Licensee shall submit to PHS within sixty (60) days after each calendar half-year ending June 30 and December 31 a royalty report setting forth for the preceding half-year period the amount of the Licensed Products sold or Licensed Processes practiced by or on behalf of Licensee in each country within the Licensed Territories , the Net Sales , and the amount of royalty accordingly due.  With each such royalty report, Licensee shall submit payment of the earned royalties due.  If no earned royalties are due to PHS for any reporting period, the written report shall so state.  The royalty report shall be certified as correct by an authorized officer of Licensee and shall include a detailed listing of all deductions made under Paragraph 2.10 to determine Net Sales made under Article 6 to determine royalties due.

 

9.05                         Licensee agrees to forward semi-annually to PHS a copy of such reports received by Licensee from its sublicensees during the preceding half-year period as shall be pertinent to a royalty accounting to PHS by Licensee for activities under the sublicense.

 

9.06                         Royalties due under Article 6 shall be paid in U.S. dollars.  For conversion of foreign currency to U.S. dollars, the conversion rate shall be the New York foreign exchange rate quoted in The Wall Street Journal on the day that the payment is due.  All checks and bank drafts shall be drawn on United States banks and shall be payable, as appropriate, to “NIH/Patent Licensing.” All such payments shall be sent to the following address: NIH, P.O. Box 360120, Pittsburgh, PA 152516120.  Any loss of exchange, value, taxes, or other expenses incurred in the transfer or conversion to U.S. dollars shall be paid entirely by Licensee .  The royalty report required by Paragraph 9.04 of this Agreement shall accompany each such payment, and a copy of such report shall also be mailed to PHS at its address for notices indicated on the Signature Page of this Agreement .

 

9.07                         Licensee shall be solely responsible for determining if any tax on royalty income is owed outside the United States and shall pay any such tax (deducting same from the total of royalties due) and be responsible for all filings, including tax exemption certificates for PHS ( PHS to provide reasonable information and cooperation in obtaining such certificates), with appropriate agencies of foreign governments.

 

9.08                         Interest and penalties may be assessed by PHS on any overdue payments in accordance with the Federal Debt Collection Act.  The payment of such late charges shall not prevent PHS from exercising any other rights it may have as a consequence of the lateness of any payment.

 

9.09                         All plans and reports required by this Article 9 and marked “confidential” by Licensee shall, to the extent permitted by law, be treated by PHS as commercial and financial information obtained from a person and as privileged and confidential, and any proposed disclosure of such records by the PHS under the Freedom of Information Act (FOIA), 5 U.S.C. § 552 shall be subject to the pre-disclosure notification requirements of 45 CFR § 5.65(d).

 

10.                                PERFORMANCE

 

10.01                  Licensee shall use its reasonable best efforts to bring the Licensed Products and Licensed Processes to Practical Application .  “Reasonable best efforts” for the purposes of this provision shall be determined by reference to the Commercial

 

12



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

Development Plan at Appendix F and performance of the Benchmarks at Appendix E.  The efforts of a sublicensee shall be considered the efforts of Licensee .

 

10.02                  Upon the First Commercial Sale , until the expiration of this Agreement , Licensee shall use its reasonable best efforts to make Licensed Products and Licensed Processes reasonably accessible to the United States public.

 

11.                                1NFRINGEMENT AND PATENT ENFORCEMENT

 

11.01                  PHS and Licensee agree to notify each other promptly of each infringement or possible infringement of the Licensed Patent Rights in the Exclusive Licensed Territory , as well as any facts which may affect the validity, scope, or enforceability of the Licensed Patent Rights in the Exclusive Licensed Territory of which either Party becomes aware.

 

11.02                  Pursuant to this Agreement and the provisions of Chapter 29 of title 35, United States Code, Licensee may: a) bring suit in its own name, at its own expense, and on its own behalf for infringement of presumably valid claims in the Licensed Patent Rights in the Exclusive Licensed Territory ; b) in any such suit, enjoin infringement and collect for its use, damages, profits, and awards of whatever nature recoverable for such infringement; and c) settle any claim or suit for infringement of the Licensed Patent Rights in the Exclusive Licensed Territory provided, however, that PHS and appropriate Government authorities shall also have the right to take such actions as set out herein: Licensee shall have the first right to initiate such suit, but in advance of initiating the suit shall notify PHS in writing of its intent, and consult with PHS and provide information to PHS relating to the suit.  During Licensee’s management of any such suit, it shall keep PHS informed regarding the progress of such suit and shall cooperate in good faith with PHS to address issues regarding the protection of PHS rights under this Agreement and in the Licensed Patent Rights , or to address any other concern regarding any Government interest in the action.

 

If Licensee elects not to initiate a suit or engage in settlement discussions with an infringer within a reasonable period after a written request by PHS to do so, then PHS shall have the right to initiate such action.  PHS and Licensee shall have a continuing right to join in any suit by the other party.  Licensee shall take no action to compel the Government either to initiate or to join in any such suit for patent infringement.  Licensee may request the Government to initiate or join in any such suit if necessary to avoid dismissal of the suit.  Should the Government be made a party to any such suit, Licensee shall reimburse the Government for any costs, expenses, or fees which the Government incurs as a result of such motion or other action, including any and all costs incurred by the Government in opposing any such motion or other action.  In all cases, Licensee agrees to keep PHS reasonably apprised of the status and progress of any litigation.  Before Licensee commences an infringement action, Licensee shall notify PHS and give careful consideration to the views of PHB and to any potential effects of the litigation on the public health in deciding whether to bring suit.

 

11.03                  In the event that a declaratory judgment action alleging invalidity or non-infringement of any of the Licensed Patent Rights in the Exclusive Licensed Territory shall be brought against Licensee or raised by way of counterclaim or affirmative defense in an infringement suit brought by Licensee under Paragraph 11.02, pursuant to this Agreement and the provisions of Chapter 29 of Title 35, United States Code or other

 

13



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

statutes, Licensee may: a) defend the suit in its own name, at its own expense, and on its own behalf for presumably valid claims in the Licensed Patent Rights in the Exclusive Licensed Territory ; b) in any such suit, ultimately to enjoin infringement and to collect for its use, damages, profits, and awards of whatever nature recoverable for such infringement; and c) settle any claim or suit for declaratory judgment involving the Licensed Patent Rights in the Exclusive Licensed Territory -provided, however, that PHS and appropriate Government authorities shall also have the right to take such actions and shall have a continuing right to join in such suit according to the procedures set out in Paragraph 11.02.  Licensee shall take no action to compel the Government either to initiate or to join in any such declaratory judgment action.  Licensee may request the Government to initiate or to join any such suit if necessary to avoid dismissal of the suit, which request shall not be unreasonably denied.  Should the Government be made a party to any such suit by motion or any other action of Licensee , Licensee shall reimburse the Government for any costs, expenses, or fees which the Government incurs as a result of such motion or other action.  If Licensee elects not to defend against such declaratory judgment action, PHS , at its option, may do so at its own expense.  In all cases, Licensee agrees to keep PHS reasonably apprised of the status and progress of any litigation.  Before Licensee commences an infringement action, Licensee shall notify PHS and give careful consideration to the views of PHS and to any potential effects of the litigation on the public health in deciding whether to bring suit.

 

11.04                  In any action under Paragraphs 11.02 or 11.03:

 

a)                                      If brought by Licensee , the expenses including costs, fees, attorney fees and disbursements, shall be paid by Licensee .  If brought by PHS , the expenses including costs, fees, attorney fees and disbursements shall be paid by PHS .  After reduction by the amount of all expenses including costs, fees, attorney fees and disbursements paid by the initiating party, the remaining value of any recovery made by either party through court judgment or settlement shall be treated as Net Sales , with appropriate earned royalties thereon deducted and paid to PHS , and the remainder paid to Licensee ;

 

b)                                      Any party electing to join, follow or otherwise participate in any such action shall bear its own expenses, including costs, fees, attorney fees and disbursements (except that Licensee shall pay the Government’s expenses in the event that Licensee requests the Government to initiate or to join any such suit if necessary to avoid dismissal of the suit).

 

11.05                  PHS shall cooperate fully with Licensee in connection with any action under Paragraphs 11.02 or 11.03.  PHS agrees promptly to provide access to all necessary documents and to render reasonable assistance in response to a request by Licensee .

 

11.06                  With respect to Licensed Patent Rights in the Non-Exclusive Licensed Territory , Licensee and PHS shall notify each other if an infringement as in Paragraph 11.02 or a declaratory judgment as in Paragraph 11.03 has occurred and shall consult with each other and, if possible, with other licensees as to the appropriate course of action.

 

12.                                NEGATION OF WARRANTIES AND INDEMNIFICATION

 

12.01                  PHS offers no warranties other than those specified in Article 1.

 

14



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

12.02                  PHS does not warrant the validity of the Licensed Patent Rights and makes no representations whatsoever with regard to the scope of the Licensed Patent Rights , or that the Licensed Patent Rights may be exploited without infringing other patents or other intellectual property rights of third parties.

 

12.03                  PHS MAKES NO WARRANTIES, EXPRESSED OR IMPLIED, OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OF ANY SUBJECT MATTER DEFINED BY THE CLAIMS OF THE LICENSED PATENT RIGHTS OR TANGIBLE MATERIALS RELATED THERETO.

 

12.04                  PHS does not represent that it shall commence legal actions against third parties infringing the Licensed Patent Rights .

 

12.05                  Licensee shall indemnify and hold PHS , Wyeth and its affiliates, and their respective employees, students, fellows, agents, consultants, officers and directors harmless from and against all liability, demands, damages, deficiencies, judgements, assessments, costs, or expenses, including reasonable attorneys’ fees and costs of investigating and defending against lawsuits, complaints, actions, or other pending or threatened litigation, and losses, including but not limited to death, personal injury, illness, or property damage in connection with or arising out of: a) the use by or on behalf of Licensee , its sublicensees, directors, employees, or third parties of any Licensed Patent Rights or documentation, information and materials, know-how, or the rights granted, transferred, or assigned to PHS by Wyeth under license agreements L-030-1987/1 and L-008-1989/1 as they relate to this Agreement ; or b) the design, manufacture, distribution, use, or sale of any Licensed Products , Licensed Processes or Biological Materials by Licensee , or other products or processes developed in connection with or arising out of the Licensed Patent Rights or Biological Materials .

 

Prior to commencement of human clinical trials by Licensee , Licensee agrees to obtain and maintain a liability insurance program consistent with sound business practice, including commercial general liability and product liability insurance for Licensed Products utilizing documentation, information and materials, know-how, or the rights granted, transferred, or assigned to PHS by Wyeth under license agreements L-030-1987/1 and L-008-1989/1 as they relate to this Agreement , naming PHS and Wyeth and its affiliates, and their respective employees, students, fellows, agents, consultants, officers and directors as insured parties, sufficient to adequately provide such indemnification.  Wyeth shall be given the right to enforce the indemnification and insurance rights and shall be named as a third party beneficiary to this agreement for such purpose.  PHS disclaims any and all liability for the failure of Licensee , its sublicensees or assigns or any other party to satisfy their obligation to Wyeth .  However, in the event of any failure of any such party to indemnify or provide or maintain insurance, in addition to any other remedies it may have against such party, Wyeth retains its rights to terminate the licenses granted to PHS in license agreements L-030-1987/1 and L-008-1989/1 as they relate to this Agreement .

 

12.06                  Licensee’s acceptance of this Agreement shall not be deemed an admission by Licensee of the novelty or patentability of the Licensed Patent Rights .

 

12.07                  Any materials provided by Licensee to PHS hereunder are provided for research purposes only and ARE NOT FOR USE IN HUMANS.  Licensee MAKES NO WARRANTIES, EXPRESSED OR IMPLIED, OF MERCHANTABILITY OR

 

15



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

FITNESS FOR A PARTICULAR PURPOSE OF ANY MATERIALS PROVIDED TO PHS HEREUNDER.

 

12.08                  Licensee does not represent that it will commence legal actions against third parties infringing the Licensed Patent Rights .

 

13.                                TERM, TERMINATION, AND MODIFICATION OF RIGHTS

 

13.01                  This Agreement is effective when signed by all parties and shall extend on a country-by-country basis until the later of (a) the expiration of all royalty obligations under Licensed Patent Rights where such rights exist or have existed or (b) eight (8) years from First Commercial Sale where such rights have ceased to exist or never existed unless terminated as provided in this Article 13 or by mutual agreement of PHS and Licensee .  Upon expiration pursuant to this Paragraph 13.01, Licensee shall have a royalty-free, paid up, non-transferrable perpetual license to the Biological Materials transferred hereunder in the Licensed Territories and all derivatives and products made by Licensee therefrom.

 

13.02                  In the event that Licensee is in default in the performance of any material obligations under this Agreement , including but not limited to the obligations listed in Paragraph 13.05, and if the default has not been remedied within ninety (90) days after the date of notice in writing of such default, PHS may terminate this Agreement by written notice and pursue outstanding amounts owed through procedures provided by the Federal Debt Collection Act.

 

13.03                  In the event that Licensee becomes insolvent, files a petition in bankruptcy, has such a petition filed against it, determines to file a petition in bankruptcy, or receives notice of a third party’s intention to file an involuntary petition in bankruptcy, Licensee shall immediately notify PHS in writing.  Furthermore, PHS shall have the right to terminate this Agreement immediately upon written notice to Licensee , given the understanding that PHS shall first endeavor in good faith to assist Licensee in any efforts to emerge from bankruptcy by maintaining the present License in effect for a reasonable period of time not to exceed one (1) year from Licensee’s receipt of written notice, unless otherwise deemed necessary to address an immediate public health need.

 

13.04                  Licensee shall have a unilateral right to terminate this Agreement and/or any licenses in any country or territory by giving PHS sixty (60) days written notice to that effect.

 

13.05                  PHS shall specifically have the right to terminate or modify, at its option, this Agreement , if PHS determines that the Licensee : 1) is not executing the Commercial Development Plan consistent with the requirement of Paragraph 10.01 and the Licensee cannot otherwise demonstrate to PHS’s reasonable satisfaction that the Licensee has taken, or can be expected to take within a reasonable time, effective steps to achieve Practical Application of the Licensed Products or Licensed Processes ; 2) has not achieved the Benchmarks as may be modified under Paragraph 9.02, and the Licensee cannot otherwise demonstrate to PHS’s reasonable satisfaction that the Licensee has taken, or can be expected to take within a reasonable time, effective steps to correct the failure to achieve the relevant Benchmark in order to achieve the relevant Benchmark within the earliest reasonably possible time; 3) has willfully made a false statement of, or willfully omitted, a material fact in the license application or in any report required by the license Agreement ; 4) has committed a material breach of a covenant or agreement

 

16



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

contained in the license; 5) is not keeping Licensed Products or Licensed Processes reasonably available to the public after commercial use commences; 6) cannot reasonably satisfy unmet health and safety needs; or 7) cannot reasonably justify a failure to comply with the domestic production requirement of Paragraph 5.02 unless waived.  In making this determination, PHS shall take into account the normal course of such commercial development programs conducted with sound and reasonable business practices and judgment and the annual reports submitted by Licensee under Paragraph 9.02.  Prior to invoking this right, PHS shall give written notice to Licensee providing Licensee specific notice of, and a ninety (90) day opportunity to respond to, PHS’s concerns as to the previous items 1) to 7).  If Licensee fails to alleviate PHS’s concerns as to the previous items 1) to 7) or fails to initiate corrective action to PHS’s satisfaction, PHS may terminate or modify this Agreement .

 

13.06                  When the public health and safety so require, and after written notice to Licensee providing Licensee a sixty (60) day opportunity to respond, PHS shall have the right to require Licensee to grant sublicenses to responsible applicants, on reasonable terms, in any Licensed Fields of Use under the Licensed Patent Rights in the Exclusive Licensed Territory , unless Licensee can reasonably demonstrate that the granting of the sublicense would not materially increase the availability to the public of the subject matter of the Licensed Patent Rights in the Exclusive Licensed Territory PHS shall not require the granting of a sublicense unless the responsible applicant has first negotiated in good faith with Licensee .

 

13.07                  PHS reserves the right according to 35 U.S.C. § 209(0(4) to terminate or modify this Agreement if it is determined that such action is necessary to meet requirements for public use specified by federal regulations issued after the date of the license and such requirements are not reasonably satisfied by Licensee .

 

13.08                  Within thirty (30) days of receipt of written notice of PHS’s unilateral decision to modify or terminate this Agreement , Licensee may, consistent with the provisions of 37 CFR 404.11, appeal the decision by written submission to the designated PHS official.  The decision of the designated PHS official shall be the final agency decision.  Licensee may thereafter exercise any and all administrative or judicial remedies that may be available.

 

13.09                  Within ninety (90) days of expiration or termination of this Agreement under this Article 13, a final report shall be submitted by Licensee .  Any royalty payments, including those incurred but not yet paid (such as the full minimum annual royalty), and those related to patent expense, due to PHS shall become immediately due and payable upon termination or expiration.  If terminated under this Article 13, sublicensees may elect to convert their sublicenses to direct licenses with PHS pursuant to Paragraph 4.03.  Unless otherwise specifically provided for under this Agreement , upon any termination of this Agreement , Licensee shall return all Licensed Products or other materials included within the Licensed Patent Rights in its possession to PHS or provide PHS with certification of the destruction thereof.

 

14.                                GENERAL PROVISIONS

 

14.01                  Neither Party may waive or release any of its rights or interests in this Agreement except in writing.  The failure of the Government to assert a right hereunder or to insist upon compliance with any term or condition of this Agreement shall not constitute a waiver of

 

17



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

that right by the Government or excuse a similar subsequent failure to perform any such term or condition by Licensee .

 

14.02                  This Agreement constitutes the entire agreement between the Parties relating to the subject matter of the Licensed Patent Rights and Biological Materials , and all prior negotiations, representations, agreements, and understandings are merged into, extinguished by, and completely expressed by this Agreement .

 

14.03                  The provisions of this Agreement are severable, and in the event that any provision of this Agreement shall be determined to be invalid or unenforceable under any controlling body of law, such determination shall not in any way affect the validity or enforceability of the remaining provisions of this Agreement .

 

14.04                  If either Party desires a modification to this Agreement , the Parties shall, upon reasonable notice of the proposed modification by the Party desiring the change, confer in good faith to determine the desirability of such modification.  No modification shall be effective until a written amendment is signed by the signatories to this Agreement or their designees.

 

14.05                  The construction, validity, performance, and effect of this Agreement shall be governed by Federal law as applied by the Federal courts in the District of Columbia.

 

14.06                  All notices required or permitted by this Agreement shall be given by prepaid, first class, registered or certified mail or by an express/overnight delivery service provided by a commercial carrier, properly addressed to the other Party at the address designated on the following Signature Page, or to such other address as may be designated in writing by such other Party.  Notices shall be considered timely if such notices are received on or before the established deadline date or sent on or before the deadline date as verifiable by U.S. Postal Service postmark or dated receipt from a commercial carrier.  Parties should request a legibly dated U.S. Postal Service postmark or obtain a dated receipt from a commercial carrier or the U.S. Postal Service.  Private metered postmarks shall not be acceptable as proof of timely mailing.

 

14.07                  This Agreement shall not be assigned by Licensee except: a) with the prior written consent of PHS , such consent not to be withheld unreasonably; or b) as part of a sale or transfer of substantially the entire business of Licensee relating to operations which concern this Agreement .  Licen s ee shall notify PHS within ten (10) days of any assignment of this Agreement by Licensee , and Licensee shall pay PHS , as an additional royalty, [***] of the fair market value of any consideration received for any assignment of this Agreement within thirty (30) days of such assignment.

 

14.08                  Licensee agrees in its use of Biological Materials and any other PHS -supplied materials to comply with all applicable statutes, regulations, and guidelines, including PHS and DHHS regulations and guidelines.  Licensee agrees not to use the materials for research involving human subjects or clinical trials in the United States without complying with 21 CFR Part 50 and 45 CFR Part 46.  Licensee agrees not to use the materials for research involving human subjects or clinical trials outside of the United States without notifying PHS , in writing, of such research or trials and complying with the applicable regulations of the appropriate national control authorities.  Written notification to PHS of research involving human subjects or clinical trials outside of the

 

18



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

United States shall be given no later than sixty (60) days prior to commencement of such research or trials.

 

14.09                  Licensee acknowledges that it is subject to and agrees to abide by the United States laws and regulations (including the Export Administration Act of 1979 and Arms Export Control Act) controlling the export of technical data, computer software, laboratory prototypes, biological material, and other commodities.  The transfer of such items may require a license from the cognizant Agency of the U.S. Government or written assurances by Licensee that it shall not export such items to certain foreign countries without prior approval of such agency.  PHS neither represents that a license is or is not required or that, if required, it shall be issued.

 

14.10                  Licensee agrees to mark the Licensed Products or their packaging sold in the United States with all applicable U.S. patent numbers and similarly to indicate “Patent Pending” status.  All Licensed Products manufactured in, shipped to, or sold in other countries shall be marked in such a manner as to preserve PHS patent rights in such countries.

 

14.11                  By entering into this Agreement , PHS does not directly or indirectly endorse any product or service provided, or to be provided, by Licensee whether directly or indirectly related to this Agreement Licensee shall not state or imply that this Agreement is an endorsement by the Government, PHS , any other Government organizational unit, or any Government employee.  Additionally, Licensee shall not use the names of NIH , CDC , PHS , or DHHS or the Government or their employees in any advertising, promotional, or sales literature without the prior written consent of PHS .

 

14.12                  The Parties agree to attempt to settle amicably any controversy or claim arising under this Agreement or a breach of this Agreement , except for appeals of modifications or termination decisions provided for in Article 13.  Licensee agrees first to appeal any such unsettled claims or controversies to the designated PHS official, or designee, whose decision shall be considered the final agency decision.  Thereafter, Licensee may exercise any administrative or judicial remedies that may be available.

 

14.13                  Nothing relating to the grant of a license, nor the grant itself, shall be construed to confer upon any person any immunity from or defenses under the antitrust laws or from a charge of patent misuse, and the acquisition and use of rights pursuant to 37 CFR Part 404 shall not be immunized from the operation of state or Federal law by reason of the source of the grant.

 

14.14                  Paragraphs 4.03, 8.01, 9.05-9.07, 12.01-12.05, 13.08, 13.09, and 14.12 and the indicated section of Appendix C of this Agreement shall survive termination of this Agreement .

 

SIGNATURES BEGIN ON NEXT PAGE

 

19



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

PHS PATENT LICENSE AGREEMENT— EXCLUSIVE

 

SIGNATURE PAGE

 

For PHS :

 

 

/s/ Steven M. Ferguson

 

Steven M. Ferguson

 

Director, Division of Technology Development and Transfer

 

Office of Technology Transfer

 

National Institutes of Health

 

 

 

Mailing Address for Notices :

 

 

 

Office of Technology Transfer

 

National Institutes of Health

 

6011 Executive Boulevard, Suite 325

 

Rockville, Maryland 20852-3804 U.S.A.

 

 

For Licensee (Upon, information and belief, the undersigned expressly certifies or affirms that the contents of any statements of Licensee made or referred to in this document are truthful and accurate.):

 

 

by:

/s/ Eric Patzer

 

 

 

 

 

Signature of Authorized Official

 

 

 

Eric Patzer, Ph.D.

 

Printed Name

 

 

 

President

 

Title

 

 

 

Official and Mailing Address for Notices:

 

 

 

Aridis Pharmaceuticals, LLC

 

 

 

350 Cervantes Road

 

 

 

Portola Valley, CA 94028

 

 

 

 

 

USA

 

 

Any false or misleading statements made, presented, or submitted to the Government, including any relevant omissions, under this Agreement and during the course of negotiation of this Agreement are subject to all applicable civil and criminal statutes including Federal statutes 31 U.S.C. §§ 3801-3812 (civil liability) and 18 U.S.C. § 1001 (criminal liability including fine(s) and/or imprisonment).

 

20



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

APPENDIX A—Patent(s) or Patent Application(s)

 

Patent(s) or Patent Application(s):

 

DHHS Technology Reference E-015-1998/0

 

Country

 

Serial Number

 

Filing Date

 

DHHS ref

USA

 

60/094,425

 

07/28/1998

 

E-015-1998/0-US-01

PCT

 

PCT/US99/17036

 

07/27/1999

 

E-015-1998/0-PCT-02

CA

 

2336875

 

07/27/1999

 

E-015-1998/0-CA-07

EP

 

99938819.2

 

07/27/1999

 

E-015-1998/0-EP-08

USA

 

09/743,338

 

01/04/2001

 

E-015-1998/0-US-10

JP

 

2000-562050

 

07/27/1999

 

E-015-1998/0-JP-09

KR

 

7001236/2001

 

07/27/1999

 

E-015-1998/0-KR-05

AU

 

5322199

 

07/27/1999

 

E-015-1998/0-AU-06

 

21



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

APPENDIX B—Licensed Fields of Use and Territory and Biological Materials and Documentation

 

Licensed Fields of Use:

 

Human Rotavirus Vaccine based on Human-Bovine Rotavirus Reassortants

 

Exclusive Licensed Territory:

 

Europe, Canada and United States of America

 

Non-Exclusive Licensed Territory:

 

Worldwide excluding Europe, Canada, United States of America, India, Brazil, and China

 

For the sake of clarification, the Non-Exclusive Licensed Territory includes (without limitation) Australia, Japan, and South Korea, where patents and patent applications under Licensed Patent Rights have been filed or issued.

 

Biological Materials:

 

Rotaviruses :

 

(1) Preseed BRota-HP-PSOI, Type ST3 (1 container with 15 ml of virus suspension)

(2) Preseed BRota-HD-PS03, Type ST1 (1 container with 15 ml of virus suspension)

(3) Preseed BRota-HDS I -PS03, Type ST2 (1 container with 15 ml of virus suspension)

(4) Preseed BRota-ST3-PS02, Type ST4 (I container with 15m1 of virus suspension)

 

PHS and Licensee acknowledge that Licensee requests, for the following human-bovine reassortant strains (or strains derived therefrom), a sample of the Preseed, Master virus seed (FRhL2 cell adapted) and Master virus seed (Vero cell adapted).  These samples will be provided by PHS and included under this Agreement , pending reasonable review by PHS for each to establish that PHS has legal access to the materials and the right to include same under this Agreement :

 

(I) HD x BRV-1, clone 47-1-1 (VP7:1 [D])

ATCC VR-2617

(2) HDS1 x BRV-1, clone 66-1-1 (VP7:2 [DS-1])

ATCC VR-2616

(3) HP x BRV-2, clone 22-1-1 (VP7:3 [P])

ATCC VR-2611

(4) HST3 x BRV-2, clone 52-1-1 (VP7:4 [ST3])

ATCC VR-2612

(5) IAL28 x UK, clone 33-1-1 (VP7:5 [IAL28]

ATCC VR-2613)

(6) AU32 x UK, clone 27-1-1 (VP7:9 [AU32]

ATCC VR-2614)

(7) KC-1 x UK, clone 32-1-1 (VP7:10 [KC-1]

ATCC VR-2615)

 

Antibodies:

 

(1) Lot W1A1-anti IgG2a (serotype I) [ 5 ml (5 vials x 1m1) of monoclonal antibody preparation)]

(2) Lot 1C10A-anti IgA( serotype 2) [ 5 ml (5 vials x 1m1) of monoclonal antibody preparation)]

(3) Lot RIA-anti IgG2b (Serotype 3) [ 5 ml (5 vials x 1m1) of monoclonal antibody preparation)]

(4) Lot S4A- anti IgG1 (Serotype 4) [ 5 ml (5 vials x 1m1) of monoclonal antibody preparation)]

(5) Rabbit Polyclonal Antisera [10 ml (1 tube x 10 ml) of sera]

 

22



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

Documentation :

 

BB-IND 7219: Human Bovine Reassortant Rotavirus (Book 1: Ser 000-008 (7/3/97-9/28/00))

BB - IND 8415

BB - IND — 7928

 

23


 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

APPENDIX C—Royalties

 

ROYALTIES:

 

Licensee agrees to pay to PHS a noncreditable, nonrefundable license issue royalty in the amount of [***] as follows:

 

·                                           [ *** ] due three (3) months after effective date of this Agreement

·                                           [***] due two (2) years after the effective date of this Agreement .

·                                           [***] at the first to occur of:

 

1)                                      raising a cumulative [***] in financing, whether from individuals, venture capital, or through the formation of partnership/sublicensing, where such payment is due within thirty (30) days of this event; or

 

2)                                      a firmly underwritten initial public offering and sale of Licensee’s Common Stock pursuant to an effective registration statement under the Securities Act of 1933, as amended, where such payment is due within sixty (60) days of this event.  This clause shall survive termination or expiration of this Agreement.

 

Licensee agrees to pay to PHS a nonrefundable minimum annual royalty in the amount of:

 

[***] for years one through three (1-3)

[***] for years four (4) through the year in which the First Commercial Sale occurs

[***] after the year in which the First Commercial Sale occurs through the remainder of this Agreement .

 

Minimum annual royalties shall be creditable as provided in Paragraph 6.02 of this Agreement .

 

Licensee agrees to pay PHS earned royalties on Net Sales by or on behalf of Licensee and its sublicensees as follows:

 

[***] in the Exclusive Licensed Territory where Licensed Patent Rights exist

[***] in the Non-Exclusive Licensed Territory where Licensed Patent Rights exist

[***] in the Exclusive Licensed Territory where no Licensed Patent Rights exist

[***] in the Non-Exclusive Licensed Territory where no Licensed Patent Rights exist

 

The above earned royalties shall be reduced, on a Licensed Product-by-Licensed Product , country-by-country, and year-to-year basis by [***] for every [***] paid as royalties for third party licenses required to sell Licensed Product or Licensed Process where said royalties for the third party license exceed [***] and provided that such reduction in earned royalties owed to PHS shall never be reduced below [***] of the earned royalties rates specified above.

 

Licensee agrees to pay PHS benchmark royalties within ninety (90) days after accomplishment of the following Benchmarks , whether achieved by Licensee or sublicensee:

 

·                                           [***] — upon completion of Phase 11 clinical trials necessary for the first complete regulatory license application for a Licensed Product .

·                                           [***] — upon commencement of a Phase 111 clinical trial for the evaluation of safety of a Licensed Product ;

 

24



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

·                                           [***] — upon completion of the Phase 111 clinical trials necessary for the first complete regulatory license application for a Licensed Product .

·                                           [***] — upon launch of the first Licensed Product .

 

Licensee agrees to pay PHS additional sublicensing royalties as follows:

 

[***] of the fair market value of any consideration received for granting each sublicense, excluding earned royalties received for Net Sales of Licensed Products , for which the earned royalties noted above shall accrue.

 

25



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

APPENDIX D—Modifications

 

PHS and Licensee agree to the following modifications to the Articles and Paragraphs of this Agreement :

 

Modifications made to the model language have been incorporated into the body of this Agreement .

 

26



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

APPENDIX E—Benchmarks and Performance

 

Licensee agrees to the following Benchmarks for its performance under this Agreement and, within thirty (30) days of achieving a Benchmark , shall notify PHS that the Benchmark has been achieved.

 

·               IND filing: January 2009.

·               Phase I clinical trial completion: November 2010.

·               Phase II clinical trial completion: November 2012.

·               Phase III clinical trial completion: May 2016.

·               Biological License Application (BLA) submission: May 2017.

·               BLA approval: November 2018.

·               First Commercial Sale : January 2019.

 

For the sake of clarification, the above benchmarks can be modified from time to time per Paragraph 9.02 in the Agreement .

 

·               Developing world access

 

Within six (6) months of NDA/BLA equivalent approval in any Licensed Territory, Licensee shall send a written report to PHS detailing the potential Public Sector market to fulfill the public health need for the approved Licensed Product in Developing Countries , including the impact of any approved competing Licensed Product .  The report shall also include Licensee’s amendment to the Commercial Development Plan , Appendix F, to satisfy said potential Public Sector market either directly with Licensee’s own resources and/or through joint ventures with third parties.  Acceptance of this report and amendment is required by PHS in writing, such acceptance will not be unreasonably denied.

 

Licensee agrees:

 

a)              To the extent that Licensee shall satisfy the potential Public Sector market through its own resources, and provided there is a commercially reasonable market therefore, Licensee shall make commercially reasonable efforts to deliver the first allotment of a safe and effective Licensed Product to the Public Sector for distribution and/or sale in Developing Countries within two (2) years of First Commercial Sale and thereafter Licensee agrees to use commercially reasonable efforts to meet any delivery date and in the quantities required in an order placed by the Public Sector .

 

b)              To the extent that Licensee shall satisfy the potential Public Sector market through joint ventures with third parties, Licensee shall:

 

(i)                                      Within one (1) year after First Commercial Sale , make commercially reasonable efforts to negotiate with third parties in order to effect joint ventures or other partnership agreements to make and sell the Licensed Products and Licensed Processes and (or to assist in development of similar third party licensed products or processes made under license directly between the third party and PHS for the technology covered by the Agreement [hereinafter “Third Party Products”]) to provide know-how and effect technology transfer to said third parties that will allow them to manufacture a safe and effective Licensed Product (or Third Party Products) for distribution and/or sale in Developing Countries .

 

27



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

(ii)                                   Within two (2) years of First Commercial Sale , and provided there is a commercially reasonable market therefore, make commercially reasonable efforts to have entered into at least one (1) joint venture or other partnership agreement with at least one (1) third party for the purpose of manufacturing a safe and effective Licensed Product or Third Party Product for distribution and/or sale in Developing Countries .

 

(iii)                                Subject to (ii) above, Within four (4) years of First Commercial Sale , ensure that any said third party(ies) have made commercially reasonable efforts to have delivered a first allotment of a safe and effective Licensed Product or Third Party Product to the Public Sector for distribution and/or sale in Developing Countries , and thereafter ensure that said third party(ies) use commercially reasonable efforts to meet any delivery date(s) and in the quantities required in an order placed by the Public Sector.

 

28



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

APPENDIX F—Commercial Development Plan

 

Background

 

This project will use the four monovalent human-bovine UK reassortant rotavirus strains designated D x UK (VP 7 serotype 1), DS-1 x UK (VP 7 serotype 2), P x UK (VP 7 serotype 3) and ST3 x UK (VP 7 serotype 4) previously tested in clinical trials that established the safety and immunogenicity of the orally administered quadrivalent mixture.

 

Proof of Concept Studies

 

This previous quadrivalent vaccine was a mixture of four serotype-specific human-bovine reassortants, which were individually produced in DBS FRhL2 cells at titers ranging from 1053 to 1058 pfu/mL, and then stored frozen.  The four reassortants were thawed and combined immediately prior to administration.  A Vero cell manufacturing process was developed by Wyeth, which represents an attractive alternative cell substrate with significant manufacturing advantages (titers ranging from 1075 to108° pfuimL).  Proof of concept studies will be performed with Vero cell produced material, which will continue into development, unless deficiencies in this material compared to the previously tested DBS FRhL2 cell material are identified.

 

In the initial proof of concept testing, we will prepare bulk vaccine in 1-10L microcarrier cultures of Vero cells based on a process developed by Wyeth using human-bovine reassortants.  Formulations, drying processes and milling conditions will be screened to generate dried powders with each individual strain, which will be subsequently tested for stability.  Once satisfactory results are obtained with each individual reassortant, the stability of the combined quadrivalent mixture will be verified.

 

From the studies by Wyeth with Rotashield®, it is known that about 90 mg of buffer (sodium bicarbonate and citric acid) is required in the final formulation to allow rotavirus to survive the acid environment of the stomach and transit to its final destination in the upper small intestine.  Similar amounts of buffer will be incorporated into the dried powder and then the powder will be fabricated into a quick dissolving tablet using standard powder mixing and tableting processes.

 

Preclinical Testing

 

Animal models that can provide relevant data with bovine rotavirus strains are restricted to a murine model with a limited ability to predict human safety and immunogenicity.  Additionally, the quadrivalent human-bovine reassortant vaccine already has been tested in humans.  Consequently, we do not anticipate that significant animal testing of the stabilized quadrivalent vaccine will be required prior to clinical testing.  We will perform extensive stability testing to demonstrate that the infectivity of the rotavirus vaccine doesn’t change during storage.  In addition, a battery of in vitro tests will be performed to demonstrate product purity, safety, identity and consistency of manufacture and that the key physical, chemical and immunological characteristics of the rotavirus strains are comparable to the previously tested strains.

 

Clinical Testing

 

The clinical program of the stabilized vaccine will exploit the prior human safety, immunogenicity and dose ranging data with individual monovalent reassortants and combined quadrivalent vaccine.  The initial phase 1 study will compare the safety of a single dose of the stabilized quadrivalent vaccine in 10 adults to the previous formulation of quadrivalent vaccine in 10 adults.  If the vaccines have similar safety profiles, we will proceed to phase 2 clinical testing of a single dose of stabilized quadrivalent vaccine in

 

29



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

10 young children (2-5 years) followed by testing of two doses of the stabilized quadrivalent vaccine administered to 200 young infants at 2 and 4 months of age for safety and immunogenicity (ELISA IgG and IgA and plaque reduction neutralization).  The progression from adults to children and then infants will necessarily require close coordination and careful review of safety data with the FDA.

 

It is estimated that preclinical and phase 1 and 2 clinical testing can be completed within 7.5 years.

 

If the immunogenicity or reactogenicity profile of the reassortants in the stabilized vaccine are not the same as the previously tested vaccine, then subsequent phase 2 testing will include dose ranging (starting at lower doses) to define the dose of the reassortants in the stabilized vaccine that exhibits similar levels of reactogenicity and immunogenicity (5).  These studies may require an additional 6-12 months to complete.

 

The phase 3 trial in 1,000 infants will be designed to obtain efficacy data in one rotavirus season; however, the trial will be extended for more than one year to gather data on the persistence of protection during subsequent rotavirus seasons.  To obtain sufficient clinical safety data for regulatory approval, a large-scale safety trial (up to 60,000 subjects) is planned that will require —2.5 years to complete.

 

During phase 3 clinical testing a bridging/consistency trial in 1,000 infants has been included to allow a transfer from a clinical pilot plant to a commercial manufacturing facility or a technical transfer to a partner’s manufacturing facility.  This trial will be completed concurrently with the other phase 3 clinical studies.  The table below lists the major phases of development and the time for each phase.  Total time for product development from project initiation to first commercial sale is estimated to require about 13.7 years.

 

Market and Competition : There are two competitors (Merck and GSK) developing rotavirus vaccines.  The Aridis vaccine will be competitively superior to both, because no refrigeration will be required and administration will be as a 2 dose quick dissolving wafer assuring full dose receipt.  Both competitor vaccines require refrigeration, administration as a liquid (with inherent inconsistencies in dosing), and either a 3-dose regimen or lengthy mixing procedures.  We will identify an established marketing partner, who in combination with a superior product will allow us to capture a large share of the rotavirus vaccine market.

 

Project Timelines for Quadrivalent Vaccine :

 

Project Phase

 

Years

1. Preclinical development (culminating in IND filing)

 

3.7

2. Phase 1 clinical (safety)

 

1.8

3. Phase 2 clinical in children & infants (safety & immunogenicity)

 

2.0

4. Phase 3 clinical development (efficacy, expanded safety, mfg consistency, bridging)

 

3.5

5. File BLA

 

1.0

6. Regulatory review & approval

 

1.5

7. First commercial sale

 

0.2

Total Time

 

13.7

 

30



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

APPENDIX G—Developing Countries

 

For the purpose of this Agreement, Developing Country will include the following countries:

 

1 Afghanistan

2 Albania

3 Angola

4 Armenia

5 Azerbaijan

6 Bangladesh

7 Benin

8 Bhutan

9 Bolivia

10 Bosnia & Herzegov

11 Burkina Faso

12 Burundi

13 Cambodia

14 Cameroon

15 Central Afr Rep

16 Chad

17 Comoros

18 Congo, Dem Rep

19 Congo, Rep

20 Cote d’Ivoire

21 Cuba

22 Djibouti

23 Eritrea

24 Ethiopia

25 Gambia

26 Georgia

27 Ghana

28 Guinea

29 Guinea-Bissau

30 Guyana

31 Haiti

32 Honduras

33 Indonesia

34 Kenya

35 Korea, DPR

36 Kyrgyz Republic

37 Lao PDR

38 Lesotho

39 Liberia

40 Madagascar

41 Malawi

42 Mali

43 Mauritania

44 Moldova

45 Mongolia

46 Mozambique

47 Myanmar

48 Nepal

 

31




Exhibit 10.3

 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

LICENSE and OPTION AGREEMENT

 

BRIGHAM YOUNG UNIVERSITY and ARIDIS, LLC

 

This Agreement, effective July 29, 2005 is entered into between Brigham Young University, a Utah non-profit corporation and institution of higher education, with its principal campus and place of business located at Provo, Utah 84602 (referred to in this Agreement as “BYU”) and Aridis, LLC, a California corporation with its principal place of business located at 350 Cervantes Road, Portola Valley, CA 94028, (referred to in this Agreement as “LICENSEE”).

 

RECITALS

 

I                                            BYU is the sole owner of certain intellectual property rights known as “Stabilization of Biological Agents” and has the right to grant licenses with respect to these rights.

 

A.                                     BYU is an institution of higher education and is not in the business of commercially developing ideas, inventions, or other types of intellectual property, but it does desire to have Stabilization of Biological Agents available to the public and is willing to grant a license for this purpose.

 

B.                                     LICENSEE has represented to BYU that LICENSEE has the technical and commercial ability, and the technical, financial and other resources necessary to successfully develop and sell products or services based upon Stabilization of Biological Agents.

 

C.                                     LICENSEE desires to obtain a license to Stabilization of Biological Agents upon the terms and conditions of this Agreement.

 

In consideration of the promises and mutual covenants contained in this Agreement the parties agree as follows:

 

TERMS OF AGREEMENT

 

1.                                       Definitions

 

For the purposes of this Agreement, the following terms, words and phrases shall have the meaning ascribed to them in this Section.

 

1.1                                ADJUSTED GROSS SALES ” shall mean actual gross receipts or the fair market monetary equivalent value of consideration received by LICENSEE, AN AFFILIATE OR A SUBLICENSEE for the sale, lease, license, transfer or use of LICENSED PRODUCTS, less qualifying costs directly attributable to such sale, lease, license or transfer actually allowed and ‘borne by LICENSEE, an AFFILIATE, or a SUBLICENSEE.  Such qualifying costs shall be limited to the costs of the following:

 

1



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

A.                                     Trade or quantity discounts and credits for free goods actually allowed and taken in such amounts as are customary in the trade;

 

B.                                     Sales, import and export duties (or other transportation taxes) and/or production, use, delivery and excise taxes directly imposed with reference to particular sales;

 

C.                                     Outbound transportation and insurance expenses prepaid or allowed; and

 

D.                                     Amounts allowed or credited by reason of timely rejections, recalls, destruction or returns, or for rebates or chargebacks.

 

No deductions shall be made for commissions paid to individuals, whether they be regularly employed by LICENSEE or by independent sales agents, or for the cost of collections.

 

1.2                                AFFILIATE ” shall mean any person or entity owned or controlled directly or indirectly by LICENSEE or a SUBLICENSEE or any person or other entity controlled by, controlling or under common control with LICENSEE or a SUBLICENSEE.  The term “control” means possession, direct or indirect, of the powers to direct or cause the direction of the management and policies of a person or entity; whether through ownership, voting securities, beneficial interests, by contract, by agreement, or otherwise.

 

1.3                                “FIELD OF APPLICATION-ANTIBODIES” means therapeutic antibodies for treatment of infectious diseases.

 

1.4                                FIELD OF APPLICATION -VACCINES” means vaccines and prophylactic biologics.

 

1.5                                IMPROVEMENT(S) ” means any invention (not currently comprised by the LICENSED TECHNOLOGY described in Exhibit A) which is both (i) specific in its operation or use as dependent upon the use of the LICENSED TECHNOLOGY as described (i.e., not general to the field of stabilization of biological agents), and (ii) an enhancement or improvement of some portion of the LICENSED TECHNOLOGY.

 

1.6                                INTELLECTUAL PROPERTY ” means and includes all patent applications listed in Exhibit A and all patent applications claiming the inventions described in Exhibit A, including any divisional, continuation, or continuation-in-part to such applications to the extent comprising the inventions described therein, as well as any patent issued thereon, any reissue or extension of such patent, and any foreign counterparts to such patents and application.

 

1.7                                LICENSED PRODUCT(S) ” means and includes any drug or other product whose manufacture, use or sale in a country would but for this agreement comprise an infringement of a valid patent claim included in the INTELLECTUAL PROPERTY, the phrase “valid patent claim” meaning either (i) a claim issued and not expired, revoked, abandoned or held unenforceable, or (ii) a claim that is pending, made in good faith, and reasonably designed to cover inventions described in the INTELLECTUAL PROPERTY.  Solely for purposes of calculating ADJUSTED GROSS SALES above, LICENSED PRODUCT shall also include any

 

2



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

drug or other product whose manufacture, use or sale in a country would, but for Aridis’s own ownership rights in a valid patent claim covering an IMPROVEMENT, comprise an infringement of that patent claim.

 

1.8                                LICENSED TECHNOLOGY ” means and includes all of BYU’s rights in the INTELLECTUAL PROPERTY known as “Stabilization of Biological Agents” as more particularly described in Exhibit A, which is attached to this Agreement and by reference is incorporated and made part of this Agreement.

 

1.9                                LICENSEE ” is Aridis, LLC and its AFFILIATES and any other person or entity that becomes a successor in interest to, purchases, merges with, assumes control of, or becomes an assignee of LICENSEE.

 

1.10                         SUBLICENSEE ” is any person or entity sublicensed by LICENSEE under any of its license rights under this Agreement.

 

1.11                         TERRITORY ” means the world.

 

2.                                       BYU Grant

 

2.1                                Subject to the provisions of Section 2.6, BYU hereby grants LICENSEE an exclusive right and license to utilize the LICENSED TECHNOLOGY to develop LICENSED PRODUCTS, and IMPROVEMENTS, and to make, have made, use, have used, import, have imported, and sell, lease and otherwise transfer LICENSED PRODUCTS within the TERRITORY and the FIELD OF APPLICATION-VACCINES as authorized in this Agreement until such time as this Agreement expires or is terminated.  This grant will extend to the manufacture, sale, lease, transfer or other disposition of LICENSED PRODUCTS within the TERRITORY and the FIELD OF APPLICATION-VACCINES through an AFFILIATE or through LICENSEE’s use of any retail outlet or distributor.

 

2.2                                Subject to the provisions of Section 2.4, BYU hereby grants LICENSEE a non-exclusive right and license to utilize the LICENSED TECHNOLOGY to develop LICENSED PRODUCTS, and IMPROVEMENTS, and to make, have made, use, have used, import, have imported, and sell, lease and otherwise transfer LICENSED PRODUCTS within the TERRITORY and the FIELD OF APPLICATION-ANTIBODIES as authorized in this Agreement until such time as this Agreement expires or is terminated.  This grant will extend to the manufacture, sale, lease, transfer or other disposition of LICENSED PRODUCTS within the TERRITORY and the FIELD OF APPLICATION-ANTIBODIES through an AFFILIATE or through LICENSEE’s use of any retail outlet or distributor.

 

2.3                                BYU hereby grants LICENSEE an option to convert the non-exclusive grant of Section 2.2 for the FIELD OF APPLICATION-ANTIBODIES into an exclusive grant upon acceptance by BYU of a reasonable development plan for the exploitation of the FIELD OF APPLICATION-ANTIBODIES including financing and a development plan and schedule.  If the exclusive license is granted, LICENSEE shall agree to pay milestone payments for the FIELD OF  APPLICATION-ANTIBODIES equal to the payments specified in Section 6.1 for

 

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Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

the HELD OF APPLICATION-VACCINES.  This option shall terminate on the fifth anniversary of the effective date of this Agreement, or if BYU receives a bona fide offer for license rights for the FIELD OF APPLICATION-ANTIBODIES from a third party and LICENSEE fails to exercise its option within ninety days of notice thereof, whichever event occurs earlier in time.

 

2.4                                The grants provided under this Agreement shall specifically include the right for LICENSEE to sublicense to SUBLICENSEES its rights under this Agreement to the LICENSED TECHNOLOGY with respect to the TERRITORY, in the following fields:

 

(i)                                      the FIELD OF APPLICATION-VACCINES;

 

(ii)                                   the FIELD OF APPLICATION-ANTIBODIES, where the sublicense is made to
cover LICENSED PRODUCTS developed or jointly developed by LICENSEE; and

 

(iii)                                the FIELD OF APPLICATION-ANTIBODIES, if the option described in section 2.3 above is exercised.

 

All sublicenses granted by LICENSEE shall be subject to the terms and conditions of this Agreement and any sublicense agreement shall have an express provision to this effect.  No sublicense shall relieve LICENSEE of any of its obligations under this Agreement.  Sublicenses under this Agreement shall be structured to guarantee the payment of royalties to BYU in an amount at least equal to the amount of royalties which BYU would have received from LICENSEE had LICENSEE made, sold, leased, or otherwise transferred the LICENSED PRODUCTS authorized in the sublicense.  LICENSEE agrees to forward to BYU a fully executed copy of each sublicense agreement within thirty (30) days of its execution, and to act as a fiduciary to protect BYU’s interests in the sublicense and to collect and transmit to BYU all royalties due.

 

2.5                                Nothing in this Agreement shall be considered as granting any rights, express or implied, in BYU’s patents, patent applications, inventions, methods, technical, confidential or proprietary information, expertise, know-how, trade secrets or knowledge not specifically licensed in this Agreement, and all rights not expressly granted by this Agreement to LICENSEE are expressly reserved by BYU.  The license granted by this Agreement shall not be construed to confer any rights upon LICENSEE by implication, estoppel or otherwise as to any existing, new or derivative technology not specifically licensed by this Agreement.  The reservation of rights described in this Section is intended to be broadly construed and not to be limited by the definitions set forth in this Agreement.

 

2.6                                Notwithstanding the exclusive license granted pursuant to this Agreement with respect to the TERRITORY and FIELD OF APPLICATION, BYU, the Church of Jesus Christ of Latter-day Saints and the Church Education System reserve the right to make, have made or use the LICENSED TECHNOLOGY, LICENSED PRODUCTS, and IMPROVEMENTS anywhere in the world for continuing research and non-commercial academic and ecclesiastical uses without cost.  Moreover, should BYU, The Church of Jesus Christ of Latter-day Saints or any educational institution within the Church Education System (collectively, the “Church”)

 

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Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

wish to purchase any LICENSED PRODUCTS from LICENSEE or its AFFILIATES, LICENSEE agrees to sell such LICENSED PRODUCTS at the [***] or the price given by LICENSEE to its most favored customers, whichever is less.  (The parties to this Agreement do not expect that these sales would comprise more than [***] of the overall LICENSED PRODUCT sales in any country.  If BYU or the Church were to require LICENSED PRODUCT in excess of this amount the parties agree to meet in order to agree upon fair consideration for the LICENSED PRODUCTS provided.)

 

3.                                       Rights in Improvements

 

3.1                                Upon any termination of this Agreement other than its termination due to expiration of the patent rights as described in section 16.1, and to the extent LICENSEE at that time has the legal right to grant such license, LICENSEE shall grant to BYU a non-exclusive, irrevocable, perpetual, worldwide license, to any of LICENSEE’s rights in IMPROVEMENTS.  LICENSEE agrees to disclose to BYU all information reasonably requested by BYU with respect to any such licensed IMPROVEMENTS and to provide to BYU all documents and data, in whatever form, reasonably necessary for BYU to exercise such license rights.  BYU’s license under this Section shall include the right to practice, license or sublicense IMPROVEMENTS for commercial use when done in conjunction with the practice, license or sublicense of INTELLECTUAL PROPERTY and LICENSED TECHNOLOGY, provided that BYU and LICENSEE shall agree in advance upon an appropriate sharing between them for royalties or other consideration received by BYU, in recognition of and to the extent of the value contributed to the INTELLECTUAL PROPERTY and LICENSED TECHNOLOGY by addition of the licensed IMPROVEMENTS.

 

3.2                                During the term of this Agreement, LICENSEE shall disclose to BYU (under appropriate confidentiality, where appropriate) information with respect to any IMPROVEMENTS developed by LICENSEE for which patent protection is being sought, in order that BYU may assess whether it has any legitimate ownership interest in the invention comprised by the IMPROVEMENT.

 

3.3                                During the term of this Agreement, any IMPROVEMENTS and associated patent rights which are developed by licensees of BYU other than LICENSEE, and for which BYU hereafter acquires ownership or license rights, shall be deemed to be included under the definition of INTELLECTUAL PROPERTY and LICENSED TECHNOLOGY above and included in the license herein.

 

4.                                       Activities of LICENSEE

 

4.1                                The parties acknowledge that LICENSEE may investigate or develop alternative approaches towards the stabilization of biological agents other than the LICENSED TECHNOLOGY.  LICENSEE represents that it enters into this Agreement, including its performance obligations under Section 5 hereunder, and its obligations to support and cooperate in BYU’s efforts to obtain properly patentable valid patent claims as set out in Section 12 hereunder, all in good faith.

 

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Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

5.                                       Performance Requirements

 

5.1                                LICENSEE shall, during the term of this Agreement, use its reasonable best efforts to bring one or more LICENSED PRODUCTS to market in order to maximize the ADJUSTED GROSS SALES through a thorough, vigorous and diligent commercial program.

 

5.2                                LICENSEE has delivered to BYU a development plan and schedule which is attached hereto as Exhibit B.  LICENSEE shall use its reasonable best efforts to accomplish said development plan and schedule.

 

5.3                                LICENSEE shall provide biannual progress reports to BYU by the last day of January and the last day of July until LICENSEE’S first commercial sale.

 

5.4                                LICENSEE’s failure to perform in accordance with this Section of the Agreement to the reasonable satisfaction of BYU may be considered by BYU to be a material breach of this Agreement and as such may entitle BYU to exercise its termination rights in accordance with Section 16.4 below.

 

6.                                       Milestone Payments and Royalties

 

In consideration of the license granted under this Agreement, LICENSEE shall pay to BYU, in the manner designated below until the Agreement shall be terminated, as follows:

 

6.1                                Milestone Payments: LICENSEE shall make the following milestone payments for the first LICENSED PRODUCT to BYU according to the following schedule:

 

Upon the completion of Phase 2 clinical trials

 

[ *** ]

 

 

 

Upon the completion of Phase 3 clinical trials

 

[ *** ]

 

 

 

Upon the first commercial sale of a LICENSED PRODUCT

 

[ *** ]

 

6.2                                Earned Royalties: Earned royalties shall be paid quarterly in the amount equal to [***] of the ADJUSTED GROSS SALES for LICENSED PRODUCT anywhere in the TERRITORY and FIELD OF APPLICATION-VACCINES or FIELD OF APPLICATION-ANTIBODIES.

 

6.3                                If LICENSEE judges it to be necessary to license and utilize additional rights from a third party which are reasonably considered to fall within the scope of the LICENSED TECHNOLOGY, LICENSEE may reduce the Earned Royalties due BYU on any such LICENSED PRODUCT sold which utilizes the third party’s licensed rights by one-half of the royalty paid to the third party for said rights provided prior notice is given to BYU by LICENSEE and BYU provides written consent thereto, which consent shall not be unreasonably withheld.  However, under no circumstances shall the Earned Royalties payable to BYU be less than [***]

 

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Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

6.4                                Any royalty amount due to BYU arising out of this Agreement shall accrue at the time of receipt by LICENSEE of consideration for LICENSED PRODUCT or LICENSED PROCESS and shall be deemed to be held in trust for the benefit of BYU until actual payment of such amounts is made pursuant to this Agreement.

 

7.                                       Reports, Records, Penalties and Interest

 

7.1                                LICENSEE shall keep, and shall require all SUBLICENSEES, AFFILIATES, and any other party responsible by the terms of this Agreement to make payments to BYU to keep, at their own expense, accurate books of account, using generally accepted accounting principles and practices, detailing all data necessary to calculate and easily audit any payments due to BYU under this Agreement.  These books of account shall be kept at LICENSEE’s, AFFILIATE’s or SUBLICENSEE’s principal place of business.  These books and supporting data shall be open at all reasonable times, upon ten (10) calendar days written notice, throughout the term of this Agreement and for a period of five (5) years following the end of the calendar year to which they pertain, to inspection by BYU or its agents for the purpose of verifying LICENSEE’s reports, royalty statements or other compliance with this Agreement.  In the event that any such inspection reveals any underpayment of royalties by LICENSEE, LICENSEE shall promptly rectify any such underpayment, reimburse BYU for the cost of such inspection if such inspection reveals a deficiency in any quarterly payment due to BYU hereunder in the amount of [***] or more of the amount payable to BYU, and shall pay the penalty and interest amounts specified in Section 7.4 below.

 

7.2                                LICENSEE, within sixty (60) days after the last day of each full calendar quarter subsequent to the effective date of this Agreement, shall deliver to BYU an accurate written report summarizing in sufficient detail to allow BYU to verify all payment amounts, the data used during the preceding three-month period under this Agreement to calculate the payments due to BYU during the applicable accounting period.  These records and reports shall include at least the following information for the accounting period:

 

A.                                     Calculation of ADJUSTED GROSS SALES, itemized as to the number and the identity of the LICENSED PRODUCTS sold.

 

B.                                     All qualifying deductible costs claimed as offsets as applicable.

 

C.                                     Calculation of earned royalties and total royalties due broken down by applicable category.

 

D.                                     Names and address of all AFFILIATES and SUBLICENSEES and full reports from them complying with the reporting requirements of Section A-C.

 

7.3                                With each such report submitted, LICENSEE shall pay to BYU all fees, royalties and all other amounts due, payable and arising pursuant to this Agreement.  If no amounts shall be due, LICENSEE shall so report.  All amounts paid to BYU pursuant to this Agreement shall be in United States Dollars unless otherwise agreed in writing between the parties, and the amount of all royalties to be paid to BYU shall be determined on the basis of the relevant

 

7



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

currency exchange rate published by the Wall Street Journal on the last business day of the calendar quarter to which such royalties relate.

 

7.4                                A penalty will be assessed in an amount equal to [***] of any payment due to BYU arising out of this Agreement if the payment is made more than sixty (60) days late.  Interest will accrue from the thirtieth day after the payment was due at a rate of [***] per annum or the highest rate permitted by law, whichever is lower.  Any unpaid interest or penalty shall be compounded monthly at the applicable interest rate.  The penalty and interest provisions of this Section 7.4 shall not apply to any payment reasonably in dispute or any circumstance of force majeure as described in Section 22.6.

 

7.5                                In the event LICENSEE engages an independent auditor or employs an internal auditor for the purpose of verifying the accuracy of its books of account, LICENSEE shall cause said auditor to verify the accuracy of the quarterly reports required in Section 7.2 of this Agreement, and LICENSEE shall provide to BYU a copy of the report and any documentation generated in the verification process on or before ninety (90) days after the verification process is completed.

 

8.                                       Confidentiality

 

8.1                                If either party receives material provided by the other party which is marked as confidential, or is verbally so designated and confirmed in writing by the disclosing party within thirty (30) days of the receipt of the materials by the receiving party, the receiving party shall take reasonable precautions to protect such material and to preserve its confidential, proprietary or trade secret status during the term of this Agreement and for a period of five (5) years after termination of this Agreement.

 

8.2                                In determining whether or not information is confidential, the burden of proof shall be upon the receiving party to establish by competent proof and by preponderance of the evidence that such information to be non-confidential was:

 

A.                                     Already known to the receiving party at the time of disclosure by the disclosing party or independently developed by the receiving party, or

 

B.                                     Generally available to the public or otherwise part of the public domain at the time of its disclosure to the receiving party, or

 

C.                                     Became generally available to the public or otherwise part of the public domain after its disclosure and other than through any act or omission of the receiving party in breach of this Agreement, or

 

D.                                     Subsequently, lawfully disclosed to the receiving party by a third party, or

 

E.                                      Required by law to be disclosed.

 

8.3                                LICENSEE may disclose BYU’s confidential information to its agents, employees, independent contractors, officers, AFFILIATES and SUBLICENSEES where

 

8



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

reasonably necessary to further the objectives of this Agreement, and otherwise only to the extent it is authorized in writing to do so by BYU.

 

8.4                                All of the receiving party’s SUBLICENSEE’s, employees and independent contractors with access to the disclosing party’s confidential information shall be bound in writing, copies of which shall be retained by the receiving party and submitted to the disclosing party upon request of the disclosing party, to make no unauthorized use or disclosure of the confidential information.

 

8.5                                Both parties agree that a breach of its obligation to protect the other party’s confidential information shall cause immediate and irreparable harm which cannot be adequately compensated by monetary damages.  Accordingly, any breach or threatened breach of confidentiality shall entitle the disclosing party to preliminary and permanent injunctive relief in addition to such remedies as may be otherwise available.

 

9.                                       Separate Service Agreement

 

If BYU and LICENSEE mutually agree that BYU shall supply technical and engineering services required to effectively transfer to LICENSEE the LICENSED TECHNOLOGY licensed herein, then LICENSEE shall reimburse BYU for its expenses incurred in furnishing such technical and engineering services pursuant to the terms and conditions of a separate written agreement.

 

10.                                Export Controls and Applicable Laws

 

10.1                         It is understood that the LICENSED TECHNOLOGY may be subject to United States laws and regulations controlling the export of technical data, computer software, laboratory prototypes and other commodities (including the Arms Export Control Act, as amended, and the Export Administration Act of 1979), and LICENSEE’s obligations under this Agreement may be contingent upon compliance with applicable United States export laws and regulations.  The transfer of certain technical data and commodities may require a license from the cognizant agent of the United States Government and/or written assurances by LICENSEE that LICENSEE shall not export data or commodities to certain foreign countries without prior approval of such agency.  BYU neither represents that a license shall not be required nor that, if required, it shall be issued.  LICENSEE shall observe and obey all export laws in countries in which it shall do business.

 

10.2                         In the exercise of its rights, and the performance of its obligations under this Agreement, LICENSEE shall comply with all applicable laws, regulations and governmental orders.  LICENSEE shall obtain, and shall maintain in full force and effect throughout the continuance of this Agreement, all licenses, permits, authorizations and approvals required under all applicable laws, regulations and governmental orders of the TERRITORY, and shall make all filings, notifications and reports to all relevant governmental agencies, which are necessary or appropriate in order for the performance by LICENSEE of all of its obligations under this Agreement.  In the event that the issuance of any such license, permit, authorization or approval is conditioned upon any material modification or amendment of BYU’s rights under this

 

9


 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

Agreement, and is sought without BYU’S agreement to that modification or amendment, then BYU shall have the right to terminate this Agreement with respect to the affected territory, and such TERRITORY shall be excluded from the definition of the TERRITORY herein

 

11.                                Patent Marking and Copyright Notice

 

If applicable, LICENSEE agrees to mark the LICENSED PRODUCTS sold in the United States with all applicable United States patent numbers and copyright notices.  All LICENSED PRODUCTS shipped to or sold in other countries shall be marked in such a manner as to conform with the patent and/or copyright laws and practice of the country of manufacture or sale.

 

12.                                Patent Prosecution and Maintenance

 

12.1                         BYU shall use its reasonable best efforts to apply for, seek prompt issuance of, and maintain during the term of this Agreement any patent rights to properly patentable INTELLECTUAL PROPERTY set forth in Exhibit A or to any enhancements and modifications thereto.  BYU shall diligently prosecute, file, perfect and maintain all such patent rights, patents or applications utilizing legal counsel of its choice.  LICENSEE shall cooperate with BYU in such prosecution, filing and maintenance.

 

12.2                         Payment of one-third of all fees and costs relating to the filing, prosecution, perfection and maintenance of the patent rights, both domestic and foreign, shall be reimbursed by LICENSEE to BYU, whether such fees and costs were incurred before or after the date of this Agreement.  If the option for an exclusive license to the HELD OF APPLICATION-ANTIBODIES of Section 2.3 is granted, and if BYU has no other non-exclusive licensee in the FIELD OF APPLICATION-ANTIBODIES, LICENSEE shall pay an additional one-third of said patent-related costs.  For filings outside the United States not made in joint agreement between the parties, LICENSEE may elect not to reimburse BYU for such expenses by providing advance written notice to BYU, but any such filing in such country shall thereafter be excluded from INTELLECTUAL PROPERTY and LICENSED TECHNOLOGY as defined herein.

 

12.3                         LICENSEE shall have the right to comment upon all patent prosecution or interference matters.  Strategic matters affecting potential breadth and term of any patent coverage, and all other material matters related to patent prosecution, shall be managed by joint agreement negotiated in good faith among BYU, LICENSEE and (where necessary) any third party BYU licensees.  Copies of all documentation and correspondence with governmental patent offices and patent counsel shall be provided to LICENSEE.

 

12.4                         LICENSEE SHALL HAVE NO CLAIM OR DAMAGES AGAINST BYU, ITS  PERSONNEL, TRUSTEES OR STUDENTS FOR FAILURE TO PERFORM ITS  OBLIGATIONS PURSUANT TO SECTION 12 OF THIS AGREEMENT, AND SHALL NOT CONSIDER BYU’S FAILURE TO SO PERFORM A BREACH OF THIS AGREEMENT, PROVIDED THAT BYU COMPLIES WITH THE FOLLOWING TERMS: IF BYU SHALL ELECT NOT TO PERFORM ITS OBLIGATIONS HEREUNDER WITH RESPECT TO ANY  OR ALL PATENT APPLICATIONS AND PATENTS, THEN IT SHALL PROVIDE  LICENSEE WITH REASONABLE ADVANCE WRITTEN NOTICE OF ITS INTENT, AND  PROVIDE LICENSEE THE OPPORTUNITY THEREAFTER TO CONTINUE THE

 

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Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

PROSECUTION, FILING, PERFECTION AND MAINTENANCE OF SUCH PATENT  APPLICATIONS AND PATENTS INDEPENDENTLY OF BYU AND AT ITS OWN  EXPENSE .

 

13.                                Infringement

 

LICENSEE will have the first right to pursue, prosecute and settle infringement matters in its exclusive field of use.  BYU shall have the first right to pursue all other infringement matters.  In either case the other party may pursue matters not elected by the party with the first right (provided the matter is within LICENSEES’ field of use).  Where LICENSEE takes first action, proceeds shall be divided, net of expenses, 75% to LICENSEE and 25% to BYU.  Where BYU takes first action, proceeds shall be divided 75% to BYU and 25% to LICENSEE.

 

14.                                Warranty and Limitation of Remedy

 

14.1                         BYU represents and warrants that to the best of its knowledge it is the owner of the entire right, title, and interest in and to and has the sole right to grant licenses under this Agreement to the LICENSED TECHNOLOGY as described on Exhibit A.  BYU makes no warranty or representation with respect to the application of the LICENSED TECHNOLOGY to any particular purpose.

 

14.2                         BYU makes no representation that the manufacture, use, lease, or sale of the LICENSED TECHNOLOGY will not infringe a copyright or patent granted to others, other than to state that it knows of no such copyright, patent or other proprietary interests which would be so infringed.

 

14.3                         Each party represents and warrants to the other that it has all of the requisite power and authority to enter into this Agreement and to perform each and every term, provision and obligation of this Agreement, and that neither the execution nor delivery of this Agreement will conflict with or result in a breach of the terms, provisions or obligations of, or constitute a default pursuant to, any other agreement or instrument under which such party is obligated.

 

14.4                         ALL WARRANTIES MADE IN THIS AGREEMENT ARE EXCLUSIVE AND, TO THE EXTENT PERMITTED BY LAW, ARE IN LIEU OF ALL OTHER WARRANTIES EXPRESS  AND IMPLIED, INCLUDING BUT NOT LIMITED TO, THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE, OR ANY OTHER WARRANTY WHETHER EXPRESS OR IMPLIED .

 

14.5                         BYU will not be liable for any loss of profits or for any claim or demand against LICENSEE by any other party.  BYU’s liability, if any, for any damages to LICENSEE shall not exceed in any event the total earned royalties which have been paid by LICENSEE to BYU during the term of this Agreement.  IN NO EVENT WILL BYU BE LIABLE FOR INCIDENTAL OR  CONSEQUENTIAL DAMAGES EVEN IF BYU HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES .  No action, regardless of form, arising out of the transaction subject of this Agreement may be brought against BYU more than one year after the cause of action is discovered.

 

11



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

15.                                Product Liability and General Indemnification

 

15.1                         BYU does not warrant the effectiveness or operation of any of the LICENSED PRODUCTS, and the parties to this Agreement agree and understand that BYU shall have no liability to any user of LICENSED PRODUCTS.  LICENSEE, therefore, agrees to hold BYU harmless and indemnify BYU, its trustees, officers, employees and agents from and against any and all litigation, claims, damages or actions (including reasonable attorneys’ fees) that may be instituted against BYU arising out of LICENSEE’s marketing, distribution, sale, production, manufacture, lease, consumption or advertisement of the LICENSED TECHNOLOGY or LICENSED PRODUCTS or arising from any obligation of LICENSEE under this Agreement, including, but not limited to, claims resulting from any alleged type of defect in the LICENSED TECHNOLOGY or LICENSED PRODUCTS or damages allegedly caused by any breach of contract by LICENSEE, its AFFILIATES or SUBLICENSEES, or the use or misuse of the LICENSED TECHNOLOGY or LICENSED PRODUCTS, notwithstanding any third-party allegation that their claims, injuries or damages were proximately caused in part or wholly by BYU’s negligence.  In the event BYU is sued as a party defendant or otherwise pursuant to claims identified in this Section as being subject to indemnification, LICENSEE agrees to defend BYU at LICENSEE’s sole expense in such action.  Should any award or decree be made against BYU, it shall be the obligation of LICENSEE to (a) appeal the decision and pay if the appeal is lost or (b) pay such award or make any settlement as may be warranted before or after the decision on appeal.  BYU shall have the right to elect to participate in any such action with counsel of its choosing; the costs of BYU’s participation shall be at its own expense.

 

15.2                         LICENSEE shall immediately notify BYU of any litigation in which it, its officers or its directors, agents or employees may be involved if there is a reasonable possibility that this Agreement or BYU will be affected and afford BYU reasonable cooperation should BYU elect to make its own defense.

 

16.                                Term and Termination

 

16.1                         Subject to earlier termination in accordance with this Section, this Agreement shall commence on the effective date of this Agreement and remain in force until the expiration of the last valid patent claim contained in the LICENSED TECHNOLOGY.

 

16.2                         The Agreement may be terminated immediately by written notice to LICENSEE by BYU at its election in the event of the occurrence of any one of the following circumstances:

 

A.                                     In the event LICENSEE is placed in the hands of a receiver or makes a general assignment for the benefit of creditors, such that LICENSEE is unable to perform its continuing obligations hereunder; or

 

B.                                     In the event that all or substantially all of the assets of LICENSEE or its successor-in-interest are seized or attached in a final, unappealed or unappealable order in conjunction with any action brought against it by a third party creditor, such that LICENSEE is unable to perform its continuing obligations hereunder.

 

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Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

16.3                         This Agreement may be terminated effective upon thirty (30) days written notice from BYU and the failure of LICENSEE to cure any breach or default prior to the expiration of the thirty-day notice period in any of the following circumstances:

 

A.                                     In the event LICENSEE becomes insolvent or shall cease to carry on its business in the normal course; or

 

B.                                     In the event there is a transfer or sale of LICENSEE’s business purporting to transfer or assign this Agreement and/or the LICENSED TECHNOLOGY without the prior express written consent of BYU.

 

16.4                         In the case of breach or default arising from LICENSEE’s failure to pay BYU royalties or other costs or expenses pursuant to the Agreement when due and payable, failure to complete the performance requirements of Section 5 of this Agreement, or from any other material breach or default of this Agreement, BYU shall have the right to terminate this Agreement upon thirty (30) days written notice to LICENSEE.  Termination shall become effective upon the failure of LICENSEE to cure such breach or default within such notice period.

 

16.5                         LICENSEE may terminate this Agreement at any time by providing sixty (60) days written notice to BYU.

 

16.6                         Upon termination of this Agreement for any reason, the parties shall not be released from any obligation that has matured prior to the effective date of the termination.  LICENSEE may, however, after the effective date of such termination, sell all LICENSED PRODUCTS in its inventory or in process as of the time of such termination, provided that LICENSEE shall pay to BYU the royalties and other consideration due on such products as required by this Agreement and shall submit the reports as required.

 

16.7                         Upon the termination of this Agreement, any SUBLICENSEE which has not breached in any material way its sublicense agreement shall be offered by BYU the option of receiving a license directly from BYU on substantially the same terms and conditions as those provided herein.

 

16.8                         Upon the termination of this Agreement, LICENSEE shall immediately cease using the INTELLECTUAL PROPERTY and return to BYU all documents and information as may have been provided by BYU pursuant to this Agreement, which contain information which is confidential or proprietary to BYU.

 

16.9                         Nothing herein shall be construed to limit BYU’s legal or equitable remedies in the event of a default by LICENSEE and/or subsequent termination of this Agreement by BYU.

 

17.                                Dispute Resolution and Mediation

 

17.1                         With respect to any and all claims, disputes or controversies arising out of the performance of or in connection with this Agreement, the parties agree to attempt in good faith to resolve those claims, disputes or controversies by negotiations between the parties.  In the

 

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Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

event either party believes the negotiation discussions are likely not to result in settlement, the parties must, in good faith, participate in mediation sessions with a professional mediator to be mutually selected by the parties and the expense of which is to be paid fifty percent (50%) by each party.  In the event, after one or more mediation sessions, either party believes the mediation process is not likely to resolve the dispute by mutual agreement, such party may seek any legal or equitable remedy available through a court of competent jurisdiction.

 

17.2                         Nothing in this Section shall be construed to waive any rights of timely performance of any obligation existing under this Agreement.

 

18.                                Licensee Assignment

 

Neither this Agreement nor the LICENSED TECHNOLOGY is assignable by LICENSEE without the express written consent of BYU, which shall not be unreasonably withheld.  Any attempt to make such an assignment without BYU’s written consent may be voided at the election of BYU.  LICENSEE agrees that in the event BYU elects to void an unauthorized assignment that BYU will have suffered immediate and irreparable damage and shall be entitled to immediate injunctive relief.  In the event BYU does not elect to void an unauthorized assignment, LICENSEE agrees that the assignee will be treated in all respects as a LICENSEE for purposes of this Agreement.  Nothing in this section may be construed to preclude BYU from initiating an independent action against the assignee of the unauthorized assignment or to otherwise pursue other legal or equitable remedies against LICENSEE, the assignee or both.

 

19.                                Non Use of BYU Name

 

LICENSEE shall not use the name of Brigham Young University nor of any of its employees, nor any adaptation thereof, in any advertisement, promotion or sales literature without the express prior written consent from BYU in each case, except that LICENSEE may state that it is licensed by BYU.

 

20.                                Publication

 

BYU shall have the right to publish any academic paper, article or learned treatise and make public disclosure at professional meetings or seminars regarding any portion of the LICENSED TECHNOLOGY which has been or may be invented, conceived or developed by BYU.

 

21.                                Payment, Notices and Other Communications

 

Any payment, notice or other communication pursuant to this Agreement shall be sufficiently made or given on the date of mailing if sent by certified first-class mail, postage prepaid, addressed to the receiving party at its address designated below or such address as shall be designated by written notice given to the other party.

 

14



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

BYU:

Technology Transfer Office

 

A-285 ASB

 

Brigham Young University

 

P.O. Box 21231

 

Provo, Utah 84602-1231

 

(801) 378-6266

 

 

LICENSEE:

Aridis, LLC

 

350 Cervantes Road

 

Portola Valley, CA 94028

 

22.                                Miscellaneous Provisions

 

22.1                         Independence of Parties .   BYU and LICENSEE are independent parties engaged in independent business and neither party nor any respective agent or employee of either party shall be regarded as an agent or an employee of the other.  Nothing in this Agreement shall be construed as reserving to either party the right to control the other in the conduct of its business, nor shall either party have the authority to make any promise, guarantee, warranty or reservation which will create any obligation or liability whether express or implied on behalf of the other.

 

22.2                         Attorneys’ Fees .  In the event a legal proceeding is commenced in a court of competent jurisdiction to construe or enforce any provision of this Agreement, the prevailing party, in addition to all other amounts to which such party may be entitled, shall be entitled to recover from the non-prevailing party its reasonable attorneys’ fees, expert witness fees and costs incurred in connection with the proceeding.

 

22.3                         Waiver .  No waiver by either party, whether express or implied, of any provisions of this Agreement or of any breach or default of either party, shall constitute a continuing waiver of such provision or a waiver of any other provisions of this Agreement.

 

22.4                         Governing Law .  This Agreement shall be interpreted and construed in accordance with the laws of the State of Utah.  Venue for any legal disputes shall be in Utah County, Utah.

 

22.5                         Partial Invalidity .  Should any Section or any part of a Section of this Agreement be held unenforceable or in conflict with the law of any jurisdiction, the validity of the remaining Sections and Subsections shall not be affected by the invalidity of any other part of the Agreement.

 

22.6                         Force Majeure .  Neither party to this Agreement shall be in default because of a delay or failure to perform which is not the result of the defaulting party’s intentional or negligent acts or omissions, but results from causes beyond the reasonable control of such party such as acts of God, terrorism, civil disobedience and war.

 

22.7                         Entire Agreement .  This Agreement constitutes the entire Agreement and understanding between the parties and supersedes all prior agreements and understandings with

 

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Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

respect to the LICENSED TECHNOLOGY, whether written or oral.  No modification or claimed waiver of any of the provisions of this Agreement shall be valid unless in writing and signed by authorized representatives of the party against whom such modification or waiver was sought to be enforced.

 

22.8                         Full and Fair Meaning .  This Agreement shall be interpreted in accordance with its fair meaning and shall not be interpreted for or against any party on the ground that such party drafted or caused to be drafted this Agreement or any part thereof.

 

22.9                         Binding Effect .  This License Agreement shall be binding upon and shall inure to the benefit of the successors, assigns and legal representatives of the parties.

 

22.10                  Headings .  The paragraph and subparagraph headings contained in this Agreement are for convenience and reference only.  They are not intended to define, limit, or expand the scope of the provisions of this Agreement.

 

IN WITNESS WHEREOF, the parties have entered into this Agreement:

 

Date:

July 29, 2005

 

BRIGHAM YOUNG UNIVERSITY

 

 

 

 

 

 

 

 

 

By:

/s/ Gary R. Hooper

 

 

 

Gary R. Hooper

 

 

 

Associate Academic Vice President

 

 

 

 

 

 

Date:

July 29, 2005

 

LICENSEE

 

 

 

 

 

 

 

 

 

By:

/s/ Eric Patzer

 

 

 

Eric J. Patzer

 

 

 

President

 

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Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

EXHIBIT A

 

LICENSED TECHNOLOGY

 

STABILIZATION OF BIOLOGICAL AGENTS

 

The LICENSED TECHNOLOGY includes U.S. patent application number 10/199,061, “Plasticized Hydrophilic Glasses for Improved Stabilization of Biological Agents”, the corresponding Patent Cooperation Treaty application number PCT/US02/28320, Canadian application number 2,458,794, European Patent Office application number 02795489.0 and any additional foreign counterparts thereof, as well as all continuations, continuations-in-part, divisions and renewals thereof, all patents which may be granted thereon, and all reissues, reexaminations and extensions; and any trade secrets and know-how which are in existence upon the effective date of this Agreement.

 




Exhibit 10.4

 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

LICENSE AGREEMENT

 

This Agreement is made and entered into by and between the University of Iowa Research Foundation (hereinafter “UIRF”) having offices at 2660 University Capitol Centre, Iowa City, Iowa 52242 and Aridis Pharmaceuticals, LLC (hereinafter “Licensee”), having offices at 5941 Optical Court, San Jose, CA 95138

 

WHEREAS, under the patent policy of The University of Iowa (UI), all inventions and technology arising during the normal course of research and teaching at the UI are assigned and entrusted to the UIRF to obtain patent or other appropriate intellectual property protection and license said technology;

 

WHEREAS, UIRF is, therefore, owner by assignment from Larry Schlesinger and Bradley Britigan (“Inventors”) of their entire right, title and interest in United States Patent [ *** ] and United States Patent  [ *** ] ( [ *** ] );

 

WHEREAS, UIRF is, therefore, co-owner, with the United States Department of Veterans Affairs (“VA”) by assignment from Bradley Britigan and owner, by assignment from Pradeep Singh (“Inventors”) of their entire right, title and interest in the following patents and patent applications ( [ *** ] ):

 

United State Patent Application  [ *** ] ;

United State Patent Application  [ *** ] ;

International Patent Application  [ *** ] ;

European Patent Application  [ *** ] ;

Australian Patent Application  [ *** ] ;

Canadian Patent Application  [ *** ] ;

Japanese Patent Application  [ *** ] ;

Indian Patent Application  [ *** ] ;

Chinese Patent Application  [ *** ] ;

Hong Kong Patent Application  [ *** ] ;

Mexican Patent Application  [ *** ] ;

New Zealand Patent Application  [ *** ] ;

 

WHEREAS, UIRF and the VA have entered into that certain Cooperative Technology Administration Agreement, effective as of September 18, 2001 (the “Inter-Institutional Agreement”), pursuant to which all inventions and technology arising during the normal course of research and teaching by VA employees at the University of Iowa (“UI”) may be assigned to both the UIRF and the VA, and are entrusted to the UIRF to obtain patent or other appropriate intellectual property protection and UIRF acquired the sole authority to license rights to any such patents, including those included in the UIRF Patent Assets;

 

WHEREAS, Licensee wishes to obtain an exclusive world-wide license in order to practice the above referenced invention covered by patent rights in the United States and in certain foreign countries, and to manufacture, use and sell in the commercial market the products made in accordance therewith; and

 

WHEREAS, UIRF wishes to grant such a license to Licensee in accordance with the terms of this Agreement.

 

NOW THEREFORE, in consideration of the foregoing premises, the parties agree as follows:

 

1



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

ARTICLE I — DEFINITIONS

 

1.1                                PATENT RIGHTS shall mean the following patents and patent applications, the inventions described and claimed therein, and any divisions, continuations, continuations-in-part to the extent the claims are directed to subject matter specifically described in the following, patents issuing thereon or reissues thereof; and any and all foreign patents and patent applications corresponding thereto; which will be automatically incorporated in and added to this Agreement and shall periodically be added to Appendix A attached to this Agreement and made part thereof.

 

United States Patent  [ *** ] ;

United States Patent  [ *** ] ;

United States Patent Application  [ *** ]

International Patent Application  [ *** ] ;

European Patent Application  [ *** ] ;

Australian Patent Application  [ *** ] ;

Canadian Patent Application  [ *** ] ;

Japanese Patent Application  [ *** ] ;

Indian Patent Application  [ *** ] ;

Chinese Patent Application  [ *** ] ;

Hong Kong Patent Application  [ *** ] ;

Mexican Patent Application  [ *** ] ;

New Zealand Patent Application  [ *** ] ; and

South Africa Patent Application  [ *** ] .

 

1.2                                LICENSED PRODUCTS shall mean any product the manufacture, use, import or sale of which, absent the license granted hereunder, would infringe one or more Valid Claims within the Patent Rights.

 

1.3                                Net Sales : Net Sales would mean the amounts received by Licensee, Affiliates and sublicensees from sales of Licensed Products (in final form for end use) to a third party, less the following deductions, which are actually incurred, separately itemized or otherwise demonstrated on invoices, and included in and not otherwise deducted from Net Sales:

 

a)                                      credits or allowances actually granted for damaged Licensed Products, returns or rejections of Licensed Products and retroactive price reductions;

b)                                      freight, packaging, postage, shipping, taxes and customs duties (imposed upon the sale, importation, delivery, or use of a Licensed Product) and insurance charges;

c)                                       normal and customary trade, cash and quantity discounts, allowances and credits;

d)                                      sales, value added, withholding or similar taxes measured by the billing amount, when included in billing.

 

1.4                                Combination Product : In the event that a Licensed Product is sold in combination with other product(s) for which no royalty would be due if sold separately, Net Sales from such combination sales for purposes of calculating the amounts due under this License Agreement shall be calculated by multiplying the Net Sales of the combination product by the fraction A/(A + B), where A is the average gross selling price during the applicable calendar quarter of the Licensed Product sold separately to the same category of customers (e.g. patients, health care providers, or product distributors) and B is the average gross selling price during the applicable calendar quarter of the other product(s) and/or services. In the event that such separate sales were not made during the previous calendar quarter then the Net Sales would be as reasonably allocated by Licensee and UIRF in good faith discussion, taking into

 

2



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

account the Licensed Product’s proprietary importance relative to the other products or services sold in combination with such Licensed Product.

 

1.5                                AFFILIATES shall mean any company, corporation, or business in which Licensee owns or controls at least fifty percent (50%) of the voting stock.

 

1.6                                FIELD shall mean the manufacture, use, sale, offer for sale, import or other exploitation of Gallium compounds, except those claimed in United States Patent [***] .

 

Note: The phrase, “except those claimed in United States Patent [***] ”, in the definition of FIELD above, is included by reason of a license agreement granted by UIRF for the practice of that patent by Titan Pharmaceuticals, Inc. Should that license agreement expire or terminate for any reason, the phrase, “except those claimed in United States Patent [***] ”, shall be deleted from the definition of FIELD above and United States Patent [***] shall be thereafter included in the definition of Patent Rights under Article 1.1 above, by written amendment to this Agreement, subject to the following:

 

a)                                      Licensee shall demonstrate compliance with this Agreement, including terms requiring diligent development of technology, reasonably satisfactory to UIRF, and

b)                                      Licensee and UIRF shall negotiate for reimbursement of any unreimbursed expenses relating to PATENT RIGHTS previously licensed to Titan.

 

1.7                                SUBLICENSE FEES shall mean amounts received by Licensee from a sublicensee in consideration for a sublicense to make and have made, to use and have used, to sell and have sold LICENSED PRODUCTS or practice a LICENSED PROCESSES under the PATENT RIGHTS, including amounts received by way of license issue fees and milestone payments on the sale or distribution of LICENSED PRODUCTS, but excluding amounts received as an earned royalty upon Net Sales. Notwithstanding the foregoing, the following would not be included in the definition of Sublicense Fees: income received by Licensee as payment or reimbursement for research, development or other costs incurred by or for Licensee, including costs associated with materials, equipment or clinical testing; amounts received for securities (equity or debt); amounts paid in consideration for licenses or other rights under intellectual property other than the PATENT RIGHTS, as allocated by Licensee; amounts in consideration for the sale of all or substantially all of the business or assets of Licensee, whether by merger, acquisition of stock or assets or otherwise; and any governmental charges, including withholding or other taxes (but not income taxes), paid or payable by Licensee on amounts received in consideration for a sublicense under the PATENT RIGHTS.

 

1.8                                “Valid Claims” shall mean any pending or issued claim of any Patent Right that has not expired, nor been permanently revoked, nor held unenforceable or invalid by a decision of a court or other governmental agency of competent jurisdiction.

 

ARTICLE II — GRANT

 

2.1                                UIRF hereby grants to Licensee and Licensee accepts, subject to the terms and conditions hereof, a worldwide license in the HELD under PATENT RIGHTS to make and have made, to use and have used, import, to sell and have sold the LICENSED PRODUCTS. Such license shall include the right to grant sublicenses in the FIELD, provided made in accordance with this Agreement. Licensee shall provide copies of all such sublicenses within thirty (30) days of execution. In order to provide Licensee with a period of exclusivity, UIRF agrees it will not grant licenses under PATENT RIGHTS to others except as required by UIRF’s obligations in paragraph 2.3 (a) or as permitted in paragraph 2.3 (b). Licensee agrees during the period of exclusivity of this license in the United States that any LICENSED

 

3



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

PRODUCT produced for sale in the United States will be manufactured substantially in the United States, to the extent required by Federal law, unless appropriate waivers shall have been obtained as provided by law.

 

2.2                                The term of this agreement and the exclusive license set forth in Paragraph 2.1 shall be from the effective date of this Agreement until the expiration of the last to expire of the PATENT RIGHTS.

 

2.3                                The granting and acceptance of this license is subject to the following conditions:

 

(a)                                  The UI Patent Policy approved in 1983, Public Law 96-517, Public Law 98-620 and UIRF’s obligations under agreements with other sponsors of research as of the Effective Date of this Agreement (UIRF represents that to the best of its knowledge the sole sponsors of research relating to Patent Rights are the VA and the United States National Institutes of Health). Any right granted in this Agreement greater than that permitted under Public Law 96-517 or Public Law 98-620 shall be subject to modification as may be required to conform to the provision of that statute. UIRF represents that the Public Laws 96-517 and 98-620 are consistent with and do authorize the grant of rights made under 2.1 above.

 

(b)                                  The right to grant non-commercial licenses on reasonable terms and conditions under 35U.S.C.§200-212 or 15 U.S.C. 3710a, and other applicable governmental implementing regulations, whichever may be appropriate.

 

(c)                                   UIRF reserves for itself, Inventors, and future not-for-profit employers of Inventors, the right to make and to use for educational, research, and patient care and treatment purposes (with respect to patient care and treatment, at UIRF only) only, the subject matter described and claimed in PA VENT RIGHTS. UIRF further reserves the right to provide and to grant non-exclusive licenses to make and use subject matter covered by PATENT RIGHTS to not-for-profit organizations and government entities for internal research and scholarly purposes only.

 

(d)                                  Licensee shall pay all future costs connected with the commercial development of the LICENSED PRODUCTS, including but not limited to the costs of complying with applicable governmental testing, approvals and regulations.

 

(e)                                   Licensee shall use reasonable efforts to effect introduction of the LICENSED PRODUCTS into the commercial market as soon as practicable, consistent with sound and reasonable business practices and judgment; thereafter, until the expiration of this Agreement, Licensee shall endeavor to keep LICENSED PRODUCTS reasonably available to the public.

 

(f)                                    Licensee has submitted to UIRF a development plan attached hereto as an appendix. Licensee shall use commercially reasonable efforts to follow the development plan. The development plan shall include benchmark dates for development as negotiated by Licensee and UIRF. Licensee shall demonstrate compliance with the benchmark dates set out in the development plan, or shall demonstrate to UIRF’s reasonable satisfaction that Licensee (Or Affilliates or sublicensees, as the case may be) has taken, or can be expected to take within a reasonable time, effective steps to correct the failure to achieve the relevant benchmark in order to achieve that benchmark within the earliest reasonably possible time. If Licensee has not met the milestones in the development plan, either as originally listed or agreed to by UIRF after demonstration by Licensee, UIRF may furnish Licensee with written notice of the determination thereof. Within sixty (60) days after receipt of the notice, Licensee shall either, at its option (i) fulfill the relevant obligation, or (ii) provide to UIRF a mutually acceptable schedule of revised diligence obligations and plans to meet the same. In the case of (ii), UIRF and Licensee shall meet and discuss such revised

 

4



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

obligations and plans, and UIRF shall consider such revisions in good faith. If the UIRF does not find the revised timeline, data and plan reasonably acceptable in its good faith discretion, UIRF may, upon fifteen (15) days written notice to Licensee, terminate the license granted under this Agreement

 

(g)                                   All sublicenses granted by Licensee hereunder shall include a requirement that the sublicensee use efforts at least equivalent to those required of Licensee to bring the subject matter of the sublicenses into commercial use as quickly as is reasonably possible, and shall bind the sublicensee to meet Licensee’s obligations to UIRF under this Agreement and a copy of this Agreement shall be attached to such sublicense agreements. Royalties charged for sublicenses by Licensee shall not be in excess of normal trade practice. Copies of all sublicense agreements shall be provided to UIRF.

 

(h)                                  In accordance with the rights reserved to the Government under 35 U.S.0 §203 and succeeding statutes, the Government shall retain the right to require UIRF or its Licensee to grant a sublicense to a responsible applicant on terms that are reasonable under the circumstances. The Government may exercise its tights retained herein only in exceptional circumstances and only if the Government determines that (i) the action is necessary to meet health or safety needs that are not reasonably satisfied by UIRF; (ii) the action is necessary to meet requirements for public use specified by Federal regulations, and such requirements are not reasonably satisfied by UIRF; or (iii) UIRF has failed to comply with an agreement containing provisions described in 35 U.S.0 §204 or 15 U.S.0 3710a©(4)(B), whichever is appropriate.

 

(i)                                      A license in any other field of use in addition to the FIELD shall be the subject of a separate agreement and shall require Licensee’s submission of evidence, satisfactory to UIRF, demonstrating its willingness and ability to develop and commercialize the kinds of products or processes likely to be encompassed in such other field. If UIRF has non-exclusively licensed in such other field prior to Licensee’s request, HIRE shall grant to Licensee a non-exclusive license under terms and conditions at least as favorable as the previous non-exclusive license.

 

2.4                                UIRF hereby grants to Licensee the right to extend the licenses granted or to be granted in paragraphs 2.1 and 2.3 to an AFFILIATE subject to the terms and conditions hereof.

 

2.5                                All rights reserved to the United States Government and others under Public Law 96-517, 98-620, 35U.S.C.§200-212, 37 CFR part 401 et.al., and succeeding statutes. To the extent set out in those statutes, the Government shall have the nonexclusive, nontransferable, irrevocable, royalty-free, paid-up right to practice or have practiced the PATENT RIGHTS throughout the world by or on behalf of the Government and on behalf of any foreign government or international organization pursuant to any existing or future treaty or agreement to which the Government is a signatory.

 

ARTICLE III — ROYALTIES, PAYMENTS

 

3.1                                Licensee shall pay to UIRF a non-refundable license fee in the sum of  [ *** ] upon sixty (60) days following execution of this Agreement and a sum of  [ *** ]   upon notice by the U.S. Patent Office that any claims in United States Patent Application  [ *** ] (or any continuation thereof) applicable to a human therapeutic use of Gallium will be allowed.

 

3.2                                (a)                                  Licensee shall pay UIRF within thirty (30) days after the end of each calendar quarter, during the term of the license of paragraph 2.1, a royalty of [***] of the NET SALES of all LICENSED PRODUCTS sold by Licensee and its AFFILIATES or sublicensees.

 

5



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

(b)                                  In the case of sublicenses, Licensee shall also pay to UIRF [***] of SUBLICENSE FEES received prior to the filing of an IND for a therapeutic Licensed Product, and [***] of SUBLICENSE FEES thereafter. All royalties paid on SUBLICENSE FEES under this section relating to a specific milestone listed under section 3.3, shall be creditable against that same milestone payment due under 3.3.

 

(c)                                   On sales between Licensee and its AFFILIATES or sublicensees for resale, the royalty shall be paid on the resale only.

 

3.3                                Licensee shall pay to UIRF the applicable non-refundable, non-recoverable, and non-creditable milestone payment set forth below within forty five (45) days after the end of the calendar quarter during which each milestone event for the Licensed Product referenced below occurs is first achieved (i.e., each milestone payment shall not be due more than one (1) time each) by Licensee, Affiliate or Sublicensee.

 

a)                                      [ *** ] upon initiation of FDA, or foreign equivalent, Phase II Clinical Trial for a therapeutic;

b)                                      [ *** ] upon initiation of FDA, or foreign equivalent, Phase III Clinical Trial for a therapeutic;

c)                                       [ *** ] upon filing with the FDA, or foreign equivalent, an NDA for a therapeutic;

d)                                      [ *** ] upon approval by FDA, or foreign equivalent, an NDA for a therapeutic;

e)                                       [ *** ] upon completion of FDA, or foreign equivalent, Phase II Clinical Trial for a Medical Device or a coating for a Medical Device;

f)                                        [ *** ] upon completion of FDA, or foreign equivalent, Phase III Clinical Trial for a Medical Device or a coating for a Medical Device;

g)                                       [ *** ] upon approval by FDA, or foreign equivalent, an NDA for a Medical Device or a coating for a Medical Device;

 

3.4                                UIRF shall have the right to terminate this license in the event that Licensee does not pay to UIRF at least  [ *** ] per year, beginning on the third anniversary of the Effective Date of the License Agreement, under Articles 3.2 and 3.3 combined, or pay to UIRF the amount of any deficiency thereto upon filing of the final royalty report for that year. Sponsored research and patent reimbursement shall not count towards this milestone. Only monies paid under Articles 3.2 and 3.3 (or the make-up of any deficiency paid under this Article 3.4) shall count as meeting the minimum  [ *** ] .

 

3.5                                Should Licensee (or any entity or person acting on its behalf, with Licensee’s express permission) bring any action or claim challenging the validity or enforceability of PATENT RIGHTS in any forum, UIRF shall have the option to terminate this Agreement upon 30 days notice to Licensee.

 

ARTICLE IV — REPORTING

 

4.1                                Prior to signing this Agreement, Licensee has provided to UIRF a written research and development plan, attached hereto as an appendix, under which Licensee intends to bring the subject matter of the licenses granted hereunder into commercial use upon execution of this Agreement.

 

4.2                                Licensee shall provide written annual reports within sixty (60) days after June 30 of each calendar year which shall include but not be limited to: reports of progress on research and development, regulatory approvals, manufacturing, sublicensing, marketing and sales during the preceding twelve (12) months as well as plans for the coming year. If progress differs from that anticipated in the plan provided under 4.1, Licensee shall explain the reasons for the difference and propose a modified plan for UIRF’s review and approval. Licensee shall also provide any reasonable additional data UIRF requires to evaluate Licensee’s performance.

 

6



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

4.3                                Licensee shall report to UIRF the date of first sale of LICENSED PRODUCTS (or results of LICENSED PROCESSES) in each country within thirty (30) days of occurrence.

 

4.4                                (a)                                  After the date of first sale of LICENSED PRODUCTS, Licensee agrees to submit to UIRF within sixty (60) days (ninety [90] days if the report includes activities of sublicensees) after the calendar quarters ending March 31, June 30, September 30, and December 31, reports setting forth for the preceding three (3) month period at least the following information:

 

i)                                          the number of the LICENSED PRODUCTS sold by Licensee, its AFFILIATES and sublicensees in each country;

ii)                                       total receipts for such LICENSED PRODUCTS;

iii)                                    an accounting for all LICENSED PROCESSES used or sold;

iv)                                   deductions applicable to determine the NET SALES thereof;

v)                                      the amount of royalty due thereon;

 

and with each such royalty report to pay the amount of royalty due. Such report shall be certified as correct by an officer of Licensee and shall include a detailed listing of all deductions from royalties as specified herein. If no royalties are due to DIRE for any reporting period, the written report shall so state. If royalties for any calendar year do not equal or exceed the minimum royalties established in paragraph 3.4, Licensee shall include the balance of the minimum royalty with the payment for half year ending December 31.

 

(b)                                  All payments due hereunder shall be payable in United States dollars. Conversion of foreign currency to U.S. dollars shall be made at the conversion rate existing in the United States (as reported in the Wall Street Journal) on the last working day of each royalty period. Such payments shall be without deduction of exchange, collection or other charges.

 

(c)                                   All such reports shall be maintained in confidence by UIRF, except as required by law, including Public Law 96-517 and 98-620.

 

(d)                                  Late payments shall be subject to an interest charge of [***] per month.

 

ARTICLE V — RECORD KEEPING

 

5.1                                Licensee shall keep, and shall require its AFFILIATES and sublicensees to keep, accurate and correct records of LICENSED PRODUCTS made, used or sold under this Agreement, appropriate to determine the amount of royalties due hereunder to UIRF. Such records shall be retained for at least five (5) years following a given reporting period. They shall be available during normal business hours for inspection at the expense of UIRF by UIRF’s Internal Audit Department or by an independent Certified Public Accountant selected by HIRE and approved by Licensee for the sole purpose of verifying reports and payments hereunder. In the event that any such inspection shows an underreporting and underpayment in excess of ten percent (10%) for any twelve (12) month period, then Licensee shall pay the cost of such examination as well as any additional sum that would have been payable to UWE had the Licensee reported correctly, plus interest.

 

ARTICLE VI — FILING, PROSECUTION AND MAINTENANCE OF PATENTS

 

6.1                                Licensee shall reimburse UIRF for seventy-five percent (75%) of all reasonable expenses UIRF has incurred for the preparation, filing, prosecution and maintenance of PATENT RIGHTS [ *** ] up to the Effective Date of this License Agreement, on the following schedule: one-half of such amounts shall be reimbursed within sixty (60) days of the Effective Date and the remaining second half within one

 

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Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

hundred twenty (120) days of the Effective Date. Licensee shall reimburse UIRF seventy-five percent (75%) for all such future expenses upon receipt of invoices from UIRF, thirty (30) days net. Late payment of these invoices shall be subject to interest charges of one and one-half percent (1 1/2%) per month. UIRF represents that the two current agreements for the patent rights shall total one-hundred percent (100%) reimbursement of all patent costs. UIRF further agrees that through duration of this License Agreement, should UIRF license the Patent Rights to another third party, then UIRF shall inform Licensee and agree with Licensee to an appropriate pro rata reduction (based on the costs of prosecution associated with Patent Rights licensed to such third party) in Licensee’s contribution to the patent expenses. UIRF shall take responsibility for the preparation, filing, prosecution and maintenance of any and all patent applications and patents included in PATENT RIGHTS. UIRF shall promptly inform Licensee regarding all matters directly pertaining to prosecution of PATENT RIGHTS, and shall seek Licensee’s counsel concerning all proposed course of action affecting the PATENT RIGHTS, including but not limited to in which countries patent protection should be obtained and all proposed course of action in any interference proceedings.

 

6.2                                UIRF and Licensee shall cooperate fully in the preparation, filing, prosecution and maintenance of PATENT RIGHTS and of all patents and patent applications licensed to Licensee hereunder, executing all papers and instruments or requiring members of UIRF to execute such papers and instruments as to enable UIRF to apply for, to prosecute and to maintain patent applications and patents in UIRF’s name in any country. Each party shall provide to the other prompt notice as to all matters which come to its attention and which may affect the preparation, filing, prosecution or maintenance of any such patent applications or patents.

 

6.3                                If Licensee elects to no longer pay the expenses of a patent application or patent included with PATENT RIGHTS, Licensee shall notify UIRF not less than sixty (60) days prior to such action and shall thereby surrender its rights under such patent or patent application.

 

ARTICLE VII — MARKING

 

7.1                                If a licensed patent has been or is subsequently issued to UIRF covering any feature or features of the LICENSED PRODUCTS, Licensee agrees to mark each and every package or container in which the LICENSED PRODUCTS are used or sold by or for Licensee with marking complying with the provisions of Title 35, U.S. Code, Section 287, if required, or any future equivalent provisions of the United States relating to the marking of patented devices, or with marking complying with the law of the country where the LICENSED PRODUCTS are shipped, used or sold.

 

ARTICLE VIII — INFRINGEMENT

 

8.1                                With respect to any PATENT RIGHTS under which Licensee is exclusively licensed in a FIELD pursuant to this Agreement, Licensee or its sublicensee shall have the right to prosecute in its own name and at its own expense any infringement within the FIELD of such patent, so long as such license is exclusive at the time of the commencement of such action. UIRF agrees to notify Licensee promptly of each infringement of such patents of which UIRF is or becomes aware. Before Licensee or its sublicensees commences an action with respect to any infringement of such patents Licensee shall give careful consideration to the views of UIRF and to potential effects on the public interest in making its decision whether or not to sue and in the case of a Licensee sublicense, shall report such views to the sublicensee.

 

8.2                                If Licensee elects to sue for patent infringement, UIRF agrees to be named as nominal third party plaintiff if necessary to the commencement of any such action, and further agrees to provide any information available to UIRF and needed by Licensee in prosecuting such action. Licensee shall

 

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Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

reimburse UIRF for any costs it incurs as part of an action brought by Licensee or its sublicensee, irrespective of whether UIRF shall become a co-plaintiff.

 

8.3                                If Licensee or its sublicensee elects to commence an action as described above, Licensee may reduce, by up to fifty percent (50%), the royalty due to UIRF earned under the patent subject to suit by fifty percent (50%) of the amount of the expenses and costs of such action, including attorney fees. In the event that such fifty percent (50%) of such expenses and costs exceed the amount of royalties withheld by Licensee for any calendar year, Licensee may to that extent reduce the royalties due to UIRF from Licensee in succeeding calendar years, but never by more than fifty percent (50%) of the royalty due in any one year.

 

8.4                                No settlement, consent judgment or other voluntary final disposition of the suit may be entered into without the consent of UIRF, which consent shall not be unreasonably withheld.

 

8.5                                Recoveries or reimbursements from such action shall first be applied to reimburse Licensee and UIRF for litigation costs not paid from royalties and then to reimburse UIRF for royalties withheld. Any remaining recoveries or reimbursements shall be shared 75% to the Party electing to pursue and 25% to the other Party.

 

8.6                                In the event that Licensee and its sublicensee, if any, elect not to exercise their right to prosecute an infringement of the PATENT RIGHTS pursuant to the above paragraphs, UIRF may do so at its own expense, controlling such action and sharing recoveries as provided in section 8.5.

 

8.7                                If a declaratory judgment action alleging invalidity of any of the PATENT RIGHTS shall be brought against Licensee, or UIRF, then UIRF, at its sole option, shall have the right to intervene and take over the sole defense of the action at its own expense.

 

8.8                                UIRF shall have no obligation to defend any action for infringement brought against Licensee by a third party. In the event Licensee is sued by a third party, and as a result of the settlement of such suit is required to pay a royalty to a third party on a LICENSED PRODUCT, the amount of royalty paid will be deducted from the royalty payment due to the UIRF for that LICENSED PRODUCT. In the event the settlement prevents the Licensee from continuing sales of a LICENSED PRODUCT, no additional royalties and/or minimum royalties will apply for that LICENSED PRODUCT.

 

ARTICLE IX — TERMINATION OF AGREEMENT

 

9.1                                Upon any termination of this Agreement, and except as provided herein to the contrary, all rights and obligations of the Parties hereunder shall cease, except as follows:

 

(a)                                  UIRF’s right to receive or recover and Licensees obligation to pay royalties accrued or accruable for payment at the time of any termination;

 

(b)                                  Licensees obligation to maintain records and UIRF’s right to conduct a final audit as provided in Article V of this Agreement; and

 

(c)                                   Any cause of action or claim of UIRF, accrued or to accrue because of any breach or default by Licensee.

 

9.2                                In the event Licensee fails to make payments due hereunder, UIRF shall have the right to terminate this Agreement upon forty-five (45) days written notice, unless Licensee makes such payments

 

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Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

plus interest within the forty-five (45) day notice period. If payments are not so made, UIRF may immediately terminate this Agreement.

 

9.3                                In the event that Licensee shall be in default in the performance of any obligations under this Agreement (other than as provided in 9.2 above which shall take precedence over any other default), and if the default has not been remedied within ninety (90) days after the date of notice in writing of such default, UIRF may terminate this Agreement immediately by written notice.

 

9.4                                If Licensee shall (a) make a general assignment for the benefit of creditors, (b) file or have filed against it a petition in bankruptcy or seeking reorganization (and, in the case of a petition filed against Licensee, such petition is not dismissed or stayed by the earlier of the date that is (i) 90 days after the date that such petition is filed, or (ii) the date that an order for relief is granted by the bankruptcy court in connection therewith), (c) voluntarily commence any case, proceeding or other action or file any petition seeking relief under Title 11 of the United States Code, (d) consent to the institution of, or fail to controvert in a timely and appropriate manner, any such proceeding or the filing of any such petition, or (e) apply for or consent to the employment of a receiver, trustee, custodian, sequestrator or similar official in bankruptcy for the Licensee; then Licensee shall notify UIRF and provide its plan, if any, for emerging from such proceeding or removing such assignment. UIRF shall review the plan in good faith and, if deemed sufficient in its reasonable discretion to emerge from such proceeding or remove such assignment, shall maintain this Agreement for a reasonable time; otherwise, it shall have the right to terminate this Agreement upon thirty (30) days written notice. In the event that Licensee commences any bankruptcy proceeding, it shall not thereafter deliver any Patent Rights constituting intellectual property (or any embodiments of such intellectual property) to any third party.

 

9.5                                Any sublicenses granted by Licensee under this Agreement shall provide for termination or assignment to UIRF, at the option of HIRE, of Licensee’s interest therein upon termination of this Agreement, except that UIRF will, to the extent it is legally able to do so, offer to the sublicensee a license agreement as immediately described below, provided that the sublicensee: CO reaffirms the terms and conditions of this Agreement as it relates to the rights the sublicensee has been granted under the sublicense; (ii) agrees to abide by all of the terms and conditions of this Agreement applicable to such sublicensee .  and to discharge directly all pertinent obligations of Licensee which Licensee is obligated hereunder to discharge; (iii) acknowledges that UIRF shall have no obligations to the sublicensee other than its obligations set forth in the License Agreement with regard to Licensee; and (iv) can demonstrate to UIRF that sublicensee has at least an equal amount of capital and ability as Licensee to diligently advance the Patent Rights for commercial use. UIRF agrees that, provided UIRF receives notice that complies with the immediately preceding sentence, and sublicensee is not in breach of its sublicense, UIRF shall grant to such sublicensee license rights and terms equivalent to the sublicense rights and terms which Licensee shall have granted to said sublicensee.

 

9.6                                Licensee shall have the right to terminate this Agreement by giving ninety (90) days advance written notice to DIRE to that effect. Upon termination, a final report shall be submitted and any royalty payments and unreimbursed patent expenses due to DIRE become immediately payable.

 

9.7                                Licensee shall have the right during a period of six (6) months following the effective date of such termination to sell or otherwise dispose of the LICENSED PRODUCT existing at the time of such termination, and shall make a final report and payment of all royalties related thereto within sixty (60) days following the end of such period or the date of the final disposition of such inventory, whichever first occurs.

 

9.8                                Termination of this agreement to a LICENSED PRODUCT shall not alter the rights and obligations of the parties to the remaining LICENSED PRODUCTS.

 

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Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

ARTICLE X — ASSIGNMENT

 

10.1                         The rights and licenses granted by UIRF in this agreement are specific and may not be assigned or otherwise transferred to any party other than to the acquirer of substantially all the business interest of Licensee relating to the PATENT RIGHTS, without the prior written approval of UIRF. Any attempted assignment or transfer without such approval except as provided in the preceding sentence shall be void and shall automatically terminate all rights of Licensee under this Agreement.

 

ARTICLE XI — REPRESENTATIONS AND WARRANTIES: LIMITATIONS

 

11.1                         Nothing in this agreement shall be construed as:

 

(a)                                  A warranty or representation by UIRF as to the validity or scope of any LICENSED PATENT; or

 

(b)                                  A warranty or representation that anything made, used or sold under the license granted in this agreement is or will be free from infringement of patents owned by third parties; or

 

(c)                                   Conferring a right to use in advertising, publicity or otherwise the name of the UI or UIRF, or the inventors. Unless required by law, or unless specifically approved in advance in writing by UIRF, Licensee’s use of the name “The University of Iowa” or the name of any University of Iowa college, department, or inventor in advertising, publicity or other promotional activities is expressly prohibited.

 

11.2                         UIRF represents that, to the best of its knowledge, anything made, used or sold under this agreement will be free from infringement of patents of third parties.

 

11.3                         UIRF EXPRESSLY DISCLAIMS ANY AND ALL IMPLIED OR EXPRESS WARRANTIES AND MAKES NO EXPRESS OR IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF THE PA PENT RIGHTS, OR INFORMATION SUPPLIED BY UIRF, LICENSED PROCESSES OR LICENSED PRODUCTS CONTEMPLATED BY THIS AGREEMENT. UIRF assumes no responsibilities whatever with respect to design, development, manufacture, use, sale or other disposition by Licensee or AFFILIATES of LICENSED PRODUCTS, or LICENSED PROCESSES. The entire risk as to the design, development, manufacture, offering for sale, sale, or other disposition and performance of LICENSED PRODUCTS and LICENSED PROCESSES is assumed by Licensee and AFFILIATES.

 

11.4                         To the best knowledge of UIRF, UIRF and VA are the sole owner by assignment of the Patent, the Inter-Institutional Agreement is in full effect and UIRF has committed no material breach nor proffered or received any notice of termination under that Agreement, and UIRF has the authority to enter into this Agreement and license the Patent Rights on behalf of itself and VA, and the patents and applications listed in Patent Rights comprise all filings relating to the subject matter disclosed in those patents and applications by the inventors listed therein that are owned by UIRF and VA. During the term of this Agreement, UIRF shall use its best efforts to maintain the Inter-Institutional Agreement (attached as appendix hereto) and all of UIRF’s rights thereunder with VA in full force and effect.

 

ARTICLE XII — GENERAL

 

12.1                         (a)                                  Licensee shall indemnify, defend and hold harmless UIRF and the University of Iowa and their current or former directors, governing board members, trustees, officers, faculty, medical and professional staff, employees, students, and agents and their respective successors, heirs and assigns (the “Indemnities”), against any liability, damage, loss or expenses (including reasonable attorneys’ fees and

 

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Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

expenses of litigation) incurred by or imposed upon the Indemnities or any one of them in connection with any claims, suits, actions, demands or judgments arising out any theory of product liability (including, but not limited to, actions in the form of tort, warranty, or strict liability) concerning any product, process or service made, used or sold pursuant to any right or license granted under this Agreement.

 

(b)                                  Licensee agrees, at its own expense, to provide attorneys reasonably acceptable to UIRF to defend against any actions brought or filed against any party indemnified hereunder with respect to the subject of indemnity contained herein, whether or not such actions are rightfully brought.

 

(c)                                   Beginning at the time as any such product, process or service is being commercially distributed or sold (other than for the purpose of obtaining regulatory approvals) by Licensee or AFFILIATE or agent of Licensee, Licensee shall, at its sole cost and expense procure and maintain Commercial General Liability insurance in amounts not less than $2,000,000 per occurrence and $2,000,000 annual aggregate and naming the Indemnitees as additional insureds. During clinical trials of any such product, process or service Licensee shall, at its sole cost and expense, procure and maintain Commercial General Liability insurance in such equal or lesser amounts as UIRF shall require, naming the Indemnitees as additional insureds. Such Commercial General Liability insurance shall provide coverage for bodily injury and property damage, including completed operations, personal injury, coverage for contractual employees, blanket contractual and products and completed operations. If Licensee elects to self-insure all or part of the limits described above (including deductibles or retentions which are in excess of $250,000 annual aggregate) such self-insurance program must be acceptable to UIRF. The minimum amounts of insurance coverage required shall not be construed to create a limit of Licensee’s liability with respect to its indemnification under this Agreement. Policy shall contain a severability of interests provision.

 

(d)                                  Licensee shall provide UIRF with a certificate of liability insurance at the time insurance is required under 12.1 (c). Licensee shall provide UIRF with written notice at least thirty (30) days prior to the cancellation, non-renewal or material change in such insurance; if Licensee does not obtain replacement insurance providing comparable coverage within such thirty (30) day period, UIRF shall have the right to terminate this Agreement effective at the end of such thirty (30) day period without notice or any additional waiting periods.

 

(e)                                   Licensee shall maintain such Commercial General Liability insurance beyond the expiration or termination of this Agreement during (i) the period that any product, process, or service, relating to, or developed pursuant to, this Agreement is being commercially distributed or sold by Licensee or by a sublicensee, AFFILIATE or agent of Licensee and (ii) a reasonable period after the period referred to in (e)(i) above which in no event shall be less than fifteen (15) years.

 

12.2                         In the event of any controversy or claim arising out of or relating to any provision of this Agreement or the breach thereof, the parties shall try to settle such conflicts amicably between themselves. Subject to the limitation stated in the final sentence of this section, any such conflict which the parties are unable to resolve may be settled through arbitration conducted in accordance with the rules of the American Arbitration Association. In the event a dispute is arbitrated, the demand for arbitration shall be filed within a reasonable time after the controversy or claim has arisen, and in no event after the date upon which institution of legal proceedings based on such controversy or claim would be barred by the applicable statutes of limitation. Such arbitration shall be held in Des Moines, Iowa. The award through arbitration shall be final and binding. Either party may enter any such award in a court having jurisdiction or may make application to such court for judicial acceptance of the award and an order of enforcement, as the case may be. Notwithstanding the foregoing, either party may, without recourse to

 

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Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

arbitration, assert against the other party a third-party claim or cross-claim in any action brought by a third party, to which the subject matter of this Agreement may be relevant.

 

12.3                         Should a court of competent jurisdiction later consider any provision of this Agreement to be invalid, illegal, or unenforceable, it shall be considered severed from this Agreement. All other provisions, rights and obligations shall continue without regard to the severed provision, provided that the remaining provisions of this Agreement are in accordance with the intention of the parties.

 

12.4                         No waiver by a Party of any breach of this Agreement, no matter how long continuing or how often repeated, shall be deemed a waiver of any subsequent breach thereof, nor shall any delay or omission on the part of a Party to exercise any right, power or privilege hereunder be deemed a waiver of such right, power or privilege.

 

12.5                         The relationship between the Parties is that of independent contractor and contractee. Licensee shall not be deemed to be an agent of UIRF in connection with the exercise of any rights hereunder, and shall not have any right or authority to assume or create any obligation or responsibility on behalf of UIRF.

 

12.6                         No party hereto shall be deemed to be in default of any provision of this Agreement, or for any failure in performance, resulting from acts or events beyond the reasonable control of such Party, such acts of God, acts of civil or military authority, civil disturbance, war, strikes, fires, power failures, natural catastrophes or other “force majeur” events.

 

ARTICLE XIII — NOTICES; APPLICABLE LAW

 

13.1                         Any notice, report or payment provided for in this Agreement shall be deemed sufficiently given if in writing and when sent by express courier, certified or registered mail addressed to the party for whom intended at the address set forth below, or to such address as either party may hereafter designate in writing to the other:

 

(a) For the UIRF:

University of Iowa Research Foundation

 

Attn: Executive Director

 

2660University Capitol Centre

 

Iowa City, Iowa 52242-5500

 

 

(b) For the Licensee:

Eric Patzer or Vu Truong

 

Aridis Pharmaceuticals

 

5941 Optical Court

 

San Jose, CA 95138

 

13.2                         This Agreement shall be construed, interpreted, and applied in accordance with the laws of the State of Iowa.

 

13.3                         Licensee agrees to comply with all applicable laws and regulations. In particular, it is understood and acknowledged that the transfer of certain commodities and technical data is subject to United States laws and regulations controlling the export of such commodities and technical data, including all Export Administration Regulations of the United States Department of Commerce. These laws and regulations among other things, prohibit or require a license for the export of certain types of technical data to certain specified countries. Licensee hereby agrees and gives written assurance that it will comply with all United States laws and regulations controlling the export of commodities and technical data, that it will be solely responsible for any violation of such by Licensee or its AFFILIATES or sublicensees, and that it will

 

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defend and hold UIRF harmless in the event of any legal action of any nature occasioned by such violation.

 

ARTICLE XIV — INTEGRATION

 

14.1                         This Agreement constitutes the final and entire agreement between the parties, and supersedes all prior written agreements and any prior or contemporaneous oral understanding regarding the subject matter hereof. Any representation, promise or condition in connection with such subject matter which is not incorporated in this agreement shall not be binding on either party. No modification, renewal, extension or termination of this agreement or any of its provisions shall be binding upon the party against whom enforcement of such modification, renewal, extension or termination is sought, unless made in writing and signed on behalf of such party by a duly authorized officer.

 

IN WITNESS WHEREOF, each of the parties have caused this agreement to be executed by its duly authorized representative. The Effective Date of this Agreement is October 22, 2016            .

 

Signed this 22 day of October, 2010

Signed this 18th day of October, 2010

 

 

LICENSOR

LICENSEE

The University of Iowa Research Foundation

Aridis Pharmaceuticals, LLC

 

 

 

 

 

By:

/s/ Pamela York

 

By:

/s/ Eric Patzer

Name:

Pamela York

Name:

Eric J. Patzer

Title:

Executive Director

Title:

President

 

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Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

Appendix A

 

The following comprise PATENT RIGHTS:

 

United State Patent Application No. 60/526,907, titled “Gallium Inhibits Biofilm Formation”, filed December 4, 2003; United State Patent Application No. 11/004,049, titled “Gallium Inhibits Biofilm Formation”, filed December 3, 2004; International Patent Application No. PCT/USO 4 / 4 0525, titled “Gallium Inhibits Biofilm Formation”, filed December 3, 2004;

European Patent Application No. 04817941.0, titled “Gallium Inhibits Biofilm Formation”, priority date December 3, 2004;

Australian Patent Application No. 2004296178, titled “Gallium Inhibits Biofilm Formation”, priority date December 3, 2004;

Canadian Patent Application No. 2,547,982, titled “Gallium Inhibits Biofilm Formation”, priority date December 3, 2004; Japanese Patent Application No. 2006-542790, titled “Gallium Inhibits Biofilm Formation”, priority date December 3, 2004;

Indian Patent Application No. 3724/DELNP/2006, titled “Gallium Inhibits Biofilm Formation”, priority date December 3, 2004;

Chinese Patent Application No. 200480039693.X, titled “Gallium Inhibits Biofilm Formation”, priority date December 3, 2004;

Hong Kong Patent Application No. 07101980.3, titled “Gallium Inhibits Biofilm Formation”, filed February 22, 2007; Mexican Patent Application No. PA/A/2006/006379, titled “Gallium Inhibits Biofilm Formation”, priority date December 3, 2004, issuing as Patent No. 267209, issuing date June 4, 2009;

New Zealand Patent Application No. 547884, titled “Gallium Inhibits Biofilm Formation”, priority date December 3, 2004, issuing as Patent No. 547884, issuing date February 11, 2010;

South Africa Patent Application No. 2006/05428, titled “Gallium Inhibits Biofilm Formation’, priority date December 3, 2004, issuing as Patent No. 2006/05428, issuing date February 28, 2008;

 

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Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

APPENDIX B

 

Panaecin TM  Product Development Plan

 

Background
Gallium has an extensive history of therapeutic use in humans. It is the active component of a commercial product (Ganite®) that is used to treat hypercalcemia related to cancer (1). In addition, there is a rich clinical history testing various gallium salts in over 1,000 cancer patients (2,3) and using 67 Ga scans to detect areas of infection and inflammation. As a result, there is a well understood safety profile of gallium nitrate when administered in large doses (200-400 mg/24h), both acutely and chronically, and as an intravenous (iv) infusion. More recently, the anti-infective properties of gallium have been increasingly recognized. Gallium is a semi-metallic compound with similar chemical characteristics to iron, particularly in atomic radius and electron negativity. It binds to many iron binding proteins, such as bacterial siderophores, and unlike iron, gallium cannot be reduced, or readily dislodged from iron binding proteins, since sequential oxidation and reduction are critical for many of iron’s biological functions. As a consequence, many critical enzymatic pathways in bacteria, which require iron, such as DNA synthesis, metabolic conversion, electron transport and oxidative stress defense are disrupted leading to growth inhibition (4). This mechanism of action mimics that of host defenses, which have evolved to combat both acute and chronic infection by sequestering iron. Thus, gallium is a new anti-infective with a mechanism of action that differs from all current antibiotics. One of the most extensive studies of the antibacterial activity of gallium has been performed with P. aeruginosa. Gallium inhibits P. aeruginosa growth with a minimum inhibitory concentration (MIC 90 ) and minimum bactericidal concentration (MBC) of approximately 10 pM (0.7 pg/mL; ref. 5). Furthermore, gallium nitrate inhibits the formation of P. aeruginosa biofilms at 0.1 pg/mL and disrupts pre-existing biofilms at 7 pg/mL (5).

 

Preclinical Development
Studies at Aridis have shown that gallium has excellent activity against P. aeruginosa clinical isolates with varying degrees of antibiotic resistance (Table 1) with 10 of 11 strains exhibiting complete inhibition at gallium concentrations below 1 ug/mL. Time to kill kinetics also demonstrated that even at concentrations 10-fold lower than the maximally achievable clinical dose, P. aeruginosa was completely killed within 3 hours of exposure to gallium (Figure 1). Furthermore, the activity of gallium against a broad spectrum of bacteria (Appendix 1, Table 4) particularly those that chronically colonize the lungs of CF patients, such as P. aeruginosa, Burkholderia cepacia, Staphylococcus aureus and methicillin-resistant S. aureus (MRSA) confirms that it is a promising drug candidate for treatment of chronic lung infections in CF patients, non-CF bronchiectasis patients and for the treatment of chronic obstructive pulmonary disease (COPD).

 

Table 1

 

[Table and Image]

 

Process Development and Manufacturing Drug Substance
Bulk GMP material (drug substance) suitable for clinical testing is commercially available from several contract manufacturers. Aridis evaluated Regis Technologies, Inc. (Morton Grove, IL) and Johnson Matthey (West Deptford, NJ) as contract manufacturers and will purchase GMP drug substance for initial clinical testing from one of these vendors.

 

Formulation Development
Rationale for the use of inhaled gallium for the treatment of lung infections
As mentioned, clinical data have demonstrated the safety of gallium when administered in large doses

 

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(200-400 mg/24h), both acutely and chronically (2,3). Aridis’ projected pulmonary daily dose (15 mg of gallium nitrate) is a small fraction of the iv doses used with the Ganite TM  product.

 

Progression toward reduced systemic exposure, reduced dose and administration time with inhalable antibiotics.
Current therapies to control P. aeruginosa infections in CF patients are inconvenient and exert a limited impact on mortality. The current standard of care to treat P. aeruginosa lung infections in CF patients, which represents a significant advancement, is twice-daily treatment of tobramycin solution administered by oral inhalation for alternating 28-day on/off cycles. Pulmonary delivery has been shown to significantly increase local lung bioavailability and reduce systemic toxicity (Figure 2). The downside of pulmonary administration is that CF patients may spend nearly three hours on an average day on inhalation therapy (i.e. saline solution, antibiotic and DNase treatment; 6), which impacts their quality of life and has become an important factor in the development of new drug therapies. In this regard, recent advances in powder inhalers and more efficient liquid nebulizers have enabled a marked reduction in dose level and dosing time.

 

FIGURE 2. (A) Mean peak tobramycin level in serum following administration via I.V. infusion at 6 to 10.8 mg/kg/day, dry powder inhalation, 4 X 28-mg capsules BID and solution inhalation 300mg BID. (B) Mean peak tobramycin levels in sputum following same dosing regimes.

 

We will develop gallium as an inhaled therapy, because it maximizes the dose at the site of infection and minimizes the systemic exposure. Gallium has been formulated into a liquid that can be readily inhaled into the lungs using a commercially available nebulizer device (Aeroneb® Go, Aerogen, Inc.). In preliminary preclinical studies, gallium administered into the lungs of rats intratracheally was shown to have a lung half-life of 16.5 hrs, which may allow a dosing frequency of about once a day. We will extend these studies by producing material initially for preclinical testing and GLP toxicology studies, and subsequently phase 1 and 2A clinical trials. A potentially more convenient powder formulation may be bridged into phase 2 clinical studies once initial efficacy has been established.

 

The formulation development has been performed at the Aridis facility. Once a clinical scale process is developed, then it will be transferred to the manufacturing facility where clinical scale formulation (drug product) will be produced under GMP manufacturing conditions.

 

Preclinical Safety Testing
Non-GLP Studies
Liquid and dry powder formulations were subjected to in vitro bacterial killing tests and acute mouse protection studies (5) to ensure that Panaecin has retained full activity. The minimum inhibitory concentration (MIC) and time to kill (TTK) were calculated for a representative sample of P.aeruginosa including both clinical isolates and standard laboratory strains. MIC and TTK will be determined for other lung pathogens including S. aureus, B. cepacia, H. influenza, S. pneumonia, Stenotrophomonas maltophilia and Klebsiella pneumonia. Panaecin has been tested in a non-GLP rat intratracheal instillation study to determine the deposition in the lung and the half-life of the residence time in the lung. The data displayed in Fig 3 indicates a half-life of 2-3 days for gallium in the lung.

 

GLP studies
Overview . GLP inhalation toxicology testing will be performed at contract laboratory and included in an IND with US FDA. Although Ganite® has been tested in >1,000 patients for cancer indications with an

 

17



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

extensive literature on the toxicology of systemic and oral administration, the FDA indicated that inhalation toxicology studies in two animal species will be required to initiate clinical testing of inhaled formulations. Several laboratories were identified with expertise in performing GLP inhalation toxicology studies in rats and dogs, and Huntingdon Life Sciences (East Milstone, NJ) has been selected. The study design mimics the administration of gallium in the proposed phase 1 and 2A clinical studies where gallium will be administered for up to 14 days. Expanded, longer duration toxicology studies are planned to support future clinical trials.

 

Maximum Tolerated Dose (MTD) Studies in Rats . MTD studies will be conducted in rats to determine the highest dose that can be safely administered to animals under routine exposure conditions. The MTD studies will be single dose administrations followed by blood collection at multiple time points to determine systemic levels of compound from tidal breathing animal exposures. Depending on the observed response of rats, after a washout period of 2 days, the exposure concentration will be increased or decreased for subsequent exposures for up to a maximum of 4 treatments to identify the maximum tolerated inhaled dose. In phase 2, rats will be exposed for 7 days to confirm the maximum tolerated or maximum practical dose. The following evaluations will be performed: twice daily viability and clinical observations, physical examinations at pretest, 2 hours after exposure and weekly thereafter, body weights, complete macroscopic examination and histology of entire respiratory tract will be performed on all animals 14-days after exposure.

 

14 Day Inhalation Toxicology Studies in Rats . These will be the definitive GLP toxicology studies. 10 male and 10 female animals per dose with four doses (low, mid, high, control; 80 total). For toxicokinetic analysis 3 male and 3 female animals will be used for the control group (6 total) and 9 male and 9 female animals will be used for each dose group (54 total). Evaluations will be as described above and will also include food consumption, ophthalmology examinations, and hematology, coagulation, clinical chemistry and urinalysis on day 14. Samples for toxicokinetic analyses will be collected on days 1 and 14 at 6 time points with 3 animals/sex/dose/timepoint being evaluated. 0.5 mL of blood will be collected at each time point and the sample processed and stored frozen until analysis. Microscopic examination of a complete tissue set (including up to 4 gross lesions) will be performed on all main study animals in the control and high dose groups (low and mid dose groups available, if needed) and examination of the respiratory tract and lymphoid tissues (including up to 4 gross lesions) will be performed on all main study animals in the low and mid-dose groups.

 

Maximum Tolerated Dose (MTD) Studies in Dogs . MTD studies will be conducted in dogs (purebred Beagles, 8 to 9 Months Old, 1 male and 1 female per group, 4 animals total) to determine the highest dose that can be safely delivered to animals under routine exposure conditions. Animals will be exposed by facemask or oro-pharyngeal administration (1 hr/day for mask or up to 10 min/day for OP) at each target dose. Dosing will proceed as described for MTD study in rats. In phase 2, an additional 1 male and 1 female dog will be exposed to confirm the maximum tolerated or maximum practical dose during a 7 day treatment period. Evaluations will be as described above for MTD in rats with the addition of a qualitative electrocardiogram at pretest and days 1 and 7, and samples will be collected for toxicokinetic evaluations on days 1 and 7 at 6 timepoints per occasion.

 

14 Day Inhalation Toxicology Studies in Dogs . These will be the definitive GLP toxicology studies with a similar design to the 14 day inhalation study in rats. This study will use purebred beagles (9 months old) with 3 males and 3 females at each dose group (low, mid, high, control; 24 total). Toxicokinetic samples will be collected from all animals on days 1 and 14 at 6 timepoints per day. Evaluations will be as described for 14 day inhalation study in rats.

 

Clinical Development Plan for Inhaled Gallium
Overview. A phase 1 clinical trial will be performed in healthy adults to determine the deposition and

 

18



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

safety of inhaled gallium. Subsequently, a phase 2A clinical trial in cystic fibrosis patients will be conducted to establish safety and antimicrobial activity of inhaled gallium in the target population. A multicenter, 3 month phase 2B trial will expand the number of CF patients treated and the duration of treatment prior to the pivotal phase 3 trial. More detailed clinical trial designs for each clinical testing phase have been prepared with the input of Aridis’ Clinical Advisory Board.

 

Phase 1 Safety, Tolerability, Deposition, and PK Trial

 

Part A. Demonstrate safety, tolerability, deposition, & PK of 3 escalating doses of inhaled gallium nitrate in 6 healthy adults (2 per dose level)

 

·                                           Safety (PFTs, AEs, ECGs, vital signs), tolerability (coughing, irritation), lung clearance by imaging, and PK will be monitored.

·                                           Safety, tolerability, and lung clearance will be evaluated before proceeding to next dose level

 

Part B. Demonstrate safety, tolerability and steady state PK of highest tolerated dose from Part A administered daily for 7 consecutive days

 

·                                           Safety, tolerability & steady state PK will be monitored periodically for duration of dosing Phase 2A Study to Evaluate Safety, Tolerability, and Anti-microbial Effect of Inhaled Gallium Nitrate

 

·                                           Outcomes: FEV1 (14 day versus baseline), QOL, Safety, Tolerability

·                                           Primary Efficacy endpoints - FEV1 & sputum microbiology with P. aeruginosa density and resistance

·                                           Secondary Efficacy endpoints - CF validated QOL questionnaire, Quittner tool)

 

Phase 28 Multi-Center Safety and Efficacy Study

 

·                                           Endpoints: FEV1, QOL (increase over baseline, versus placebo), and time to exacerbation, sputum Pa microbiology

 

·                                           Primary endpoint - FEV1

·                                           2° endpoints - CF validated QOL questionnaire, Quittner tool, and time to exacerbation), exercise test, high quality CT scan

 

Post Phase 2 meeting with FDA, and discussion of possible further study requirements and Phase 3 plan.

 

Pivotal Phase 3 Trial

 

·                                           Primary efficacy endpoint - FEV1

·                                           Secondary endpoints

 

·                                           CF validated QOL questionnaire

·                                           Quittner tool

·                                           Time to exacerbation

 

·                                           6 month open-label extension

·                                           Size and duration dependent on results from Phase 2 trials & FDA concurrence

 

NDA will follow the successful Phase 3 trials .

 

19



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

Phase 4 Registration Studies and other indications with chronic pulmonary Pseudomonas (Non-CF bronchiectasis, Chronic obstructive pulmonary disease [COPD], Ventilator Associated Pneumonia), Burkholderia cepacia CF population .

 

·                                           To satisfy requirements of FDA for long-term follow up

·                                           To pursue label expansions in pulmonary disease with chronic Pseudomonas infection

 

PanaecinTm

 

Yr1

 

Yr2

 

Yr3

 

Yr4

 

Yr5

 

Yr6

 

Yr7

 

Yr8

 

Yr9

 

Yr10

 

Yr11

Activity

 

1

 

2

 

1

 

2

 

1

 

2

 

1

 

2

 

1

 

2

 

1

 

2

 

1

 

2

 

1

 

2

 

1

 

2

 

1

 

2

 

 

 

 

Formulation & Device Dev’t (12 mo)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Analytical Dev’t & Testing (12 mo)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Preclinical Animal Testing

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Bulk manufacturing — 3 clinical lots (6 mo)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fill/finish — 3 clinical lots (6 mo)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GLP Tox studies (12 mo)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

File IND (1 mo)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Phase 1 Safety, Tolerability, PK in Healthy Adults

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Part A. Dose Escalation (3 mo)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Part B. 7 Day Dosing at MTD (3 mo)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Phase 2A Repeat Dose Safety, Tol., Antimicrobial in CF (18 mo)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Phase 2B Multi-center Safety & Efficacy in CF (24 m)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Phase 3 Safety & Efficacy in CF (24 mo)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

File US IND (6 mo)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Regulatory Review and approval (18 mo)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Table 3. Panaecin TM  Product Development Timelines for treatment of CF Chronic Lung Infections

 

References

 

1.                                       Ganite package insert

2.                                       Collery, P., Keppler, B., Madoulet, C., and Desoize, B. (2002) Gallium in cancer treatment, Crit Rev Oncol Hematol 42, 283-296.

3.                                       Chitambar Curr Opin Onco1.2004.16.547_Gallium As Antineoplastic

4.                                       Bullen et al., FEMS Immunol. Med. Microbiol. (2005) 43:325-330.

5.                                       Kaneko et al., 2007 J Clin Invest. 117: 877-888.

6.                                       Geller, D. E., Konstan, M. W., Smith, J., Noonberg, S. B., and Conrad, C. (2007) Novel tobramycin inhalation powder in cystic fibrosis subjects: Pharmacokinetics and safety, Pediatr Pulmonol 42, 307-313.

 

20



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

APPENDIX 1

 

Table 4 The antimicrobial activity spectrum of Ga(III)

 

21




Exhibit 10.5

 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

FIRST AMENDMENT TO LICENSE AGREEMENT

 

This First Amendment to License Agreement (the “Amendment”) is entered into as of the 10 th  day of January 2017 (the “Effective Date”) by and between the University of Iowa Research Foundation (“UIRF”), and Aridis Pharmaceuticals, Inc (“Licensee”).

 

RECITALS

 

WHEREAS, UIRF and Licensee have entered into a License Agreement effective as of October 22, 2010, a copy of which is attached hereto as Exhibit A (the “License Agreement”), and;

 

WHEREAS, UIRF and Licensee desire to amend the License Agreement according to the provisions of Article 14.1 thereof, and;

 

WHEREAS, UIRF and Licensee desire to amend Article III of the License Agreement concerning payments due thereunder, and

 

NOW, THEREFORE, in consideration of the terms and conditions set forth herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

 

TERMS AND CONDITIONS

 

1.                                       Definitions. Each initially capitalized term used herein without definition shall have the meaning ascribed to such term in the License Agreement.

 

2.                                       Amendment to Payments.

 

(a)                                  Article 3.1 is hereby amended to replace “...a sum [ *** ] ...” with “...a sum of [ *** ]

 

(b)                                  Licensee agrees to pay UIRF the sum of [ *** ] in two (2) installments, as follows:

 

(i)                                      Licensee shall pay UIRF the first installment of [ *** ] within thirty (30) days from the Effective Date of this Amendment.

 

(ii)                                   Licensee shall pay UIRF the second installment of [ *** ] within one hundred and eighty (180) days from the Effective Date of this Amendment.

 

3.                                       This Amendment shall be in effect as of the Effective Date. Except as specifically modified or amended by the terms of this Amendment, the License Agreement, and all provisions contained therein are, and shall continue, in full force and effect, binding on the parties thereto and hereto in accordance with the terms therein, and are hereby ratified and confirmed.

 

4.                                       This Amendment 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 agreement. The parties acknowledge and agree that an original signature or a copy thereof transmitted by facsimile, e-mail or other electronic means of transmission will constitute an original signature for purposes of this Amendment, and will have the same force and legal effect as if the original had been received.

 

5.                                       This Amendment shall be governed by the laws of the State of Iowa without regard to any conflict of laws principles that would require application of the laws of another jurisdiction.

 

1



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

Accepted and agreed to:

 

THE UNIVERSITY OF IOWA RESEARCH FOUNDATION

 

 

By:

/s/ Richard Hichwa

 

Name:

Richard Hichwa

 

Title:

Snr. Associate VP for Research

 

Date:

January 20, 2017

 

 

 

 

 

Aridis Pharmaceuticals, Inc.

 

 

 

 

 

 

By:

/s/ Eric Patzer

 

Name:

Eric J Patzer

 

Title:

Chairman

 

Date:

January 21, 2017

 

 

2




Exhibit 10.6

 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

THE BRIGHAM AND WOMEN’S HOSPITAL, INC.

 

EXCLUSIVE PATENT LICENSE AGREEMENT

 

BWH Agreement No: 107605.05
BWH Case Nos: 10706, 11049

 

This License Agreement (“Agreement”) is made as of the tenth day of November, 2010 (“Effective Date”), by and between Aridis Pharmaceuticals, LLC, a California corporation, having an office at 5941 Optical Court, San Jose, CA 95138 (“Company”) and The Brigham and Women’s Hospital, Inc., a not-for-profit Massachusetts corporation, with a principal place of business at 75 Francis Street, Boston, Massachusetts 02115 (“Hospital”), each referred to herein individually as a “Party” and collectively as the “Parties”.

 

RECITALS

 

Hospital, as a center for patient care, research and education, is the owner of certain Patent Rights (defined below) and desires to grant a license of those Patent Rights to Company in order to benefit the public by disseminating the results of its research via the commercial development, manufacture, distribution and use of Products and Processes (defined below).

 

Hospital’s rights to the Patent Rights pertaining to BWH Invention 10706 and its rights to grant licenses to those Patent Rights are governed by an interinstitutional agreement between Hospital and Beth Israel Deaconess Medical Center (“BIDMC”) dated August 2, 2001 as amended on October 23, 2005.

 

Company has the capability to commercially develop, manufacture, distribute and use Products and Processes for public use and benefit and desires to license such Patent Rights.

 

For good and valuable consideration, the sufficiency of which is hereby acknowledged, the Parties hereby agree as follows:

 

1.                                       CERTAIN DEFINITIONS

 

As used in this Agreement, the following terms shall have the following meanings, unless the context requires otherwise.

 

1.1                                Affiliate ” with respect to either Party shall mean any corporation or other legal entity other than that Party in whatever country organized, controlling, controlled by or under common control with that Party. The term “control” shall mean (i) in the case of Company, direct or indirect ownership of fifty percent (50%) or more of the voting securities having the right to elect directors, and (ii) in the case of Hospital, the power, direct or indirect, to elect or appoint fifty percent (50%) or more of the directors or trustees, or to cause direction of management and policies, whether through the ownership of voting securities, by contract or otherwise.

 

1.2                                Claim ” shall mean any pending or issued claim of any Patent Right that has not been permanently revoked, nor held unenforceable or invalid by a decision of a court or other

 



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

governmental agency of competent jurisdiction that is unappealable or unappealed in the time allowed for appeal.

 

1.3                                Distributor ” shall mean any third party entity to whom Company, a Company Affiliate or a Sublicensee has granted, express or implied, the right to distribute any Product or Process pursuant to Section 2.1(b)(ii).

 

1.4                                First Commercial Sale ” shall mean the initial Sale anywhere in the applicable License Territory of a Product or Process.

 

1.5                                License Field ” shall mean all therapeutic and prophylactic fields in the treatment of pseudomonas infections in humans and shall not include diagnostic uses, sale of antibodies as a research tool or any other field not specifically set forth herein.

 

1.6                                License Territory ” shall mean worldwide.

 

1.7                                Net Sales ” shall be calculated as set forth in this Section 1.7.

 

(a)                                  Subject to the conditions set forth below, “Net Sales” shall mean:

 

(i)                                      the gross amount billed or invoiced, or if no such bill or invoice is issued the amount received, whichever is greatest by Company and its Affiliates and Sublicensees for or on account of Sales of Products and Processes;

 

(ii)                                   less the following amounts:

 

(A)                                to the extent separately stated on the bill or invoice, actually paid by Company and its Affiliates in effecting such Sale:

 

1.         amounts repaid or credited by reason of rejection or return of applicable Products or Processes;

 

2.         reasonable and customary trade, quantity or cash rebates or discounts or chargebacks to the extent allowed and taken;

 

3.         amounts for outbound transportation, insurance, handling and shipping, but only to the extent separately invoiced in a manner that clearly specifies the charges applicable to the applicable Products; and

 

4.         taxes, customs duties and other governmental charges levied on or measured by Sales of Products or Processes, to the extent separately invoiced, whether paid by or on behalf of Company so long as Company’s price is reduced thereby, but not franchise or income taxes of any kind whatsoever.

 

2



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

(B)                                the gross amount billed or invoiced, or if no such bill or invoice is issued the amount received, whichever is greatest, by Company and its Affiliates and Sublicensees for or on account of Sales of Products and Processes to Hospital and Hospital’s Affiliates

 

(b)                                  Specifically excluded from the definition of “Net Sales” are amounts attributable to any Sale of any Product or Process between or among Company and any Company Affiliate and/or Sublicensee, unless the transferee is the end purchaser, user or consumer of such Product or Process.

 

(c)                                   No deductions shall be made for any commissions paid to any individuals or for any costs or expenses of collections.

 

(d)                                  Net Sales shall be deemed to have occurred and the applicable Product or Process “Sold” on the earliest of the date of billing, invoicing, delivery or payment or the due date for payment.

 

(e)                                   If any Product or Process is Sold to an Affiliate at a discounted price that is lower than the customary price charged; or to any party for non-cash consideration (whether or not at a discount) or at a price that is unreasonably low; Net Sales shall be calculated based on the non-discounted cash amount charged to an independent third party for the Product or Process during the same Reporting Period or, in the absence of such transaction, on the fair market value of the Product or Process. Non-cash consideration that could affect any payment due to Hospital hereunder shall not be accepted without the prior written consent of Hospital.

 

1.8                                Patent Rights ” shall mean, inclusively, all issued and pending patent applications detailed in Appendix A-1, and/or the equivalent of such applications including any division, continuation (but not including continuation-in-part except where and to the extent covering the subject matter of the applications listed on Appendix A-1), foreign patent application, Letters Patent, and/or the equivalent thereof issuing thereon, and/or reissue, reexamination or extension thereof.

 

1.9                                Process ” shall mean any process, method or service the use or performance of which, in whole or in part, absent the license granted hereunder would infringe, or is covered by, one or more Claims of Patent Rights; or

 

1.10                         Product ” shall mean any article, device or composition, the manufacture, use, or sale of which, in whole or in part, absent the license granted hereunder would infringe, or is covered by, one or more Claims of Patent Rights.

 

1.11                         Reporting Period ” shall mean each three month period ending March 31, June 30, September 30 and December 31.

 

3



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

1.12                         Sell ” (and “Sale” and “Sold” as the case may be) shall mean to sell or have sold, to lease or have leased, to import or have imported or otherwise to transfer or have transferred a Product or Process for valuable consideration (in the form of cash or otherwise), and further in the case of a Process to use or perform such Process for the benefit of a third party.

 

1.13                         Sublicense Income ” shall mean consideration in any form received by Company and/or Company’s Affiliate(s) attributable to a grant of a sublicense or any other right, license, privilege or immunity (regardless of whether such grantee is a “Sublicensee” as defined in this Agreement) to make, have made, use, have used, Sell or have Sold Products or Processes, including but not limited to option rights, but excluding consideration included within Net Sales. Sublicense Income shall include without limitation any license or option signing fee, license or option maintenance or annual fee, unearned portion of any minimum royalty payment, or distribution or joint marketing fee.

 

Sublicense Income shall not include reimbursement received by Company for actual costs incurred in research and development efforts, or consideration received for an equity interest in Company or Affiliates, or extensions of credit to or other investment in Company or Company’s Affiliates, unless and to the extent such consideration is not reasonably attributable to the equity or other interest received but is instead is reasonably attributable to a grant of sublicense as determined by agreement of the Parties or by an independent appraiser mutually agreeable to the Parties. Sublicensee consideration provided for research and development funding, equity interest, or extensions of credit shall be reported by Company in Sublicense reporting pursuant to Article 5 for Hospital’s information.

 

1.14                         Sublicensee ” shall mean any sublicensee of rights granted in accordance with Section 2.1(a)(ii). For purpose of this Agreement, a Distributor of a Product or Process shall not be included in the definition of Sublicensee unless such Distributor (i) is granted any right to make, have made, use or have used Products or Processes in accordance with Section 2.1(a)(ii), or (ii) has agreed to pay to Company or its Affiliate(s) royalties on such Distributor’s sales of Products or Processes, in which case such Distributor shall be a Sublicensee for all purposes of this Agreement.

 

2.                                       LICENSE

 

2.1                                Grant of License .

 

(a)                                  Subject to the terms of this Agreement and Hospital’s rights in Patent Rights, Hospital hereby grants to Company in the License Field in the License Territory:

 

(i)                                    an exclusive, royalty-bearing license under its and BIDMC’s rights in Patent Rights to make, have made, use, have used, Sell and have Sold Products and Processes;

 

(ii)                                 the right to grant sublicenses under the rights granted in Section 2.1(a)(i) to Sublicensees, provided that in each case Company shall be responsible for the performance of any obligations of Sublicensees relevant to this

 

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Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

Agreement as if such performance were carried out by Company itself, including, without limitation, the payment of any royalties or other payments provided for hereunder, regardless of whether the terms of any sublicense provide for such amounts to be paid by the Sublicensee directly to Hospital; and

 

(b)                                  The license granted in Section 2.1(a) above includes:

 

(i)                                    the right to grant to the final purchaser, user or consumer of Products the right to use such purchased Products in a method coming within the scope of Patent Rights within the License Field and License Territory; and

 

(ii)                                 the right to grant a Distributor the right to Sell (but not to make, have made, use or have used) such Products and/or Processes for or on behalf of Company, its Affiliates and Sublicensees in a manner consistent with this Agreement.

 

(c)                                   The foregoing license grant shall include the grant of such license to any Affiliate of Company, provided that such Affiliate shall assume the same obligations as those of Company and be subject to the same terms and conditions hereunder; and further provided that Company shall be responsible for the performance of all of such obligations and for compliance with all of such terms and conditions by Affiliate. Company shall provide to Hospital a fully signed, non-redacted copy of each agreement with each Affiliate that assumes the aforesaid obligations, including all exhibits, attachments and related documents and any amendments, within thirty (30) days of request by Hospital.

 

2.2                                Sublicenses .  Each sublicense granted hereunder shall be consistent with and comply with all terms of this Agreement, shall incorporate terms and conditions sufficient to enable Company to comply with this Agreement, shall prohibit any further sublicense or assignment by a Sublicensee without Hospital consent (not to be unreasonably withheld) and shall provide that Hospital is a third party beneficiary thereof. Any sublicense granted by Company shall be subject to the prior written approval of Hospital to demonstrate conformance with these requirements, which approval shall not be unreasonably withheld. Company shall provide to Hospital a fully signed non-redacted copy of all sublicense agreements and amendments thereto, including all exhibits, attachments and related documents, within thirty (30) days of executing the same. Upon termination of this Agreement or any license granted hereunder for any reason, any sublicenses shall be addressed in accordance with Section 10.7. Any sublicense which is not in accordance with the forgoing provisions shall be null and void.

 

2.3                                Retained Rights; Requirements .  Any and all licenses granted hereunder are subject to:

 

(a)                                  the right of Hospital, BIDMC and their respective Affiliates and academic, government and not-for-profit institutions to make and to use the subject matter described and/or claimed in the Patent Rights for research and educational purposes; and

 

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Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

(b)                                  for Patent Rights supported by federal funding, the rights, conditions and limitations imposed by U.S. law (see 35 U.S.C. § 202 et seq . and regulations pertaining thereto), including without limitation:

 

(i)                                    the royalty-free non-exclusive license granted to the U.S. government; and

 

(ii)                                 the requirement that any Products used or sold in the United States shall be manufactured substantially in the United States or that appropriate waivers be obtained by Company.

 

2.4                                No Additional Rights . It is understood that nothing in this Agreement shall be construed to grant Company or any of its Affiliates a license, express or implied, under any patent owned solely or jointly by Hospital or BIDMC, other than the Patent Rights expressly licensed hereunder. Hospital and BIDMC shall have the right to license any Patent Rights to any other party for any purpose outside of the License Field or the License Territory.

 

3.                                       DUE DILIGENCE OBLIGATIONS

 

3.1                                Diligence Requirements . Company shall provide to Hospital a development plan covering development of Products or Processes. Company shall use, and shall cause its Affiliates and Sublicensees, as applicable, to use best efforts to pursue the development plan, and to develop and make available to the public Products and Processes throughout the License Territory in the License Field, and shall provide annual progress reports (per Section 5). Such efforts shall include achieving, subject to section 3.2, the following benchmarks within the time periods designated below following the Effective Date:

 

(a)                                  Pre-Sales Requirements .

 

(i)                                    Company shall make best efforts to follow the research and development plan attached hereto as Appendix B, and shall submit annual progress reports to Hospital on each anniversary of the Effective Date; and

 

(ii)                                 Within three (3) years of the Effective Date, Company will commence a Phase I clinical trial; and

 

(iii)                              Within five (5) years of the Effective Date, Company will commence a Phase II clinical trial; and

 

(iv)                             Within eight (8) years of the Effective Date, Company will commence a Phase III clinical trial; and

 

(v)                                Within ten (10) years of the Effective Date, Company will file an NDA for a Product.

 

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Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

(b)                                  Post-Sales Requirements .

 

(i)                                    Following the First Commercial Sale in any country in the License Territory, Company shall itself or through its Affiliates and/or Sublicensees make continuing Sales in such country without any elapsed time period of one (1) year or more in which such Sales do not occur, unless Company can demonstrate to Hospital’s reasonable satisfaction that such lapse in sales is (a) consistent with reasonable commercial practice (and due to no intent to minimize or exclude royalties or fees under this Agreement ); or (b) is caused by factors beyond the control of Company . Company shall itself or through an Affiliate or Sublicensee make such First Commercial Sale within the United States within fifteen (15) years after the Effective Date of this Agreement.

 

3.2                                Diligence Failures . The benchmark dates set out in Section 3.1 shall be material obligations of this Agreement. Company shall demonstrate compliance with the benchmark dates set out in Section 3.1. If events or difficulties encountered by Company in the development of Products or Processes occur that Company can demonstrate to Hospital’s reasonable satisfaction are not due to Company’s (or Affiliates or Sublicensees, as the case may be) failure to exercise commercially reasonable efforts, and Company (or Affiliates or Sublicensees, as the case may be) has taken commercially reasonable effective steps to correct the failure, in which case Hospital shall agree to an extension of one year of the time allowed for achieving the benchmarks detailed in Section 3.1 above (or, in Hospital’s sole discretion, such longer period as is demonstrated by Company to be required for diligent development), providing that Company shall notify Hospital, in writing, the reason for the delay no later than sixty (60 days) prior to the date of the relevant diligence benchmark, and such writing shall state Company’s plan to facilitate achievement of the relevant benchmark within the one year extension period, and by paying to Hospital a non-refundable, non-creditable extension fee of $50,000 within thirty (30) days of sending such notice to Hospital. Company shall be entitled to no more than one extension for any individual benchmark described in Section 3.1, and no more than a total of two extensions in the aggregate.

 

3.3                                Diligence Reports . Company shall provide all reports with respect to its obligations under Section 3.1 as set forth in Section 5.

 

4.                                       PAYMENTS AND ROYALTIES

 

4.1                                License Issue Fee . Company shall pay Hospital a non-refundable license issue fee in the amount of [***] payable as follows:

 

[***] due six (6) months after the Effective Date, and
[***] due twelve (12) months after the Effective Date.

 

4.2                                Patent Cost Reimbursement . Company shall reimburse Hospital for all unreimbursed costs associated with the preparation, filing, prosecution and maintenance of all Patent Rights (“Patent Costs”) within thirty (30) days of Company’s receipt of an invoice for such Patent Costs either from Hospital or Hospital’s patent counsel, or at Hospital’s request Company shall pay such invoices directly to Hospital’s patent counsel. It is agreed that no earlier than October 1,

 

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Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

2010, Hospital shall provide Company with an invoice for those unreimbursed Patent Costs incurred by Hospital prior to November 10, 2005, which after appropriate credits for option fees paid by Company to Hospital are approximately [***].

 

Company agrees to indemnify, defend and hold Hospital harmless from and against any and all liabilities, damages, costs and expenses arising from the failure of Company to timely pay such invoices and Patent Costs. Hospital shall instruct patent counsel to provide copies to Hospital for Hospital’s administrative files of all invoices detailing Patent Costs which are sent directly to Company. If Company pays any Patent Costs directly, Company shall advise patent counsel that Hospital is and shall remain patent counsel’s client.

 

Should Hospital license the Patent Rights to a third party for use outside the Field, then Hospital shall inform Company and agree with Company to an appropriate pro rata reduction (based on the reasonable costs of prosecution associated with Patent Rights licensed to such third party) in Company’s contribution to the Patent Costs.

 

4.3                                Annual License Fee; Annual Minimum Royalty .

 

(a)                                  Before First Commercial Sale . Prior to the First Commercial Sale, Company shall pay to Hospital a non-refundable annual license fee of ten thousand dollars [***] within sixty (60) days after the anniversary of the Effective Date, beginning on the second anniversary of the Effective Date, and on each subsequent anniversary of the Effective Date thereafter.

 

(b)                                  After First Commercial Sale . Following the First Commercial Sale, Company shall pay Hospital a non-refundable minimum annual royalty in the amount of [***] per year within sixty (60) days after each annual anniversary of the Effective Date. The annual minimum royalty shall be credited against royalties subsequently due on Net Sales made during the same calendar year, if any, but shall not be credited against royalties due on Net Sales made in any other year.

 

4.4                                Milestone Payments . In addition to the payments set forth in Sections 4.1 through 4.3 above, Company shall pay Hospital milestone payments of up to eight hundred and ten thousand dollars [***] , as follows:

 

(a)                                  [***] within sixty (60) days of completion of Phase I clinical studies necessary for complete regulatory application for first Product; and

 

(b)                                  [***] within sixty (60) days of completion of a Phase II clinical study for the first Product.

 

(c)                                   [***] within sixty (60) days of completion of a Phase III clinical for the first Product

 

(d)                                  [***] upon FDA approval of first Product.

 

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Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

(e)                                   [*** ] upon FDA approval of first Product labeled for use in cystic fibrosis patients with both early stage (non-mucoid form) and late stage (mucoid form) pseudomonas infections.

 

(f)                                    [***] upon FDA approval of first Product labeled for use in treatment or prevention of hospital acquired pneumonia.

 

4.5                                Royalties and Sublicense Income .

 

(a)                                  Beginning with the First Commercial Sale in any country in the License Territory, Company shall pay Hospital, during the term of any license granted under Section 2.1(a)(i), a royalty of [***] of the Net Sales of all Products and Processes. If Company is legally required to make royalty payments to one or more third parties in order to produce and sell Products or Processes, Company may offset a total of [***] of such third party payments against any royalty due to BWH in the same reporting period, provided that in no event shall the royalty payments when aggregated with any offsets and credits allowed under the license agreement be reduced by more than [***] in any reporting period; and

 

(b)                                  Company shall pay Hospital [***] of any and all Sublicense Income, received by Company prior to initiation of a Phase I clinical trial, and [***] of any and all Sublicense Income received by Company after initiation of a Phase I clinical trial. Where Company pays a royalty to Hospital hereunder for any Sublicensee payment based upon a milestone listed in Section 4.4, Company shall receive a credit in the amount of that royalty against payments due to Hospital under Section 4.4 for the same milestone.

 

(c)                                   All payments due to Hospital under this Section 4.5 shall be due and payable by Company within thirty (30) days after the end of each Reporting Period, and shall be accompanied by a report as set forth in Sections 5.3 and 5.4.

 

4.6                                Form of Payment . All payments due under this Agreement shall be drawn on a United States bank and shall be payable in United States dollars. Each payment shall reference this Agreement and its Agreement Number and identify the obligation under this Agreement that the payment satisfies. Conversion of foreign currency to U.S. dollars shall be made at the conversion rate existing in the United States, as reported in The Wall Street Journal, on the last working day of the applicable Reporting Period. Such payments shall be without deduction of exchange, collection or other charges, and, specifically, without deduction of withholding or similar taxes or other government imposed fees or taxes, except as permitted in the definition of Net Sales.

 

Checks for all payments due to the Hospital under this Agreement shall be made payable to the Hospital and addressed as set forth below:

 

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Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

Brigham and Women’s Hospital
BOA-Lockbox Services
PCSR Lockbox #415007
MA5-527-02-07
2 Morrissey Blvd
Dorchester, MA 02125

 

Reference Agreement #: A 107605.05

 

Payments via wire transfer should be made as follows:

 

ACH Credit:
Federal Reserve Wire:
SWIFT Code:
Account
Brigham and Women’s Hospital
Bank of America
100 Federal Street
Boston, MA 02110

 

Reference Agreement #: A 107605.05

 

4.7                                Overdue Payments . The payments due under this Agreement shall, if overdue, bear interest beginning on the first day following the Reporting Period to which such payment was incurred and until payment thereof at a per annum rate equal to [***] above the prime rate in effect on the due date as reported by The Wall Street Journal, such interest rate being compounded on the last day of each Reporting Period, not to exceed the maximum permitted by law. Any such overdue payments when made shall be accompanied by all interest so accrued. Said interest and the payment and acceptance thereof shall not preclude Hospital from exercising any other rights it may have as a consequence of the lateness of any payment.

 

5.                                       REPORTS AND RECORDS

 

5.1                                Diligence Reports . Within sixty (60) days after the end of each calendar year, Company shall report in writing to Hospital on progress made toward the objectives set forth in Section 3.1 during such preceding 12 month period, including, without limitation, progress on research and development, status of applications for regulatory approvals, manufacturing, sublicensing and the number of sublicenses entered into and marketing.

 

5.2                                Milestone Achievement Notification . Company shall report to Hospital the dates on which it achieves the milestones set forth in Section 4.4 within sixty (60) days of each such occurrence.

 

5.3                                Sales Reports . Company shall report to Hospital the date of the First Commercial Sale in each country of the License Territory within thirty (30) days of each such occurrence. Following the First Commercial Sale, Company shall deliver reports to Hospital within forty-five (45) days

 

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Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

after the end of each Reporting Period (sixty (60) days, if Sublicensee earned royalties are to be reported). Each report under this Section 5.4 shall have substantially the format outlined in Appendix C, shall be certified as correct by an officer of Company and shall contain at least the following information as may be pertinent to a royalty accounting hereunder for the immediately preceding Reporting Period:

 

(a)                                  the number of Products and Processes Sold by Company, its Affiliates and Sublicensees in each country;

 

(b)                                  the amounts billed, invoiced and received by Company, its Affiliates and Sublicensees for each Product and Process, in each country, and total billings or payments due or made for all Products and Processes;

 

(c)                                   calculation of Net Sales for the applicable Reporting Period in each country, including an itemized listing of permitted offsets and deductions;

 

(d)                                  total royalties payable on Net Sales in U.S. dollars, together with the exchange rates used for conversion; and

 

(e)                                   any other payments due to Hospital under this Agreement.

 

If no amounts are due to Hospital for any Reporting Period, the report shall so state.

 

5.4                                Sublicense Income Reports . Company shall, along with delivering payment as set forth in Section 4.6, report to Hospital within thirty (30) days of receipt the amount of all Sublicense Income received by Company, and Company’s calculation of the amount due and paid to Hospital from such income, including an itemized listing of the source of income comprising such consideration, and the name and address of each entity making such payments in substantially the format outlined in Appendix D.

 

5.5                                Audit Rights . Company shall maintain, and shall cause each of its Affiliates and Sublicensees to maintain, complete and accurate records relating to the rights and obligations under this Agreement and any amounts payable to Hospital in relation to this Agreement, which records shall contain sufficient information to permit Hospital and its representatives to confirm the accuracy of any payments and reports delivered to Hospital and compliance in all other respects with this Agreement. Company shall retain and make available, and shall cause each of its Affiliates and Sublicensees to retain and make available, such records for at least five (5) years following the end of the calendar year to which they pertain, to Hospital and/or its representatives and upon at least fifteen (15) days’ advance written notice, for inspection during normal business hours, to verify any reports and payments made and/or compliance in other respects under this Agreement. If any examination conducted by Hospital or its representatives pursuant to the provisions of this Section show an underreporting or underpayment of five percent (5%) or more in any payment due to Hospital hereunder, Company shall bear the full cost of such audit and shall remit any amounts due to Hospital (including interest due in accordance with Section 4.7) within thirty (30) days of receiving notice thereof from Hospital.

 

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Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

6.                                       PATENT PROSECUTION AND MAINTENANCE

 

6.1                                Prosecution . Hospital shall be responsible for the preparation, filing, prosecution and maintenance of all patent applications and patents included in Patent Rights. Company shall reimburse Hospital for Patent Costs incurred by Hospital relating thereto in accordance with Section 4.2.

 

6.2                                Copies of Documents . With respect to any Patent Right licensed hereunder, Hospital shall instruct the patent counsel prosecuting such Patent Right to (i) copy Company on patent prosecution documents that are received from or filed with the United States Patent and Trademark Office and foreign equivalent, as applicable; (ii) provide Company with copies of draft submissions to the USPTO prior to filing with reasonable time to allow for review by Company; and (iii) give consideration to the comments and requests of Company or its patent counsel.

 

6.3                                Company’s Election Not to Proceed . Company may elect to surrender any patent or patent application in Patent Rights in any country upon sixty (60) days advance written notice to Hospital (at Company request, Hospital will provide advice about whether it would intend to proceed with maintenance or prosecution of a specific patent or patent application should Company elect to surrender rights in the applicable Patent Rights). Such notice shall relieve Company from the obligation to pay for future Patent Costs but shall not relieve Company from responsibility to pay Patent Costs incurred prior to the expiration of the sixty (60) day notice period. Such U.S. or foreign patent application or patent shall thereupon cease to be a Patent Right hereunder, Company shall have no further rights therein and Hospital shall be free to license its rights to that particular U.S. or foreign patent application or patent to any other party on any terms.

 

6.4                                Confidentiality of Prosecution and Maintenance Information . Company agrees to treat all information related to prosecution and maintenance of Patent Rights as Confidential Information in accordance with the provisions of Appendix E .

 

7.                                       THIRD PARTY INFRINGEMENT AND LEGAL ACTIONS

 

7.1                                Company Right to Prosecute . Company will protect its Patent Rights from infringement and prosecute infringers when, in its sole judgment, such action may be reasonably necessary, proper and justified. If Hospital shall have supplied Company with written evidence demonstrating to Company’s reasonable satisfaction prima facie infringement of a claim of a Patent Right in the License Field in the License Territory by a third party which poses a material threat to Hospital’s rights under this Agreement, Hospital may by notice request Company to take steps to protect such Patent Right. Company shall notify Hospital within three (3) months of the receipt of such notice whether Company intends to prosecute the alleged infringement. If Company notifies Hospital that it intends to so prosecute, Company shall, within three (3) months of its notice to Hospital either (i) cause such infringement to terminate, or (ii) initiate legal proceedings against the infringer.

 

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Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

7.2                                Hospital Right to Prosecute . Company may and shall have the first right to, upon notice to Hospital, initiate legal proceedings against the infringer at Company’s expense with respect to a claim of a Patent Right in the License Field in the License Territory. Or, in the event Company notifies Hospital that Company does not intend to prosecute infringement identified under Section 7.1, Hospital may, upon notice to Company, initiate legal proceedings against the infringer at Hospital’s expense with respect to a claim of a Patent Right in the License Field in the License Territory.

 

Before commencing an infringement action, Company and, as applicable, any Affiliate, shall consult with Hospital, concerning, among other things, Company’s standing to bring suit, the advisability of bringing suit, the selection of counsel and the jurisdiction for such action (provided Company must have Hospital’s reasonable prior written consent with respect to selection of jurisdiction for any action in which Hospital may be joined as a party-plaintiff) and shall use reasonable efforts to accommodate the views of Hospital regarding the proposed action, including without limitation with respect to potential effects on the public interest. Company shall be responsible for all costs, expenses and liabilities in connection with any such action and shall indemnify and hold Hospital harmless therefrom, regardless of whether Hospital is a party-plaintiff, except for the expense of any independent counsel retained by Hospital in accordance with Section 7.5 below.

 

7.3                                Hospital Joined as Party-Plaintiff . If Company elects to commence an action as described in Section 7.1 or 7.2 above, Hospital shall have, in its sole discretion, the option to join such action as a party-plaintiff. If Hospital is required by law to join such action as a party-plaintiff, Hospital may either, in its sole discretion, permit itself to be joined as a party-plaintiff at the sole expense of Company, or assign to Company all of Hospital’s right, title and interest in and to the Patent Right which is the subject of such action (subject to all of Hospital’s obligations to the government under law and any other rights that others may have in such Patent Right). If Hospital makes such an assignment, such action by Company shall thereafter be brought or continued without Hospital as a party; provided, however, that Hospital shall continue to have all rights of prosecution and maintenance with respect to Patent Rights and Company shall continue to meet all of its obligations under this Agreement as if the assigned Patent Right were still licensed to Company hereunder.

 

7.4                                Notice of Actions; Settlement . Company shall promptly inform Hospital of any action or suit relating to Patent Rights and shall not enter into any settlement, consent judgment or other voluntary final disposition of any action relating to Patent Rights, including but not limited to appeals, without the prior written consent of Hospital.

 

7.5                                Cooperation . Each Party agrees to cooperate reasonably in any action under Section 7 which is controlled by the other Party, provided that the controlling party reimburses the cooperating party for any costs and expenses incurred by the cooperating party in connection with providing such assistance, except for the expense of any independent counsel retained by the cooperating party in accordance with this Section 7.5. Such controlling party shall keep the cooperating party informed of the progress of such proceedings and shall make its counsel available to the cooperating party. The cooperating party shall also be entitled to independent

 

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Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

counsel in such proceedings but at its own expense, said expense to be offset against any damages received by the Party bringing suit in accordance with Section 7.6.

 

7.6                                Recovery . Any award paid by third parties as the result of such proceedings (whether by way of settlement or otherwise) shall first be applied to reimbursement of any legal fees and expenses incurred by either Party, and then the remainder shall be divided between the Parties as follows:

 

(a)                                  (i)                                      Company shall receive an amount equal to its lost profits or a reasonable royalty on the infringing sales , or whichever measure of damages the court shall have applied; and

 

(ii)                                   Hospital shall receive an amount equal to the royalties and other amounts that Company would have paid to Hospital if Company had Sold the infringing Products and Services rather than the infringer; and

 

(b)                                  the balance, if any, remaining after Company and Hospital have been compensated under Section 7.6(a) shall be shall be shared 2/3 to the Party electing to pursue and 1/3 to the other Party.

 

8.                                       INDEMNIFICATION AND INSURANCE

 

8.1                                Indemnification .

 

(a)                                  Company shall indemnify, defend and hold harmless Hospital, and its Affiliates and their respective trustees, directors, officers, medical and professional staff, employees, and agents and their respective successors, heirs and assigns, as well as BIDMC and its Affiliates and their respective trustees, directors, officers, medical and professional staff, employees, and agents and their respective successors, heirs and assigns (collectively, the “Indemnitees”), against any liability, damage, loss or expense (including reasonable attorney’s fees and expenses of litigation) incurred by or imposed upon the Indemnitees or any one of them in connection with any claims, suits, actions, demands or judgments arising out of any theory of product liability (including, but not limited to, actions in the form of contract, tort, warranty, or strict liability) concerning any licensed Product or Process made, used, or sold or performed pursuant to any right or license granted under this Agreement.

 

(b)                                  Company agrees, at its own expense, to provide attorneys reasonably acceptable to the Hospital and BIDMC to defend against any actions brought or filed against any party indemnified hereunder with respect to the subject of indemnity contained herein, whether or not such actions are rightfully brought; provided, however, that any Indemnitee shall have the right to retain its own counsel, at the expense of Company, if representation of such Indemnitee by counsel retained by Company would be inappropriate because of conflict of interests of such Indemnitee and any other party represented by such counsel. Company agrees to

 

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Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

keep Hospital and BIDMC informed of the progress in the defense and disposition of such claim and to consult with Hospital and BIDMC prior to any proposed settlement.

 

(c)                                   This section 8.1 shall survive expiration or termination of this Agreement.

 

8.2                                Insurance .

 

(a)                                  Beginning at such time as any such licensed Product or Process is being commercially distributed, sold, leased or otherwise transferred, or performed or used (other than for the purpose of obtaining regulatory approvals), by Company, an Affiliate or Sublicensee, Company shall, at its sole cost and expense, procure and maintain commercial general liability insurance in amounts not less than $2,000,000 per incident and $2,000,000 annual aggregate and naming the Indemnitees as additional insureds. Such commercial general liability insurance shall provide (i) product liability coverage and (ii) broad form contractual liability coverage for Company’s indemnification under Section 8.1 of this Agreement. If Company elects to self-insure or have Affiliates or Sublicensees arrange for self-insurance including Company’s obligations hereunder all or part of the limits described above (including deductibles or retentions which are in excess of $250,000 annual aggregate) such self-insurance program must be acceptable to the Hospital and the Risk Management Foundation. The minimum amounts of insurance coverage required under this Section 8.2 shall not be construed to create a limit of Company’s liability with respect to its indemnification under Section 8.1 of this Agreement.

 

(b)                                  Company shall provide Hospital with written evidence of such insurance upon request of Hospital. Company shall provide Hospital with written notice at least fifteen (15) days prior to the cancellation, non-renewal or material change in such insurance; if Company does not obtain replacement insurance providing comparable coverage prior to the expiration of such fifteen (15) day period, Hospital shall have the right to terminate this Agreement effective at the end of such fifteen (15) day period without notice or any additional waiting periods.

 

(c)                                   Company shall maintain such commercial general liability insurance beyond the expiration or termination of this Agreement during (i) the period that any such licensed Product or Process is being commercially distributed, sold, leased or otherwise transferred, or performed or used (other than for the purpose of obtaining regulatory approvals), by Company or by a licensee, affiliate or agent of Company and (ii) a reasonable period after the period referred to in (c) (i) above which in no event shall be less than fifteen (15) years.

 

(d)                                  This section 8.2 shall survive expiration or termination of this Agreement.

 

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Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

9.                                       DISCLAIMER OF WARRANTIES; LIMITATION OF LIABILITY

 

9.1                                Title to Patent Rights . To the best knowledge of Hospital’s Office of Research, Ventures and Licensing, Hospital is the sole owner by assignment of the Patent Rights associated with Invention 11049, and is co-owner with BIDMC of the Patent Rights associated with Invention 10706, and has the authority to enter into this Agreement and license the Patent Rights to Company hereunder. During the term of this Agreement, Hospital shall maintain the interinstitutional agreement (a redacted copy is attached as appendix hereto) with BIDMC in full force and effect.

 

9.2                                No Warranties . HOSPITAL AND BIDMC MAKE NO REPRESENTATIONS OR WARRANTIES OF ANY KIND, EXPRESS OR IMPLIED, CONCERNING THE PATENT RIGHTS AND THE RIGHTS GRANTED HEREUNDER, INCLUDING, WITHOUT LIMITATION, WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NONINFRINGEMENT, VALIDITY OF PATENT RIGHTS CLAIMS, WHETHER ISSUED OR PENDING, AND THE ABSENCE OF LATENT OR OTHER DEFECTS, WHETHER OR NOT DISCOVERABLE, AND HEREBY DISCLAIMS THE SAME. SPECIFICALLY, AND NOT TO LIMIT THE FOREGOING, HOSPITAL AND BIDMC MAKE NO WARRANTY OR REPRESENTATION (i) REGARDING THE VALIDITY OR SCOPE OF ANY OF THE CLAIM(S), WHETHER ISSUED OR PENDING, OF ANY OF THE PATENT RIGHTS, AND (ii) THAT THE EXPLOITATION OF THE PATENT RIGHTS OR ANY PRODUCT WILL NOT INFRINGE ANY PATENTS OR OTHER INTELLECTUAL PROPERTY RIGHTS OF HOSPITAL, BIDMC, OR OF ANY THIRD PARTY.

 

9.3                                Limitation of Liability . IN NO EVENT SHALL HOSPITAL, BIDMC, OR ANY OF THEIR RESPECTIVE AFFILIATES OR ANY OF THE RESPECTIVE TRUSTEES, DIRECTORS, OFFICERS, MEDICAL OR PROFESSIONAL STAFF, EMPLOYEES AND AGENTS OF HOSPITAL, BIDMC OR THEIR RESPECTIVE AFFILIATES BE LIABLE TO LICENSEE OR ANY OF ITS AFFILIATES, SUBLICENSEES OR DISTRIBUTORS FOR INDIRECT, SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES OF ANY KIND ARISING IN ANY WAY OUT OF THIS AGREEMENT OR THE LICENSE OR RIGHTS GRANTED HEREUNDER, HOWEVER CAUSED AND ON ANY THEORY OF LIABILITY, INCLUDING WITHOUT LIMITATION ECONOMIC DAMAGES OR INJURY TO PROPERTY OR LOST PROFITS, REGARDLESS OF WHETHER HOSPITAL OR BIDMC SHALL BE ADVISED, SHALL HAVE OTHER REASON TO KNOW, OR IN FACT SHALL KNOW OF THE POSSIBILITY OF THE FOREGOING.

 

10.                                TERM AND TERMINATION

 

10.1                         Term. The term of this Agreement shall commence on the Effective Date and shall remain in effect until the date on which all issued patents and filed patent applications within the Patent Rights have expired or been abandoned, unless this Agreement is terminated earlier in accordance with any of the other provisions of Section 10.

 

16



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

10.2                         Termination for Failure to Pay . If Company fails to make any payment due hereunder, and if such default has not been cured within thirty (30) days after notice by Hospital in writing of such default, Hospital may immediately terminate this Agreement, and/or any license granted hereunder at the end of said thirty (30) day cure period. Company shall be entitled to no more than two such cure periods in a calendar year; in the event of a third failure to make payment on time within a calendar year, Hospital shall have the right to terminate the Agreement immediately upon written notice.

 

10.3                         Termination for Insurance and Insolvency .

 

(a)                                  Insurance . Hospital shall have the right to terminate this Agreement in accordance with Section 8.2(b) if Company fails to maintain the insurance required by Section 8.2.

 

(b)                                  Insolvency and other Bankruptcy Related Events . Hospital shall have the right to terminate this Agreement immediately upon written notice to Company with no further notice obligation or opportunity to cure if Company: (i) shall become insolvent; (ii) shall make an assignment for the benefit of creditors; or (iii) or shall have a petition in bankruptcy filed for or against it and such proceeding is not dismissed within ninety (90) days after the filing thereof.

 

10.4                         Termination for Non-Financial Default . If Company, any of its Affiliates or any Sublicensee shall default in the performance of any of its other obligations under this Agreement not otherwise covered by the provisions of Section 10.2 and 10.3, including but not limited to diligence benchmarks in accordance with Sections 3.1 and 3.2 above, and if such default has not been cured within sixty (60) days after notice by Hospital in writing of such default, Hospital may immediately terminate this Agreement, and/or any license granted hereunder with respect to the country or countries in which such default has occurred, at the end of said sixty (60) day cure period. Hospital shall also have the right to terminate this Agreement and/or any such license immediately, upon written notice, in the event of three or more repeated defaults even if cured within such sixty (60) day period.

 

10.5                         Challenging Validity . During the term of this Agreement, Company shall not challenge, and shall restrict Company Affiliates and Sublicensees from challenging, the validity of the Patent Rights and in the event of any breach of this provision Hospital shall have the right to terminate this Agreement and any license granted hereunder immediately. In addition, if the Patent Rights are upheld Company shall reimburse Hospital for its legal costs and expenses incurred in defending any such challenge.

 

10.6                         Termination by Company . Company shall have the right to terminate this Agreement by giving ninety (90) days advance written notice to Hospital and upon such termination shall immediately cease all use and Sales of Products and Processes, subject to Section 10.9.

 

10.7                         Effect of Termination on Sublicenses . Any sublicenses granted by Company under this Agreement shall provide for termination or assignment to Hospital of Company’s interest

 

17



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

therein, at the option of Hospital, upon termination of this Agreement or upon termination of any license hereunder under which such sublicense has been granted.

 

10.8                         Effects of Termination of Agreement . Upon termination of this Agreement or any of the licenses hereunder for any reason, final reports in accordance with Section 5 shall be submitted to Hospital and all royalties and other payments, including without limitation any unreimbursed Patent Costs, accrued or due to Hospital as of the termination date shall become immediately payable. Company shall cease, and shall cause its Affiliates and Sublicensees to cease under any sublicense granted by Company, all Sales and uses of Products and Processes upon such termination, subject to Section 10.9. The termination or expiration of this Agreement or any license granted hereunder shall not relieve Company, its Affiliates or Sublicensees of obligations arising before such termination or expiration.

 

10.9                         Inventory . Upon early termination of this Agreement other than for Company default, Company, Company Affiliates and Sublicensees may complete and sell any work-in-progress and inventory of Products that exist as of the effective date of termination provided that (i) Company pays Hospital the applicable running royalty or other amounts due on such Net Sales in accordance with the terms and conditions of this Agreement, and (ii) Company, Company Affiliates and Sublicensees shall complete and sell all work-in-progress and inventory of Products within six (6) months after the effective date of termination. Upon expiration of this Agreement, Company shall pay to Hospital the royalties set forth in Section 4.5(a) for Sales of any Product that was in inventory or was a work-in-progress on the date of expiration of the Agreement.

 

11.                                COMPLIANCE WITH LAW

 

11.1                         Compliance . Company shall have the sole obligation for compliance with, and shall ensure that any Affiliates and Sublicensees comply with, all government statutes and regulations that relate to Products and Processes, including, but not limited to, those of the Food and Drug Administration and the Export Administration, as amended, and any applicable laws and regulations of any other country in the License Territory. Company agrees that it shall be solely responsible for obtaining any necessary licenses to export, re-export, or import Products or Processes covered by Patent Rights and/or Confidential Information. Company shall indemnify and hold harmless Hospital for any breach of Company’s obligations under this Section 11.1.

 

11.2                         Patent Numbers . Company shall cause all Products sold in the United States to be marked with all applicable U.S. Patent Numbers, to the full extent required by United States law. Company shall similarly cause all Products shipped to or sold in any other country to be marked in such a manner as to conform with the patent laws and practices of such country.

 

12.                                MISCELLANEOUS

 

12.1                         Entire Agreement . This Agreement constitutes the entire understanding between the Parties with respect to the subject matter hereof

 

18



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

12.2                         Notices . Any notices, reports, waivers, correspondences or other communications required under or pertaining to this Agreement shall be in writing and shall be delivered by hand, or sent by a reputable overnight mail service (e.g., Federal Express), or by first class mail (certified or registered), or by facsimile confirmed by one of the foregoing methods, to the other party. Notices will be deemed effective (a) three (3) working days after deposit, postage prepaid, if mailed, (b) the next day if sent by overnight mail, or (c) the same day if sent by facsimile and confirmed as set forth above or delivered by hand. Unless changed in writing in accordance with this Section, the notice address for Hospital shall be as follows:

 

Executive Director, Research Ventures and Licensing
Brigham and Women’s Hospital
101 Huntington Avenue, 4
th  Floor
Boston, MA 02199

 

Fax No. (617) 954-9361

 

12.3                         Amendment; Waiver . This Agreement may be amended and any of its terms or conditions may be waived only by a written instrument executed by an authorized signatory of the Parties or, in the case of a waiver, by the Party waiving compliance. The failure of either Party at any time or times to require performance of any provision hereof shall in no manner affect its rights at a later time to enforce the same. No waiver by either Party of any condition or term shall be deemed as a further or continuing waiver of such condition or term or of any other condition or term.

 

12.4                         Binding Effect . This Agreement shall be binding upon and inure to the benefit of and be enforceable by the Parties hereto and their respective permitted successors and assigns.

 

12.5                         Assignment . Company shall not assign this Agreement or any of its rights or obligations under this Agreement without the prior written consent of Hospital; provided, however, that if Company has fulfilled its diligence obligations as set forth in Section 3, no such consent will be required to assign this Agreement to a successor of the Company’s business to which this Agreement pertains or to a purchaser of substantially all of the Company’s assets related to this Agreement, so long as such successor or purchaser shall agree in writing to be bound by all of the terms and conditions hereof prior to such assignment. Company shall notify Hospital in writing of any such assignment and provide a copy of all assignment documents and related agreements to Hospital within thirty (30) days of such assignment. Failure of an assignee to agree to be bound by the terms hereof or failure of Company to notify hospital and provide copies of assignment documentation shall be grounds for termination of this Agreement for default. Further, neither any rights granted under this Agreement nor any sublicense may be assigned by any Sublicensee without the prior written consent of Hospital.

 

12.6                         Force Majeure . Neither Party shall be responsible for delays resulting from causes beyond the reasonable control of such Party, including without limitation fire, explosion, flood, war, sabotage, strike or riot, provided that the nonperforming Party uses commercially reasonable efforts to avoid or remove such causes of nonperformance and continues

 

19


 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

performance under this Agreement with reasonable dispatch whenever such causes are removed.

 

12.7                         Use of Name . Neither Party shall use the name of the other Party or BIDMC, or of any trustee, director, officer, staff member, employee, student or agent of the other Party or BIDMC, or any adaptation thereof in any advertising, promotional or sales literature, publicity or in any document employed to obtain funds or financing without the prior written approval of the party or individual whose name is to be used. For Hospital, such approval shall be obtained from Hospital’s VP of Public Affairs.

 

12.8                         Governing Law . This Agreement shall be governed by and construed and interpreted in accordance with the laws of the Commonwealth of Massachusetts, excluding with respect to conflict of laws, except that questions affecting the construction and effect of any patent shall be determined by the law of the country in which the patent shall have been granted. Each Party agrees to submit to the exclusive jurisdiction of the Superior Court for Suffolk County, Massachusetts, and the United States District Court for the District of Massachusetts with respect to any claim, suit or action in law or equity arising in any way out of this Agreement or the subject matter hereof.

 

12.9                         Hospital Policies . Company acknowledges that Hospital’s employees and medical and professional staff members and the employees and staff members of Hospital’s Affiliates are subject to the applicable policies of Hospital and such Affiliates, including, without limitation, policies regarding conflicts of interest, intellectual property and other matters. Company shall provide Hospital with any agreement it proposes to enter into with any employee or staff member of Hospital or any of Hospital’s Affiliates for Hospital’s prior review and shall not enter into any oral or written agreement with such employee or staff member which conflicts with any such policy. Hospital shall provide Company, at Company’s request, with copies of any such policies applicable to any such employee or staff member.

 

12.10                  Severability . If any provision(s) of this Agreement are or become invalid, are ruled illegal by any court of competent jurisdiction or are deemed unenforceable under then current applicable law from time to time in effect during the term hereof, it is the intention of the parties that the remainder of this Agreement shall not be effected thereby. It is further the intention of the parties that in lieu of each such provision which is invalid, illegal or unenforceable, there be substituted or added as part of this Agreement a provision which shall be as similar as possible in economic and business objectives as intended by the parties to such invalid, illegal or enforceable provision, but shall be valid, legal and enforceable.

 

12.11                  Survival . In addition to any specific survival references in this Agreement, Sections 1, 2.4, 4.2, 4.6, 4.7, 5.3, 5.4, 5.5, 6.4, 8.1, 8.2, 9.2, 9.3, 10.7, 10.8, 10.9, 12.1, 12.2, 12.3, 12.4, 12.7, 12.8, 12.9, 12.10, 12.11, 12.12 and 12.13 shall survive termination or expiration of this Agreement. Any other rights, responsibilities, obligations, covenants and warranties which by their nature should survive this Agreement shall similarly survive and remain in effect.

 

20



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

12.12                  Interpretation . The parties hereto are sophisticated, have had the opportunity to consult legal counsel with respect to this transaction and hereby waive any presumptions of any statutory or common law rule relating to the interpretation of contracts against the drafter.

 

12.13                  Headings . All headings are for convenience only and shall not affect the meaning of any provision of this Agreement.

 

IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed by their duly authorized representatives as of the Effective Date first written above.

 

ARIDIS PHARMACEUTICALS

 

THE BRIGHAM AND WOMEN’S HOSPITAL, INC.

 

 

 

 

 

 

 

 

BY:

/s/ Eric Patzer

 

BY:

/s/ Brian Hicks

 

Name: Eric Patzer

 

 

Name: Brian Hicks

 

 

 

 

 

 

 

 

TITLE:

President

 

TITLE:

Executive Director

 

 

 

 

 

 

 

 

DATE:

November 16, 2010

 

DATE:

November 11, 2010

 

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Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

Appendix A-1

 

DESCRIPTION OF PATENT RIGHTS

 

IPs ID

 

Title

 

Ctry

 

Type

 

SN

 

Filing Dt

 

Patent #

 

Issue Dt

 

Status

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

22



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

Appendix B

 

DEVELOPMENT PLAN

 

Pseudomonas Monoclonal Antibody Product Development Plan

 

Background

 

Pseudomonas aeruginosa, a ubiquitous gram negative bacterium, has been identified as one of six “superbugs” on the “hit list” of top priority, dangerous pathogens that are becoming increasingly drug resistant” 1,2 . P. aeruginosa is also the most prevalent/causative pathogen in multi-drug resistant lung infections exceeding even MRSA. P. aeruginosa is an opportunistic pathogen that is a significant problem for critically ill or immunocompromised individuals and poses a particular threat for patients with lung infections, i.e., Hospital acquired gram negative pneumonias (HAP) including: ventilator associated pneumonia (VAP), Healthcare Associated Pneumonia (HCAP), non-CF bronchiectasis and chronic obstructive pulmonary disease (COPD). CF patients, in particular, are susceptible to chronic P. aeruginosa infections with over 80% of adult CF patients chronically infected with P. aeruginosa. Although several inhaled antibiotics, i.e., TOBI, aztreonam, amikacin, ciprofloxacin, have been, or are being developed to treat lung infections their use is limited by antibiotic resistance (both at the institutional and societal level) and in some cases the potential nephrotoxicity and ototoxicity associated with their long term use. Drug resistance is not expected to be a problem with Aerucin, since any selective pressure that may down-regulate alginate expression would result in less virulent non-mucoid Pa strains, which are more susceptible to conventional antibiotics.

 

Alginate expression is key to colonization, biofilm growth, virulence & immune evasion. The mucoid phenotype involves upregulating its secretion, which consists of 0-1, 4-linked D-mannuronic acid and L-guluronic acid and confers resistance to antibiotics 5 . In a small subset of adult CF patients, there is a class of phagocytic antibodies (i.e. they activate engulfment and destruction by immune cells) directed against alginate that appear to play a protective role. These patients are not colonized with mucoid P. aeruginosa, have better lung function than chronically colonized patients 6 , and have a specific class of anti-alginate antibodies that mediate phagocytic killing. Aerucin™ binds to the carboxyl group of the C6 of alginate mannuronic acid, an epitope that is conserved on all Pa alginate, and mediates complement dependent phagocytic killing of both mucoid and non-mucoid P. aeruginosa.

 

There are multiple therapeutic areas in which P. aeruginosa is a significant pathogen, which can be categorized according to the site of infection. We plan to initially develop these mAbs for lung infections, which are characterized by individuals in a weakened state due to chronic disease or intubation that leaves them particularly susceptible to P. aeruginosa infections. The initial indication will be hospital acquired Gram Negative Pneumonias including ventilator associated pneumonia (VAP), Healthcare Associated Pneumonias (HCAP), and Severe Community Acquired Pneumonias (CAP) with suspected P. aeruginosa 8 . Subsequently, we will investigate non-CF bronchiectasis, chronic obstructive pulmonary disease (COPD) and cystic fibrosis (CF).

 

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Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

Business Opportunity in Lung Infections

 

Lung infection markets are characterized by patients who either have a disruption of the normal protective barrier to infection such as hospital acquired pneumonias or have an underlying chronic disease (CF, non-CF bronchiectasis and COPD) that in any case leaves their lungs in a weakened state and susceptible to infections by P. aeruginosa. Additionally, those patients who are at highest risk for a hospital acquired pneumonia or health care associated pneumonia can be often overlooked if a careful patient history is not conducted. Each of these offers a specific opportunity to treat the infection and improve the disease outcome. The combined market for lung infections is a multi-billion dollar opportunity. With respect to Aerucin and our initial market focus in gram negative pneumonias, we project that Aerucin could achieve in excess of $800 Million globally and possibly greater with a comprehensive phase III development program for Gram negative pneumonias and CF.

 

Aerucin™ for Gram Negative Hospital Acquired Pneumonias

 

Nosocomial infections result from treatment in a hospital or hospital-like setting, but are secondary to the patient’s original condition. Direct mortality to HAP is ~50% with approximately 21% of all HAP caused by P. aeruginosa infections. Aerucin TM  is ideally suited for use in ventilated patients with gram negative pneumonia to improve the clinical outcome and limit systemic exposure to antibiotics. Additionally, a clinical development plan that includes intravenous or inhalation administration (wet or dry application) of Aerucin post extubation potentially improves therapeutic outcomes (full course of therapy) and expands the market opportunity for Aerucin either as continuation therapy or as initial therapy in patients where mechanical ventilation could be avoided by earlier treatment and improved efficacy in moderate to severe gram negative pneumonias.

 

Aerucin™ for the treatment of lung infections in CF patients

 

Aerucin can be given under both therapeutic and prophylactic modalities. This is because CF patients are initially infected with non-mucoid P. aeruginosa strains at an early age (median age of 13 months), which then convert to a chronic infection with mucoid strains in >80% of CF patients by 18 years of age”. Thus, Aerucin™ can be used to either prevent the initial infection with P. aeruginosa or therapeutically to control or eradicate the infection. The potential for formulation flexibility (intravenous or inhalation) greatly expands the scope of therapeutic options for the CF patient. Simple I.V. formulation could meet the needs to prevent exacerbations in CF patients who are already required to be hospitalized following an episode; however for chronic everyday use, an inhaled formulation would be more attractive to CF patients. Currently, nebulized liquid formulations can be cumbersome and time consuming considering an average CF patient is taking upwards of 9 medications for their condition at any given time. The future availability of dry powder formulations offer convenience but also have their limitations. These formulations require the patient to effectively self-administer the medication. Dry powder formulations will likely have labeling language excluding patients less than 6 years of age. A liquid formulation of Aerucin administered with an efficient nebulizer will offer the range of therapeutic options to maximize market penetration in the CF population. The current approach for use of TOBI in the CF patient recommends an alternating period of

 

24



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

antibiotic therapy for 28 days and then stops therapy for 28 days and resuming therapy for 28 days.

 

Aerucin™ for prevention of exacerbations and hospitalization in non-CF bronchiectasis and COPD.

 

Non-CF bronchiectasis and COPD are chronic lung disorders characterized by frequent lung infections and lung exacerbations (2-5 per year) leading to systemic antibiotic use and hospitalization. Each exacerbation increases the risk of antibiotic resistance and loss of lung function. Aerucin™ would be used in this setting to prevent exacerbation and hospitalization.

 

Preclinical Development

 

There is published in vitro data of Aerucin™ demonstrating effective phagocytic killing of both mucoid and non-mucoid isolates of Pa in vitro 7 . Furthermore, Aerucin demonstrated potent in vitro killing activity against a panel of recent P.aeruginosa clinical isolates, both mucoid and non-mucoid, with varying levels of antibiotic resistance to tobramycin and aztreonam (see figure).

 

 

Process Development

 

The stably transfected CHO cell line obtained from Dr. Pier’s lab exhibited a starting yield of 0.01 - 0.02 mg/mL or ~8 pg/cell/day when grown to exhaustion (~day 8) at a cell density limit of ~2x10 6  cells/mL in serum free F-12 media. Culture conditions were optimized by evaluating culture time, pH, feeding regime, seeding density, agitation speed and serum-free media. Antibody yields of 77 pg/cell/day at day 8 were observed with a cell density of up to 4.4 x10 6  cells/mL. This represents approximately a 10-fold antibody yield enhancement from the initial starting point of 8 pg/cell/day.

 

A second cell line expressing F429 mAb was developed to determine if the yields of F429 could be enhanced further. A mouse myeloma cell line NS0 (European Collection of Animal Cell Cultures, ECACC number 85110503) was used as the host cell line to express F429 light and heavy chain variable regions (VL and VH) genes in a single expression vector. NS0 was selected because it can be adapted to grow in protein-free medium and is one of the three most commonly used host cell lines for the production of human and humanized antibodies. A final clinical production cell line, called ‘2H2’, was selected for cell banking, and has been shown to have an initial mAb production yield of ~0.2g/L after 4-6 days without media optimization at 1-3L scale. Antibody produced from suspension cell cultures of these cells, followed by affinity column chromatography purification currently shows a production yield that can support phase 1 and 2 clinical studies.

 

25



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

Formulation Development

 

Aridis has a proprietary technology to produce room temperature stable powder containing Aerucin for direct inhalation using commercially available dry powder inhalers. However, while dry powder formulations bring several advantages in convenience and patient compliance, a simple refrigerated stable liquid formulation for systemic delivery will initially be developed. Formulations were tested for stability at 2-8°C and 37°C (accelerated condition) for six months to determine the most stable formulation. The data shown in the accompanying figure demonstrated that a simple histidine buffer (10 mM, pH 6.0) is sufficient to stabilize the antibody at 2-8° C.

 

 

Preclinical Safety Testing

 

Non-GLP Studies

 

Standard in vitro human tissue cross-reactivity studies were performed with tissue panel samples from three unrelated human donors. Preliminary results indicate that there was no cross reactivity to the FDA panel of 40 human tissues.

 

Preliminary pharmacokinetics study in rodents showed a 2-3 days lung residence time of antibodies delivered by intratracheal administration. Toxicology testing will include single and repeat dose inhalation studies performed with escalating doses in rodents.

 

GLP Toxicology Testing

 

Overview. GLP inhalation toxicology testing will be performed at contract laboratory and included in an IND with US FDA. Prior to initiation of tox studies the design and relevance of these studies will be discussed with FDA. There are certain circumstances in which tox studies may not be necessary with human mAbs. Nevertheless, our plans include the likelihood of both acute and repeat dose toxicology studies in two animal species (rodent and non-rodent).

 

Acute Toxicology Studies In Rodents And Non-Rodents To Determine The Maximum Tolerated Dose (MTD)

 

·                   Single dose at three dose levels (low, med, and high) — doses will be based on in vitro and in vivo data as well as pharmacokinetic analyses

·                   Administration by intravenous injection

·                   Six animals per group

·                   Study measurements

 

26



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

·                               Morbidity, mortality, weight, appearance

·                               Quantitation of treatment antibody in lung by ELISA

 

Repeat Dose (14 Day) Toxicology Studies In Rodents And Non-Rodents

 

·                         Dosing frequency based on half life determination from pharmacokinetics

·                         Administration by intravenous injection

·                         Duration of dosing will be —14 days

·                         Three dose levels (low, medium, high)

·                         Six animals per group

·                         Study measurements

·                         Morbidity, mortality, weight, appearance

·                         Quantitation of treatment antibody in lung by ELISA

 

Clinical Development

 

Overview. A phase 1 clinical trial will be performed in healthy adults to determine the biodistribution and safety of Aerucin after intravenous administration. Subsequently, a phase 2 clinical trial in adult patients on mechanical ventilation with Gram negative Pseudomonas pneumonia will be conducted to establish safety and clinical cure rate of I.V. Aerucin in the target population. A multicenter pivotal phase 3 trial will expand the number of patients treated and the duration of treatment.

 

Aerucin TM  Phase 1 Safety, Pharmacokinetics, and Dose Escalation Trial in Healthy Adults

 

·                     18 Healthy adult volunteers (4 active at each dose:2 controls)

·                     Aerucin dose to be evaluated is 1, 2 and 4 mg/kg by IV administration

·                     Multiple dose at maximum tolerated dose if needed (4 active)*

·                     Safety endpoints

·                   Any new onset of medically significant conditions

·                   Serious adverse events (SAEs)

·                   Pulmonary function testing

·                   Safety labs and EKG

·                     Biodistribution endpoints

·                   Systemic clearance

·                   Pharmacokinetics endpoint

·                   Blood and urine levels

 


*Administration frequency to be determined by initial PK

 

Aerucin Phase 2 Dose Study in Adults on Mechanical Ventilation

 

·                          Phase 2, Randomized 1:1 Double Blind Placebo Controlled

·                          40 adults: 1 dose level group (20 patients active : 20 control)

·                   Diagnosed ventilator associated pneumonia or ventilator associated tracheobronchitis

 

27



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

·                   Colonized with Pseudomonas aeruginosa**

·                   Concurrent combination antibiotic treatment according to ATS standards

·                           Regimen

·                   Dose at maximum tolerated dose (MTD) level

·                   Dosing frequency determined by PK

·                           Safety endpoints

·                   Non-inferiority in mortality & other AEs to placebo

·                   Serious adverse events (SAEs)

·                   Changes in lung resistance and compliance

·                   Oxygenation

·                   Chemistry & hematology (Cmax, Tmax, trough baseline)

·                           Efficacy endpoints

·                   Clinical cure rate - superiority compared to placebo

·                  Antibiotic utilization during treatment period

·                  Clinical Pulmonary Infection Score (CPIS; improvement by at least 2 points)

·                   Reduction in ventilator days

·                   Reduction in ICU days

·                   Decrease Microbiological recurrence rates

·                   Pseudomonas aeruginosa concentration in lung aspirate & BAL collected serially during therapy

 

Aerucin TM Phase 3 Safety and Efficacy Trial in Adults on Mechanical Ventilation

 

·                   Two Randomized, Double-Blind, Placebo-Controlled, Parallel-Group, Multicenter, and Multinational Study in hundreds of adult subjects

·                   Adult Subjects

·                   Intubated and mechanically-ventilated

·                   Microbiologically-confirmed pneumonia caused by gram-negative P. aeruginosa

·                   Compare safety and efficacy of standard of care (ATS) with and without IV Aerucin

·                   Regimen

·                   Dose (frequency TBD) for 7-10 days

·                   Intravenous Aerucin or placebo

·                   Primary Objectives

·                   Superiority in clinical cure rate of adjunctive Aerucin*

·                   Improvement in Clinical Pulmonary Infection Score (CPIS; by at least 2 points)

·                   Reduction in antibiotic utilization during treatment period

·                   Non-inferiority in mortality

·                   Secondary Objectives

·                   Decrease in microbiological recurrence rates with Aerucin

·                   Reduction in ventilator days

·                   Reduction in ICU days

 

28



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

·                   Pseudomonas aeruginosa concentration in lung aspirate & BAL collected serially during therapy

 


*Clinical Cure: Resolution of clinical signs and symptoms of pneumonia and improvement in pulmonary function or lack of progression of abnormalities on chest radiograph assessed by the 7-to 21-day test-of-cure visit.

 

Aerucin™ Product Development Timelines for treatment of Gram Negative Pseudomonas Pneumonia

 

 

Key Scientific Literature

 

1.                                       The Resistance Phenomenon in Microbes and Infectious Disease Vectors: Implications for Human Health and Strategies for Containment — Workshop Summary, S L Knobler, SM Lemon, M Najafi and T Bourroughs, eds., Forum on Emerging Infections (2003) Institute of Medicine, National Academies Press.

 

2.                                       IDSA News Release, March 1, 2006, http://www.idsociety.org/Content/NavigationMenu/News_Room1/Bad Bugs_Need_Drugs/IDSA_Releases_Hit_List_Of_Dangerous_Bugs.htm

 

3.                                       Gibson RL, Pathophysiology and management of pulmonary infections in cystic fibrosis, Am J Respir Crit Care Med. 2003. 168: p. 918-51.

 

4.                                       Li Z, Longitudinal development of mucoid Pseudomonas aeruginosa infection and lung disease progression in children with cystic fibrosis, JAMA. 2005. 293: p. 581-8.

 

5.                                       Zielinski NA, Maharaj R, Roychoudhury S, Danganan CE, Hendrickson W and Chakrabarty AM. Alginate Synthesis in Pseudomonas aeruginosa: Environmental Regulation of the algC Promoter. J Bacteriol. 1992. 174:7680-8.

 

6.                                       Pier GB, et al, Opsonophagocytic killing antibody to Pseudomonas aeruginosa mucoid exopolysaccharide in older noncolonized patients with cystic fibrosis. N Engl J Med, 1987. 317: p. 793-8.

 

29



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

7.                                       Pier GB, Boyer D, Preston M, Coleman FT, Llosa N, Mueschenborn-Koglin S, Theilacker C, Goldenberg H, Uchin J, Priebe GP, Grout M, Posner M, Cavacini L. Human monoclonal antibodies to Pseudomonas aeruginosa alginate that protect against infection by both mucoid and nonmucoid strains. J Immunol. 2004.173:5671-8.

 

8.                                       Arlington Medical Resources 2007

 

30



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

Appendix C
SALES REPORTS

 

AGREEMENT INCOME REPORT

Royalty Income

 

BWH Agreement #A 107605.05

Licensee -

Sub-Licensee -

 

Separate reports must be filed for:

1.             Each Product sold.

2.             Each country of sale, if different deductions or royalty rates apply.

 

Product Name:

Report Time Period:

 

From       mm/dd/yyyy                      

To           mm/dd/yyyy                       

 

 

Country of Sale

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Quantity Sold

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross Sales (USD)

 

$

 

 

$

 

 

$

 

 

 

 

 

 

 

 

 

 

Exchange Rate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deductions (Itemize)

 

 

 

 

 

 

 

 

Please list each deduction separately. Use same definition as appears in Agreement and include the contract paragraph as a reference (Std Section 1.17(a)(ii) line item deductions listed below).

 

A1.

 

 

 

 

 

 

 

A2.

 

 

 

 

 

 

 

A3.

 

 

 

 

 

 

 

A4.

 

 

 

 

 

 

 

B.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Deductions

 

(

)

(

)

(

)

 

 

 

 

 

 

 

 

Net Sales

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Royalty Percentage

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Credits (itemize)

 

(

)

(

)

(

)

 

 

 

 

 

 

 

 

Royalties Due

 

$

 

 

$

 

 

$

 

 

 

 

PLEASE ATTACH DETAIL SALES REPORTS AS REQUIRED

 

31



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

Appendix D

 

AGREEMENT INCOME REPORT

Sublicense Income

 

BWH Agreement # 107605.05

Licensee -

Sub-Licensee -

 

Separate reports must be filed for Payments associated with each Product:

 

Product Name:

 

Report Time Period:

 

From       mm/dd/yyyy                      

 

To           mm/dd/yyyy                      

 

Detailed Explanation of Payment

Required for “Other Payment”

 

Annual Fees/Minimum Royalties

 

$

 

 

 

 

 

 

 

 

 

 

Milestone Payments

 

$

 

 

 

 

 

 

 

 

 

 

Sublicense Fees and Royalties

 

$

 

 

 

 

 

 

 

 

 

 

Other Payment

 

$

 

 

 

 

 

 

 

 

 

 

Other Payment

 

$

 

 

 

 

 

 

 

 

 

 

Other Payment

 

$

 

 

 

 

 

 

 

 

 

 

TOTAL

 

$

 

 

 

 

 

 

PLEASE ATTACH DETAIL AS REQUIRED

 

32



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

Appendix E

 

CONFIDENTIALITY TERMS AND CONDITIONS

 

1.                                       Definition of Confidential Information. “Confidential Information” shall mean any information, including but not limited to data, techniques, protocols or results, or business, financial, commercial or technical information, disclosed by one Party (each a “Discloser” as applicable) to the other Party (each a “Recipient” as applicable) in connection with the terms of that certain Exclusive License Agreement dated November 10, 2010 (the “License Agreement”) and identified as confidential at the time of disclosure (the “Purpose”). Hospital’s Confidential Information shall also include all information disclosed by Hospital to Company in connection with the Patent Rights. Company’s Confidential Information shall also include all reports made pursuant to the License Agreement, including without limitation the development report appended to the license Agreement, and all royalty reports and related data; as well as all data disclosed in any audit or review performed by Hospital. Capitalized terms used in this Appendix that are not otherwise defined herein have the meanings ascribed in the License Agreement to which this Appendix is attached and made a part thereof.

 

2.                                       Exclusions . “Confidential Information” under this Agreement shall not include any information that (i) is or becomes publicly available through no wrongful act of Recipient; was known by Recipient prior to disclosure by Discloser, as evidenced by tangible records; (ii) becomes known to Recipient after disclosure from a third party having an apparent bona fide right to disclose it; (iv) is independently developed or discovered by Recipient without use of Discloser’s Confidential Information, as evidenced by tangible records; or (v) is disclosed to another party by Discloser without restriction on further disclosure. The obligations of confidentiality and non-use set forth in this Agreement shall not apply with respect to any information that Recipient is required to disclose or produce pursuant to applicable law, court order or other valid legal process provided that Recipient promptly notifies Discloser prior to such required disclosure, discloses such information only to the extent so required and cooperates reasonably with Discloser’s efforts to contest or limit the scope of such disclosure.

 

3.                                       Permitted Purpose . Recipient shall have the right to, and agrees that it will, use Discloser’s Confidential Information solely for the Purpose as described in the License Agreement, except as may be otherwise specified in a separate definitive written agreement negotiated and executed between the parties.

 

4.                                       Restrictions . For the term of the License Agreement and a period of three (3) years thereafter (and indefinitely with respect to any individually identifiable health information disclosed by Hospital to Company, if any), each Recipient agrees that: (i) it will not use such Confidential Information for any purpose other than as specified herein, including without limitation for its own benefit or the benefit of any other person or entity; and (ii) it will use reasonable efforts (but no less than the efforts used to protect its own confidential and/or proprietary information of a similar nature) not to disclose such Confidential Information to any [ORIGINAL DOCUMENT ENDS HERE]

 

33




Exhibit 10.7

 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

THE BRIGHAM AND WOMEN’S HOSPITAL, INC.

 

FIRST AMENDMENT to
EXCLUSIVE PATENT LICENSE AGREEMENT

 

BWH Agreement No: 107605.06
BWH Case Nos: 10706, 11049

 

This First Amendment to the License Agreement (as defined below) (“First Amendment”) is made as of the eighteenth day of February, 2016 (“First Amendment Effective Date”), by and between Aridis Pharmaceuticals, Inc, a Delaware corporation, having an office at 5941 Optical Court, San Jose, CA 95138 (“Company”) and The Brigham and Women’s Hospital, Inc., a not-for-profit Massachusetts corporation, with a principal place of business at 75 Francis Street, Boston, Massachusetts 02115 (“Hospital”), each referred to herein individually as a “Party” and collectively as the “Parties”.

 

RECITALS

 

Whereas Company and Hospital are parties to an exclusive license agreement (BWH #107605.05) which has an effective date of November 10, 2010 (the “License Agreement); and

 

Whereas the Parties would like to amend the License Agreement in order to modify the Pre-Sales Diligence Requirement and the Milestone Payments;

 

Except as expressly modified hereby, the terms of the License Agreement remain in full force and effect and shall govern and apply to this Amendment. Unless otherwise indicated, all defined terms shall have the same meaning in this Amendment as in the License Agreement.

 

Now therefore, in consideration of the covenants and undertakings hereinafter set forth, it is agreed by and between the parties as follows:

 

1.                                       Section 3.1(a) of the License Agreement shall be deleted and replaced with the following:

 

“(a)                            Pre-Sales Requirements .

 

(i)                                      Company shall make best efforts to follow the research and development plan attached hereto as Appendix B, and shall submit

 



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

annual progress reports to Hospital on each anniversary of the Effective Date; and

 

(ii)                                   Within five (5) years of the Effective Date, Company will commence a Phase I clinical trial; and

 

(iii)                                Within seven (7) years of the Effective Date, Company will commence a Phase II clinical trial; and

 

(iv)                               Within ten (10) years of the Effective Date, Company will commence a Phase III clinical trial; and

 

(v)                                  Within twelve (12) years of the Effective Date, Company will file an NDA for a Product.”

 

2.                                       Section 4.4(c) and 4.4(d) of the License Agreement shall be deleted and replaced with the following:

 

“(c)  [***] within sixty (60) days of completion of a Phase III clinical for the first Product

 

(d)  [***] upon FDA approval of first Product.”

 

IN WITNESS WHEREOF, the Parties have duly executed and delivered this First Amendment to be effective as of the date hereof.

 

ARIDIS PHARMACEUTICALS

 

THE BRIGHAM AND WOMEN’S HOSPITAL, INC.

 

 

 

 

 

 

 

 

BY:

/s/ Eric J Patzer

 

BY:

/s/ Seema Basu

 

Name: Eric J Patzer

 

 

Name: Seema Basu

 

 

 

 

 

 

 

 

TITLE:

Chairman

 

TITLE:

Director

 

 

 

 

 

DATE:

February 22, 2016

 

DATE:

February 22, 2016

 

2




Exhibit 10.8

 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

ASSET PURCHASE AGREEMENT

 

between

 

1.                                       Kenta Biotech Ltd. , Wagistrasse 25, 8952 Schlieren, Switzerland

 

(“ Seller ”)

 

and

 

2.                                       Aridis Pharmaceuticals LLC , 5941 Optical Court, San Jose, CA 95138, USA

 

(“ Buyer ”)

 

Seller and Buyer individually and collectively referred to as “ Party ” or “ Parties

 

regarding the sale and purchase of Seller’s Assets as described herein

 

1



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

WHEREAS:

 

A.                                     Seller is a corporation ( Aktiengesellschaft ) duly incorporated in Schlieren (Canton of Zurich, Switzerland), registered under the identification number CH-035.3.035.876-2.  Seller’s principal purpose is research, development, manufacture and marketing of biotechnology and pharmaceutical products, particularly monoclonal antibodies, as well as the exploitation of intellectual property assets and immaterial property law similar assets (research projects, know-how).

 

B.                                     Buyer is a company duly incorporated under the laws of the State of California, USA, with registered address at 5941 Optical Court, San Jose, CA 95138.

 

C.                                     The Parties completed an unsigned “Non-Binding Outline of Proposed Terms” outlining the structure and the major terms and conditions of this asset deal.

 

D.                                     Pursuant to the terms and conditions of this Agreement, Seller intends to sell to Buyer and Buyer intends to purchase from Seller the Assets as further described herein.

 

NOW, THEREFORE , the Parties agree as follows:

 

1.                                       DEFINITIONS

 

Agreement ” shall mean this Agreement and its Exhibits.

 

Assets ” shall mean the Physical Assets, the Contracts and the Technology in the property of the Seller at Closing Date, but shall exclude any advance payments made by the Seller to a third party.

 

Business Day ” shall mean any day on which the commercial banks in Zurich are open for regular business transactions.

 

CO ” shall mean the Swiss Code of Obligations.

 

Closing ” shall mean the consummation of the transactions as set forth in Section 5 of this Agreement and “Closing Date” shall mean the date and time thereof.

 

Liens ” shall mean any liens, encumbrances, charges, pledges or other security arrangements, other than created by applicable law in the ordinary course of business.

 

Purchase Price ” shall mean the amount defined in Section 3 of this Agreement.

 

Physical Assets ” shall mean all physical assets owned or controlled by Kenta, including but not limited to cell lines, genes, antibodies, diagnostic assays and related documentation, which are related to Kenta’s MabIgX technology platform for hybridoma generation and its monoclonal antibodies targeting Staphylococcus aureus (SA), Pseudomonas

 

2



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

aeruginosa (PA), Acinetobacter baumannii (AB) and respiratory syncytial virus, including such Physical Assets as are specified in Schedule A existing on the Closing Date.

 

Contracts ” shall mean the contracts and agreements (including all rights and obligations thereunder), whether oral or written, which Seller has concluded and which pertain to the Assets, as listed in Schedule B attached hereto.

 

Technology ” shall mean all intellectual property, including but not limited to patents, patent applications, trademarks, knowhow, trade secrets, regulatory filings, clinical trials, clinical trial information, all supporting documentation and all other related intellectual property which are related to Kenta’s MabIgX technology platform for hybridoma generation and its monoclonal antibodies targeting Staphylococcus aureus (SA), Pseudomonas aeruginosa (PA), Acinetobacter baumannii (AB) and respiratory syncytial virus, including such Technology as is listed in Schedule C attached hereto.

 

Signing ” shall mean the signing of this contract as set forth in Section 4 and “Signing Date” shall mean the date and time thereof.

 

2.                                       SALE AND PURCHASE OF THE ASSETS

 

Subject to the terms and conditions defined herein, Seller hereby agrees to sell to Buyer the Assets by assigning and transferring the Physical Assets, Contracts and the Technology to Buyer and Buyer hereby agrees to purchase from Seller the Assets by accepting the sale, assignment and transfer of the Physical Assets, the Contracts and the Technology by way of singular succession.

 

3.                                       PURCHASE PRICE

 

The consideration for the Assets sold in accordance with Section 2 of this Agreement consists of a Fixed Purchase Price (according to Section 3.1) and Royalty Payments (according to Section 3.2) (the “ Purchase Price ”).

 

3.1.                             Fixed Purchase Price

 

Subject to the terms and conditions defined herein, Buyer agrees to pay to Seller by wire transfer to the account mentioned in Schedule 3.1 the aggregate amount of USD [***] divided into five installments and on the respective dates as described hereinafter:

 

·                                           [***] (payable on Signing Date);

 

·                                           [***] (payable 90 Business Days after Signing Date);

 

·                                           [***] (payable on Closing Date);

 

·                                           [***] (payable 60 Business Days after Closing Date);

 

·                                           [***] (payable 180 Business Days after Closing Date);

 

3



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

(the sum of the items listed in this Section 3.1 being referred to as the “ Fixed Purchase Price ”).

 

3.2.                             Royalty Payments

 

3.2.1.                   Determination of Royalty Payments

 

In addition to the Fixed Purchase Price, Buyer shall pay to Seller a Royalty Payment on Gross Licensing Revenue actually received by Buyer.  The amount of the Royalty Payments according to Section 3.2.2 shall be calculated on a diminishing scale as follows:

 

·                                           [***]

 

·                                           [***]

 

·                                           [***]

 

·                                           [***]

 

(each item listed above in this Section 3.2 being referred to as “ Royalty Payment ”).

 

In this context “ Gross Licensing Revenue ” shall mean all amounts received by Buyer in consideration for out-licensing of the Assets (including Physical Assets or Technology) to any third parties for commercial sale worldwide.  Gross Licensing Revenue shall exclude amounts received in consideration other than for license of the Assets, such as research reimbursement or equity investment.

 

Gross Licensing Revenue shall include net sales revenue of the Buyer for sale of products incorporating Assets although the royalty payment due shall be under a separate schedule as described here (this includes net sales made by the Buyer alone or in cooperation with a distributing, co-marketing or co-promotion partner, but it does not include net sales made by partners of Buyer to whom the Assets have been out-licensed by Buyer — for those partners Buyer shall pay royalties only on its Gross Licensing Revenue receipts from the third party partner and the royalty rates listed above apply): Where such net sales are received, Buyer shall pay to Seller a Royalty Payment equal to [***] of net sales (gross sales less customarily accepted shipping, insurance, taxes and similar usual deductions).  In this case the above mentioned diminishing scale is not applicable.  This clause does not apply where Assets have been sold to a third party as provided below, and that party thereafter receives such net sales.

 

In the case of the sale of the Assets to a third party, including a sale of the Assets in combination with other property of Buyer, the sale of the entire business of Buyer, or the sale of the business of Buyer in exchange for shares of a third party company, the following shall apply: Gross Licensing Revenue shall include the amounts received for sale of the Assets to the third party, or pro rata for that portion of the sale proceeds received due to the value of the Assets in such sale.  The amount received for sale shall include deferred payments like Royalty Payments, earn-out payments or any other payments to be made in

 

4



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

future.  If shares are provided as consideration, Seller may receive the appropriate portion of shares (if only a part of the payment is made with shares, the Seller shall receive shares pro rata as to other consideration in the equal ratio as the Buyer).  If such shares are publicly traded, Seller may in lieu request the fair market value thereof at time of receipt.  In any such sale, Buyer shall use reasonable efforts to ensure that fair market value for Assets is received.  If a pro rata portion of such sale applies to Assets, Buyer shall describe in reasonable detail the sale to Seller, and accompany such description with reasonable description of the value of all components sold and the calculation used in the determination of the pro rata portion.  Such documentation shall also be subject to review pursuant to section 3.2.2 below.  In the event of any significant disagreement by Seller as to the assessment made, the parties shall first meet to attempt to determine a fair apportionment, and if no such apportionment can be made, the arbitration provisions below shall be activated.

 

In all such sales of Assets by Buyer, all royalty obligations under this Agreement shall cease, this Agreement shall terminate, and the third party purchaser shall thereafter be free to further license, sell product incorporating or based on, or otherwise exploit Assets without payment of further royalties hereunder.

 

3.2.2.                   Payment of Royalty Payments

 

Royalty Payments shall be paid by Buyer to Seller as follows:

 

(i)                                      regarding one time Gross Licensing Revenue (e.g. upfront payment regarding an out-licensing agreement payment, a milestone payment or a sale of Assets/IPR), within 90 Business Days after Buyer has received such payment;

 

(ii)                                   regarding regularly generated Gross Licensing Revenue (or net sales royalties, if applicable), on a quarterly basis, due 90 days after the conclusion of each calendar quarter of each year.

 

Each of these Royalty Payments to be made in cash, in USD, by wire transfer to the account of Seller according to Schedule 3.1.

 

Royalty Payments will be due to Seller for the following periods: (i) for products based upon Kenta’s monoclonal antibodies targeting Staphylococcus aureus (SA) or Pseudomonas aeruginosa (PA), the date which is the twentieth anniversary of the Closing Date; and (ii) for all other products incorporating Kenta Assets, the date which is the tenth anniversary of the Closing Date; except that (iii) if at any point the Royalty Payments (on Gross Licensing Revenue and net sales royalties combined; and including any Gross Licensing Revenue arising from sale of Assets as described above) paid by Buyer amount to a total cumulative sum of USD 50 million, all further royalty payments shall immediately cease and no further amounts shall be due.

 

Seller shall be responsible for all taxes, including VAT (if any), that occurs on the Royalty Payments.

 

5



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

3.2.3.                   Expert

 

Buyer shall keep complete and accurate records in connection with the sale or licensing of the Assets or any portion thereof to third parties so as to permit Seller to confirm the accuracy of the determination of the Gross Licensing Revenue according to Section 3.2.1 (“ Royalty Payment Calculation ”).  Any books and records to be maintained by Seller under this Agreement shall be maintained in accordance with generally accepted accounting principles, consistently applied in its territory.

 

The accounts of Buyer must be made available to Seller to the extent necessary to verify the accuracy of the Royalty Payment Calculations within 90 days after the end of each calendar year or the respective business year of Buyer.

 

At the request of Seller, Buyer shall permit an independent, certified public accountant appointed by Seller and reasonably acceptable to Buyer, at reasonable times and upon reasonable notice, to examine those records as may be necessary to verify the Royalty Payment Calculations for any period.  Results of any such examination shall be made available to both Parties.  Seller shall bear the full cost of the performance of any such audit requested except as hereinafter set forth.

 

If, as a result of any inspection of the books and records of Buyer, it is shown that Buyer’s Royalty Payments to Seller under this Agreement were less than the amount that should have been paid, then Buyer shall make all payments required to be made to eliminate any discrepancy revealed by said inspection within thirty (30) days after Seller’s demand therefore.  Furthermore, if the payments made were less than ninety percent (90%) of the amount that should have been paid during the period in question, Buyer shall also reimburse the Seller for the reasonable costs of such audit at the same time.

 

4.                                       SIGNING AND SIGNING DATE

 

The contract shall be signed in Schlieren on the May 10, 2013.

 

4.1.                             Signing Actions

 

The Buyer shall pay the first installment of the Fixed Purchase Price, meaning [***] , to Seller, as set forth in article 3.1 in this agreement.  Within a reasonable time after signing, Seller shall provide access to the Buyer or a third party appointed by the Buyer (at Buyer’s discretion) to all documentation and data related to Assets (including all Contracts), and other reasonable assistance to Buyer as is necessary to enable Buyer to pursue financing related to the development of the Assets.

 

4.2.                             Conduct between Signing and Closing

 

a)                                      The Kenta KBSA301 clinical trial has been suspended and is on hold.  Between Signing and Closing of this Agreement, Seller shall maintain the clinical trial on hold without termination and therefore perform the necessary payments, provide

 

6



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

for IT services and for the Location and maintain the communication with the responsible authorities.  Furthermore Seller shall maintain sufficient Assets to properly terminate the trial if required, or if this Agreement is terminated during that time.

 

In case Buyer requires further assistance to maintain the Kenta KBSA301 clinical trial, the Buyer shall contact the present or former staff of Seller and Buyer shall agree on the respective terms and conditions directly with the required person.

 

b)                                      The Buyer shall pay 90 Business Days after Signing Date the second installment of the Fixed Purchase Price, meaning [***] , to Seller, as set forth in article 3.1 in this agreement.

 

5.                                       CLOSING CONDITIONS, CLOSING ACTIONS AND DELIVERIES

 

5.1.                             Closing Conditions

 

The respective obligations of each Party to consummate the transactions contemplated in this Agreement shall be subject to the satisfaction or waiver at or prior to the Closing Date of the following condition precedent:

 

a)                                      Buyer has paid second installment, can make the Closing Date installment, and has secured or can demonstrate a reasonable expectation to be able to secure (for example, through a financing letter of intent) all the outstanding installments of the Fixed Purchase Price;

 

b)                                      Buyer continues reasonable best efforts to secure funds for the remainder of the completion of the clinical trial currently on hold;

 

c)                                       There are no judgments or orders outstanding or suits or actions filed which enjoin or threaten to enjoin the consummation of the transactions contemplated in this Agreement;

 

d)                                      If one of the Closing Conditions are not fulfilled and not waived by the other Party, this Agreement shall be automatically terminated without any further payments or obligations of either Party.

 

5.2.                             Closing and Closing Date

 

The transactions contemplated in this Agreement shall be consummated 180 Business Days after Signing or, to the extent legally possible, waiver by the Parties of the conditions precedent set forth in article 5.1 of this Agreement, or at any other date mutually agreed by the Parties, by simultaneously performing the actions and deliveries set forth in Section 5.3 until 5.4 of this Agreement (“ Closing Date ”).

 

7



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

5.3.                             Seller’s Closing Actions and Deliveries

 

At Closing Date Seller shall:

 

a)                                      assign and transfer the Physical Assets to Buyer and for such purpose execute any other instruments and documents necessary to validly transfer the Assets to Buyer;

 

b)                                      assign and transfer the Contracts to Buyer, at the option of and pursuant to instructions as provided by Buyer;

 

c)                                       assign and transfer to Buyer the Technology and for such purpose execute the instruments and documents necessary to validly assign and transfer the IPR to Buyer.

 

5.4.                             Buyer’s Closing Actions and Deliveries

 

At Closing Date Buyer shall:

 

a)                                      pay the third installment of the Fixed Purchase Price, meaning [***] , to Seller;

 

b)                                      duly execute any agreements necessary regarding the transfer of the Assets.

 

5.5.                             Further Actions and Delivery

 

The Buyer shall use reasonable business efforts in its development of the Assets to maximize the outcome of the business related to the Assets (e.g. Gross Licensing Revenue).

 

5.6.                             Concurrent Actions

 

The actions described in Section 5.3 until 5.4 shall be deemed to take place concurrently.

 

6.                                       NO TRANSFER OF LIABILITIES

 

This is a contract for the purchase of Assets by Buyer.  No transfer of business risk, operations risk, or existing liabilities of the business of Seller is intended or made hereunder unless specifically noted herein.  Buyer does not take over or assume any liabilities, whatever their nature, whether contingent or otherwise from Seller.  Seller shall hold Buyer harmless from, and indemnify Buyer, against any losses and liabilities arising from the transferred Assets, if any, if and to the extent that such losses and liabilities relate to matters up to and including the Closing Date.  Any losses or liabilities up to the Closing Date relating to the Physical Assets, the Contracts and the Technology or any other matter related to the transfer of Assets contemplated by this Agreement shall be borne exclusively by Seller, irrespective of the fact that any such losses or liabilities may have been transferred by operation of law to Buyer.

 

8



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

7.                                       WARRANTIES & GUARANTEES OF SELLER

 

Seller hereby provides for the following warranties and guarantees to Buyer:

 

7.1.                             Authorizations

 

Seller warrants to Buyer that he is fully authorized and empowered to enter into this Agreement and that the entering into the Agreement and the performance of their respective obligations under the Agreement will not violate any agreement or regulation.

 

7.2.                             Assets

 

Seller has sole and valid title to the Assets which are free and clear of any liens.  The Assets have been properly maintained in accordance with past practice and are in good working condition, and in particular to Seller’s best knowledge there are no known safety issues related to any Assets, no data to suggest or imply lack of efficacy, safety issues, or the potential for serious adverse events in any clinical trial related to the Assets, including that there are no reported serious adverse events considered by the investigators related to the study drug KBSA301.

 

7.3.                             Contracts

 

The Contracts are valid and binding on Seller and, to the best knowledge of Seller, the counterparties thereto, and are in full force and effect.  Seller is not in breach or material default under any of the Contracts to which it is a party.  Neither the execution of this Agreement nor the consummation of the transactions contemplated herein will terminate or give rise to any right of the respective counterparty to terminate, not automatically renew, accelerate or modify, or require the consent of the respective counterparty to the transfer of, any of the Contracts.

 

Furthermore, neither the execution of this Agreement nor the consummation of the transactions contemplated herein will result in or give rise to any additional right or entitlement of the respective counterparty to increased, additional or accelerated payments under any of the Contracts, result in the creation or imposition of any liens upon any of the Assets under the terms of any of the Contracts, or result in any restriction on Seller’s rights under any of the Contracts.

 

7.4.                             Intellectual Property Rights

 

Seller is registered owner of or, as the case may be, has valid title to the Assets including the Technology.  As used by Seller in its territories, the Technology does not, until the Closing Date, infringe the intellectual property rights of any third party and to the best of Seller’s knowledge no third party has infringed the Technology.

 

Until the Closing Date, the development of the Assets as conducted in its territories does not conflict with, infringe, misappropriate or otherwise violate the intellectual property rights or other proprietary rights of any third party.  To the best of Seller’s knowledge,

 

9



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

Buyer will be entitled to use all intellectual property rights necessary to develop the Assets until the Closing Date.

 

7.5.                             Litigation

 

There are no legal actions or proceedings pending or threatened against Seller relating to, or arising out of, the Assets which could have a material adverse effect on the Assets.

 

7.6.                             Taxes and Charges

 

There are no tax liabilities or charges for periods up to the Closing Date, including but not restricted to VAT liabilities, connected with or attached to the Assets in a way that Buyer may be held liable for such tax liabilities or charges or that the tax authorities may claim for a lien over such assets or contracts.

 

7.7.                             Data, Files and Records

 

All material data, files, records and archives relating to the Assets are owned and maintained by and in the possession of Seller in accordance with applicable legal requirements.

 

7.8.                             No Material Adverse Change

 

Between April 1, 2013, and the Closing Date, Seller has:

 

a)                                      not made any material changes in the Physical Assets, Contracts or Technology or other than changes in the ordinary course of business;

 

b)                                      not made any changes which are likely to have a materially detrimental effect on the Assets;

 

c)                                       not materially amended or terminated any Contract, other than in the ordinary course of business;

 

d)                                      has maintained all patent applications or patents without forfeiture or abandonment of rights.

 

8.                                       WARRANTIES & GUARANTEES OF BUYER

 

Buyer hereby provides for the following warranties and guarantees to Seller:

 

8.1.                             Authorizations

 

Buyer warrants to Seller that he is fully authorized and empowered to enter into this Agreement and that the entering into the Agreement and the performance of their respective obligations under the Agreement will not violate any agreement or regulation.

 

10


 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

8.2.                             Financing

 

Buyer has all funds necessary to finance itself the payment of the Purchase Price, whether exclusively by its own means or with a partial external financing available to Buyer.

 

9.                                       REMEDIES, LIMITATION AND EXCLUSION OF LIABILITY

 

9.1.                             Indemnity

 

In case of a breach of a representation and warranty by Seller, Seller shall within the limitations set forth in article 4 of this Agreement remedy such breach within forty-five (45) days after being duly notified in writing thereof.  If such remedy is not possible or successful, Seller shall pay to Buyer the amount which is necessary to establish the state described in such representation and warranty, including compensation for any Losses caused by such breach, except for any lost profits or goodwill.

 

9.2.                             Term of Representations and Warranties

 

The representations and warranties set forth in Section 8 of this Agreement shall continue in effect until eighteen (18) months after the Closing Date.

 

9.3.                             Limitations and Exclusions of Liability

 

Seller shall have no obligation to pay any compensation or damages for a breach of a representation and warranty unless the amount of any single claim raised by Buyer exceeds USD 50,000.00 or the cumulative value of claims exceeds USD 100,000 (“ De minimis ”).  Seller’s total liability for breaches of representations and warranties shall be limited to the Fixed Purchase Price (“ Cap ”).

 

Seller shall not be liable in respect of a claim by Buyer for a breach of a representation and warranty:

 

a)                                      If and to the extent the matter giving rise to a claim has been fairly and adequately disclosed to Buyer; or

 

b)                                      If and to the extent Buyer is entitled to claim compensation for any Losses from a third party (no double dip); or

 

c)                                       If and to the extent any Losses were caused by the fact that Buyer has failed to mitigate the Losses caused by a breach of a representation and warranty.

 

9.4.                             Procedure with Third Parties and Authorities

 

If a breach of a representation and warranty arises because any authority or other third party raises claims against Buyer or if Buyer in connection with such a breach has to enforce any rights or claims against such authority or other third party, any negotiations and proceedings required shall be carried out upon consultation with Seller and, upon Seller’s

 

11



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

request and at Seller’s expense, with the good faith participation of Seller’s counsel.  Buyer may in any event not settle any such claims without Seller’s prior written consent which shall not be unreasonably withheld, it being understood that Seller shall respond to Buyer’s request for consent within 20 days or such shorter period as a competent authority may set, failing which consent shall be deemed given the Business Day after expiry of such period.

 

9.5.                             Exclusive Remedies

 

Buyer shall exclusively have the remedies provided for in this Agreement including claims for specific performance.  Any other claims of Buyer against Seller as well as claims asserted by Buyer against Seller on the basis of other legal provisions, including damages, remedies under the theory of culpa in contrahendo, enrichment law, or any statutory warranty, in particular the remedies of rescission (Wandlung) and reduction of purchase price (Minderung) are hereby expressly excluded.

 

Buyer hereby confirms that all facts relevant for Buyer in the sense of Article 24 of the Swiss Code of Obligations are covered by the representations and warranties made by the Seller in Section 7 of this Agreement; as a result, Buyer explicitly waives the right to rescind this Agreement under Article 24 of the Swiss Code of Obligations.

 

10.                                COVENANTS

 

10.1.                      Taxes and other Charges

 

10.1.1.            Taxes caused by the Business

 

Any taxes arising from or with respect to the Physical Assets, the Contracts or the Technology or arising from or with respect to any operations of the Business prior to the Closing Date shall be borne by Seller.

 

10.1.2.            Transfer Taxes, Charges, Duties and Fees

 

Each party shall bear its own transfer taxes, charges, duties or fees caused by the transfer of the Physical Assets, the Contracts or the Technology.

 

11.                                TERM AND TERMINATION

 

11.1.                      Term

 

This Agreement shall enter into effect upon signature of both Parties at Signing Date.

 

This Agreement shall remain effective until the Royalty Payment obligations under section 3.2.1 have expired.

 

12



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

12.                                MISCELLANEOUS

 

12.1.                      Costs and Fees

 

Each Party shall bear its own fees and expenses of its counsel and advisors (including, without limitation, notary and register fees and expenses and related lawyer’s fees).

 

12.2.                      Notices

 

Any notice, request, instruction or other document deemed by either Party to be necessary or desirable to be given to the other Party, shall be in writing and shall be sent by registered mail or facsimile followed by registered mail addressed as follows:

 

If to Buyer:                                                                                 Kenta Biotech Ltd.
Dr. Franco Merckling
Wagistrasse 25
8952 Schlieren
Switzerland

 

If to Seller:                                                                                     Aridis Pharmaceuticals LLC
Dr. Vu L. Truong
5941 Optical Court San Jose
CA 95138, USA

 

Each Party may at any time change its address by giving notice to the other Party in the manner described above.  All notices shall be effective upon receipt (in case of email followed by registered mail/DHL).

 

12.3.                      Entire Agreement; Amendments

 

This Agreement embodies the entire agreement between the Parties with respect to the transactions contemplated herein, and there have been and are no agreements or understandings between the Parties other than those set forth or provided for herein.  It supersedes the “Non-Binding Outline of Proposed Terms”.

 

This Agreement may be amended only in writing through a document duly signed by the Parties.

 

12.4.                      No Waiver

 

The failure of any of the Parties to enforce any provision of this Agreement or any rights with respect thereto shall in no way be considered as a waiver of such provision or rights or in any way to affect the validity of this Agreement.  The waiver of any claim for breach of this Agreement by any of the Parties shall not operate as a waiver of any claim pertaining to another, prior or subsequent breach.

 

13



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

12.5.                      Assignment

 

Except as set forth hereunder, neither of the Parties shall assign this Agreement or any rights or obligations to any third party without the consent of the other Party provided however that any assignment to an affiliated company or to the shareholders of a Party shall be possible without prior consent of the other Party.

 

12.6.                      Binding on Successors

 

All of the terms, provisions and conditions of this Agreement shall be binding upon and inure to the benefit of the Parties and their respective successors and assigns except as set forth herein.

 

12.7.                      Severability; Good Faith

 

Should any part or provision of this Agreement be held to be invalid or unenforceable by any competent court, governmental or administrative authority having jurisdiction, the other provisions of this Agreement shall nonetheless remain valid.  In such case, the Parties shall endeavour to negotiate a substitute provision that best reflects the economic intentions of the Parties without being invalid or unenforceable, and shall execute all instruments and documents required to this effect.

 

12.8.                      Confidentiality

 

The Parties agree to keep the terms and conditions of this Agreement confidential subject to requirements by law or by authorities; however, Buyer may disclose details regarding the Agreement and the Assets in communications, websites, and otherwise as necessary to support its financing efforts related to development of the Assets.

 

13.                                GOVERNING LAW AND JURISDICTION

 

13.1.                      Governing Law

 

This Agreement, and any other agreements to be entered into under this Agreement, shall be subject to and governed by Swiss substantive law to the exclusion of the rules set forth in the United Nations Convention on the International Sale of Goods.

 

13.2.                      Arbitration

 

All disputes arising out of or in connection with this Agreement and the annexes, including its validity, performance and termination, shall be settled as follows:

 

a)                                      The Parties shall first use reasonable business efforts to resolve such dispute among themselves.  The Parties agree to meet face-to-face to discuss the issues and attempt, in good faith, to negotiate an amicable resolution.  Such meeting will happen at a place mutually agreed, not later than 30 days after written notice of a dispute is served by one Party upon the other.

 

14



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

b)                                      If the Parties fail to achieve a resolution within 60 days of the initiation of the dispute resolution process, the dispute shall be solely and finally settled by a sole arbitrator in accordance with the Rules of International Arbitration of the Swiss Chambers of Commerce.  The place of arbitration shall be Zurich.  The arbitral tribunal shall conduct the proceedings in English.

 

15



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

SCHEDULES

 

Schedule A

 

List of Physical Assets

 

All physical assets owned or controlled by Kenta, including but not limited to cell lines, genes, antibodies, diagnostic assays and related documentation, related to:

 

·                                           MabIgX technology platform (unique fusion cell line for human hybridoma generation);

 

·                                           KBSA301 master cell bank, preclinical and (preliminary) clinical data;

 

·                                           KBSA301 GMP study material;

 

·                                           KBPA101 master cell bank, preclinical and clinical data (phase 2a);

 

·                                           KBPA102-104 (human monoclonal antibodies against the other most prevalent PA serotypes) preclinical data;

 

·                                           Rapid PA serotype-specific companion diagnostic kit;

 

·                                           KBAB401 (preliminary human monoclonal antibody leads against AB) and validated antibody or vaccine targets of AB;

 

·                                           KBRV201 (human monoclonal antibody to prevent respiratory syncytial virus (RSV) infections) preclinical data showing superiority vs. Astra Zeneca’s marketed product (Synagis).

 

KBPA101 - KBPA104

 

Cell lines (MCB, RCB and cell lines)

 

Cell lines

 

Location

KBPA101 hybridoma MCB (approx. 100 vials)

 

Sanquin Pharmaceutical Services SPS, Amsterdam, NL

KBPA102 hybridoma

 

Kenta Biotech, Schlieren, CH

KBPA103 hybridoma

 

Kenta Biotech, Schlieren, CH

KBPA104 hybridoma

 

Kenta Biotech, Schlieren, CH

 

16



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

Cell lines

 

Location

CHO-KBPA102

 

Kenta Biotech, Schlieren, CH

CHO-KBPA103

 

Kenta Biotech, Schlieren, CH

CHO-KBPA104

 

Kenta Biotech, Schlieren, CH

Anti-ID KBPA101

 

Kenta Biotech, Schlieren, CH

Anti-ID KBPA102

 

Kenta Biotech, Schlieren, CH

Anti-ID KBPA103

 

Kenta Biotech, Schlieren, CH

Anti-ID KBPA104

 

Kenta Biotech, Schlieren, CH

Mock-KBPA101-hybridoma (non-producer)

 

Kenta Biotech, Schlieren, CH

Mock-KBPA103-hybridoma (non-producer)

 

Kenta Biotech, Schlieren, CH

Mock-KBPA104-hybridoma (non-producer)

 

Kenta Biotech, Schlieren, CH

 

Reagents

 

All remaining reagents stored at 2-8C, -20C and -80C, including remaining GMP-clinical material (KBPA101), sera and samples from animal and human studies (see document “Freezer Content”) as well as reagents for diagnostic kit;

 

Sera and clinical isolates from phase I and phase IIa clinical trial (stored at Kenta Biotech, Schlieren).

 

KBSA301

 

Cell lines (MCB, RCB and cell lines)

 

Cell lines

 

Location

KBSA301 hybridoma cell line 243-5 MCB

 

Bioreliance, US and UK

 

17



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

Cell lines

 

Location

KBSA301 hybridoma cell line 243-5 RCB

 

Kenta Biotech, Schlieren, CH

Anti-ID KBSA301 cell line

 

Kenta Biotech, Schlieren, CH

SA-243 Mock cell line

 

Kenta Biotech, Schlieren, CH

 

Reagents

 

All remaining reagents stored at 2-8C, -20C and -80C, including rejected GMP-clinical material (KBSA301), placebo, sera and samples from animal and human studies (see document “Freezer Content”).

 

KBRV201

 

Reagents

 

All remaining reagents stored at 2-8C, -20C and -80C.

 

Reagents for KBRV201 include expression vectors for production of intact KBRV201 antibody by transient transfection of mammalian cell lines.

 

KBAB401

 

Cell lines (MCB, RCB and cell lines)

 

Cell lines

 

Location

All KBAB401 hybridoma and LCL cell lines (uncharacterized)

 

Kenta Biotech, Schlieren, CH

 

Reagents

 

All remaining human PBLS stored in LN2 and all patient sera stored at -20C (see document “Freezer Content”).

 

18



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

General

 

Cell lines

 

Cell lines

 

Location

 

 

LA55 fusion partner cell line (RCB)

 

Kenta Biotech, Schlieren, CH

 

 

HL60 phagocytic cell line

 

Kenta Biotech, Schlieren, CH

 

 

B95-8 EBV secreting cell line

 

Kenta Biotech, Schlieren, CH

 

 

EL4-B5 murine feeder cell line

 

Kenta Biotech, Schlieren, CH

 

 

Patients PBL

 

Kenta Biotech, Schlieren, CH

 

 

Commercially available cell lines (Jurkat, HEK293, etc.)

 

Kenta Biotech, Schlieren, CH

 

See list of LN2 storage tank

 

 

Kenta Biotech, Schlieren, CH

 

 

 

 

Kenta Biotech, Schlieren, CH

 

 

 

Reagents

 

All remaining reagents stored at 2-8C, -20C and -80C (see document “Freezer Content”), including clinical isolates of viruses (RSV) and bacteria (P. aeruginosa, S. aureus, A. baumannii);

 

Patients sera and clinical isolates (BAL, ETA and sputum) from all research activities.

 

19



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

Schedule B

 

List of Contracts

 

KBSA301-001 FIH CT

 

Operational Partner:

 

·                   ORION Clinical Services Limited, 7 Bath Road, Slough, England SL1 3UA

·                   Fisher Clinical Services Switzerland, Steinbühlweg 69, 4123 Allschwil / Switzerland

·                   Cenduit LLC, Chelsea Place, 1007 Slater Road, Suite 301, Durham, NC 27703, USA

·                   Eurofins Medinet B.V., Bergschot 71, 4817 PA, Breda, the Netherlands

 

Details:

 

Partner

 

Title

 

Effective date

ORION

 

Amendment No 5 to Work Order 001

 

expected

 

 

Amendment No 4 to Work Order 001

 

Mar 27, 2013

 

 

Amendment No 3 to Work Order 001

 

Mar 26, 2013

 

 

Amendment No 2 to Work Order 001

 

Feb 1, 2013

 

 

Amendment No 1 to Work Order 001

 

Feb 1, 2013

 

 

Work Order 001

 

Feb 1, 2012

 

 

Master Study Agreement

 

Dec 8, 2011

Fisher

 

Order 7, Vers. 2; FCS No 205523, Quote relabeling

 

May 21, 2012

 

 

Order 1, Vers. 2; FCS No 207727, Quote LN2 storage, back ups

 

May 14, 2012

 

 

Order 4, Vers. 2; FCS No 205523, Quote Logistics

 

Feb 1, 2012

 

 

Order 6, Vers. 1; FCS No 205523, Quote Label- and Packaging

 

Jan 31, 2012

 

 

Responsibilities Agreement (GMP)

 

Nov 18, 2010

Cenduit

 

IRT Change Order Pricing

 

Mar 27, 2012

 

 

Individual Project Agreement

 

Feb 24, 2012

 

 

IRT Pricing Proposal

 

Feb 15, 2012

 

20


 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

Partner

 

Title

 

Effective date

 

 

Master Project Agreement

 

Dec 20, 2011

Eurofins

 

Change Order 1 to Study Agreement

 

Apr 11, 2012

 

 

Study Agreement

 

Dec 20, 2011

Clinical Sites

 

Cliniques Universitaires St Luc, 10 avenue Hippocrate, 1200 Brussels, Belgium

 

Jun 12

 

 

Clinique Saint-Pierre 9, Avenue Reine Fabiola, 1340 Ottignies, Belgium

 

Jun 12

 

 

University Hospital of Liege, CHU Sart Tilman, Avenue de I’Hopital, n°1, 4000, Liege, Belgium

 

Jun 12

 

 

University Hospital Mont-Godinne, Avenue Docteur G. Therasse 1, 5530 Yvoir, Belgium

 

Jun 12

 

 

Le Centre Hospitalier Universitaire de Limoges, 2 Avenue Martin Luther King, 87 042 Limoges Cedex, France

 

Mar 12

 

 

Le CENTRE HOSPITALIER VICTOR DUPOUY 69, rue du Lieutenant Colonel Prudhon, 95107 Argenteuil, France

 

Apr 12

 

 

Le CENTRE HOSPITALIER REGIONAL ET UNIVERSITAIRE DE TOURS, 2 boulevard Tonnelle, 37044 Tours Cedex, France

 

Apr 12

 

 

I’Hopital Louis Mourier, 178, rue des Renouillers, 92700 Colombes, France

 

May 12

 

 

CHD Les Oudairies, 85925 La Roche Sur Yon Cedex 9

 

Apr 12

 

 

Centre Hospitalier Universitaire de DIJON, 1, bd Jeanne d’Arc, BP 77908, 21079 Dijon Cedex, France

 

Jun 12

 

 

Le CENTRE HOSPITALIER UNIVERSITAIRE de NANTES, 5 allee de I’Ile Gloriette, 44093 Nantes, Cedex 1, France

 

May 12

 

 

I’Hopital de Ia source 14, avenue de I’hopital - CHR Orleans - BP, 86709 - 47067 Orléans Cedex, France

 

Apr 12

 

 

UNIVERSITE CLAUDE BERNARD LYON 1, 69100 Villerbanne, France

 

Aug 12

 

 

CENTRE HOSPITALIER D’ANGOULEME, 16470 Saint-Michel, France

 

Jul 12

 

21



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

Partner

 

Title

 

Effective date

 

 

CHU Angers, 4 rue Larrey, 49933 Angers cedex, France

 

Sep 12

 

 

Hospital Universitari Vall d’Hebron, Passeig Vall d’Hebron 119-129 , 08035 Barcelona, Spain

 

Jun 12

 

 

Hospital Universitario de Bellvitge (HUB) , C/ Feixa Llarga, s/n de Hospitalet de Llobregat, 08907 Llobregat, Spain

 

May 12

 

 

Doctor Negrin University Hospital of Gran Canaria c/ Bar- ranco de la Ballena s/n 35010, Las Palmas, Spain

 

Jul 12

 

 

Son Espases Hospital, Ctra Valldemossa 79, 07010 Palma — Balearic Islands, Spain

 

Jul 12

 

 

HOSPITAL Universitario de Getafe, Ctra. de Toledo, Km. 12,500, Getafe de Madrid, Spain

 

Nov 12

 

 

HOSPITAL UNIVERSITARIO LA PAZ, Pº. Castellana 261, Madrid, 28046, Spain

 

Jun 12

 

 

Hospital Universitario Marqués de Valdecilla, Avenida de Valdecilla s/n. 39008-Santander, Spain

 

Jul 12

 

 

LA FUNDACION PARA EL FOMENTO DE LA INVESTIGACION SANITARIA Y BIOMEDICA DE LA COMUNIDAD VALENCIANA (FISABIO) C/ Micer Masco No. 31, 46010 -Valencia, Spain

 

Jul 12

Data Monitoring Committee

 

Prof Steven Michael Opal, USA

 

May 10

 

 

Prof Jean Chastre, France

 

Jan 12

 

 

Dr Philippe Eggimann, Switzerland

 

Oct 11

 

22



 

Schedule C

 

Technology

 

Documentations (all located at Kenta Biotech, Schlieren, CH) KBPA101 - KBPA104

 

·                   All preclinical reports and R&D reports for the KBPA101-104 research projects (electronic and hard copies)

·                   All regulatory documents for the KBPA101-104 projects (electronic and hard copies)

·                   All clinical documents for the KBPA101 project (phase I and phase II), (electronic (if available) and hard copies), including trials-master-files and case-report-forms (only hard copies)

·                   All documents, reports and SOP regarding the diagnostic kit

·                   All raw data stored electronically related to KBPA101 — KBPA104

 

KBSA301

 

·                   All preclinical reports and R&D reports for the KBSA301 research projects (electronic and hard copies)

·                   All regulatory documents for the KBSA301 projects (electronic and hard copies)

·                   All clinical documents for the KBSA301 project (ongoing phase I/II studies), (electronic (if available) and hard copies)

·                   All raw data stored electronically related to KBSA301

 

KBRV201

 

·                   All R&D reports for the KBRV201 research project (electronic and hard copies)

·                   All raw data stored electronically related to KBRV201

 

KBAB401

 

·                   All preclinical reports and R&D reports for the KBAB401 research project (electronic and hard copies)

·                   All raw data stored electronically related to KBAB401

 

General

 

·                   All lab journals (hard copies and electronic scans, if available)

·                   All relevant reports to cell line characterization of LA55 in hard copies and electronic forms (if available)

·                   All documentation to FCS used in research projects

·                   SOP related to R&D and clinical activities at Kenta Biotech

·                   Marketing & commercial and financial projections, presentations, competitive analysis documents & information

 

23



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

IPR

 

Until the closing of the Asset Purchase Agreement Kenta will ensure the maintenance of the IPR estate related to KBSA301 and KBAB401 and do all necessary payments to competent authorities and offices as required (cost covered by payments mentioned in this agreement).  Regarding the IPR estate related to the KBPA Franchise Kenta will consult Aridis on a case-by-case level and make the decisions accordingly (cost not covered under this agreement).  Status of IP Rights as of May 7 th , 2013.

 

Patents, Licenses, Trademarks and Domains of Kenta Biotech AG

 

Kenta Biotech is focusing on the discovery and development of innovative, fully human monoclonal antibodies for the life-saving treatment of patients with serious infectious diseases.

 

For the identification and isolation of the monoclonal antibodies, the company is using its proprietary MabIgX technology platform that enables the generation of an advanced class of fully human monoclonal antibodies that are expected to have superior safety and efficacy profiles.

 

Kenta`s patent portfolio currently consists of 6 patent families: three patent families are related to human monoclonal antibodies specific for Lipopolysaccharides (LPS) of three different Pseudomonas aeruginosa serotypes, one patent application refers to assays and kits for serotyping Pseudomonas aeruginosa , one patent family is related to a human monoclonal antibody specific for alpha-toxin of Staphylococcus aureus .  Recently a patent application was filed claiming “Novel targets of Acinetobacter baumannii

 

The IP portfolio consists further of trademarks and domains (see table below).

 

Kenta Biotech’s representatives:

 

European patent attorneys:

 

Corresponding US patent attorneys:

 

 

 

Grünecker, Kinkeldey & Schwanhäusser

 

Riverside Law

Leopoldstr. 4

 

300 Four Falls Corporate Center, Suite 710

D 80802 München

 

300 Conshohocken State Road

Dr. Heike Vogelsang-Wenke

 

West Conshohocken, PA 19428

Phone: +49-89-212350

 

Dr. Kathryn Doyle

Fax: +49-89-220287

 

Phone: 001-215-268-3888

vogelsang-wenke@grunecker.de

 

(all correspondence via Grünecker et al)

 

 

 

Trademark attorneys:

 

 

 

 

 

Kellerhals Attorneys at Law

 

 

Dr. Beat Brechbühl

 

 

Effingerstrasse 1

 

 

Post Box 6916

 

 

CH 3001 Bern

 

 

 

24



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

Phone: +41-58 200 3500

 

 

Fax: +41-58 200 3511

 

 

 

 

 

On behalf of SELLER:

 

 

 

 

 

/s/ Dr. Kuno Sommer

 

/s/ Hans-Beat Gurlter

Dr. Kuno Sommer

 

Hans-Beat Gurlter

 

 

 

On behalf of BUYER:

 

 

 

 

 

/s/ Dr. Vu L, Truong

 

/s/ Dr. Eric Patzer

Dr. Vu L, Truong

 

Dr. Eric Patzer

 

25




Exhibit 10.9

 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

CONFIDENTIAL

 

FORMULATION DEVELOPMENT AGREEMENT

 

This FORMULATION DEVELOPMENT AGREEMENT (this “ Agreement ”) is entered into as of June l, 2007 (the Effective Date ) by and between Aridis Pharmaceuticals, LLC, a California corporation with its business at 5941 Optical Court, San Jose, CA 95138 (“ Aridis ) and PATH Vaccine Solutions, a nonprofit organization and affiliate of PATH organized as a separate legal entity under the laws of the State of Washington, having a primary place of business at 1455 NW Leary Way, Seattle, WA 98107 (“ PVS ) .

 

RECITALS

 

WHEREAS, PATH is an international, nonprofit, non-governmental organization whose mission is to improve the health of people around the world by advancing technologies, strengthening systems, and encouraging healthy behaviors.  PATH identifies, develops and applies appropriate and innovative solutions to public health problems, especially in low-resource settings, and shares knowledge, skills, and technologies with governmental and nongovernmental partners in developing countries and with groups in need;

 

WHEREAS, the mission of PVS is to accelerate the development of a rotavirus vaccine for pediatric indications and ensure its availability, affordability and accessibility for the developing world.  The objective of the PATH rotavirus program is to reduce the number of deaths and hospitalizations of children in the developing world due to rotavirus infection through advanced development and introduction of safe, affordable and efficacious new rotavirus vaccines;

 

WHEREAS, Aridis has expertise in the field of formulation development for vaccines and holds proprietary rights in technology for such formulation development;

 

WHEREAS, if a rotavirus vaccine formulation is successfully developed in accordance with the provisions of this Agreement, Aridis shall make available to PVS and its designated vaccine manufacturers the selected rotavirus vaccine formulations for use by such manufacturers in the manufacture and distribution of a rotavirus vaccine in accordance with PVS’ mission in Developing Countries; and

 

WHEREAS, Aridis and PVS wish to enter into an Agreement to formalize their collaboration on the development of select rotavirus vaccine formulations under conditions as set forth herein.

 

NOW, THEREFORE, in consideration of the foregoing and the representations, warranties and covenants set forth in this Agreement, Aridis and PVS agree as follows:

 

1.                                       DEFINITIONS

 

1.1                                “Affiliate” shall mean, with respect to any Party, any other individual or entity directly or indirectly controlling, controlled by or under common control with such Party.  For

 

1



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

purposes of this Section 1.1, “control” means the beneficial ownership, directly or indirectly, of fifty percent (50%) or more of the equity or the outstanding voting shares or securities, or the right to receive fifty percent (50%) or more of the profits or earnings of an entity, or the ability to direct or cause the direction of the management or policies of an entity.

 

1.2                                “ATCC License” shall have the meaning as set forth in Section 5.3 herein.

 

1.3                                “Background Intellectual Property” shall mean any and all information, data (including research data), know-how, methods, formulas, formulations, compositions, materials, manufacturing know-how (including methods and standard operating procedures), computer programs, test results and trade secrets, owned or controlled by Aridis as of the Effective Date of this Agreement for which a license is required in order to practice the Project Intellectual Property for the manufacture, use or sale of the Primary Formulation or Optional Formulation developed under the scope of the Project.  Specifically excluded from this definition are (i) those rights held by Aridis under license to the U.S. DHHS National Institute of Health technology known as “Multivalent Human Bovine Rotavirus Vaccine,” DHHS reference No. E-015-98/0; (ii) those intellectual property rights owned, controlled or licensed by Aridis where the practice of such intellectual property would require the payment of consideration or fulfillment of obligations to a third party; (iii) rights to technologies unrelated to formulation which cover distinct therapeutic compounds, methods or product types (such as a Shigella vaccine form, for example); and (iv) clinical data.

 

1.4                                “Budget’ shall mean the budget for performing the Project, including payment schedule and deliverables, as mutually agreed upon by the Parties, a copy of which is attached hereto as Appendix A , and incorporated herein.

 

1.5                                “Developing Countries” shall mean those countries identified by the World Bank as of the Effective Date as having “low income economies,” or “lower-middle income economies” or “upper-middle income economies,” and which are set forth in Appendix C , attached hereto, as may be amended from time to time by the World Bank.

 

1.6                                “Dispute” shall have the meaning as set forth in Section 13.6 herein.

 

1.7                                “Electing Party” and “Non-Electing Party” shall have the meaning as set forth in Section 12.4 herein.

 

1.8                                “Enabling Technology” shall have the meaning as set forth in Section 4.2 herein.

 

1.9                                “Milestones” shall mean the goals, go-no-go decision points, deadlines and deliverables for the development of select rotavirus vaccine formulations as set forth in Appendix B of this Agreement and incorporated herein.

 

1.10                         “Notice of Breach” and “Notice of Termination” shall have the meaning as set forth in Section 12.2 herein.

 

1.11                         “Optional Formulation” shall have the meaning as set forth in Section 2.1 herein.

 

2



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

1.12                         “Parties” shall mean Aridis and PVS together and “Party” shall mean any one of them.

 

1.13                         “Patent Rights” shall mean (i) all patents and patent applications owned by Aridis and/or its Affiliates or sublicensees, or to which Aridis and/or its Affiliate(s) or sublicensees otherwise have the right to grant licenses, existing as of the Effective Date or coming into existence at any time thereafter, which generally or specifically claim or cover processes or formulations for Rotavirus Vaccine; (ii) all patents issued with respect to the applications described above; and (iii) all divisionals, continuations, continuations-in-part, re-examinations, re-issues and extensions of such patents and applications.  A list of Aridis’ Patent Rights as of the Effective Date is attached hereto as Appendix D and incorporated into this Agreement.  Aridis shall provide PVS with written updates of the list of Patent Rights or more frequent updates when, in Aridis’ reasonable judgment, modifications may have bearing on or be relevant to the Project.

 

1.14                         “Primary Formulation” shall have the meaning as set forth in Section 2.1 herein.

 

1.15                         “Private Sector” shall mean those entities not included within the definition of Public Sector as defined herein.

 

1.16                         “Project Plan “ shall mean the scope of work to be undertaken by Aridis in performance of its obligations under this Agreement as defined in Appendix B and incorporated herein as may be amended from time to time upon mutual written approval of the Parties.

 

1.17                         “Project Intellectual Property” shall mean any and all inventions (whether patentable or not), proprietary information, know-how, technology, formulae, processes (including all SOPs), trade secrets, materials, technical data and any other information for or related to the formulations developed for Rotavirus Vaccine, or as invented, developed or acquired by, or come into the possession or control (by licensure or otherwise) of Aridis, all where arising out of performance by Aridis of the work under the Project Plan.

 

1.18                         “Public Sector” shall mean governmental health ministries and other governmental agencies of Developing Countries, the Global Fund for Children’s Vaccines, the WHO, World Bank, UNICEF and other governmental and non-profit charitable agencies or organizations, including PATH, and shall include without limitation United States and European governmental agencies (e.g. USAID, DANIDA, DFID and GTZ) that may purchase vaccines for delivery, distribution and/or sale to Developing Countries.

 

1.19                         “Rotavirus Vaccine” shall mean a multivalent vaccine for the prevention of rotavirus infection having a bovine parenteral virus backbone developed under license from the U.S. DHHS National Institute of Health technology known as “Multivalent Human Bovine Rotavirus Vaccine,” DHHS reference No. E-015-98/0 NIH, select formulations of which shall be as developed under this Agreement.

 

1.20                         “SOPs” shall mean standard operating procedures for the development of selected formulations of the Rotavirus Vaccine.

 

3



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

1.21                         “Term” shall have the meaning as set forth in Section 12.1 herein.

 

2.                                       PROJECT PLAN

 

2.1                                The Scope of Work .  The Parties shall mutually develop and agree upon Milestones, including decision points as part of the Project Plan, attached hereto and made a part of this Agreement as Appendix B , which sets forth the scope of work for the vaccine formulation development activities to be conducted under this Agreement, it being understood that Appendix B shall initially include the scope of work for Phase I of the Project Plan, Phase II to be agreed upon by the Parties upon successful completion of Phase I and included as part of Appendix B at such time.  The Project Plan may be modified from time to time by the mutual agreement of the Parties as select formulations for Rotavirus Vaccine are identified.  The Project Plan will be comprised of two Phases, Phase I will include the identification and development of both a liquid formulation and one or more powder formulations.  Phase II will be the optimization of the formulation as selected by PVS upon the completion of Phase I.  It is anticipated by the Parties that the formulation to be initially selected by PVS for optimization may be a liquid formulation, and once selected this formulation will be referred to as the “Primary Formulation” in this Agreement.  It being under stood that prior to the start of Phase II, PVS will determine the formulation to be taken forward for optimization by Aridis and such formulation shall be designated as the Primary Formulation, and PVS may select a second formulation to be used as an optional formulation for Rotavirus Vaccine in Developing Countries ( “Optional Formulation” ).

 

2.2                                Conduct of the Project Plan .  Aridis shall allocate a sufficient amount of time and effort, using personnel with sufficient skills and experience, together with sufficient equipment, supplies and facilities to perform its obligations for the vaccine formulation development work as identified in the Project Plan, including without limitation, (i) in a good scientific manner; (ii) in accordance with all applicable laws and regulations (including those pertaining to animal or human use or testing); (iii) in accordance with good research practices incorporating mutually agreed standards and procedures; and (iv) with diligence, using reasonable best efforts to meet all Milestones under the Project Plan.  Successful completion of Phase I of the Plan shall be the selection by PVS of a Primary Formulation developed by Aridis under Phase I of the Plan and within the Budget for Phase I as specified in Appendix A .

 

2.2.1                      For the avoidance of doubt, it is understood and agreed by the Parties that Aridis’ obligation under this Agreement is to use reasonable best efforts as described in this Section 2.2 to perform in accordance with the Project Plan, and such reasonable best efforts shall not include an obligation to expend resources in excess of that specified in the Budget or Project Plan without the mutual prior written agreement of the Parties.

 

2.2.2                      Aridis shall be obligated to use reasonable best efforts to meet the Milestone completion dates as set forth in Appendix B , it being understood and agreed that completion of a Milestone by the designated date does not guarantee that completion of such Milestones will result in a successful formulation acceptable for use with the Rotavirus Vaccine; provided that, the steps undertaken by Aridis in completion of a Milestone meet the criteria as set forth in this Section 2.2.

 

4



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

2.2.3                      It is agreed that the deliverables to be provided to PVS or its designees by Aridis in accordance with the Project Plan, shall include data, information, study reports, and certain formulation test materials and/or reagents.  It is not anticipated that biological materials will be a part of the deliverables provided to PVS or its designees hereunder.

 

2.3                                Scientific/Technical Management Committee .  PVS and Aridis shall form a Scientific/Technical Management Committee.  The purpose of such Committee shall be to review, evaluate and offer input with respect to the efforts and activities under the Project Plan on an ad hoc basis.  Without limiting the foregoing, the Committee shall be responsible for overseeing the Project Plan in a manner consistent with the Agreement, including, but not limited to, (i) reviewing the progress of the Project Plan, including by way of example, review of Aridis activities and progress; (ii) providing technical guidance and recommendations in support of the selected formulations; and (iii) such other matters as from time to time the Parties consider necessary for the advancement of the Project Plan.

 

2.4                                Reports .

 

2.4.1                      Regular Progress Reports .  Aridis shall submit to PVS bi-annual written progress and financial reports.  Such reports shall also summarize the financial expenditures incurred by Aridis in implementing the Project Plan.  Upon completion of Phase I of the Project Plan, Aridis shall promptly submit a written report to PVS summarizing Aridis’ progress and results in implementing the Plan.  In addition, Aridis shall submit to PVS a final written progress and financial report, with substantiating documentation, within three (3) months following the completion of the Plan or termination of this Agreement if termination occurs prior to completion of the Plan.  The form of financial report is as set forth in Appendix E .

 

2.4.2                      Disclosure of Inventions and Improvements; Disclosure of Data and Information .  In addition to the foregoing reporting requirements, Aridis shall promptly disclose to PVS in writing (i) Project Intellectual Property; (ii) Background Intellectual Property; and (iii) all data, information and other documentation developed, acquired, controlled or otherwise obtained by Aridis, rights to which are specifically excluded from the definition of Background Information under Subsection l .3(ii) to the extent such data, information and other documentation is used or included by Aridis in the Project Plan.

 

2.5                                Books and Records .  Aridis shall keep complete and accurate books and records, including financial records, pertaining to its implementation of the Project Plan for a minimum of five (5) years after the completion or termination of this Agreement.  Such books and records shall be made available to PVS or its designee upon request.  PVS shall have the right, with at least seven (7) days written notice, to conduct audits of the activities undertaken by Aridis in implementing the Project Plan.

 

3.                                       PAYMENTS BY PVS; INDIRECT SUPPORT

 

3.1                                PVS Funding .  In consideration of Aridis’ performance of its obligations under this Agreement and the Project Plan, PVS shall pay to Aridis, subject to the terms of this Agreement, an amount not to exceed the total Budget as set forth in Appendix A during the Term

 

5



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

of the Agreement, subject at all times to PVS’ right, described in Section 12.2 below, to terminate this Agreement and the funding of the Project Plan.  The agreed upon Budget including payment schedule and deliverables is as set forth in Appendix A .  PVS shall only be obligated to pay those sums as set forth in the Budget that are the responsibility of PVS in accordance with schedule of payment and deliverables as set forth therein, it being understood that prior to commencement of Phase II, the statement of work for Phase II shall be agreed to by the Parties in conformance with the Budget for Phase II as set for in Appendix A .

 

3.2                                Indirect Support by PVS .  In addition to the funding provided by PVS directly to Aridis as set forth in Section 3.1 hereunder, PVS shall provide certain materials, either itself or through its designee, as set forth in the Project Plan.  Such materials are included within the definition of Enabling Technology as specifically set forth in Section 4.2.

 

3.3                                Use of PVS Funds .  Aridis shall use all funds received from PVS hereunder, including any interest earned on funds advanced, in accordance with the Budget and the Plan.  Without the prior express written permission of PVS, the total payments to Aridis under this Agreement shall not exceed the Budget agreed in advance by PVS.  PVS shall only pay Aridis for actual expenses (including overhead where specifically noted in the approved Budget) incurred up to the approved budgeted amounts as set forth in the Plan.  To the extent funds provided by PVS remain unspent due to modification of the Budget or termination of the Agreement, such unexpended funds shall be returned to PVS as set forth in Section 12.6.

 

3.4                                No Other Payments .  Other than the payments as set forth in Section 3.1 herein, all costs and expenses incurred in connection with the performance of the Project Plan and other obligations of Aridis hereunder shall be borne exclusively by Aridis without further reimbursement or compensation directly or indirectly by PVS, unless PVS in its discretion elects in writing to undertake additional funding commitments due to a modification or amendment to the Plan.

 

4.                                       OWNERSHIP OF INTELLECTUAL PROPERTY, DATA AND INFORMATION

 

4.1                                Ownership of Inventions and Prosecution of Patents .

 

4.1.1                      Subject to the provisions of this Agreement, as between PVS and Aridis, title to any inventions conceived or reduced to practice solely by an Aridis employee in the course of implementing the Project Plan shall be owned by Aridis, shall be included within the definition of Project Intellectual Property hereunder, and shall be subject to the grant of rights specified herein.  Inventions developed jointly by employees, Affiliates or consultants of PVS and employees and Affiliates of Aridis shall be jointly owned in accordance with U.S. patent laws and regulations and shall be included within the definition of Project Intellectual Property.  Aridis may file patent applications on any such inventions at their sole cost and expense.  If Aridis chooses not to file for patent protection with respect to any jointly owned inventions developed hereunder, Aridis shall notify PVS in writing of such decision within sufficient time to allow action to be taken by PVS without the loss of potential patent rights, and shall provide PVS with the opportunity to file, at PVS’ sole cost and expense, patent applications on any such jointly owned invention conceived or reduced to practice in the course of the Project Plan.

 

6



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

4.1.2                      Aridis shall not abandon any patent application, patent or other right included within the scope of the Project Intellectual Property or the Background Intellectual Property, the effect of which would be to limit or prevent PVS from practicing the intellectual property rights licensed to PVS under this Agreement, without disclosure to PVS and arrangement by mutual agreement with PVS for the protection of PVS license rights.

 

4.1.3                      Except as expressly provided in this Agreement, PVS shall receive no rights under the Aridis Background Intellectual Property and Project Intellectual Property.

 

4.2                                Enabling Technology . It is understood and agreed to by Aridis that Project Intellectual Property and the underlying Background Intellectual Property as licensed to PVS by Aridis hereunder shall be used by PVS for the advancement of the Primary Formulation and/or the Optional Formulation developed by Aridis under the Project Plan and shall be made available in accordance with Article 5 to PVS designated manufacturers for the advancement of a Rotavirus Vaccine in Developing Countries.

 

4.2.1                      Information, reagents and materials, including but not limited to (a) qualified cell lines, (b) production processes and formulations, (c) assay design and reagents, and (d) packaging design, some or all of which may be made available to Aridis by PVS or its designees or, in the case of a formulation, developed by Aridis under the Project Plan is defined as “Enabling Technology.”

 

4.2.2                      Should Aridis elect to develop and manufacture a Rotavirus Vaccine, PVS shall, upon such written notification from Aridis and to the extent reasonable based on good faith negotiations by the Parties, provide Aridis with access to Enabling Technology with the right to use such Enabling Technology in the commercial development of a Rotavirus Vaccine.  Acceptance and use of Enabling Technology shall obligate Aridis to the global access provisions as set forth in Article 6.

 

4.3                                No Impairment of Rights .  Neither Party shall grant any rights or licenses, or enter into any contract, agreement or transaction that would impair or be inconsistent with the rights and licenses that may be granted to the other Party under this Agreement.

 

5.                                       GRANT OF LICENSE; FIELD OF USE

 

5.1                                Grant of Rights to PVS .  In consideration for the funding and indirect support provided by PVS to Aridis hereunder, Aridis hereby grants to PVS a non-exclusive license, with right to sublicense, at no additional fee, charge or royalty obligation, under the Aridis Project Intellectual Property and underlying Aridis Background Intellectual Property to the extent necessary for PVS, its Affiliates and sublicensees to make, use and sell the Primary Formulation and the Optional Formulation in the Field within the Territory and with the Scope as specified in Table I below.  Table I herein summarizes the rights granted by Aridis to PVS hereunder, where the license granted to PVS as implemented for use in Developing Countries shall include the right to have manufactured the selected formulations worldwide for use solely in Developing Countries.  License rights as granted by Aridis to PVS hereunder as applied to the Field of pneumococcal disease and enteric disease shall be limited to Developing Countries; however,

 

7



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

Aridis shall discuss with PVS in good faith possible partnering or licensing opportunities with designated PVS commercial collaborators to extend the license rights proposed by PVS to such commercial collaborator to include Developed Country rights to the extent such rights are available from Aridis at that time.

 

Table I

 

Field

 

Territory

 

Scope

Rotavirus Vaccine

 

Developing Countries

 

Non-exclusive

Pneumococcal disease and enteric disease:
Shigellae (all forms)
Entertoxogenic E. coli (multiple components of ETEC)

 

Developing Countries

 

Non-exclusive

 

5.2                                Grant of Rights to Aridis .  Pursuant to Section 4.1, ownership of Project Intellectual Property shall be held by Aridis, provided however, use of the Project Intellectual Property and the underlying Background Intellectual Property by Aridis shall be in conformance with the license rights granted to PVS as set forth in Section 5.1 and as further defined by the terms of this Agreement.  Should Aridis elect to make, use or sell a Rotavirus Vaccine in Developing Countries as formulated using the Enabling Technology, Aridis shall undertake the commercial terms for global access as set forth in Article 6.  Table II summarized the obligations of Aridis hereunder.

 

Table II

 

Field

 

Territory

 

Scope

Rotavirus Vaccine

 

Developed Countries

 

Exclusive (non-exclusive with respect to PVS manufacturing rights asset forth in Section 5. I)

Rotavirus vaccine

 

Developing Countries

 

Non-exclusive (subject to commercial terms for global access as set forth in Article 6)

Pneumococcal and enteric disease vaccines

 

Worldwide

 

Non-exclusive ( exclusive as to Developed Countries rights but subject to good faith discussion obligations as set forth in Section 5.1 )

Other diseases and other fields of use

 

Worldwide

 

Exclusive

 

5.3                                Sublicense under PVS-ATCC License Agreement .  In order to facilitate the work to be conducted by Aridis under the Project Plan, PVS may by mutual agreement with Aridis provide certain ATCC materials to Aridis.  Such ATCC materials would be provided to Aridis as a sublicensee of PVS under the PVS-ATCC License Agreement dated as of February 7, 2007 (the “ATCC License’’) , and the use of such ATCC materials would be limited to those activities as set forth in the Project Plan.

 

8



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

5.3.1                      In conformance with the terms of the ATCC License, Aridis will agree in writing prior to receipt of such ATCC materials to be bound by all applicable terms, conditions, obligations (including reporting, and inspections) and other restrictions of the rights granted by ATCC to PVS under the ATCC License that protect or benefit ATCC’s rights and interests.

 

5.3.2                      Prior to the receipt of ATCC materials by Aridis hereunder, Aridis shall execute a material transfer agreement with ATCC, substantially in the form attached hereto as Appendix F , before any ATCC material is transferred to Aridis.  The transfer of ATCC material from ATCC to Aridis shall be direct from ATCC’s storage facility.

 

6.                                       COMMERCIAL TERMS FOR GLOBAL ACCESS

 

6.1                                Obligations of Global Access .  In the event that Aridis elects to commercialize a Rotavirus Vaccine in the Developing Countries under terms as set forth in Section 5.2 of this Agreement development of which incorporates or utilizes the Enabling Technology, Aridis shall negotiate in good faith with PVS to insure that the terms under which Aridis is introducing a Rotavirus Vaccine into Developing Countries, either itself or through a commercial partner, provides for availability of a Rotavirus Vaccine to Public Sector purchasers in or for Developing Countries at a preferential price and supply to that provided to Private Sector purchasers in the Developing Countries.  The following provisions in this Article 6 shall be used as the basis for the good faith negotiation of an agreement for the commercialization and supply of a Rotavirus Vaccine in Developing Countries by Aridis.  Such negotiations shall be undertaken between Aridis and PVS upon written notice by Aridis to PVS of Aridis’ intent to enter the Developing Countries market with a Rotavirus Vaccine.  In such negotiations PVS shall in its reasonable discretion take into account the degree to which Enabling Technology has enabled the Aridis Rotavirus Vaccine.

 

6.2                                Supply for Commercial Sale .  Upon an election to make and sell a Rotavirus Vaccine to Public Sector purchasers in Developing Countries, Aridis shall manufacture, supply and sell, or cause to be manufactured, supplied and sold, the Rotavirus Vaccine for use in designated Developing Countries for a period of time to be agreed upon by the Parties following licensure of a Rotavirus Vaccine in a Developing Country.  Aridis shall fill, or cause to be filled, Developing Country requirements for Rotavirus Vaccines by using commercially reasonable efforts to supply Rotavirus Vaccines to Public Sector purchasers in such quantities and timeframes sufficient to fulfill the purchase orders for use in Developing Countries.

 

6.3                                Public Sector Pricing .  Aridis shall provide Rotavirus Vaccine to Public Sector purchasers at a price to be determined by the Parties, it being understood that in accordance with achievement of the mission of PVS to make available to Developing Countries a Rotavirus Vaccine that is safe, efficacious, accessible and affordable, the Public Sector price for such Rotavirus Vaccine shall be at a substantial discount to the Private Sector price for the same Rotavirus Vaccine.

 

6.4                                Selection of Developing Countries by Aridis .  Should Aridis intend to deliver Rotavirus Vaccine into Developing Countries classified as “upper middle income” countries by the World Bank, Aridis may petition PVS for full or partial exclusivity in those territories with

 

9



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

respect to the rights otherwise granted to PVS under Section 5.1, subject to determination in PVS’s sole discretion that such exclusivity would not be inconsistent with any PVS obligations and in accordance with its objectives (including its mission to accelerate the development of a rotavirus vaccine and ensure its availability, affordability and accessibility for the developing world).

 

7.                                       CONFIDENTIALITY

 

7.1                                Exchange of Confidential Information .  During the course of this Agreement, Aridis and PVS (the “Disclosing Party,” as the case may be) may provide the other Party (the “Receiving Party”) with certain information, data or material in writing that the Disclosing Party has prominently marked or otherwise prominently identified as confidential or proprietary in nature ( “Confidential Information’’ ).  Without limiting the Parties’ rights under this Agreement, the Receiving Party will use its commercially reasonable efforts to hold such Confidential Information in confidence and to prevent disclosure to third parties in the manner the Receiving Party treats its own similar confidential information (except that disclosure may be made to third parties working with the Receiving Party in connection with development of the Rotavirus Vaccine who are under similar confidentiality obligations).

 

7.2                                Disclosure to Third Parties .  In support of the PVS rotavirus vaccine program, either Party may disclose, under appropriate confidentiality provision no less restrictive than the confidentiality and non-use provisions under this Agreement, Confidential Information of the other Party to members of PVS supported working groups and technical advisory groups or to consultants or development partners of PVS or Aridis, respectively, as reasonably necessary for consultation directed toward the advancement of the PVS rotavirus vaccine program.  Notwithstanding the foregoing, the Receiving Party shall have no such non-disclosure obligations with respect to any information identified as Confidential Information and disclosed by the other party that (i) is or becomes publicly available through no breach of this Agreement; (ii) is rightfully in the Receiving Party’s possession prior to the Disclosing Party’s disclosure; (iii) is disclosed to the Receiving Party by an independent third party under no obligation of confidentiality; (iv) is independently developed by the Receiving Party as can be demonstrated by documentary evidence; or (v) is required to be disclosed by the Receiving Party under any applicable law, rule or regulation of any government in any country, but only to the extent of such required disclosure.  Without limiting the foregoing, PVS shall have the right to include Confidential Information as part of PVS’ reports to its donors to the extent such Confidential Information is reasonably necessary to be included within PVS reports of its rotavirus vaccine program activities (in summary or general descriptive form to the extent reasonably feasible, and otherwise so as to minimize disclosure of information not required to be disclosed).

 

8.                                       REPRESENTATIONS AND WARRANTIES

 

8.1                                PVS Representations and Warranties .  PVS represents and warrants that:

 

8.1.1                      PVS has the right, power and authority to enter into this Agreement and to perform PVS’ obligations hereunder.

 

10



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

8.1.2                      This Agreement has been duly executed and delivered by PVS and is a legal, valid and binding obligation enforceable against PVS in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, arrangement, moratorium and other laws relating to or affecting creditors’ rights generally and equitable principles.

 

8.1.3                      The execution, delivery and performance of this Agreement, and the rights granted hereunder, do not conflict with, violate or breach any agreement to which PVS is a party, and there are no agreements, assignments or encumbrances in existence inconsistent with the provisions of this Agreement.

 

8.2                                Aridis Representations and Warranties .  Aridis represent and warrant that:

 

8.2.1                      Aridis has the right, power and authority to enter into this Agreement and to perform its obligations hereunder and grant the rights granted herein.

 

8.2.2                      This Agreement has been duly executed and delivered by Aridis and is a legal, valid and binding obligation enforceable against Aridis in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, arrangement, moratorium and other laws relating to or affecting creditors’ rights generally and equitable principles.

 

8.2.3                      The execution, delivery and performance of this Agreement, and the rights granted hereunder, do not conflict with, violate or breach any agreement to which Aridis is a party, and there are no agreements, assignments or encumbrances in existence inconsistent with the provisions of this Agreement.  Aridis will not grant any license or other right in the Background Intellectual Property and/or the Project Intellectual Property that interferes with, conflicts with or is inconsistent with any of or Aridis’ obligations or PVS’ license, rights or entitlements under this Agreement.

 

8.2.4                      As of the Effective Date, Aridis has no actual knowledge of, and without having performed any investigation as to such likelihood, is not aware of any potential claim by a third party of infringement by Aridis as to its Background Intellectual Property and Aridis will in good faith endeavor not to develop Project Intellectual Property that to its knowledge could infringe the intellectual property rights of a third party.

 

8.2.5                      Should Aridis identify third party technology of possible interest for incorporation into the Project Plan, Aridis will first consult with PVS and the parties shall mutually agree upon a course of action.

 

8.2.6                      Aridis will apply the funding it receives from PVS under this Agreement directly and solely toward implementing and achieving the objectives of the Project.

 

8.2.7                      In the event PVS terminates this Agreement pursuant to Section 12.3 or 12.4, the license granted to PVS under this Agreement shall remain valid and enforceable and shall not be impaired, modified or terminated in any way as a result of such termination.

 

11


 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

8.3                                Disclaimer of Certain Warranties .  Except as specifically set forth in Section 8.1 and 8.2, ARIDIS AND PVS EACH MAKE NO WARRANTIES TO THE OTHER, EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION, ANY WARRANTIES WITH RESPECT TO THE COMPLETION, SUCCESS OR PARTICULAR RESULTS OF THE PROJECT, STABILITY OR VIABILITY OF THE FINAL FORMULATION, OR THE CONDITION, MERCHANTABILITY, OR FITNESS FOR A PARTICULAR PURPOSE OF THE PROJECT RESULTS.

 

9.                                       LIMITATIONS ON LIABILITY

 

9.1                                Aridis Obligations .  Aridis shall be liable for its actions in accordance with the terms of this Agreement for (i) the performance of the Project Plan by Aridis; (ii) the acts of Aridis in connection with this Agreement; and (iii) the breach (by act or omission) of any of Aridis’ obligations, representations or warranties under this Agreement; except only to the extent such actions were caused by the gross negligence or willful misconduct of PVS.  Aridis shall not be liable under a claim of product liability for any product developed, used or sold incorporating the formulation data or information or other deliverable hereunder or Background Intellectual Property rights or Project Intellectual Property rights delivered to PVS under this Agreement.

 

9.2                                Limitation of Liability .  IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER PARTY FOR ANY INDIRECT, INCIDENTAL, EXEMPLARY, PUNITIVE, SPECIAL OR CONSEQUENTIAL DAMAGES (INCLUDING LOSS OF PROFIT) OF ANY KIND WHATSOEVER ARISING FROM THIS AGREEMENT OR AN ACT OR OMISSION BY EITHER PARTY, WHETHER BASED ON BREACH OF CONTRACT, BREACH OF WARRANTY, TORT OR ANY OTHER LEGAL THEORY.

 

10.                                INSURANCE

 

10.1                         Form of Insurance Coverage .  Aridis shall, at all times during the term of this Agreement, obtain and maintain at its own cost and expense, comprehensive commercial general liability insurance, and other insurance as may be commercially appropriate from time to time, with respect to its activities hereunder and insuring against risks therefrom.

 

10.2                         In the event Aridis elects to receive ATCC materials from PVS under a sublicense to the ATCC License as set forth in Section 5.3 of this Agreement, the insurance maintained by Aridis hereunder shall be in such amounts as Aridis and PVS may agree, based upon standards prevailing in the international vaccine industry at the time, but at least in the following amounts: Three Million US Dollars (US $3,000,000) per occurrence and Ten Million US Dollars (US $10,000,000) in the aggregate for damage, injury and/or death to persons, unless such coverage is not obtainable, in which case the parties will discuss appropriate adjustments.

 

10.3                         Verification of Insurance Coverage .  Upon execution of this Agreement and on an annual basis thereafter during the term of this Agreement, Aridis shall provide PVS with certificates of insurance for all relevant current insurance.

 

12



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

11.                                PUBLICATIONS: RELEASE OF INFORMATION

 

11.1                         Publications .  Subject to the confidentiality provisions of Section 7 of this Agreement, the Parties shall have the right to publish or present the technical data, clinical data or results of any test or clinical trial relating to the Project, in any peer review journal, similar publication or oral presentation to the general public; provided that before making such publication or presentation, each Party shall provide a draft manuscript or abstract to each other Party for its review and comment at least thirty (30) days prior to the proposed date of publication or presentation.  A Party may request the removal of any of its Confidential Information contained in the proposed publication or presentation, may request the deletion of its name which the Party, in its sole discretion, considers inappropriate, and, in the event a Party determines a need to delay the publication or presentation to protect or preserve exclusive Patent Rights, request such delay.  The non-publishing Party(ies) may comment on the publication and the publishing Party shall consider these comments seriously and give good faith consideration to revising the publication where appropriate.  The publishing Party shall delay the publication or presentation for up to ninety (90) days from the date of a non-publishing Party’s request as necessary to permit filings to preserve or protect Patent Rights.  Scientists at Aridis and PVS will be expected to treat matters of authorship in a proper, collaborative spirit, giving credit where it is due and proceeding in a manner that fosters cooperation and communication, but will not do anything in this regard that will jeopardize the issuance of a valid patent.  The provisions of this Section shall survive the termination of this Agreement.

 

11.2                         Use of Names .  Neither Party shall use the name of the other in any public documents, publicity or advertising without the prior written consent of the Party.  This obligation does not prohibit PVS from disclosing Aridis as a collaborator in the PVS rotavirus program to other PVS collaborators or potential collaborators, nor does it prohibit Aridis from acknowledging the PVS funding received by Aridis under this Agreement to potential partners or investors of Aridis.  Unless PVS informs Aridis otherwise, any publication or presentation shall state the following in an appropriate location: “Funded in whole or in part by the PATH Vaccine Solution Rotavirus Vaccine Program.”

 

11.3                         Public Statements .  Any press release, public statement or public announcement with respect to the Project shall be subject to the mutual written approval of the Parties.  PVS shall not refer to Aridis or any of its representative, officer or director in any Rotavirus Vaccine presentation, Rotavirus Vaccine packaging or promotional materials without the prior written approval of Aridis.

 

12.                                TERMINATION

 

12.1                         Term .  The initial Term of this Agreement shall be for a period of eighteen (18) months from the Effective Date, it being understood that the Term of this Agreement is in accordance with the time frame for development through the completion of Phase I of the Project.  The Parties will meet prior to the completion of Phase I to determine the scope of work to be continued under Phase II of the Project and shall amend the Budget ( Appendix A ), Project Plan ( Appendix B ), and Term of the Agreement accordingly.  The Parties may amend the Term of this Agreement by a written instrument signed by both Parties.

 

13



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

12.2                         Termination upon Completion of Phase I .  Subject to the provisions of Section 12.6 below, PVS may terminate this Agreement and its funding of the Project at its election upon sixty (60) days written notice to Aridis.  Either Party at its election may terminate this Agreement at the completion of Phase I and have no further obligations under this Agreement save for those terms that survive termination including the income rights and obligations as set forth in Sections 5.1 and 5.2.  Upon termination of this Agreement as provided hereunder, PVS shall have no further payment obligation to Aridis; provided that PVS shall pay or reimburse Aridis for all activities authorized by PVS and achieved as of the effective date of termination.

 

12.3                         Termination for Breach .  Subject to the provisions of Section 12.6 below, in the event that either Party shall breach any of the material terms, conditions or agreements contained in this Agreement and fail to remedy such breach within thirty (30) days of written notice thereof (the “Notice of Breach” ) from the non-breaching Party, the non-breaching Party may terminate this Agreement, by giving the breaching Party a second notice (the “Notice of Termination” ), which notice shall terminate this Agreement effective ten (10) days following the breaching Party’s receipt of such notice.

 

12.4                         Termination in Event of Bankruptcy .  Subject to the provisions of Section 12.6 below, a Party (the “Electing Party ”) shall have the right to terminate this Agreement effective immediately upon written notice to the other Party (the “Non-Electing Party ”) if: (a) the Non-Electing Party makes an assignment for the benefit of creditors; (b) a receiver is appointed for the Non-Electing Party and is not removed within sixty (60) days, or such assignment is not withdrawn within sixty (60) days; or (c) the Non-Electing Party files a voluntary petition in bankruptcy or is otherwise a party to proceedings in bankruptcy, reorganization or the appointment of a receiver, trustee, or custodian for or over its property and such proceedings, if involuntary are not vacated, set aside or stayed within sixty (60) days after commencement.  The termination shall become effective on the date of receipt of the notice by the Electing Party to the Non-Electing Party.

 

12.5                         Mutual Termination .  In addition to the foregoing, this Agreement may be terminated upon the mutual written agreement of the Parties only if the Parties set forth their agreement to terminate in a written document signed by a senior executive of each Party.

 

12.6                         Effect of Termination .

 

12.6.1               If this Agreement is terminated by PVS or Aridis, with respect to any activity not yet completed, Aridis shall promptly refund to PVS all unspent funds paid by PVS to Aridis, less (i) any non-cancelable amounts paid or non-cancelable obligations incurred prior to termination; and (ii) those funds as agreed to by PVS in support of the wind down of Aridis activities upon such notice of termination.

 

12.6.2               The parties acknowledge and agree that the mission of PVS to accelerate development of a Rotavirus Vaccine and to ensure its widespread and timely availability and accessibility for use in Developing Countries will be substantially impaired if this Agreement is terminated.  Therefore, in the event of termination of this Agreement by either Party for any of the reasons as set forth in Section 12.2, 12.3 , 12.4 or 12.5, upon such termination, the following

 

14



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

provisions and terms shall automatically become and/or continue to be effective: (a) except for termination due to breach or voluntary termination by PVS prior to completion of Phase I and through no breach of Arid is, the grant of license by Aridis to PVS pursuant to Section 5.1 shall survive; (b) Aridis promptly shall provide to PVS all know-how, and materials not already provided to PVS necessary for the further development of the selected formulations and rights as granted under Section 4.2 and Section 5.1; and (c) Aridis shall execute and deliver such documents and instruments as PVS may reasonably request to further evidence or give effect to this Section 12.6.2.

 

12.6.3               In the event of termination of this Agreement by either Party, then upon such termination, the following provisions and terms shall automatically become and continue to be effective:  (a) Aridis shall have the right to continue the Project under its own funding and resources and shall have the right to use for commercial purposes all Project Intellectual Property; and (b) PVS shall have the rights as set forth in Sub-Section 12.6.2.

 

12.6.4               Upon termination of this Agreement, neither Party shall use the name of the other Party without the express written permission of the other Party.

 

12.7                         Termination of Funding Obligations .  After fulfilling its financial commitments specified in Section 3.1, PVS shall have no further funding obligations under this Agreement.

 

12.8                         Surviva l.  The provisions of Articles 4, 5 (survival of the licenses granted by Aridis is governed by Section 12.6.2 above), 6, 7, 8, 9 and 13 and Sections 11.2, 12.6 and 12.8 shall survive the expiration or termination of this Agreement to the extent such terms by their nature continue following termination.

 

13.                                MISCELLANEOUS

 

13.1                         No Agency or Joint Venture .  Nothing in this Agreement shall be deemed to create an agency or partnership relationship or joint venture between the Parties.  Each Party shall be solely responsible for all taxes, benefits, withholding, worker’s compensation, unemployment insurance and similar requirements pertaining to its own employees.  Neither Party’s employees shall be deemed agents or employees of the other Party and neither Party shall have the power or authority to obligate or bind the other Party.

 

13.2                         Notices .  Any notices required to be given or which shall be given under this Agreement shall be in writing delivered by recognized commercial overnight courier service, personal delivery, confirmed facsimile or by certified or registered mail addressed to the parties as shown below, and shall be deemed to have been given or made as of the date received:

 

15



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

For PVS:

 

PATH Vaccine Solutions
(PVS) 1455 NW Leary Way
Seattle, WA 98107
Attention: Director of Legal Affairs
Fax: 206-285-6619
Tel: 206-285-3500

 

with a copy to:

 

PVS Rotavirus Vaccine
Program 1455 NW Leary Way
Seattle, WA 98107
Attention: Senior Program Administer
Fax: 206-285-6619
Tel: 206-285-3500

 

For Aridis:

 

Aridis Pharmaceuticals, LLC
5941 Optical Court
San Jose, CA 95138
Fax: 408-960-3822
Tel: 408-385-1742

 

13.3                         Assignment .  This Agreement shall be binding upon and inure to the benefit of the Parties hereto and their respective successors and permitted assigns, collaborators and sublicensees.  Neither Party may assign or otherwise transfer this Agreement without the prior written consent of the other Party.

 

13.4                         Governing Law .  The validity, interpretation, construction and effect of this Agreement and the legal relationship of the parties to it shall be governed by and in accordance with the laws of the State of California, without regard to it or any other jurisdictions choice of law provisions.

 

13.5                         Voluntary Resolution of Disputes .  In the event of any dispute, controversy or claim between the Parties based on, arising out of or related to this Agreement (a “Dispute”), the Parties shall attempt in good faith to resolve such dispute promptly, voluntarily and amicably.  The Vaccine Development Committee shall first attempt to resolve the dispute.  If reasonably necessary to promote the prompt resolution of the dispute, either Party may, by written notice to the other, escalate the voluntary dispute resolution process to include the President or Chief Executive Officer of each Party or a senior officer designated by such President or Chief Executive Officer.  The designated officers of each Party shall use reasonable efforts to resolve the dispute within forty-five (45) days after the dispute is referred to them.

 

16



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

13.6                         Force Majeure Aridis shall not be responsible to PVS for delay in performing any of the tasks in the Project where such delay is due to force majeure causes beyond the control of Aridis, including fire, flood, explosion, lightning, windstorm, earthquake, civil commotion, riot, war, strikes, or any other cause beyond the control of Aridis.  Should the force majeure event continue for a period of more than six (6) months, PVS shall have the right, at its sole discretion, to terminate this Agreement in accordance with Section 12.2.

 

13.7                         Other Documents .  From time to time as appropriate, the Parties shall prepare, execute and deliver such other documents as may be reasonably necessary or appropriate to give effect to or implement the intentions, agreements and undertakings of the Parties set forth in this Agreement.

 

13.8                         Severability .  In the event any portion of this Agreement shall be held illegal, void or ineffective, the remaining portions hereof shall remain in full force and effect.  If any of the terms or provisions of this Agreement are in conflict with any applicable statute or rule of law, then such terms or provisions shall be deemed inoperative to the extent that they may conflict therewith and shall be deemed to be modified to conform with such statute or rule of law.  In the event that the terms and conditions of this Agreement are materially altered as a result of this Section 13.8, the parties will renegotiate the terms and conditions of this Agreement to resolve any inequities.

 

13.9                         Entire Agreement .  This Agreement embodies the entire understanding and agreement between Aridis and PVS with respect to the subject matter contained herein, and any prior or contemporaneous representations, either oral or written, are hereby superseded.  No amendments or modifications to this Agreement (including, without limitation, changes to the Project Plan), or waivers of any rights under this Agreement, shall be effective unless and until made in writing and signed and delivered by authorized representatives of the Parties.

 

13.10                  Execution in Counterparts .  This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original as against any party whose signature appears hereon, and all of which shall together constitute one and the same instrument.  This Agreement shall become binding when one or more counterparts hereof, individually or taken together, shall bear the signatures of both of the parties.

 

17



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

IN WITNESS WHEREOF, Aridis and PVS have executed and delivered this Agreement in duplicate originals by and through their duly authorized representatives below.

 

ARDIS PHARMACEUTICAL, LLC

 

PATH VACCINE SOLUTIONS

 

 

 

By:

/s/ Eric Patzer

 

By:

/s/ Christopher J. Elias

 

 

 

 

 

Name:

Eric Patzer

 

Name:

Christopher J. Elias

 

 

 

 

 

Title:

President

 

Title:

Chair

 

 

APPENDICES

 

Appendix A

 

Budget (including Deliverables and Payment Schedule)

 

 

 

Appendix B

 

Project Plan

 

 

 

Appendix C

 

List of Developing Countries

 

 

 

Appendix D

 

Aridis Patent Rights

 

 

 

Appendix E

 

Financial Report Form

 

 

 

Appendix F

 

Form of MTA for ATCC Materials

 

18



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

APPENDIX A
Budget
Advancing Rotavirus Vaccine Development (ARVAC) Project

 

BUDGET CATEGORY

 

INITIAL PERIOD
(18 months)

 

SECOND PERIOD
(18 months)

 

PERSONNEL
(Salary and fringe benefits)
b

 

$

537,195

a

$

557,904 a

 

CONSULTANT COSTS c

 

$

50,000

 

 

EQUIPMENT d

 

$

80,000

 

$

40,000

 

SUPPLIES e

 

$

60,000

 

$

51,000

 

TRAVEL f

 

$

42,000

 

$

42,000

 

OTHER EXPENSES g

 

$

100,600

 

$

100,600

 

SUBTOTAL DIRECT COSTS

 

$

869,795

 

$

791,504

 

ADMINISTRATIVE EXPENSES h

 

$

130,159

 

$

108,621

 

TOTAL COSTS

 

$

999,954

 

$

900,125

 

 


a  Personnel costs for each 18 month period are itemized on page 2.

b  Fringe benefits - 18%.

c  Consultant costs - consultant has extensive experience in analytical characterization of viral vaccines.  Consultant will provide analytical and scientific input regarding formulations and will devote the equivalent of 25 days to this project at a per diem rate of $2,000.

d  A freeze drier will be needed to accommodate the additional capacity requirements of this project and to provide adequate separation between this project and other infectious agents in the lab that utilize a freeze dried formulation.  Cost estimates for a freeze drier are $80,000 to be purchased in the initial period.  During the second period, milling equipment will be needed to convert bulk dried material to a powder at a cost of $20,000.  In addition 4°C and 25°C stability chambers will be needed for scale-up of the liquid and powder processes at a cost of $20,000.

e  Lab supplies are $15,000 per full time equivalent (FTE), which is the standard rate in NIH grants.  In the initial period 4 FTE x 15,000 = $60,000.  In the second period 3.4 FTE x $15,000 = $51,000.

f  Travel expenses include two international meetings per funding period for two key personnel for a total of four meetings.  Cost estimate is $8,500 per meeting x 4 = $34,000.  Two domestic meetings are included for two personnel to attend scientific meetings and/or visit consultant lab.  Cost estimate is $2,000 per trip x 4 = $8,000 total.  Total travel costs= $34,000 + $8,000 = $42,000.

g  Other expenses include grant management costs ($52,000) for record keeping (scientific and financial) and project management.  This project will also incur an expansion into an adjacent laboratory at an additional cost of $2,700 per month for a total of $48,600 ($2,700 x 18 month).

 

1



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

h  Includes indirect/overhead expenses at -15% of direct costs.

 

2



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

BUDGET FOR INITIAL (1 st ) 18 MONTH PERIOD DIRECT COSTS ONLY

 

ROLE ON 
PROJECT

 

EFFORT ON 
PROJECT(%)

 

ANNUAL 
SALARY

 

SALARY REQUESTED
FOR
18 MONTHS

 

FRINGE 
BENEFITS (18%)

 

TOTAL

 

Principal Investigator

 

50

 

158,000

 

118,500

 

21,330

 

139,830

 

Sr. Manager

 

100

 

104,000

 

156,000

 

28,080

 

184,080

 

Res. Associate

 

100

 

53,000

 

79,500

 

14,310

 

93,810

 

Res. Assistant

 

100

 

45,000

 

67,500

 

12,150

 

79,650

 

Res. Assistant

 

50

 

45,000

 

33,750

 

6,075

 

39,825

 

 

 

 

 

 

 

 

 

 

 

 

 

SUBTOTALS

 

455,250

 

81,945

 

537,195

 

 

BUDGET FOR 2nd 18 MONTH PERIOD DIRECT COSTS ONLY

 

ROLE ON 
PROJECT

 

EFFORT ON 
PROJECT(%)

 

ANNUAL 
SALARY

 

SALARY REQUESTED
FOR
18 MONTHS

 

FRINGE 
BENEFITS (18%)

 

TOTAL

 

Principal Investigator

 

40

 

158,000

 

94,800

 

17,064

 

111,864

 

Sr. Manager

 

100

 

104,000

 

156,000

 

28,080

 

184,080

 

Res. Associate

 

100

 

53,000

 

79,500

 

14,310

 

93,810

 

Tech Transfer Manager

 

100

 

95,000

 

142,500

 

25,650

 

168,150

 

 

 

 

 

 

 

 

 

 

 

 

 

SUBTOTALS

 

472,800

 

85,104

 

557,904

 

 

3


 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

Payment Schedule

 

·                                           [***] upon execution of the contract

 

·                                           [***] after six months of implementation upon receipt and approval of the narrative and financial reports

 

·                                           [***] after twelve months of implementation upon receipt and approval of the narrative and financial reports

 

·                                           [***] Up to $50,000 upon receipt and approval of all end of project deliverables (these being the study reports specified in the Project Plan)

 

4



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

APPENDIX B
Project Plan
UK Bovine Vaccine Project Plan for Phase I Formulation Development

 

PROJECT OBJECTIVES AND SCOPE

 

The goal of this project is to develop a rotavirus formulation using GRAS (Generally Regarded as Safe) ingredients that is superior to the current dosage formulation currently being used which is a single dose lyophilized formulation stored at 2-8°C reconstituted with liquid antacid (citrate and bicarbonate). The criteria for success are defined as follows:

 

·                                           Stability : A vaccine formulation that is stable when stored at 2-8°C for at least one year with 0.5 log FFU/dose per serotype is desirable and should be the goal of project. However if the new formulation has superior attributes to the current lyophilized formulation that enhanced commercial acceptability (e.g. stable at higher temperatures, supports a less expense delivery device, etc.) then virus loss> 0.5 log FFU/dose per serotype may be acceptable.

·                                           Buffer : A successful formulation will contain sufficient amount of antacids to buffer against stomach acids and transit through to the gut.

·                                           Cost effective : The manufacturing process for a successful formulation must be implementable at commercial scale in a developing world manufacturing setting.

·                                           Intellectual property : A successful formulation will not infringe any other patents (prior art for rotavirus vaccines).

·                                           Vaccine serotypes studied : A successful formulation must work with UK x Human reassortants for Serotype G1, G2, G4 and G9.

 

Project execution

 

Phase I is anticipated to be approximately 18 months in duration. At the completion of Phase I, Aridis will present to PVS and the UK bovine rotavirus vaccine (BRV) manufacturing partners the liquid and powder blend formulations Aridis believes meets the goals of the project. If sufficient data are available that demonstrates one or more formulation options to be superior to the existing formulation, PVS will decide whether to authorize Aridis to continue formulation development (Phase II) in cooperation with the BRV manufacturing partners and a delivery device/packaging company. This phase will evaluate delivery devices for the new formulations.

 

A superior formulation will include one or more of the following:

 

·                                           Buffer and vaccine together in one formulation

·                                           Any formulation that is liquid stored at 2-8°C

·                                           A formulation that lends itself to a more convenient delivery device

·                                           A formulation that leads to a cheaper delivery device

 

1



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

·                                           A formulation process that is determined to be less expense than lyophilization in terms of capital expense or unit cost

·                                           Increased stability resulting in less virus needed at the time of formulation

·                                           Increased stability at temperatures above 25°C

 

Project milestones and work plan

 

(All time periods originate from the date Aridis receives materials from PVS to initiate formulation activities)

 

Liquid Formulation

 

Month 0- 4

 

Develop a multidimensional phase diagram using high throughput appropriate analytical tests (possible methods include high resolution 2 nd  derivative UV spectroscopy, intrinsic and extrinsic fluorescence spectroscopy, circular dichroism, and dynamic light scattering) to map the pH, ionic strength, and temperature regimes where the vaccine is most physically stable. These analytical tests will define solution conditions that avoid viral aggregation, protein structural changes, membrane changes, disassembly, etc. that are potential pathways leading to poor storage stability. Data provided to PVS at the completion of this milestone. If the data from these studies demonstrate that virus serotypes other than G1, G2, G4 and G9 be evaluated in subsequent studies or additional data is obtained from other sources, Aridis and PVS will work together to make the necessary adjustments in the virus serotypes evaluated.

 

 

 

Month 4 and 5

 

Select excipients, formulations, and additives to develop a refrigerator stable liquid formulation. Stabilizer classes that have been successfully used previously include non- reducing polysaccharides (sucrose, trehalose, etc.), synthetic polymers and biopolymers (hydrolyzed gelatin, polyvinyl pyrrolidone, etc.), small charged amino acids (arginine, lysine, etc.) and surfactants (pluronics, Tweens). Candidate antacids (citrate, sodium bicarbonate, etc.) will also be screened together with stabilizers. The stabilizers selected and formulations to be studies provided to PVS.

 

 

 

Month 6 to 11

 

A minimum of 15 formulations combinations will be tested using monovalent vaccine preparations of G9 and G1 serotype viruses for stability under 2-8°C, and 25°C (accelerated) storage conditions.

 

 

 

Month 12 to 17

 

Up to 5 lead formulation candidates will be tested as a tetravalent vaccine consisting of G1, G2, G4 and G9 for stability under real-time at 2-8°C storage condition.

 

 

 

Month 18

 

Present final results to PVS on lead candidate.

 

2



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

Powder Formulation

 

Month 0-1

 

Review data from PVS on the Wyeth powder blend formulation process.

 

 

 

Month 2 to 4

 

Prepare spray dried and bulk lyophilized preparations of two rotavirus serotypes, G1 and G9 serotypes. Prepare antacid buffer salts.

 

 

 

Month 5 to 6

 

Prepare powder blends of bivalent virus with and without antacid buffer salts for stability evaluation under l 5°C, and 25°C (accelerated) storage conditions.

 

 

 

Month 7 to 10

 

Evaluate the stability of all 4 powder formulations: Gl/G9 bulk lyophilized; Gl/G9 spray dried; Gl/G9 with buffer salts; Gl/G9 without buffer salts.

 

 

 

Month 11 to 13

 

Prepare a tetravalent powder blend (G1, G2, G4 and G9) using one manufacturing process (spray dried or bulk lyophilized) and evaluate stability at 2-8°C.

 

 

 

Month 18

 

Present the manufacturing process and stability data to PVS.

 

Materials to be provided by PVS (or through its designee):

 

1.                                       5 liters of post filtered monovalent bulk of serotypes G1, G2, G4 and G9 and 50 ml of G3 and GS stored at -70°C from Shantha, Biotech. If more vaccine bulks is needed, Shantha Biotech will supply to Aridis upon request.

 

2.                                       1ml of 1:100 dilution of monoclonal antibodies to G2, G3 and 20 vials of 1 ml each of G1, G4. Reagent supplies for GS and G9 will be determined later by PVS. If more reagent is needed, PVS or its affiliates will supply to Aridis upon request.

 

Deliverable at the end of Phase I

 

Aridis will provide PVS with an abbreviated technology transfer package of sufficient detail to allow a third party to implement the final liquid and powder formulation which has demonstrated to be an improvement over the existing formulation. Aridis will also provide in this abbreviated technology transfer package all stability data used to support the formulation selected for Phase II as well as data from formulations that were not selected. The written package will include the raw materials and solutions that were used in the final formulations studies, a brief description of the manufacturing process, any special equipment used in the formulation; unique facility requirements; process flow diagrams, process operating ranges such as mixing times, temperature conditions, etc. needed to prepare the formulation. All of the above information will

 

3



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

be provided on the formulation or formulations that Aridis and PVS agree warrant further development.

 

For clarification, the Phase 1 program comprises formulation development and stability testing but not process optimization or scale-up, and the abbreviated data package is not expected to be a manufacturing grade technology transfer package sufficient to allow third party manufacture without further development. Such manufacturing process, process flow and process operating ranges as are developed per this Project Plan - in addition to formulation and stability data - shall be shared.

 

Formulation, stability and other related data regarding formulations other than the Primary Formulation and Optional Formulation may be provided in summary form.

 

Scope of Work for Phase II Formulation Development

 

Prior to commencement of Phase II of the Project Plan, the Parties will develop a mutually agreeable Phase II Project Plan in accordance with the following objectives:

 

There are two objectives of the Phase II formulation development proposal: First, to continue the development at Aridis of a single formulation selected from the Phase I development program (either liquid or powder blend formulation) in sufficient detail to allow for a smooth transfer of the formulation technology to the developing country rotavirus vaccine manufacturer. Second, to work closely with PVS in selecting a contractor to develop a delivery device that is compatible with the formulation selected for Phase II and meets the needs of the developing world manufacturer.

 

Activities that will be included in the first objective include scale up of the formulation process in sufficient scale to permit the selection of appropriate equipment and identification of raw material suppliers to carry out the formulation process at commercial manufacturing scale. This objective will also include conducting real time stability studies at the recommended storage conditions and one higher temperature for a shorter duration on 3 pentavalent vaccine formulations containing the GI, G2, G3, G4 and G9 serotypes that were produced at a larger scale of production.

 

The second objective will involve providing samples of the formulation selected to the delivery device contractor. These samples will match as closely as possible to the final vaccine formulation selected for Phase II development except no live virus will be present. The chemical properties, ingredients and concentrations will be provided to the contractor to assist in the development of the delivery device. Aridis will work closely with the delivery device contractor to evaluate minor changes in the formulation that may be necessary to allow the formulation to adapt to the delivery device. Arid is will be expected to conduct stability studies in the delivery device selected, the extent to which will be dependent on the ability of Aridis or a contract manufacturing organization to fill the live virus vaccine formulation into the delivery device selected for development.

 

4



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

APPENDIX C
World Bank List of Developing Countries

 

Low-income economies (59)

 

 

 

 

Afghanistan

Bangladesh

Benin

Bhutan

Burkina Faso

Burundi

Cambodia

Cameroon

Central African Republic

Chad

Comoros

Congo, Dem. Rep.

Congo, Rep.

Cote d’Ivoire

Eritrea

Ethiopia

Gambia, The

Ghana

Guinea

Guinea-Bissau

 

Haiti

India

Kenya

Korea, Dem Rep.

Kyrgyz Republic

Lao PDR

Lesotho

Liberia

Madagascar

Malawi

Mali

Mauritania

Moldova

Mongolia

Mozambique

Myanmar

Nepal

Nicaragua

Niger

Nigeria

 

Pakistan

Papua New Guinea

Rwanda

Sao Tome and Principe

Senegal

Sierra Leone

Solomon Islands

Somalia

Sudan

Tajikistan

Tanzania

Timor-Leste

Togo

Uganda

Uzbekistan

Vietnam

Yemen, Rep.

Zambia

Zimbabwe

 

 

 

 

 

Lower-middle-income economies

 

 

 

 

Albania

Algeria

Angola

Armenia

Azerbaijan

Belarus

Bolivia

Bosnia and Herzegovina

Brazil

Bulgaria

Cape Verde

China

Colombia

Cuba

Djibouti

Dominican Republic

Ecuador

Egypt, Arab Rep.

 

El Salvador

Fiji

Georgia

Guatemala

Guyana

Honduras

Indonesia

Iran, Islamic Rep.

Iraq

Jamaica

Jordan

Kazakhstan

Kiribati

Macedonia, FYR

Maldives

Marshall Islands

Micronesia, Fed. Sts.

Morocco

 

Namibia

Paraguay

Peru

Philippines

Romania

Samoa

Serbia and Montenegro

Sri Lanka

Suriname

Swaziland

Syrian Arab Republic

Thailand

Tonga

Tunisia

Turkmenistan

Ukraine

Vanuatu

West Bank and Gaza

 

1



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

Upper-middle-income economies (40)

American Samoa

Antigua and Barbuda

Argentina

Barbados

Belize

Botswana

Chile

Costa Rica

Croatia

Czech Republic

Dominica

Equatorial Guinea

Estonia

Gabon

 

Grenada

Hungary

Latvia

Lebanon

Libya

Lithuania

Malaysia

Mauritius

Mayotte

Mexico

Northern Mariana Islands

Oman

Palau

Panama

 

Poland

Russian Federation

Seychelles

Slovak Republic

South Africa

St. Kitts and Nevis

St. Lucia

St. Vincent and the Grenadines

Trinidad and Tobago

Turkey

Uruguay

Venezuela, RB

 

2



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

APPENDIX D
Aridis Patent Rights

 

This Appendix is to list Aridis Patent Rights as of the Effective Date pursuant to section 1.13 of the Agreement. Certain patent applications are under consideration by Aridis and will be included in this Appendix D by amendment to be completed by Aridis promptly upon filing with the U.S. Patent Office or any equivalent foreign agency.

 

The Appendix shall note all relevant application numbers, application types, filing dates, inventors, assignees, government or other reserved rights noted in the application, and application titles.

 

3



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

APPENDIX E
Financial Report Form

 

Recipient: Aridis Pharmaceuticals

Period of Agreement:

Period of this Report: From        , 20  , to       , 20

Dated Submitted:

 

 

 

A

 

B

 

C

 

D

 

E

 

Budget Categories

 

Budget (in U.S.
dollars)

 

Expenses this 
Report

 

Total Expenses 
Previous 
Reports

 

Total Expenses 
(8 + C)

 

Budget Balance 
(A- D)

 

Personnel

 

537,195

 

 

 

 

 

 

 

 

 

Consultants

 

50,000

 

 

 

 

 

 

 

 

 

Supplies

 

60,000

 

 

 

 

 

 

 

 

 

Travel and per diem

 

42,000

 

 

 

 

 

 

 

 

 

Equipment

 

80,000

 

 

 

 

 

 

 

 

 

Other project costs

 

100,600

 

 

 

 

 

 

 

 

 

Indirect Expenses

 

130,159

 

 

 

 

 

 

 

 

 

TOTAL COSTS (US$)

 

999,954

 

 

 

 

 

(*)

 

 

 

 

Status of Cash on Hand

 

 

Payments Received to Date

 

 

Expenses to Date (*)

 

 

Balance

 

 

 

 

 

Status of Interest Earned

 

 

Total Interest Earned Previous Reports

 

 

Interest Earned this Reporting Period

 

 

Total Interest Earned to Date

 

 

 

Signature:

 

 

Title:

 

 

Date:

 

 

 

CERTIFICATION

 

The undersigned hereby certifies:

 

a.            That payment of the sum claimed under the cited Agreement is proper and due and that appropriate refund to PVS will be made upon request by PVS in the event of misrepresentation and/or nonperformance, in whole or in part, under the Agreement or for any breach of the terms of the Agreement, the amount of the refund to reimburse PVS for such misrepresentation, nonperformance, or breach; and

 

b.            That information in the Financial Report is correct and such detailed supporting information as PVS may require will be furnished to PVS on request; and

 

c.             That all requirements called for by the Agreement to the date of this certification have been met

 

1


 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

Appendix F

(Form of Material Transfer Agreement)

 

Material Transfer Agreement

 

This Material Transfer Agreement (hereafter “Agreement”) is between you (“ Sublicensee” or “you”) and American Type Culture Collection, a not-for-profit organization (“ATCC” or “we” or “us”).

 

The parties are entering into this Agreement in connection with your sublicense agreement (the “Sublicense”) with PATH Vaccine Solutions (“PVS”). PVS and ATCC have entered into a License Agreement dated as of       , 2006 (the “License”).

 

Scope of Use

 

YOU MAY MAKE AND USE THE MATERIAL PROVIDED TO YOU UNDER THE SUBLICENSE (“MATERIAL”) AND ALL REPLICATES AND DERIVATIVES FOR PURPOSES PERMITTED IN THE SUBLICENSE ONLY. THE MATERIAL IS NOT INTENDED FOR USE IN HUMANS. SUBLICENSEE AGREES THAT MATERIAL DESIGNATED AS BIOSAFETY LEVEL 2 OR 3 CONSTITUTES KNOWN PATHOGENS AND THAT OTHER MATERIAL NOT SO DESIGNATED AND REPLICATES OR DERIVATIVES MAY BE PATHOGENIC UNDER CERTAIN CONDITIONS. SUBLICENSEE ASSUMES ALL RISK AND RESPONSIBILITY IN CONNECTION WITH THE RECEIPT, HANDLING, STORAGE, DISPOSAL, TRANSFER AND USE OF THE MATERIAL INCLUDING WITHOUT LIMITATION TAKING ALL APPROPRIATE SAFETY AND HANDLING PRECAUTIONS TO MINIMIZE HEALTH OR ENVIRONMENTAL RISK.

 

Sublicensee shall not distribute, sell, lend or otherwise transfer the Material, Replicates, or Derivatives (the “Biological Material”) for any reason. Except as expressly permitted in the Sublicense, any commercial use of the Biological Material is prohibited without ATCC’s prior written authorization. Your use of the Biological Materials requires a sublicense from PATH.

 

For purposes of this Agreement, “Replicate” means any biological or chemical material that represents a substantially unmodified copy of the Material such as, but not limited to, material produced by growth of cells or microorganisms or amplification of Material. “Derivative” means material created from the Material that is substantially modified to have new properties.

 

Warranty; Warranty Disclaimer

 

The Material provided to you under this Agreement is subject to a warranty provided by ATCC to PVS in the License. EXCEPT AS EXPRESSLY PROVIDED TO PVS IN THE LICENSE, THE MATERIAL AND ANY TECHNICAL INFORMATION AND ASSISTANCE PROVIDED BY ATCC ARE PROVIDED AS IS, WITHOUT WARRANTIES OF ANY KIND, EXPRESS OR

 

1



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

IMPLIED, INCLUDING BUT NOT LIMITED TO ANY IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, TYPICALITY, SAFETY, AND ACCURACY.

 

Compliance With Laws

 

SUBLICENSEE IS SOLELY RESPONSIBLE FOR COMPLIANCE WITH ALL APPLICABLE FOREIGN AND DOMESTIC, FEDERAL, STATE AND LOCAL LAWS, STATUTES, ORDINANCES AND REGULATIONS. Without limiting the generality of the foregoing, any shipment of the Material to countries outside the United States must comply with all applicable U.S. laws, including the U.S. export control laws and related regulations.

 

Indemnification

 

Sublicensee hereby agrees to indemnify, defend and hold harmless ATCC, its officers, agents, employees and its contributors, against all third party claims, losses, expenses and damages (including reasonable attorneys’ fees) arising out of or relating to the use, receipt, handling, storage, transfer, disposal and other activities relating to the Biological Material or products related to the Biological Material. All non-monetary settlements will be subject to ATCC’s consent.

 

Limitation of Liability

 

IN NO EVENT WILL ATCC OR ITS CONTRIBUTORS BE LIABLE FOR ANY INDIRECT, SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES OF ANY KIND IN CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT, BIOLOGICAL MATERIALS OR PRODUCTS RELATED TO BIOLOGICAL MATERIALS (WHETHER IN CONTRACT, TORT, NEGLIGENCE, STRICT LIABILITY, STATUTE OR OTHERWISE) EVEN IF ATCC HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. IN NO EVENT SHALL ATCC’S CUMULATIVE LIABILITY IN CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT, THE SUBLICENSE, BIOLOGICAL MATERIALS OR PRODUCTS RELATED TO BIOLOGICAL MATERIALS EXCEED THE FEES PAID BY PVS TO ATCC UNDER THE LICENSE. THE PROVISIONS OF THIS SECTION SHALL SURVIVE THE EXPIRATION OR TERMINATION OF THIS AGREEMENT.

 

Sublicensee agrees that the limitations of liability set forth in this Agreement shall apply even if a limited remedy provided hereunder fails of its essential purpose.

 

Intellectual Property; Identification

 

ATCC shall retain ownership of all right, title and interest in the Biological Material. ATCC also retains rights to any intellectual property it owns in the Biological Material.  Sublicensee retains ownership of those substances created through the use of the Biological Material, but which do not contain Biological Material. Sublicensee will notify ATCC of any Derivatives it creates from ATCC Material and make such Derivatives available to ATCC. The Biological Material is subject to the restrictions noted in the “Scope of Use” section above. ATCC retains all right, title and interest in the trademarks registered or owned by the ATCC and any and all ATCC catalog numbers or ATCC specific designations of Material sold by the ATCC. ATCC also retains rights to any intellectual property it owns in the Material.

 

Sublicensee is responsible for ensuring that all permits required for Sublicensee to receive Material are obtained and that sufficient proof of such permits is provided to ATCC.

 

Termination:

 

This Agreement shall survive the termination of the Sublicense provided that said Sublicense is

 

2



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

assigned to ATCC. In all other instances, or upon termination of any assigned Sublicense, this Agreement shall terminate and Sublicensee shall destroy all stocks of Biological Material and provide by ATCC with written notification of that fact. The following provisions shall survive termination of this Agreement: Indemnification, Limitation of Liability, and Intellectual Property; Identification.

 

Miscellaneous

 

This Agreement shall be governed by the laws of the State of New York, without reference to its choice of law rules. Sublicensee may not assign or otherwise transfer this Agreement or any rights or obligations under this Agreement, whether by operation of law or otherwise. Any attempted assignment or transfer will be void and of no force or effect. This Agreement and all documents incorporated herein by reference constitute the entire agreement between ATCC and Sublicensee with respect to the Biological Material and supersede all previous agreements or representations; This Agreement may not be modified, changed or terminated orally. No change, modification, addition or amendment shall be valid unless in writing and signed by an authorized representative of
each of the parties hereto.

 

This Agreement shall be signed in two counterparts each of which shall be deemed to be an original, and both of which taken together shall constitute one and the same instrument.

 

IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by their respective duly authorized officers.

 

 

For ATCC

 

For Sublicensee

 

 

 

 

 

 

Signature

 

Signature

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Title

 

Title

 

 

 

 

 

 

Date

 

Date

 

3




Exhibit 10.10

 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

 

 

 

 

 

Executed

 

December 30, 2016

 

Vu Truong, CEO

 

Aridis Pharmaceuticals, Inc.

 

5941 Optical Court

 

San Jose, California  95138

 

Development Program:

 

Inhaled Gallium Citrate Anti-Infective

 

 

 

Amount of Award:

 

$2,902,097.00

 

 

 

Name of Awardee:

 

Aridis Pharmaceuticals, Inc. (“Aridis”)

 

Dear Dr. Truong:

 

We are pleased to inform you that the Cystic Fibrosis Foundation Therapeutics, Inc. (“CFFT”) is hereby issuing an award for the Development Program described in Exhibit A and disbursed in accordance with Exhibit B up to the amount indicated above.  The awardee, Aridis, shall be responsible for the payment of all of the remaining costs required to complete the Development Program and for costs associated with the further development and commercialization of the Product.  Each party’s obligations hereunder will commence and apply upon the execution of this Agreement.  CFFT has determined that the Award is consistent with its charitable mission to cure and mitigate the effects of cystic fibrosis and that the Development Program is unlikely to be completed or could be significantly delayed without the Award.  The Award is subject to the following terms, conditions and policies of this Letter Agreement (“Agreement”):

 

1.                                       Disbursement of Award; CFFT Know-How; Reports .

 

(a)                                  The Award will be disbursed by CFFT to Aridis in accordance with the Milestone Payment Schedule set forth in Exhibit B .  Upon completion of the Development Program, any CFFT funds not expended on the Development Program must be returned to CFFT, and upon such return, the amounts of such returned funds will not be included as part of the “Award” for purposes of calculating any payment due to CFFT pursuant to Paragraph 2 (a) and (b).

 

1



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

(b)                                  To the extent CFFT shall provide or make available to Aridis any information, expertise, know-how or other intellectual property related to cystic fibrosis or the treatment, prevention, or cure thereof (“CFFT Know-How”) to Aridis, CFFT hereby grants to Aridis a royalty-free, irrevocable, non-exclusive, transferable, sublicensable (through multiple tiers), worldwide right and license under all of CFFT’s rights in such CFFT Know-How to assist Aridis and for Aridis to research, develop, commercialize, make, have made, use, sell, have sold, offer for sale, import, export and otherwise exploit the Product.

 

(c)                                   During the Development Program, Aridis agrees to provide CFFT and the Project Advisory Group (“PAG”) specified below with a reasonably detailed, written report every three (3) months, summarizing progress toward achieving the goals of the Development Program.  In addition, Aridis shall prepare and deliver to CFFT a closing report within thirty (30) days after the completion of the Development Program.  Following the completion of the Development Program, Aridis shall continue to report to CFFT once per year on the progress of its development activities regarding the Product until the earlier of First Commercial Sale of the Product (as defined below) or such time as Aridis (or its Affiliates or licensee or sublicensees of either) ceases development of the Product in the Field.

 

2.                                       Payments to CFFT .  In consideration of license under Paragraph 1(b), Aridis agrees to make the following payments to CFFT:

 

(a)                                  Aridis shall pay to CFFT a one-time amount equal to the Cap.  Such amount shall be paid in as few as three (3) and not more than five (5) annual installments, as follows:  within ninety (90) days of the end of the calendar year in which the First Commercial Sale occurs, and within ninety (90) days of the end of each subsequent calendar year until the Cap is paid, Aridis shall pay up to [***] of Net Sales for that calendar year (except that in the fifth installment, if any, Aridis shall pay the remaining unpaid portion of the Cap, regardless of the percentage of Net Sales or fraction of Cap such payment would represent).

 

(b)                                  In addition to the amount payable pursuant to subparagraph (a) above, Aridis shall pay to CFFT a one-time amount equal to the Actual Award within sixty (60) days after the end of the first calendar year during which aggregate Net Sales of the Product exceed [***] .

 

(c)                                   In the event that Aridis licenses rights to the Product in the Field to a third party, sells the Product, or consummates a Change of Control Transaction (collectively, a “Disposition Transaction”) prior to the First Commercial Sale, Aridis shall pay to CFFT an amount equal to:

 

2



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

(i) Two (2) times the Actual Award, if the Change of Control Transaction occurs prior to the completion of the first Phase IIb (or equivalent) clinical study with respect to the Product; and (ii) four (4) times the Actual Award if the Change of Control Transaction occurs after the completion of the clinical trial specified in (i) above.  The Disposition Payment shall be made within sixty (60) days after the closing of a Disposition Transaction.  Notwithstanding the payment of the Disposition Payment, the payments specified in subparagraphs (a) and (b), if not paid in full after the Disposition Payment, shall survive, provided that the amount specified in subparagraph (a) shall be reduced by the Disposition Payment.  If any portion of the Cap in subparagraph (a) has been paid prior to the Disposition Payment, then the Cap shall be reduced by such amount previously paid.

 

3.                                       Commercially Reasonable Efforts .  Aridis (or its Affiliates or licensees or sublicensees of either) shall use Commercially Reasonable Efforts to conduct the Development Program during the term of this Agreement.  After the Development Program is completed, Aridis shall exercise Commercially Reasonable Efforts to continue to develop the Product (the “Post-Development Program Obligation”) until the earlier of the First Commercial Sale of the Product, or such time as Aridis (or its Affiliates or licensees or sublicensees of either) ceases development of the Product in the Field.

 

4.                                       Program Advisory Group (“PAG”) .

 

(a)                                  Aridis and CFFT shall form a PAG.  The PAG serves the function of allowing CFFT to monitor the use of its funding.  The PAG shall terminate and cease to exist on the earlier of (i) the First Commercial Sale of the Product, or (ii) the termination of this Agreement.  The PAG shall consist of two (2) individuals appointed by Aridis and two (2) individuals appointed by CFFT.  One of such individuals from Aridis and CFFT, respectively, shall be the principal liaison to the Development Program.  A party may replace the individuals appointed by such party and designate a different individual as the principal liaison upon written notice to the other party.

 

(b)                                  The role of the PAG shall be to discuss and propose amendments to the Development Program, including the budget, to determine whether payment milestones have been achieved, and provide recommendations on other issues raised by either party relating to the Development Program, provided that no change to the Development Program shall be made without the written agreement of both parties.

 

(c)                                   Each party shall be responsible for its own expenses in connection with attending and participating in the PAG.

 

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Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

5.                                       Interruption License .  Aridis hereby grants the Interruption License (as defined below) to CFFT, which Interruption License shall be effective as provided below.  Upon written notice from CFFT following an Interruption (the “Interruption Notice”), Aridis shall elect, within thirty (30) days of such Interruption Notice, one of the following options by written notice to CFFT:

 

(a)                                  Aridis shall reasonably demonstrate, in the form of a written progress report, that an Interruption has not occurred, or that Aridis, an Affiliate thereof, or a licensee or sublicensee of either of the foregoing is exercising Commercially Reasonable Efforts to develop the Product in accordance with Paragraph 3;

 

(b)                                  Aridis shall provide CFFT with written notice within such thirty (30) day-period that Aridis, an Affiliate thereof, or a licensee or sublicensee of either of the foregoing, has plans to resume Commercially Reasonable Efforts to develop the Product in accordance with Paragraph 3 and resumes such Commercially Reasonable Efforts within the ninety (90) day period following such notice;

 

(c)                                   The Interruption License shall become effective, as set forth below; or

 

(d)                                  In lieu of the Interruption License, within thirty (30) days of the Interruption Notice, Aridis shall pay to CFFT the greater of (A) two (2) times the Actual Award, and (B) the total of the Actual Award plus Interest up to the time of such election; and in the event of such payment, this Paragraph 5 and Paragraph 2 shall no longer be applicable.

 

If Aridis has elected (a) or (b) above within thirty (30) days of the Interruption Notice, the Interruption Notice shall be deemed satisfied and be of no further force or effect unless CFFT notifies Aridis within thirty (30) days after receipt of Aridis’ progress report under (a) above or provides notice under (b) above that CFFT disputes such progress report or notice, as the case may be.  If CFFT provides timely notice of its dispute, the parties shall resolve such dispute in accordance with the dispute resolution provision of this Agreement.

 

If Aridis has elected (a) or (b) above, CFFT has disputed such election, the resolution of the dispute is concluded and the final outcome of such dispute resolution is that such election was defective, Aridis shall have the right to elect (c) and (d) above within thirty (30) days of the final outcome.  If Aridis does not make such election within such thirty (30)-day period, Aridis shall be deemed to have made the election specified in (c) above.  If Aridis has made (or is deemed to have made) the election specified in (c) above, the Interruption License shall be effective upon such election (or deemed election) (such date, the “Interruption License Effective Date”).  The Interruption License

 

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Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

shall mean an exclusive (even as to Aridis), worldwide license to CFFT under the Aridis Development Program Technology to manufacture, have manufactured, license, use, sell, offer to sell, and support the Product in the Field.  Under the Interruption License, in lieu of any further payments to CFFT hereunder, Aridis and CFFT shall share on a 50-50 basis all compensation and consideration received from any third party in connection with the license, sale or other transfer of the Development Program Technology, whether in the form of an option or signing fee, license fees, milestone payments, royalties or otherwise, provided that CFFT’s share of any such compensation and consideration shall be increased by [***] , and Aridis’ share shall be reduced by like percentage points, for each [***] additional investment in the development of the Product and/or the Research Program Technology made by CFFT after the Interruption License Effective Date, except that, in no event shall Aridis’ share in any compensation and consideration received be reduced below [***] .   Aridis shall deliver to CFFT, within ninety (90) days after the Interruption License Effective Date, a copy of all materials and data in its possession or control constituting Development Program Technology, to the extent required by CFFT to make, use, or sell the Product in the Field and to the extent that Aridis has the right to provide such materials and data.  The Interruption License shall be deemed to constitute intellectual property as defined in Paragraph 365(n) of the U.S. Bankruptcy Code; provided, however, that nothing in this Agreement shall be deemed to constitute a present exercise of such rights and elections.  Aridis agrees that CFFT, as a licensee of such rights, shall retain and may exercise all of its rights and elections under the U.S. Bankruptcy Code.  CFFT’s rights to the Interruption License shall be enforceable against any assignee, licensee or other transferee of the Product and the Development Program Technology.

 

6.                                       Indemnification

 

(a)                                  Aridis shall indemnify, defend and hold harmless CFFT, its Affiliates, and their respective directors, officers, employees, consultants, committee members, volunteers, agents and representatives and their respective successors, heirs and assigns (each, an “CFFT Indemnitee”), from and against any and all claims, suits and demands of third parties and losses, liabilities, damages for personal injury, property damage or otherwise, costs, penalties, fines and expenses (including court costs and the reasonable fees of attorneys and other professionals) payable to such third parties arising out of, and relating to any such third party claims resulting from:

 

(i)                                      the conduct of the Development Program by Aridis or its Affiliates or their respective directors, officers, employees, consultants, agents, representatives, licensees, sublicensees, subcontractors and/or investigators (each, an “Aridis Party”) under this Agreement and/or pursuant to one or more agreements between Aridis and any Aridis Party, or any actual or alleged violation of law resulting therefrom;

 

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Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

(ii)                                   Aridis’ or its Affiliates’ development, manufacture, or commercialization of the Product developed in whole or in part as a result of the Development Program;

 

(iii)                                any claim of infringement or misappropriation with respect to the conduct of the Development Program by or on behalf of Aridis or its Affiliates, or Aridis’ or its Affiliates’ third party licensees’ or sublicensees’ manufacture, use, sale, or import of the Product developed in whole or in part as a result of the Development Program; and

 

(iv)                               any tort claims of personal injury (including death) relating to or arising out of any such injury sustained as the result of, or in connection with, the conduct of the Development Program by or on behalf of Aridis or its Affiliates, or Aridis’ or its Affiliates’ third party licensees’ or sublicensees’; in each case, (A) other than CFFT’s or any of CFFT’s licensees’ or sublicensees’ development, manufacture or commercialization of the Product developed in whole or in part as a result of the Development Program following the Interruption License Effective Date, and (B) except to the extent the claim, suit, demand, liability, damage, or loss results from the negligence, willful misconduct or other fault of a CFFT Indemnitee.

 

(b)                                  CFFT shall indemnify, defend and hold harmless Aridis, its Affiliates and their respective directors, officers, employees, consultants, agents and representatives and their respective successors, heirs and assigns (“each an Aridis Indemnitee”) from and against any and all claims, suits and demands of third parties and losses, liabilities, damages for personal injury, property damage or otherwise, costs, penalties, fines and expenses (including court costs and the reasonable fees of attorneys and other professionals) payable to such third parties arising out of, resulting from, or relating to any exercise of any rights under the Interruption License by or on behalf of CFFT, any designee, assignee or successor in interest thereto, or any licensee or sublicensee of any of the foregoing, except to the extent the claim, suit, demand, liability, damage or loss results from the negligence or willful misconduct of a Aridis Indemnitee after the effective date of the Interruption License.

 

(c)                                   A party entitled to indemnification under this Paragraph 6 (the “Indemnified Party”) will promptly notify the other party (the “Indemnifying Party”) of any claims, suits, demands, losses, liabilities, damages, costs, penalties, fines, or expenses subject to indemnification under this Paragraph 6 of which it is made aware.  The Indemnified Party will cooperate, and exert efforts to cause other Indemnified Parties to cooperate, in assisting the Indemnifying Party in presenting a

 

6



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

defense, if requested to do so.  The Indemnifying Party shall have sole control to select defense counsel, direct the defense of any such complaint or claim, and the right to settle claims at the Indemnifying Party’s sole expense, provided that any such settlement does not incur non-indemnified liability for or admit fault by any Indemnified Party and fully releases the Indemnified Party for all liability that would otherwise be paid or satisfied by the Indemnifying Party.  In the event a claim or action is or may be asserted, the Indemnified Party shall have the right to select and to obtain representation by separate legal counsel.  If the Indemnified Party exercises such right, all costs and expenses incurred for such separate counsel shall be borne by the Indemnified Party.  No Indemnified Party shall settle or enter into any voluntary disposition of any matter subject to indemnification under this Paragraph 6 without the prior written consent of the Indemnifying Party, such consent not to be unreasonably withheld.

 

7.                                       Insurance .  Aridis shall maintain at its own expense, with a reputable insurance carrier, coverage for Aridis, its Affiliates, and their respective employees written on a per occurrence basis commensurate with a reasonable assessment of the risks associated with the development efforts being conducted by Aridis, the following policies:  Commercial general liability insurance, including contractual liability as respects this Agreement for bodily injury and property damage and, no later than the first use administration of the Product to a human subject, the Product liability and clinical trials liability.

 

Maintenance of such insurance coverage will not relieve Aridis of any responsibility under this Agreement for damage in excess of insurance limits or otherwise.  On or prior to the Effective Date of this Agreement, Aridis shall provide CFFT with an insurance certificate from the insurer(s), broker(s) or agent(s) (hereinafter collectively the “Insurance Providers”) evidencing the applicable insurance coverage.  At its request, during the term of this Agreement CFFT may review Aridis’ insurance coverage with relevant Aridis personnel no more than one time per year.

 

8.                                       Intellectual Property Rights .  All inventions, data, know-how, information, results, analyses, and other intellectual property rights resulting from the Development Program shall, as between the parties, be owned by Aridis and the preparation, filing and maintenance of all patents and patent applications resulting from the Development Program shall, as between the parties, be the sole responsibility, and under the sole control, of Aridis.  Subject to Paragraph 5, CFFT hereby assigns and transfers to Aridis all of CFFT’s right, title, and interest in and to inventions, data, know-how, information, results, analyses, and other intellectual property rights resulting from the Development Program, CFFT’s access to, or knowledge or use of, any Aridis Development Program Technology, the Product, or confidential or proprietary information of Aridis, and all intellectual property rights related to any of the foregoing, free and clear of all liens, claims, and encumbrances.

 

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Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

9.                                       Termination of Agreement .

 

(a)                                  This Agreement will expire upon the completion of the Development Program if Aridis is not subject to a Post-Development Program Obligation unless sooner terminated as provided in this Paragraph 9(a).  Either party may terminate this Agreement for cause, without prejudice to any other remedies available to the terminated party with respect thereto, by providing the other party with written notice of such cause and intent to terminate; provided, however, that the other party shall have thirty (30) days following the receipt of written notice to cure such cause.  For this Paragraph 9, “cause” shall mean (i) a party’s material breach of its covenants or obligations under this Agreement or (ii) a bankruptcy or similar filing by a party or a proceeding under the applicable bankruptcy laws or under any dissolution or liquidation law or statute now or hereafter in effect and filed against such party or all or substantially all of its assets if such filing is not dismissed within sixty (60) days after the date of its filing.

 

(b)                                  The following provisions shall survive the termination of this Agreement:  Paragraphs 2, 5, 6, 8, 9, 10 (solely with respect to the confidentiality obligations therein), 11, and 12.

 

10.                                Audits .  At the request of CFFT, from time to time, Aridis shall permit CFFT, upon reasonable notice, to audit and examine such books and records of Aridis as may be necessary for verifying Aridis’ expenditures of the Award and the payment of royalties, if any, but no more frequently than once every calendar year.  All non-public information made available by Aridis as part of any such audit, as part of any other reports (whether written or non-written), or otherwise under this Agreement (including, but not limited to, in connection with the PAG) shall be regarded as Aridis’ confidential information under the confidentiality agreement between the parties, and CFFT hereby covenants that, except to the extent required by law (provided that CFFT promptly notifies Aridis of such requirement and permits Aridis to seek, and reasonably cooperates with Aridis at Aridis’ expense in seeking, a protective order therefor or other confidential treatment thereof), it shall not use any such information for any purpose other than determining whether Aridis has complied with its obligations hereunder (provided that CFFT may also use information provided through the PAG to further the purposes of the PAG hereunder) or, in the event of the grant of the Interruption License, the exercise thereof, or disclose any such information to any third party, and shall maintain such information in confidence in a manner at least as restrictive as its manner of treating its own confidential information of similar

 

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Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

nature and in any event not less than with a reasonable degree of care.  CFFT shall pay the cost of any such audit unless the audit discloses a deficiency of more than five 5% in any payment made to CFFT, in which event, Aridis shall reimburse CFFT for the cost of the audit.  In addition, all payments and other items found to be erroneous as a result of the audit shall be corrected.

 

11.                                Miscellaneous .

 

(a)                                  Governing Law.  This Agreement shall be governed by and construed in accordance with the internal laws of the State of Maryland

 

(b)                                  Dispute Resolution.

 

(i)                                      In the event of any dispute, claim or controversy arising out of, relating to or in any way connected to the interpretation of any provision of this Agreement, or the rights or obligations of either party under this Agreement (a “Dispute”), either party may at any time provide the other party written notice specifying the terms of such Dispute in reasonable detail.  As soon as practicable after receipt of such notice, an officer of each party shall meet at a mutually agreed upon time and location to engage in good faith discussions for the purpose of resolving such Dispute.  If the Dispute is not resolved within thirty (30) days of such notice, either party may institute arbitration in accordance with (ii) below.

 

(ii)                                   In the event any Dispute is not resolved in accordance with (i) above, such Dispute shall be resolved by final and binding arbitration.  Whenever a party decides to institute arbitration proceedings, it shall give written notice to that effect to the other party.  Arbitration shall be held in Washington, D.C., according to the then-current commercial arbitration rules of the Center for Public Resources (“CPR”), except to the extent such rules are inconsistent with this subparagraph.  The arbitration will be conducted by one (1) independent, neutral arbitrator who shall be mutually acceptable to both parties, such acceptance not to be unreasonably withheld, and who shall be appointed in accordance with CPR rules.  If the parties are unable to mutually agree on such an arbitrator within 20 business days of the notice of the institution of the arbitration proceedings, then either party shall have the arbitrator be appointed in accordance with CPR rules.  Any arbitrator chosen hereunder shall have educational training and industry experience sufficient to demonstrate a reasonable level of relevant scientific, financial, medical and industry knowledge.  The arbitrator shall use his/her best efforts to conduct and conclude the proceedings within thirty (30) days of the final arbitration hearing.  No arbitrator shall have the power to award punitive damages and such award is expressly prohibited.  The proceedings and decisions of the arbitrator shall be confidential, final and

 

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Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

binding on all of the parties.  Judgment on the award so rendered may be entered in any court having jurisdiction thereof.  The parties shall share the costs of arbitration according to the decision of the arbitrator.  Nothing in this subparagraph will preclude either party from seeking equitable or injunctive relief, or interim or provisional relief, from a court of competent jurisdiction, including a temporary restraining order, preliminary injunction, or any other form of permanent or interim equitable or injunctive relief, concerning a dispute either prior to or during any arbitration.

 

(c)                                   This Agreement may be executed in two (2) or more counterparts, each of which shall be deemed to be an original, but all of which together shall constitute one and the same Agreement.  Facsimile and other electronically scanned signatures shall have the same effect as their originals.

 

(d)                                  All communications between the parties with respect to any of the provisions of this Agreement will be sent to the addresses set out below, or to such other addresses as may be designated by one party to the other by notice pursuant hereto, by prepaid, certified air mail (which shall be deemed received by the other party on the seventh (7 th ) business day following deposit in the mail), or other electronic means of communication (each of which shall be deemed received when transmitted), with confirmation by first class letter, postage pre-paid, given by the close of business on or before the next following business day:

 

if to CFFT, to:

 

Preston Campbell, III, M.D.
6931 Arlington Rd.
Suite 200
Bethesda, Maryland  20814
Phone:  301-907-2541
Fax:  301-907-2699
Email:  pcampbell@cff.org

 

with a copy to:

 

Schaner & Lubitz, PLLC
6931 Arlington Rd., Suite 200
Bethesda, Maryland  20814
Attn:  Kenneth I. Schaner, Esq.
Phone:  240-482-2848
Fax:  202-470-2241
E-mail:  ken@schanerlaw.com

 

10


 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

if to Aridis, to:

 

Aridis Pharmaceuticals, Inc.
5941 Optical Court
San Jose, California  95138
Attn:  Vu Truong, CEO
Phone:  408-385-1742
Fax:  408-960-3822
E-mail:  truongv@aridispharma.com

 

(e)                                   The paragraph headings are for convenience only and will not be deemed to affect in any way the language of the provisions to which they refer.

 

(f)                                    This Agreement may not be assigned by any party without the consent of the other party, except that either Party may assign this Agreement without such consent to an Affiliate of such party or in connection with the transfer, whether by sale of assets, merger or otherwise, of all or substantially all of the assets or business of such party to which this Agreement relates, provided that the assignee agrees in a writing delivered to the other Party that he or she agrees to be bound by this Agreement.  Any assignment that is not in accordance with this subparagraph 11(f) will be null and void ab initio .

 

(g)                                   Nothing herein contained shall be deemed to create an agency, joint venture, amalgamation, partnership or similar relationship between CFFT and Aridis.  Notwithstanding any of the provisions of this Agreement, neither party to this Agreement shall at any time enter into, incur, or hold itself out to third parties as having authority to enter into or incur, on behalf of the other party, any commitment, expense, or liability whatsoever, and all contracts, expenses and liabilities in connection with or relating to the obligations of each party under this Agreement shall be made, paid, and undertaken exclusively by such party on its own behalf and not as an agent or representative of the other.

 

(h)                                  Aridis shall submit any proposed press release or other public announcement, other than an academic, scholarly, or scientific publication, concerning the terms of this Agreement or this Award to the Public Affairs Department of CFFT prior to its public release with sufficient time prior to its public release to allow for review and comments, except to the extent any such release or announcement is required by law, rule, or regulation or the rules of any securities exchange.  CFFT’s support for the Development Program shall be acknowledged in any publications relating to the Development Program.  Nothing in this Agreement shall prohibit Aridis from disclosing the terms of this Agreement pursuant to federal securities laws or the rules of any securities exchange.

 

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Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

(i)                                      The parties agree that they intend to advance the body of general scientific knowledge of cystic fibrosis and its potential therapies and cures and the parties acknowledge that Aridis intends to, as commercially and scientifically reasonable based on the results of the Development Program, submit for publication the results of the Development Program in a scientific peer-reviewed publication on a timely basis and provide CFFT with copies of at least one public forum presentation annually.

 

(j)                                     In accordance with the U.S. Department of the Treasury Anti-Terrorist Financing Guidelines, Aridis shall take reasonable steps to ensure that the payments received from CFFT are not distributed to terrorists or their support networks or used for activities that support terrorism or terrorist organizations.  Aridis certifies that it is in compliance in all material respects with all laws, statutes and regulations restricting U.S. persons from dealing with any individuals, entities, or groups subject to Office of Foreign Assets Control (OFAC) sanctions.

 

(k)                                  Aridis shall provide CFFT on the effective date of this Agreement with a description of its other sources of support and update that description from time to time during the Development Program.

 

(l)                                      Aridis shall provide CFFT with a copy of its public filings, such as annual reports, with governmental units from time to time during the Development Program.

 

12.                                Definitions .

 

(a)                                  Unless otherwise defined in this letter, the following shall apply:

 

·                   “Actual Award” means the total amount of the Award actually paid to Aridis.

 

·                   “Affiliate” shall mean, with respect to a party, any entity, which directly or indirectly controls, is controlled by, or is under common control with, such party.  For these purposes, “control” shall refer to (a) the ownership, directly or indirectly, of at least fifty percent (50%) of the voting securities or other ownership interest of an entity; or (b) the possession, directly or indirectly, of the power to direct the management or policies of an entity, whether through the ownership of voting securities, by contract or otherwise.

 

·                   “Aridis Development Program Technology” shall mean all technology, in whole or in part, discovered, developed, or controlled, by Aridis or its Affiliates, as a result of the Development Program under this Agreement (solely for purposes of the Interruption License), including, without limitation, technology owned or controlled by Aridis prior to Aridis’ performance of the Development Program under this Agreement that is necessary in the performance of the Development Program under

 

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Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

this Agreement.  Without limitation, Aridis Development Program Technology shall include data, technical information, source codes, know-how, inventions (whether or not patented), trade secrets, laboratory notebooks, and processes and methods.

 

·                   “Cap” shall mean five (5) times the Actual Award if the First Commercial Sale occurs on or before December 31, 2022, and six (6) times the Actual Award if the First Commercial Sale occurs after that date.

 

·                   “Change of Control Transaction” shall mean the consummation of a transaction, whether in a single transaction or in a series of related and substantially contemporaneous transactions, constituting (i) a merger, share exchange or other reorganization, (ii) the sale by one or more stockholders of Aridis of stock representing a majority of the voting power of the stock of Aridis then outstanding to one or more related parties, or (iii) a sale of all or substantially all of the assets of Aridis (or of that portion of its assets related to the subject matter of this Agreement), in each case in which the stockholders of Aridis immediately prior to such transaction do not own a majority of the voting power of the acquiring, surviving or successor entity, as the case may be, immediately following such transaction; provided that a Change of Control Transaction shall not include an initial public offering or a bona fide financing transaction for the benefit of Aridis (i.e. in which Aridis raises capital for general working or business purposes) in which voting control of Aridis transfers to one or more persons or entities who acquire shares of Aridis, and the existing Aridis stockholders receive no consideration directly or indirectly in connection with the transaction or initial public offering.

 

·                   “Commercially Reasonable Efforts” shall mean the level of effort, expertise and resources that is substantially and materially consistent with industry standards for companies of similar size and financial resources to research, develop and commercialize the Product, provided such research, development and commercialization is technically feasible, devoting the degree of attention and diligence to such efforts that is substantially and materially consistent with industry standards for a product at a comparable stage in development, with similar market potential, and taking into account material issues of safety and efficacy, proprietary position, competitive environment, regulatory environment, and other relevant scientific technical and commercial issues that are not subject to correction with reasonable efforts;

 

·                   “Field” shall mean the treatment of cystic fibrosis and other pulmonary diseases.

 

·                   “First Commercial Sale” shall mean the date on which the Product is first sold in a country in a bona fide commercial sale following marketing authorization of the Product in such

 

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Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

country by, on behalf of or under the authority of the Company or any of the Company’s Affiliates or licensees or sublicensees in an arm’s-length transaction to a third party.  Sales for clinical study purposes or compassionate, named patient or similar use shall not constitute a First Commercial Sale.

 

·                   “Interest” shall mean the prime rate applicable during the relevant time period, as published in the Wall Street Journal , plus five (5) percentage points.

 

·                   “Interruption” shall mean the cessation by the Company (including for this purpose its Affiliates and licensees and sublicensees) of Commercially Reasonable Efforts to develop a Product for more than one hundred eighty (180) consecutive days at any time before the First Commercial Sale of the Product.  For clarity, delays resulting from events outside of Aridis’ reasonable control (e.g., technical difficulties, shortages of supplies or materials, delays in preclinical or clinical studies or regulatory processes, etc.) will not be deemed cessation of Commercially Reasonable Efforts.

 

·                   “Net Sales” shall mean for any period, the gross amount received for sales of the Product in the Field by Aridis or any Aridis Affiliate or any licensee or sublicensee of either as applicable (a “Selling Person”), to a non-Affiliate of the Selling Person, less the following deductions, in each case to the extent specifically related to the Product and taken by the Selling Person or otherwise paid for or accrued by the Selling Person (“Permitted Deductions”):

 

trade, cash, promotional and quantity discounts and inventory management fees paid to wholesalers;

 

tariffs, duties, excises and taxes on sales (including sales or use taxes or value added taxes) to the extent imposed upon and paid directly with respect to such sales (and excluding national, sales or local taxes based on income);

 

freight, insurance, packing costs and other transportation charges allocated to the sale;

 

amounts repaid or credits taken by reason of damaged goods, rejections, defects, expired dating, recalls or returns or because of retroactive price reductions, billing errors, or trial prescriptions;

 

charge back payments, rebates and discounts granted to (i) managed healthcare organizations, (ii) federal, state or provincial or local governments or other agencies, (iii) purchasers and reimbursers or (iv) trade customers, including wholesalers and chain and pharmacy buying groups;

 

discounts paid under state legislated or seller-sponsored discount prescription drug programs or reductions for coupon and voucher programs; and

 

documented custom duties actually paid by the Selling Person.

 

14



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

Sales of the Product between or among Aridis and its Affiliates and any licensee or sublicensee of either for resale, or for use in the production or manufacture of the Product, shall not be included within Net Sales; provided, however, that any subsequent sale of the Product (or any Product produced or manufactured using the Product) by Aridis or its Affiliate or licensee or sublicensee to another non-Affiliate third party shall be included within Net Sales.  Net Sales shall exclude any sale or other distribution for use in a clinical trial or other Development activity, for compassionate or named-patient use or for test marketing.

 

·                   “Product” shall mean any product in any form, dosage or preparation containing gallium citrate or gallium nitrate citrate as an active ingredient intended for treatment of patients in the Field.

 

We are pleased to make the Award described in this Agreement.  Please indicate your agreement to the terms set forth in this Agreement by signing below.

 

Sincerely,

 

Cystic Fibrosis Foundation Therapeutics, Inc.

 

By:

/s/ Preston W. Campbell

 

 

 

 

Name:

Preston W. Campbell

 

 

 

 

Title:

President

 

 

Agreed:

 

Aridis, Inc.

 

By:

/s/ Vu Truong

 

 

 

 

Name:

Vu Truong

 

 

 

 

Title:

CEO

 

 

15



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

Exhibit A

 

Development Program Plan and Budget

 


 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

Exhibit B

 

Payment Schedule

 

Milestone

 

Milestone Payment

 

Expected Milestone
Estimated Completion Date

Contract execution

 

[***]

 

December 2016

Identification of NOAEL of either gallium citrate or gallium nitrate citrate from non-GLP 7-day, 2 species tox studies

 

[***]

 

March 2017

First animal from each species dosed in 4-week GLP inhalational toxicology studies

 

[***]

 

April 2017

Completion of 4-week GLP inhalational toxicology studies

 

[***]

 

September 2017

Therapeutics Development Network Protocol Review Committee approval of CF clinical study

 

[***]

 

October 2017

IND opened

 

[***]

 

December 2017

First CF patient, first dose in Phase 2A clinical study

 

[***]

 

February 2018

Median CF patient, first dose in Phase 2A clinical study

 

[***]

 

July 2018

Last CF patient, last visit in Phase 2A clinical study

 

[***]

 

December 2018

Final integrated clinical and statistical report reviewed and approved by CFFT

 

[***]

 

March 2019

 

Payments shall be made by CFFT within forty-five (45) days of receipt from Aridis of the corresponding invoice and supporting documentation verifying occurrence of such milestone and PAG verification.

 



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

TECHNICAL ABSTRACT

 

APPLICANT NAME

DATE SUBMITTED

Truong, Vu

8/10/2016 8:34:43 PM

 

TITLE OF PROJECT (Titles exceeding 81 characters, including spaces and punctuation, will be truncated.)

Inhaled Gallium Citrate Anti-Infective in CF

 

This Abstract will become public information; therefore, do not include proprietary/confidential information.

 

The overall objective of this proposal is to develop an inhalable, broad spectrum therapy to improve lung function in CF patients based on the potent anti-infective property of gallium citrate.  Gallium citrate represent a new class of anti-infective which exhibits a unique mechanism of action involving iron metabolism interference that is different from all current antibiotics.  This drug candidate exhibits strong biofilm activity, long lung half-life, and absence of detectable drug resistance.  Gallium citrate is the active species formed when blending citrate buffer with gallium nitrate, which is similar to Ganite®, a drug that has been studied for its anti-infective properties by Dr. Pradeep Singh and others.  Gallium citrate exhibits in vitro activity against a broad spectrum of Gram (-) and Gram (+) bacteria, which is indistinguishable from Ganite.  A recent proof-of-concept open label phase 1 clinical study conducted by Dr. Christopher Goss et al. with an IV Ganite formulation in CF patients showed preliminary hint of improvement in lung function, despite relatively low lung uptake of the drug.  Such data provided a strong rationale for local inhaled delivery.  The inhaled formulation that has been developed for this drug candidate is compatible with several commercially available nebulizers (e.g. PARI eFlow, Aerogen Aeroneb Go) that are being used by many CF patients.  We propose to extend these studies by completing inhalation toxicology testing, followed by phase 1 and 2A clinical trials in CF patients.

 



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

LAY ABSTRACT

 

APPLICANT NAME

DATE SUBMITTED

Truong, Vu

8/10/2016 8:34:43 PM

 

TITLE OF PROJECT (Titles exceeding 81 characters, including spaces and punctuation, will be truncated.)

Inhaled Gallium Citrate Anti-Infective in CF

 

This Abstract will become public information; therefore, do not include proprietary/confidential information.

 

We are developing an inhaled antimicrobial therapy called Panaecin™ with broad spectrum activity against bacteria, fungi, and viruses to treat chronic lung infections in cystic fibrosis (CF) patients.  This gallium-based therapy works differently than current antibiotics and relies on its ability to interfere with iron uptake and metabolism in microorganisms.  It essentially employs a “Trojan horse” type of mechanism tricking the microorganism into ingesting gallium rather than iron.  Since iron is essential for growth and survival, the bacteria starve for iron and cannot grow.  Laboratory studies have shown that Panaecin exhibits broad spectrum antimicrobial activity against many of the bacteria that are found in the lungs of CF patients including Pseudomonas aeruginosa, Stenotrophomonas maltophilia, Burkholderia cepacia, B. cenocepacia, and Staphylococcus aureus.  Furthermore, Panaecin was 10-fold more potent than current inhaled therapies against P. aeruginosa and also exhibits several key advantages including a long residence time in the lung (possibly reducing dosing frequency), no detectable development of drug resistance (minimizing “drug holidays”) and strong activity against bacteria growing in biofilms.  We have also shown that an inhaled form of this drug can protect animals from pneumonia caused by P. aeruginosa.  A recent proof-of-concept phase 1 clinical study with an intravenously administered form of a gallium complex in CF patients indicated that it was safe and there was a preliminary hint of lung function improvement.  This proposal is designed to first demonstrate the safety of inhaled Panaecin in animals, followed by phase 1 and phase 2 clinical trials in CF patients to demonstrate safety and efficacy, respectively.

 



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

APPLICANT:   Truong, Vu

 

PROPOSED BUDGET

 

 

 

Period 1

 

Period 2

 

Period 3

 

Period 4

 

Period 5

 

Start Date (mm/dd/yyyy)

 

Sep 01, 2016

 

Sep 01, 2017

 

 

 

 

 

 

 

End Date (mm/dd/yyyy)

 

Aug 31, 2017

 

Mar 31, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Personnel Direct Costs

 

 

 

 

 

 

 

 

 

 

 

Salaries & Wages

 

0.00

 

0.00

 

 

 

 

 

 

 

Fringe Benefits

 

0.00

 

0.00

 

 

 

 

 

 

 

SubTotal: Personnel Costs

 

0.00

 

0.00

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non - Personnel Direct Costs

 

 

 

 

 

 

 

 

 

 

 

Consultant Costs

 

0.00

 

0.00

 

 

 

 

 

 

 

Equipment

 

0.00

 

0.00

 

 

 

 

 

 

 

Supplies

 

0.00

 

0.00

 

 

 

 

 

 

 

Travel (North American Continent ONLY)

 

0.00

 

0.00

 

 

 

 

 

 

 

Patient Care In-Patient

 

0.00

 

0.00

 

 

 

 

 

 

 

Patient Care Out-Patient

 

0.00

 

1736197.00

 

 

 

 

 

 

 

Alterations and Renovations

 

0.00

 

0.00

 

 

 

 

 

 

 

Other Expenses

 

1165900.00

 

0.00

 

 

 

 

 

 

 

Consortium & Contractual Direct

 

0.00

 

0.00

 

 

 

 

 

 

 

Sub Total: Non-Personnel costs:

 

1165900.00

 

1736197.00

 

 

 

 

 

 

 

TOTAL DIRECT COSTS

 

1165900.00

 

1736197.00

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Indirect Costs (i.e. overhead costs, facilities and administrative costs)

 

 

 

 

 

 

 

 

 

 

 

INDIRECT COSTS

 

0.00

 

0.00

 

 

 

 

 

 

 

TOTAL COSTS

 

1165900.00

 

1736197.00

 

 

 

 

 

 

 

 



 

P.I. Vu Truong, Ph.D.

 

THERAPEUTICS DEVELOPMENT AWARD

 

TABLE OF CONTENTS / CHECKLIST

 

Number pages consecutively at the bottom of the page.  Type the name of the Principal Investigator at the top of each page.

 

SECTION 1*

PAGES 1-5

Face Page

1-2

Lay Abstract

3

Technical Abstract

4

Proposed Budget

5

( *SECTION 1 is automatically assembled by Proposal Central. Pagination is not required.)

 

 

 

SECTION 2

 

Table of Contents

6

Detailed Budget(s) for each year of support

7

Budget Justifications(s)

10

Biographical Sketches of Key Personnel

41

Facilities Available

59

 

 

SECTION 3 - Research Plan (30 page max)

 

Specific Aims

64

Milestones Timetable Outline

64

Significance

65

Experimental Design, Methods and Milestones

73

Consultants/Collaborative Arrangements

83

Literature Cited

84

 

 

SECTION 4 - Appendix / other attachments

( Pagination not necessary. )

Contents : Summary results of the 14-days exploratory toxicology study

 

 


 

DETAILED BUDGET FOR YEAR 1

 

From: September 1, 2016 Through: August 31, 2017

 

Personnel (Applicant Organization Only)

 

TOTALS

 

Name

 

Position Title

 

%

 

Hours per
Week

 

Salary

 

Fringe
Benefits

 

CFFT

 

Sponsor
Matching Costs

 

Vu Truong, Ph.D.

 

PI

 

20

 

8

 

55,000

 

20

%

 

66,000

 

Eric Patzer, Ph.D.

 

Co-investigator

 

20

 

8

 

55,000

 

20

%

 

66,000

 

Andrew Kelson, Ph.D.

 

Co-investigator

 

40

 

16

 

54,400

 

20

%

 

65,280

 

Phillip Lovalenti, Ph.D.

 

Co-investigator

 

35

 

14

 

58,800

 

20

%

 

70,560

 

Guy Lalonde, Ph.D.

 

Co-investigator

 

18

 

7

 

25,000

 

20

%

 

30,000

 

Luisa Yee

 

Manager

 

50

 

20

 

63,780

 

20

%

 

76,536

 

Heeral Kothari

 

Res Asst

 

50

 

20

 

30,227

 

20

%

 

36,272

 

Hong Yang

 

Res Asst

 

50

 

20

 

24,000

 

20

%

 

28,800

 

 

 

 

 

 

 

Subtotals

 

 

 

 

 

 

439,448

 

Consultant Costs

 

 

 

 

 

 

 

Brian Rogers

 

 

 

 

 

49,000

 

Elizabeth Leininger, Ph.D.

 

 

 

 

 

75,000

 

 

 

Subtotal

 

 

 

124,000

 

Equipment (Itemize)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Subtotal

 

 

 

 

Supplies (Itemize by category)

 

 

 

 

 

Laboratory supplies

 

 

 

15,000

 

Animals for efficacy testing

 

 

 

15,000

 

Assay reagents

 

 

 

15,000

 

 

 

Subtotal

 

 

 

45,000

 

Travel

 

 

 

 

 

Annual Meeting

 

 

 

2,000

 

GLP Tox site visit

 

 

 

7,500

 

 

 

Subtotal

 

 

 

9,500

 

Patient Care Costs

 

 

 

 

 

 

 

Subtotal

 

 

 

 

 

Other Expenses (Itemize by category)

 

 

 

 

 

 

 

Liquid Aerosol Development, aerosol characterization, assay devt, animal PK/biodistribution

 

 

 

 

 

1,150,000

 

Gallium Citrate process development & manufacturing (GMP)

 

 

 

 

 

121,994

 

Gallium Citrate ICH Stability testing

 

 

 

 

 

48,750

 

Fill/Finish of final drug product

 

 

 

450,000

 

non-GLP research toxicology studies

 

370,230

 

 

 

GLP Toxicology studies, genetic tox and safety pharmacology

 

795,670

 

 

 

IND filing

 

 

 

50,000

 

 

 

Subtotal

 

1,165,900

 

1,820,744

 

TOTAL DIRECT COSTS

 

 

 

 

 

Component I -

Discovery and/or Preclinical Development Phase: CFFT contributions not to exceed $200,000

 

1,165,900

 

2,438,692

 

Component II -

Clinical Phase: CFFT contributions not to exceed $750,000

 

 

 

 

 

 



 

DETAILED BUDGET FOR YEAR 2

 

From: September 1, 2017   Through: August 31, 2018

 

Personnel (Applicant Organization Only)

 

TOTALS

 

Name

 

Position Title

 

%

 

Hours per
Week

 

Salary

 

Fringe
Benefits

 

CFFT

 

Sponsor
Matching Costs

 

Vu Truong, Ph.D.

 

PI

 

20

 

8

 

55,000

 

20

%

 

66,000

 

Eric Patzer, Ph.D.

 

Co-investigator

 

20

 

8

 

55,000

 

20

%

 

66,000

 

Andrew Kelson, Ph.D.

 

Co-investigator

 

30

 

12

 

40,800

 

20

%

 

48,960

 

Phillip Lovalenti, Ph.D.

 

Co-investigator

 

35

 

6

 

25,200

 

20

%

 

30,240

 

Yu Ping Yen, Ph.D.

 

Clinical Ops

 

28

 

11

 

62,500

 

20

%

 

75,000

 

Paul-Andre de Lame, M.D.

 

CMO

 

24

 

9.5

 

83,333

 

20

%

 

100,000

 

 

 

 

 

 

 

Subtotals

 

 

 

 

 

 

 

386,200

 

Consultant Costs

 

 

 

 

 

 

 

Elizabeth Leininger, Ph.D.

 

 

 

 

 

50,000

 

 

 

Subtotal

 

 

 

50,000

 

Equipment (Itemize)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Subtotal

 

 

 

 

 

Supplies (Itemize by category)

 

 

 

 

 

 

 

Assay reagents

 

 

 

 

 

15,000

 

 

 

Subtotal

 

 

 

15,000

 

Travel

 

 

 

 

 

 

 

Annual Meeting

 

 

 

 

 

2,000

 

Clinical site visits

 

 

 

 

 

9,000

 

QA site visit

 

 

 

 

 

2,500

 

 

 

Subtotal

 

 

 

13,500

 

Patient Care Costs

 

 

 

 

 

 

 

Phase 1/2a Safety, tolerability & PK Clinical Trial in healthy & CF adults

 

 

 

1,157,465

 

 

 

 

 

 

 

 

 

 

 

 

 

Subtotal

 

1,157,465

 

 

 

Other Expenses (Itemize by category)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Subtotal

 

 

 

 

 

TOTAL DIRECT COSTS

 

 

 

 

 

 

 

Component I -

Discovery and/or Preclinical Development Phase: CFFT contributions not to exceed $200,000

 

1,157,465

 

464,700

 

Component II -

Clinical Phase: CFFT contributions not to exceed $750,000

 

 

 

 

 

 



 

DETAILED BUDGET FOR YEAR 3

 

From: September 1, 2018   Through: March 31, 2019

 

Personnel (Applicant Organization Only)

 

TOTALS

 

Name

 

Position Title

 

%

 

Hours per
Week

 

Salary

 

Fringe
Benefits

 

CFFT

 

Sponsor
Matching Costs

 

Vu Truong, Ph.D.

 

PI

 

20

 

8

 

55,000

 

20

%

 

66,000

 

Eric Patzer, Ph.D.

 

Co-investigator

 

20

 

8

 

55,000

 

20

%

 

66,000

 

Andrew Kelson, Ph.D.

 

Co-investigator

 

40

 

12

 

40,800

 

20

%

 

48,960

 

Phillip Lovalenti, Ph.D.

 

Co-investigator

 

35

 

6

 

25,200

 

20

%

 

30,240

 

Yu Ping Yen, Ph.D.

 

Clinical Ops

 

9

 

3.6

 

20,250

 

20

%

 

24,300

 

Paul-Andre de Lame, M.D.

 

CMO

 

10

 

4

 

35,000

 

20

%

 

42,000

 

Subtotals

 

 

 

 

 

 

 

 

 

 

 

 

 

277,500

 

Consultant Costs

 

 

 

 

 

 

 

Elizabeth Leininger, Ph.D.

 

 

 

 

 

25,000

 

 

 

Subtotal

 

 

 

25,000

 

Equipment (Itemize)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Subtotal

 

 

 

 

 

 

 

 

 

 

 

 

 

Supplies (Itemize by category)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Subtotal

 

 

 

 

 

Travel

 

 

 

 

 

Annual Meeting

 

 

 

2,000

 

Clinical site visits

 

 

 

9,000

 

 

 

Subtotal

 

 

 

11,000

 

Patient Care Costs

 

 

 

 

 

Phase 1/2a Safety, tolerability & PK Clinical Trial in healthy & CF adults

 

578,732

 

 

 

 

 

 

 

 

 

 

 

Subtotal

 

578,732

 

 

 

Other Expenses (Itemize by category)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Subtotal

 

 

 

 

 

TOTAL DIRECT COSTS

 

 

 

 

 

Component I -

Discovery and/or Preclinical Development Phase: CFFT contributions not to exceed $200,000

 

578,732

 

313,500

 

Component II -

Clinical Phase: CFFT contributions not to exceed $750,000

 

 

 

 

 

 


 

BUDGET JUSTIFICATION

 

Year: all

 

From: September 1, 2016

 

Through: March 31, 2019

Direct Costs:
CFFT - $2,902,097
Sponsor - $3,216,892

 

Indirect Costs:
Not allowed.

 

Total Costs: $6,228,401

 

Provide justification by major categories.  Please note that indirect costs are not allowed.

 

BUDGET JUSTIFICATION FOR ALL THREE YEARS

 

Key Personnel

 

1.                                       Vu Truong, Ph.D. - Principal Investigator

 

Dr. Truong Aridis’ Chief Scientific Officer at Aridis will have overall responsibility for managing the scientific and technical aspects of the project.  This takes advantage of both his core area of expertise, as well as his experience managing technically diverse projects.  Dr. Truong has more than 15 years of experience in formulation and stabilization of macromolecules.  He is one of the leading researchers studying the biopreservation and delivery of biologicals.

 

2.                                       Eric J. Patzer, Ph.D., Aridis - Co-investigator

 

Dr. Patzer has over 30 years of experience managing large organizations including project management departments of up to 10 professionals, and spanning all product development stages from early preclinical development to commercialization.  He was the project leader of the FluMist® (intranasal influenza) vaccine during preclinical and clinical development and has managed all of the major activities proposed in this grant application (formulation development, preclinical testing, clinical manufacturing, GLP toxicology studies).  He will provide the overall senior level guidance to the project and will be responsible for oversight of the financial, resource allocation, timelines and business relationships of the project.

 

3.                                       Phillip Lovalenti, Ph.D., Aridis — Director

 

Dr. Lovalenti will be leading the final fill/finish of the drug product.  He has over 15 years’ experience in pharmaceutical formulation development, drug delivery and sustained release formulations.  Prior to joining Aridis, he developed spray drying processes for manufacturing sustained release drug formulations and also developed formulations for intravenous and intranasal delivery.  He will work closely with Dr. Truong and have primary responsibility to develop the final container and fill.

 

4.                                       Andrew Kelson, Ph.D. - Director

 

He will be assisting Vu Truong in the overall technical oversight of the project including assay development.  Dr. Kelson has over 20 years of experience in the pharmaceutical industry most recently as Group Leader at Telik and has worked on the synthesis and scale-up of small molecule drugs.  He has typically initiated projects using a medicinal synthetic approach for producing milligram to gram quantities of material to produce a safe, efficient and continuous process that can then be scaled up to produce over 1kg of API.  He has been involved in preparation of Master Batch Records and analytical methods that were transferred to an external CRO for the production of over 10 kg of cGMP grade API.

 



 

5.                                       Paul-Andre de Lame, M.D. - Chief Medical Officer

 

Dr. de Lame is a seasoned industry executive with over 30 years of experience in the biopharmaceutical industry in clinical development of major cardiovascular, metabolic and anti-infective agents.  His strategic leadership has been instrumental in the success of several blockbusters, including enalapril (Vasotec®, Renitec®), and atorvastatin (Lipitor®).  As an industry physician and expert medical monitor, he has been part on an ongoing basis of significant research programs related to heart failure, ischemic heart disease, and metabolic disorders assessing treatment interventions ranging from drugs and biologics to medical devices and stem cell therapy.  Dr. de Lame was a key contributor to the clinical development effort for several vaccines and antibiotics, and the life cycle management of imipenem/cilastatin (Tienam®, Primaxin®), norfloxacin, and several medical devices.  He will be in charge of the clinical development of gallium citrate.

 

Other Personnel

 

6.                                       Guy Lalonde, Ph.D. - Preclinical Scientist

 

Dr. Lalonde is an experienced scientist with over 15 years’ experience across a wide range of drug discovery, pre-clinical research and development functions.  He most recently worked at Nektar Therapeutics where he was responsible for selection of candidate compounds following aerosol administration.  He developed rat and dog metabolic PK/PD models, as well as immunoassays, binding assays and cell based functional assays for the characterization of pharmacokinetic, pharmacological and potential toxicological properties of candidate compounds.  In this capacity he managed CRO execution of animal studies of candidate compounds in support of IND-enabling studies.  He will participate in the analysis of the animal efficacy and toxicokinetoc/PK studies in year 1.

 

7.                                       Yu Ping Yen, Ph.D. - VP Clinical Operations

 

Dr. Yen has more than 25 years of experience in successfully managing clinical operations with a proven track record in delivering strong supportive clinical data culminating in multiple NDA/BLA and PMA/510(k) product approvals in the US and EU.  She has led highly motivated in-house clinical and cross-functional teams, vendors and CROs in strategic planning and execution of early to late phase clinical trials in oncology, immunotherapy, CNS, CVD and upper respiratory disorders.  She has a thorough knowledge of FDA regulatory requirements and ICH/GCP guidelines, and has authored and supported the clinical sections of multiple global regulatory submissions.  She will be involved in the clinical development strategy and will be instrumental in implementing the phase 1 and 2A clinical trials in year 2 and 3.

 

8.                                       Luisa Yee - Senior Manager

 

Ms. Yee has over 20 years of experience in R&D laboratories developing and validating analytical assays including antimicrobial susceptibility assays.  She will bring a level of experience to this project, which will ensure that experiments are well designed and executed, so that there is a timely execution of the project goals.  She will perform antimicrobial testing and provide analytical support for all process and formulation development, preclinical animal PK, efficacy and GLP Tox studies, and manufacturing support.  She will oversee the work of the two research associates (H. Kothari and H Yang).

 

9.                                       Two Research Associates (H. Kothari, H. Yang)

 

They will work with Ms. Yee to provide analytical support and antimicrobial susceptibility testing to the project.

 



 

Key Consultants:

 

Brian Rogers, Ph.D., DABT

 

Dr. Rogers has an extensive background in preclinical toxicology and safety assessment of both small and large biological molecules.  He has 24 years of industrial toxicology experience in biotechnology and pharmaceuticals, including 5 years at Genentech with a wide variety of drug products, routes of administration, and clinical indications.  He has assessed the safety implications of product impurities, contamination, and occupational exposure to selected drugs and chemicals.  Dr. Rogers has extensively interacted with the FDA in correspondence and in face-to-face meetings and has authored over 60 IND and NDA/BLA nonclinical sections for over 75 development projects.  He will have responsibility for the design and execution of the preclinical toxicology studies and will prepare the Preclinical Toxicology section of the IND for submission to the FDA.  He is currently a consultant to Aridis on the design and implementation of the GLP toxicology studies.

 

Elizabeth Leininger, Ph.D.

 

Dr. Leininger is a Regulatory Affairs and Quality professional with over 20 years of experience at CBER/FDA, the BioPharmaceutical Industry and as a consultant.  She has been involved in global strategic development, licensing and post-marketing regulatory activities of products and has experience in the evaluation, development and implementation of Quality Systems, including documentation, training, auditing and gap analysis.  Dr. Leininger has considerable experience interacting with the FDA and other regulatory agencies and has prepared, reviewed and submitted regulatory documents for clinical and CMC sections of new drugs under development, specifically pre-IND documents, US INDs, amendments, comparability protocols, orphan drug applications, master files, facility design packages, meeting requests, briefing documents, EU IMPD/CTDs and Canadian CTAs.

 

Consultant Costs:

 

·                   Dr. Brian Rogers - $49,000 (year 1) for consulting services for the design and implementation of the research and GLP toxicology studies for the IND for submission.

·                   Dr. Elizabeth Leininger - $125,000 for regulatory consultant, who will advise and compile document for pre- IND meeting, IND filing, and preparation of clinical data for FDA submission ($75K in year 1, $50K in year 2 and $25K in year 3).

 

Travel Costs: Dr. Truong (Principal Investigator) one trip annually to attend annual review meetings ($2,000 per trip.  Three trips per year in years 2 & 3 for clinical consultant Yu Ping Yen for clinical site visits (3K/trip).  Regulatory/QA consultant Elizabeth Leininger one trip per year in year 1 & 2 to visit preclinical & clinical sites ($2.5K/trip).  Two trips in year 1 for toxicologist Brian Rogers to visit LRRI for the preclinical animal toxicology study ($2.5k/trip).

 

Supplies: $30,000 year 1, $15,000 for year 2 for analytical testing of preclinical and clinical samples and stability studies of the GMP clinical lots.

 

Subawards/Consortium/Contractual costs:

 

IIT Research Institute (IITRI) will provide the Non-GLP pilot dose ranging studies in rats and dogs ($370,230), the 4 week GLP toxicology study in rats and dogs ($715,740) and the Ames, micronucleus, chromosome aberration and hERG assays ($79,930) all in year 1for a total cost of $1,165,900.

 



 

Aridis Pharmaceuticals, Inc.

 

Clinical Budget Summary
STUDY NUMBER:  AR-501-002
VERSION DATE:  9-Aug-2016

 

Total Study Budget Estimate

 

 

 

$

1,736,197.28

 

Payment Schedule (Tentative)

 

 

 

 

 

At the time of Contract Signing (Non-Refundable)

 

 

 

20

%

At Start of Screening

 

 

 

25

%

At Time of First Dose

 

 

 

20

%

At the time of the last shipment of primary samples

 

 

 

20

%

At time of Data Entry Completion

 

 

 

10

%

At time of IRB Close Out

 

 

 

5

%

 

 

 

 

 

 

Assumptions

 

 

 

 

 

Number of Study Sites

 

3

 

 

 

Number of Subjects

 

 

 

 

 

Healthy Volunteers

 

12

 

 

 

Cystic Fibrosis Patients

 

18

 

 

 

Total

 

30

 

 

 

 

 

 

 

 

 

Budget Estimate Details

 

 

 

 

 

Clinical Cost

 

 

 

 

 

Per subject - Healthy volunteers

 

$

37,699.58

 

 

 

Per subject - Cystic Fibrosis Patients

 

$

25,000.00

 

 

 

Total for study

 

 

 

$

902,395.01

 

 

 

 

 

 

 

Other Costs - Healthy Volunteers Portion

 

 

 

 

 

SNBL Study Coordination

 

 

 

$

28,180.54

 

Additional costs

 

 

 

$

17,746.13

 

Screen Failures

 

$

1,661.30

 

 

 

N

 

12

 

 

 

Total for study

 

 

 

$

19,935.60

 

Stipend for Enrolled Subjects

 

$

4,350.00

 

 

 

N

 

12

 

 

 

Total for study

 

 

 

$

52,200.00

 

Stipend for Alternates

 

$

110.00

 

 

 

N

 

4

 

 

 

Total for study

 

 

 

$

440.00

 

Stipend for Screen Failures

 

$

35.00

 

 

 

N

 

12

 

 

 

Total for study

 

 

 

$

420.00

 

Advertising

 

 

 

$

1,500.00

 

Stipend - Unscheduled Visit

 

$

50.00

 

As Incurred

 

Courier Fees (World Courier)

 

$

1,000.00

 

As Incurred

 

Attorney’s Fees

 

$

1,500.00

 

As Incurred

 

 



 

Other Costs - entire study

 

 

 

 

 

Start-up cost

 

 

 

 

 

Per site

 

$

14,850.00

 

 

 

Total for study

 

 

 

$

44,550.00

 

Study Management

 

 

 

$

75,000.00

 

Site monitoring

 

 

 

 

 

Per visit

 

$

2,500.00

 

 

 

Number of visits

 

15

 

$

37,500.00

 

Medical monitoring

 

 

 

$

25,000.00

 

Safety management

 

 

 

 

 

Per month

 

$

2,000.00

 

 

 

Number of months

 

16

 

$

32,000.00

 

Contract & budget negotiation

 

 

 

 

 

Per site

 

$

2,500.00

 

 

 

N sites

 

4

 

$

10,000.00

 

DSMB

 

 

 

 

 

Per meeting

 

$

10,000.00

 

 

 

N meetings

 

14

 

$

140,000.00

 

Data Management System

 

 

 

 

 

EDC system license

 

$

17,810.00

 

 

 

Inventory module

 

$

3,810.00

 

 

 

Randomization module

 

$

5,710.00

 

 

 

Build

 

$

22,000.00

 

 

 

Total for study

 

 

 

$

49,330.00

 

Data Management Resources

 

 

 

 

 

FTE

 

0.75

 

 

 

Per month

 

$

12,500.00

 

 

 

Number of months

 

24

 

 

 

Total for study

 

 

 

$

225,000.00

 

Statistics

 

 

 

 

 

Protocol design and randomization schedule

 

$

5,000.00

 

 

 

Statistical Analysis Plan (SAP)

 

$

7,500.00

 

 

 

Analysis, table, listings and figures

 

$

50,000.00

 

 

 

PK analysis

 

$

7,500.00

 

 

 

Contribution to CSR

 

$

5,000.00

 

 

 

Total for study

 

 

 

$

75,000.00

 

 


 

 

July 29, 2016
IITRI Proposal No.: 143-4-5716-018

 

Guy Lalonde, Ph.D.
Director R&D
ARIDIS Pharmaceuticals
5941 Optical Court
San Jose, CA  95138

 

Dear Guy:

 

IIT Research Institute (IITRI) is pleased to respond to your request for a proposal to conduct a series of inhalation toxicology studies in rats and dogs to support your project for an inhaled formulation of an anti-infective drug candidate.  The combined capabilities of IITRI and pathology subcontractor, Charles River Laboratories, Pathology Associates (CRL-PA) will provide ARIDIS Pharmaceuticals with the needed expertise to conduct these studies successfully in a timely manner.

 

Scope of Work.   The proposed program will have a series of preclinical studies of an anti-infective drug formulation.  The route of administration of the drug is via inhalation using a commercial nebulizer device.  The aim of the preclinical studies is to demonstrate safety of drug formulation at several fold higher than the clinical dose.  The tasks to be executed in the program are:

 

1)                                      Nebulizer performance and aerosol characterization (Task IA) and setup and validation of analytical method to determine gallium levels in rat and dog plasma (Task 1 B)

2)                                      Non-GLP single dose study in rats (Phase A)

3)                                      Non-GLP single dose, dose-escalation study in dogs (Phase A)

4)                                      Non-GLP 7-day, dose-range finding study in rats (Phase B)

5)                                      Non-GLP 7-day, dose-range finding study in dogs (Phase B)

6)                                      GLP 4-week rat inhalation toxicology study with two week recovery

7)                                      GLP 4-week dog inhalation toxicology study with two week recovery

8)                                      In-vivo micronucleus study in rats with i.v. administration of test material

9)                                      Ames assay

10)                               Chromosomal aberration assay in human lymphocytes

11)                               hERG assay

 

Supporting Documentation.   A more detailed outline for each of the above described study is provided in the Attachment.

 

Study Costs.   The GLP studies will be conducted in compliance with US FDA Good Laboratory Practice Regulations (21 CFR Part 58).  The total price of this testing program is $1,165,900.  An itemized costing follows:

 



 

Study Task

 

GLP

 

Cost($)

IA. Nebulizer Performance, Aerosol Characterization

 

No

 

27,500

IB. Validation of Analytical Method to Determine

 

No

 

 

Gallium Levels in Rat and Dog Plasma

 

 

 

14,590

2. Single Dose, Dose-Range Finding (Phase A)-Rats

 

No

 

35,730

3. Single Dose, Dose-Range Finding (Phase A)-Dogs

 

No

 

55,260

4. 7-day Dose-Range Finding (Phase B)-Rats

 

No

 

105,050

5. 7-day Dose-Range Finding (Phase B)-Dogs

 

No

 

132,030

6. 4-week Study in Rats with 2 week recovery

 

Yes

 

316,810

7. 4-week Study in Dogs with 2 week recovery

 

Yes

 

398,930

8. in-Vivo Micronucleus

 

Yes

 

35,390

9. Ames Assay

 

Yes

 

14,320

10. Chromosome Aberration Assay

 

Yes

 

22,520

11. hERG Assay

 

Yes

 

7,700

Total

 

 

 

1,165,900

 

This cost includes the submission of draft final reports (one per study task) to the Sponsor, a revised final report and the archiving of all appropriate data and specimens for one year.  The GLP-compliant phases of this study and its report will be audited and inspected by the IITRI Quality Assurance Unit.

 

Project Timeline.   Task 1 will be initiated within 3 weeks of contract authorization and receipt of test material.  Once we know the start date of the project a firm and detailed timeline will be provided.

 

The proposed payment schedule is:

 

For Tasks 1, 2, 3, 4, 5, 8, 9, 10, 11

 

40%            advance payment upon authorization to proceed with the task; IITRI will submit an invoice upon task authorization

40% upon study plan/ protocol approval

15% upon Completion of Laboratory/ in-life work

5% upon submission of the draft report.

 

For Tasks 6 and 7

 

30%            upon authorization to proceed with the task; IITRI will submit an invoice upon task authorization

20% upon protocol approval

20% upon one month after study start

25% upon completion of in-life

5% upon submission of the draft report.

 

IITRI would be pleased to perform the proposed study on a fixed price basis.  We are enclosing a copy of our Agreement for Research Services for your review.  Our proposal will be considered to be in effect for a period of ninety (90) days from the date of its submission.  To initiate the testing program, please sign the Agreement and return a copy.  The individual who will represent IITRI on any contractual negotiations which may be required is Mr. Michael McGibbon, Vice President and Director for Administration.  He can be contacted at 312-567-4170.  If you have technical questions regarding this proposal or need clarifications, please call me at 312-567-4285.

 

2



 

IIT Research Institute looks forward to working with ARIDIS Pharmaceuticals on this program.

 

 

Respectfully submitted,
IIT Research Institute

 

Narayanan Rajendran, Ph.D.
Vice President and Manager,
Inhalation Toxicology Division

 

Approved:

 

Michael C. McGibbon
Vice President and
Director for Administration

 

cc:                                 Inhalation Toxicology Files
Michael McGibbon

 

This proposal includes data that shall not be disclosed outside the Client’s organization and shall not be duplicated, used, or disclosed - in whole or in part - for any purpose other than to evaluate this proposal.  If, however, a contract is awarded to this offeror as a result of - or in connection with - the submission of these data, the Client shall have the right to duplicate, use, or disclose the data to the extent provided in the resulting contract.  This restriction does not limit the Client’s right to use information contained in these data if it is obtained from another source without restriction.  The data subject to this restriction are contained in all sheets.

 

3



 

Attachment

 

Study Outlines

 

4



 

Task 1A: Nebulizer Selection and Aerosol Characterization

 

a.                                       Nebulizer performance and aerosol Characterization

 

Test atmospheres containing test material will be generated using a solution of the test material and an appropriate nebulizer.  Based on previous studies, AeroNeb solo from Aerogen will be used.  The main parameters for performance evaluation of the nebulizer are:

 

1)   aerosolization rate
2)  Amount and stability of aerosol output

 

Appropriate target concentrations will be established by proper dilution.  Once IITRI receives specific information about the test material, we will design aerosol generation/dilution interfaces for use in inhalation exposure studies.

 

b.                                       Test Atmosphere Concentration Monitoring

 

Based on our understanding of the test material property, we propose the following: Test atmospheres containing the test material will be monitored continuously with a real time aerosol sensor.  Additionally, aerosol samples will be collected from an unused animal exposure port by appropriate particulate filters for gravimetric measurements.  Selected filters can be submitted for analysis to verify gravimetric measurement as well as to demonstrate test article integrity after nebulization.

 

c.                                        Aerosol Particle Size Measurement

 

Aerosol particle size distribution in the test atmosphere will be determined with a cascade impaction device.  The data will be used to calculate mass median aerodynamic diameter (MMAD) and geometric standard deviation (GSD).

 

Task 1B: Analytical Method Setup and Validation - Measurement of Gallium in Rat and Dog plasma

 

Setup and validate analytical method for concentration measurement in plasma samples from rats and dogs using ICP / MS

 

1)                                      Setup and validate an analytical method to support GLP studies

2)                                      Generate validation report.

 

5



 

Task 2: Dose-Range Finding Toxicology Study Phase A—Rats

 

Exposure
Group

 

Maximum Daily
Exposure Duration,
(hours)

 

Number of Animals

 

 

 

 

M

 

F

Low

 

6

 

3

 

3

Mid

 

6

 

3

 

3

Hi

 

6

 

3

 

3

 

Toxicology
Study Parameter

 

Comment

 

 

 

Regulatory

 

Non-GLP; Guide for Care and Use of Laboratory Animals (1996)

 

 

 

Objective

 

To determine maximum tolerated dose (MTD) by single exposure

 

 

 

Species

 

Sprague Dawley

 

 

 

Duration

 

Single Exposure as described in the table above and observe for 3 days then discard.

 

 

 

Administration

 

By nose-only inhalation of test material at concentration to be determined.

 

 

 

Housing

 

Single-housed

 

 

 

Mortality

 

2x daily; 1x daily on weekends and holidays

 

 

 

Clinical signs

 

2x daily

 

 

 

Body weights

 

Upon receipt, randomization on Study Day 1 and daily till termination

 

 

 

Food Consumption

 

None Required

 

 

 

Respiratory Physiology

 

None Required

 

 

 

Necropsy

 

On Day 4; no tissue collection.

 

6



 

Task 3: Dose-Range Finding Toxicology Study Phase—A-Dogs

 

Exposure
Group

 

Maximum Daily
Exposure Duration,
(hours)

 

Number of Animals

 

 

 

 

M

 

F

Low

 

1.5 /session

 

1

 

1

Mid

 

1.5 /session

 

 

 

 

Hi

 

1.5/session

 

 

 

 

 

Toxicology
Study Parameter

 

Comment

 

 

 

Regulatory

 

Non-GLP; Guide for Care and Use of Laboratory Animals (1996)

 

 

 

Objective

 

To determine maximum tolerated dose (MTD) by single exposure

 

 

 

Species

 

Beagle Dog

 

 

 

Duration

 

Single Exposure as described in the table above and observe for 4-days then use the same animals for the next round. Maximum exposure duration of 1.5 hrs/ session; To meet dose criteria, if required, up to two sessions per day possible.

 

 

 

Administration

 

By oronasal administration of test material at concentration to be determined.

 

 

 

Housing

 

Single-housed

 

 

 

Mortality

 

2x daily; 1x daily on weekends and holidays

 

 

 

Clinical signs

 

2x daily

 

 

 

Body weights

 

Upon receipt, randomization on Study Day 1 and daily till termination

 

 

 

Food Consumption

 

None Required

 

 

 

Necropsy

 

None; animals returned to stock colony.

 

7



 

Task 4: Dose-Range  Finding Toxicology Study Phase B—Rats

 

 

 

Maximum

 

 

 

 

 

 

Daily

 

 

 

 

 

 

Exposure

 

Number of

 

 

Exposure

 

Duration,

 

Animals,

 

Number of Animals in Subgroup a

Group

 

(hours)

 

Total

 

 

Core b

 

Recovery

 

Toxicokinetic c

 

 

 

 

M

 

F

 

M

 

F

 

M

 

F

 

M

 

F

Vehicle Control

 

6

 

5

 

5

 

5

 

5

 

 

 

 

Low

 

6

 

15

 

15

 

5

 

5

 

 

 

10

 

10

Mid

 

6

 

15

 

15

 

5

 

5

 

 

 

10

 

10

High

 

6

 

15

 

15

 

5

 

5

 

 

 

10

 

10

Total

 

 

 

50

 

50

 

20

 

20

 

 

 

 

 

30

 

30

 


a  These rats will be subgroups of the total animals; b  these rats will be necropsied one day after last exposure; c  TK subgroup will have 3 subgroups of 3/s/g with one extra animal to serve as replacement, these rats will not be necropsied.

 

Toxicology
Study Parameter

 

Comment

 

 

 

Regulatory

 

Non-GLP; Guide for Care and Use of Laboratory Animals (1996)

 

 

 

Objective

 

To determine maximum tolerated dose (MTD)

 

 

 

Species

 

Sprague Dawley

 

 

 

Duration

 

7 consecutive days exposure, once daily.

 

 

 

Administration

 

By nose-only inhalation of test material at concentration to be determined (TBD).

 

 

 

Housing

 

Single-housed

 

 

 

Mortality

 

2x daily; 1x daily on weekends and holidays

 

 

 

Clinical signs

 

2x daily

 

 

 

Body weights

 

Upon receipt, randomization on Study Day 1 and twice weekly till termination

 

 

 

Food Consumption

 

consistent with body weights

 

 

 

Toxicokinetics

 

Blood will be drawn from the retro-orbital sinus from TK rats (subgroups assigned to designated-time points). Each animal will be bled no more than three times within 24 hours and to the maximum extent possible, will have two hour period between consecutive bleeds. No necropsy on TK animals; euthanize and

 

8



 

 

 

discard after last sample collection. Samples taken on Day 1 and last day of dosing at up to 8 time points (TBD).

 

 

 

TK Sample Analysis

 

Samples will be shipped to Sponsor for analysis.

 

 

 

Clinical Pathology

 

All core animals at termination.

 

 

 

Respiratory Physiology

 

None Required

 

 

 

Necropsy

 

On Day 8; standard tissue collection and preserved for possible histopathology evaluation. Organ weights; bone marrow smears collected, fixed and stored.

 

9


 

Task 5: Dose-Range  Finding Toxicology Study Phase B—Dogs

 

 

 

Maximum

 

 

 

 

 

 

Daily

 

 

 

 

 

 

Exposure

 

Number of

 

 

Exposure

 

Duration,

 

Animals,

 

Number of Animals in Subgroup  a

Group

 

(hours)

 

Total

 

Core  b

 

Recovery

 

Toxicokinetic  c

 

 

 

 

M

 

F

 

M

 

F

 

M

 

F

 

M

 

F

Vehicle Control

 

1.5 / session

 

2

 

2

 

2

 

2

 

 

 

 

Low

 

1.5 / session

 

2

 

2

 

2

 

2

 

 

 

 

 

 

Mid

 

1.5 / session

 

0

 

0

 

0

 

0

 

 

 

 

 

 

High

 

1.5 / session

 

2

 

2

 

2

 

2

 

 

 

 

 

 

Total

 

 

 

6

 

6

 

6

 

6

 

 

 

 

 

 

 

 

 


a  These dogs will be subgroups of the total animals; b  these dogs will be necropsied one day after last exposure; c  no additional animals; samples collected from core animals.

 

Toxicology
Study Parameter

 

Comment

 

 

 

Regulatory

 

Non-GLP; Guide for Care and Use of Laboratory Animals (1996)

 

 

 

Objective

 

To determine maximum tolerated dose (MTD)

 

 

 

Species

 

Beagle Dog

 

 

 

Duration

 

7 consecutive days exposure, once daily. Maximum exposure duration of 1.5 hrs/ session; if dose criteria requires, up to two sessions per day possible.

 

 

 

Administration

 

By oronasal administration of test material at concentration to be determined.

 

 

 

Housing

 

Single-housed

 

 

 

Mortality

 

2x daily; 1x daily on weekends and holidays

 

 

 

Clinical signs

 

2x daily

 

 

 

Body weights

 

Upon receipt, randomization, on Study Day 1 and twice weekly till termination consistent with body weights

 

 

 

Food Consumption

 

Blood will be drawn from the cephalic or jugular vein from all dogs.

 

10



 

Toxicokinetics

 

Samples taken on Day 1 and last day of dosing at 8 time points (maximum) from test article groups and twice from control group.

 

 

 

Clinical Pathology

 

All animals prestudy and at termination.

 

 

 

TK Sample Analysis

 

Samples will be shipped to Sponsor for analysis.

 

 

 

Respiratory Physiology

 

None Required

 

 

 

Necropsy

 

On Day 8; standard tissue collection and preserved for possible histopathology evaluation. Organ weights; bone marrow smears collected, fixed and stored.

 

11



 

Task 6: 4-Week Repeat Dose Inhalation Study in Rats

 

 

 

 

 

 

 

Number of Animals in subgroup  a

 

 

 

Exposure

 

Number of

 

Core Toxicology

 

Exposure Group

 

Duration, hr

 

Animals Total

 

Main  b

 

Recovery

 

TK

 

 

 

 

 

M

 

F

 

M

 

F

 

M

 

F

 

M

 

F

 

1 (Vehicle Control)

 

TBD

 

19

 

19

 

10

 

10

 

5

 

5

 

4

 

4

 

2 (Air Control)

 

 

 

14

 

14

 

10

 

10

 

0

 

0

 

4

 

4

 

3 (Low)

 

TBD

 

20

 

20

 

10

 

10

 

0

 

0

 

10

 

10

 

4 (Mid)

 

TBD

 

20

 

20

 

10

 

10

 

0

 

0

 

10

 

10

 

5 (High)

 

TBD

 

25

 

25

 

10

 

10

 

5

 

5

 

10

 

10

 

Total

 

 

 

98

 

98

 

50

 

50

 

10

 

10

 

38

 

38

 

 


a  These rats will be subgroups of the total animals; b  these rats will be necrops1ed one day after last exposure; c  TK subgroup in dosed exposure groups will have 3 subgroups of 3/s/g with one extra animal to serve as replacement and in control groups 1 subgroup of 3/s/g with one extra animal, TK rats will not be necropsied.

 

Toxicology Study Parameter

 

Comment

 

 

 

Regulatory

 

Good Laboratory Practice Regulations, 21CFR58; and Guide for Care and Use of Laboratory Animals (1996)

 

 

 

Species

 

Sprague Dawley

 

 

 

Duration

 

28 consecutive days exposure, once daily.

 

 

 

Administration

 

By nose-only inhalation of test material at concentration to be determined.

 

 

 

Recovery

 

Recovery groups maintained for 2 weeks post exposure.

 

 

 

Housing

 

Single-housed

 

 

 

Mortality

 

2x daily

 

 

 

Clinical signs

 

At least once daily till necropsy as appropriate

 

 

 

Body weights

 

Upon receipt, for randomization prior to day 1, then weekly. Fasted weight on Day 29.

 

 

 

Food Consumption

 

Consistent with body weight determination

 

 

 

Toxicokinetics

 

Blood will be drawn from the retro-orbital sinus from TK rats (3/s/g/timepoint).

 

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Samples taken on Days 1 (first dose) and 28 (last dose) at up to 8 time points. Each animal will be bled no more than three times within 24 hours and to the maximum extent possible, will have two hour period between consecutive bleeds. No necropsy on TK animals; euthanize and discard after last sample collection.

 

 

 

TK Sample Analysis

 

Samples will be shipped to Sponsor for analysis.

 

 

 

Respiratory Function

 

Minute volumes will be determined pretreatment and on weeks 1, 4 and 6 (recovery animals) for 4 animals/sex/dosed groups at pre dose, as soon as possible post exposure and approximately 2 hours post exposure if the post exposure measurement shows an effect.

 

 

 

Clinical Pathology

 

Hematology, coagulation and blood chemistry on all animals at termination (terminal and recovery necropsy).

 

 

 

Urinalysis

 

Consistent with clinical pathology

 

 

 

Ophthalmology

 

pretreatment, prior to terminal sacrifice and at recovery necropsy if effects are seen at terminal necropsy

 

 

 

Necropsy

 

Necropsy on Day 29 (terminal) and 43 (recovery); terminal necropsy over two days and one day for recovery groups. Collect all tissues (standard FDA tissue list).

 

 

 

Histopathology

 

Full tissue list evaluation for control group and High dose group animals in Main study. Lungs, trachea and larynx for all the remaining terminal necropsy animals. Read down for low dose groups and recovery animals at additional cost. Bone marrow smears collected, fixed and stored.

 

 

 

Organ weights

 

Absolute and relative-to-body weight: lung, liver, heart, kidney, brain, ovaries or testes and spleen for all animals.

 

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Task 7: 4-Week Inhalation Toxicity Study in Dogs

 

 

 

Exposure

 

Number of

 

Number of Animals in

 

 

 

Duration,

 

Animals

 

subgroup  a

 

Exposure Group

 

hr

 

Total

 

Toxicity  b

 

  Recovery  c

 

 

 

 

 

M

 

F

 

M

 

F

 

M

 

F

 

1 (Vehicle Control)

 

TBD

 

6

 

6

 

4

 

4

 

2

 

2

 

2 (Air Control)

 

TBD

 

4

 

4

 

4

 

4

 

0

 

0

 

3 (Low)

 

TBD

 

4

 

4

 

4

 

4

 

0

 

0

 

4 (Mid)

 

TBD

 

4

 

4

 

4

 

4

 

0

 

0

 

5 (High)

 

TBD

 

6

 

6

 

4

 

4

 

2

 

2

 

Total

 

 

 

98

 

98

 

50

 

50

 

10

 

10

 

 


a  These dogs will be subgroups of the total animals; b  these dogs will be necrops1ed one day after last exposure; c  these dogs will be necropsied after two weeks of recovery period

 

Toxicology
Study Parameter

 

Comment

 

 

 

Regulatory

 

Good Laboratory Practice Regulations, 21CFR58; and Guide for Care and Use of Laboratory Animals (1996)

 

 

 

Species

 

Beagle Dog

 

 

 

Duration

 

7days/week for at least 4 weeks exposure, once daily (maximum exposure duration of 90 minutes/day). Recovery groups maintained for 2 weeks without exposure to test material.

 

 

 

Administration

 

By oronasal administration of test material at concentration to be determined.

 

 

 

Recovery

 

Recovery groups maintained for 2 weeks post exposure.

 

 

 

Housing

 

Single-housed

 

 

 

Mortality

 

2x daily

 

 

 

Clinical signs

 

At least twice daily till necropsy as appropriate

 

 

 

Body weights

 

Upon receipt, three days prior to day 1, then twice weekly. Fasted weight on the necropsy day.

 

 

 

Food Consumption

 

Consistent with body weight determination

 

 

 

Body Temperature

 

None

 

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Toxicokinetics

 

None included

 

 

 

TK Sample Analysis

 

Samples will be shipped to Sponsor for analysis.

 

 

 

Pulmonary Function

 

Minute volumes will be determined during prestudy, weeks 1 and 4 for 4 animals/sex/group at pre dose, as soon as possible post exposure and approximately 2 hours post exposure if the post exposure measurement shows an effect.

 

 

 

ECG

 

Obtained for all animals twice during pretest and during weeks 4 and 6, the last week of exposure and recovery.

 

 

 

Clinical Pathology

 

Hematology, coagulation, blood chemistry at pretest, on all animals at termination (terminal and recovery necropsy).

 

 

 

Urinalysis

 

Consistent with clinical pathology

 

 

 

Ophthalmology

 

pretreatment, prior to terminal sacrifice and at recovery necropsy if effects are seen at terminal necropsy

 

 

 

Necropsy

 

Necropsy over three days; two for terminal and one for recovery groups. Collect all tissues (standard FDA tissue list).

 

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Task 8: In-Vivo Micronucleus Assay in Rats

 

The in vivo micronucleus assay is used for the detection of chromosome damage or mitotic apparatus dysfunction in the bone marrow of animals, usually rodents.  The assay is used to identify substances that cause cytogenetic damage resulting in the formation of micronuclei.  Micronuclei are chromosome fragments or entire chromosomes that lag behind at the anaphase stage of mitosis.  During erythroblast progression into red blood cells in the bone marrow the main nucleus is extruded at a defined stage of development.  Micronuclei, formed prior to nuclear extrusion, persist in the cytoplasm of the immature red blood cell, or polychromatic erythrocyte, and are visible as small chromatin containing bodies.  An increase in the frequency of micronucleated polychromatic erythrocytes serves as an indicator of induced chromosome damage.

 

The experimental design of a routine micronucleus assay in rats is shown in the following Table:

 

 

 

 

 

Number Of Rats (Males
per Group)

 

Group

 

Test Material

 

24 Hour

 

48 Hour

 

1

 

Vehicle Control

 

6

 

6

 

2

 

Positive Control

 

6

 

 

3

 

Test Material - Dose 1 (low)

 

6

 

 

4

 

Test Material - Dose 2 (mid)

 

6

 

 

5

 

Test Material - Dose 3 (high)

 

6

 

6

 

 

Test material will be administered intravenously.  A pilot study with three groups of 3 animals will be conducted to determine maximum tolerated dose.  Twenty four hours after dosing the animals are euthanized and bone marrow is flushed from the tibia/fibula into labeled centrifuged tubes from each animal in groups 1-5.  The cells are centrifuged and re-suspended in calf serum.  Bone marrow cells are smeared onto labeled glass slides, fixed, air dried and stained with Acridine Orange.  The slides are coded an at least 2000 polychromatic erythrocytes (PCEs) will be screened for the presence of micronuclei (MN) using a fluorescent microscope.  In addition, to determine whether the test substance is toxic to bone marrow cells, at least 1000 erythrocytes will be examined to determine the proportion of PCE relative to total erythrocytes.  Forty-eight hours after dosing, the remaining animals (from Groups 1 and 5) are euthanized; bone marrow cells are obtained, processed and analyzed just like the cells sampled at twenty four hours.  After all of the slides have been analyzed the frequency of MN-PCE for each for each test group will be analyzed with an analysis of variance and, if necessary, by pair wise comparison of treated versus control group by Dunnet’s test.

 

16



 

Task 9: Ames Assay

 

The Ames test or Salmonella reverse mutation assay assesses the impact of chemicals or their metabolites on prokaryotic DNA.  Each test will include an initial assay followed by a confirmatory assay.  The test article will be tested in five bacterial strains, four Salmonella typhimurium strains (TA98, TA100, TA1535 and TA1537) and one E.coli strain (WP2 uvrA ).  The S. typhimurium tester strains detect histidine (his) reversion (his “7 his+) at G-C sites and have an rfa (deep rough) mutation that eliminates a polysaccharide side chain of the lipopolysaccharide layer coating the bacterial surface, thereby increasing permeability to larger molecules.  The four S. typhimurium strains also have a deletion of a gene coding for the DNA excision repair system (uvrB), which increases the sensitivity of the bacteria to mutagens.  E. coli strain WP2 uvrA detects tryptophan (trp) reversion (trp· “7 trp+) at A-T sites and also has a deletion of a gene coding for the DNA excision repair system (uvrA), also increasing the sensitivity of the bacteria to mutagens.  At least 5 concentrations of test article will be tested in triplicate cultures in the presence and absence of S9 metabolic activation using the plate incorporation method.  Strain appropriate and ±S9 appropriate positive control cultures will also be included in the assay.  Forty eight to seventy two hours after test article treatment initiation the revertant colonies on the plates will be counted and the mean response of each dose level tested for each strain will be analyzed by comparing the counts of the test article treated plates with the vehicle control counts of the vehicle control.  Each strain and each metabolic activation test system (±S9) will be analyzed separately.

 

17



 

Task 10: Chromosome Aberration Assay

 

Chromosome aberrations are a consequence of failure or error in repair mechanisms such that breaks either do not rejoin or rejoin inappropriately after treatment with test articles.  The chromosome aberration test in human lymphocytes is a standard in vitro assay for detecting structural damage to chromosomes or the mitotic apparatus using light microscopy.  Structural chromosome damage detected in this way is observed as chromosome breaks or rearrangements.  Numerical changes such as polyploidy may also indicate damage to the mitotic spindle apparatus.  Human peripheral blood lymphocytes (HPBL) will be used as the test system will be obtained from healthy donors.  Lymphocytes in peripheral blood are stimulated to divide in culture by treatment with phytohemagglutinin (PHA) for 48 hours.

 

Target concentrations for testing will be determined for the test article using OECD guideline limits, cytotoxicity, or solubility data.  Testing will be conducted in the presence and absence of S9 metabolic activation.  Exposure to the test article will be 3 hours and 24 hours in the absence of S9 metabolic activation and 3 hours in the presence of S9.  Cytotoxicity will be assessed using mitotic activity reduction of the treated cell cultures relative to the vehicle controls.

 

Appropriate positive controls for the S9 activated system and the non-activated system will be included.

 

Forty-eight hours following PHA addition, the culture medium will be replaced with fresh serum-free medium for the three-hour exposures or fresh complete medium for the 24-hour exposure.  The vehicle, the test article, or the positive control will be added to the appropriate culture and then incubated for three hours or 24 hours.  After the three-hour exposures, cultures will be rinsed and re-fed with fresh culture medium containing PHA.  Colcemid® will be added to all cultures for the final 2 ± 0.5 hours of incubation after which time the cells will be collected and prepared for analysis.

 

At least 1000 cells per slide will be counted to establish a mitotic index.  After the mitotic index has been determined for each culture, dose levels will be selected for chromosome analysis.  Doses selected for analysis will be the highest dose level tested where approximately a 50% reduction in the frequency of metaphase cells is observed relative to the vehicle controls.

 

The percentage of cells with structural aberrations will be the basis for evaluation.  Statistical analysis will consist of a one-way analysis of variance (ANOVA) to compare the percentage of cells with structural chromosome aberrations in the test article treated groups to the vehicle control groups.

 

18



 

Task 11: hERG Assay

 

Study Details: Cells expressing the hERG channel are dosed with test agent at 6 concentrations in duplicate for 5 minutes.  Membrane currents are measured using an automated patch clamp system.  Readout: IC50 and% inhibition at each test concentration.  Negative and positive controls will be included in the study.

 

19


 

 

AGREEMENT FOR RESEARCH SERVICES

 

This Agreement for Research Services (hereinafter referred to as “Agreement”) is made this  day of         2016 between IIT Research Institute (IITRI), an Illinois not-for-profit corporation, (hereinafter referred to as “IITRI”), having its corporate offices at 10 West 35th Street, Chicago, IL 60616, and ARIDIS Pharmaceuticals, Inc., (hereinafter referred to as “Client”) having offices or principal place of business at 5941 Optical Court, San Jose, CA 95138, (IITRI and Client hereinafter referred to collectively as the “Parties”).

 

ARTICLE I.       SCOPE OF WORK

 

IITRI hereby agrees to provide the services as set forth and defined in its Proposal to Client identified as Proposal Number 143-4-5716-018 entitled, “conduct a series of inhalation toxicology studies in rats and dogs to support your project for an inhaled formulation of an anti-infective drug candidate” dated July 29, 2016, which Proposal is incorporated herein by reference (hereinafter referred to as the “Proposal”).

 

ARTICLE II.       VALIDITY, ACCEPTANCE, TERM, AND TERMINATION

 

IITRI’s Proposal shall remain valid for a period of sixty (60) days from the Proposal’s submission date unless such validity period is extended, in writing, by IITRI.  Acceptance of this Proposal by the Client shall be evidenced by the Client’s execution of this Agreement.  In the event this Agreement is not executed by Client during the validity period, or any extension thereof, IITRI, in its sole discretion may modify the Proposal or withdraw it from further consideration.

 

This Agreement shall become effective upon its mutual execution by the Parties and shall terminate when IITRI has completed performance of its services as set forth in the Proposal.

 

IITRI may terminate this Agreement if Client fails to pay to IITRI any monetary obligation when due and such failure is not cured within ten (10) days after written notice to Client from IITRI.  Either IITRI or Client may terminate this Agreement upon a default of this Agreement.  The occurrence of any of the following shall constitute a default (“Default”) hereunder: (i) IITRI or Client fails to perform any provision of this Agreement and such failure is not cured within thirty (30) days after written notice from the non-defaulting Party, or (ii) any voluntary or involuntary proceedings are filed by or against IITRI or Client under bankruptcy, insolvency, or similar laws and, in case of any involuntary proceedings, are not dismissed within thirty (30) days after filing.  Upon termination for Default, IITRI shall be paid for all completed work, work in progress, and commitments incurred, up to and including the date of termination including anticipated profit for the services performed and Client shall be furnished all reports concerning services completed or in progress through and including the date of termination.

 

Client shall have the right to terminate this Agreement for its convenience at any time by giving IITRI not less than ten (10) days advanced written notice thereof.  In the event of termination by Client of this Agreement for any reason other than for default as set forth above, IITRI shall promptly cease working, except to the extent needed to safely finish any work in progress.  In the event of such termination, IITRI shall be paid for all completed work, work in progress, and commitments incurred, up to and including the date of termination including anticipated profit for the

 

1



 

services performed, and shall be paid at its normal rates for reasonable termination costs, which include the time expended in properly and safely terminating its services, closing its files, and in completing work as necessary for the orderly closing of the project.  IITRI agrees, at the written request of Client, to generate a final report on the technical services performed to the date of termination, and all cost associated with the development of such report shall be included in the termination costs.

 

Either Party may immediately terminate this Agreement upon written notice to the other Party if conditions or hazards are encountered that differ materially from expected conditions and hazards and that make performance of the services impracticable.  Any such termination shall not be deemed a breach or default by the terminating Party and shall not give rise to any action for damages or other cause of action against the terminating Party, and the Parties agree to wind down this contract in accordance with the obligation that each owes to the other in the event of a termination for Default.

 

ARTICLE Ill.       RESEARCH RESULTS

 

The results of the services performed under this Agreement will be transmitted to the Client in writing as provided for in the Proposal.  The results of the research services performed hereunder will be kept in confidence by IITRI and will not knowingly be communicated to others without the Client’s express written consent.  IITRI MAKES NO REPRESENTATION, WARRANTY, OR GUARANTEE THAT THE RESULTS OF THE RESEARCH PERFORMED UNDER THIS AGREEMENT WILL CONFIRM ANY GIVEN HYPOTHESIS, MEET CLIENT’S EXPECTATIONS, OR PROVE USEFUL IN ANY WAY.

 

ARTICLE IV.       PAYMENT AND PRICING

 

Client agrees to pay IITRI for the services as set forth in the Proposal, a Fixed Price sum of [***] .  The specific payment schedule for this Agreement is set forth in the Proposal.

 

Payment terms for this Agreement are net thirty (30) days with invoices considered past due after thirty (30) days from the date of the invoice.  Client agrees to pay a finance charge on past due accounts of one and one-half percent (l-1/2%) per month, or, if lower, the maximum permitted by law.  Should Client not pay IITRI for services rendered under this agreement within ninety (90) days of the invoice date, Client agrees to reimburse IITRI for all reasonable legal expenses, including attorney’s fees, incurred by IITRI in collecting those monies due under this agreement.

 

ARTICLE V.       CONFIDENTIAL INFORMATION

 

A.                                     Confidential information (“Confidential Information”) shall include (i) any proprietary information that is disclosed in a tangible format and marked or labeled as confidential, and (ii) any proprietary information that is disclosed orally, visually or in an intangible format that is identified at the time of disclosure as Confidential Information and which is subsequently confirmed, within ten (10) days after its disclosure, in writing to be such.  Confidential Information shall exclude:

 

1.                                       Information that is or which becomes publicly known through no fault of the receiving Party;

 

2.                                       Information known to the receiving Party prior to receipt from the disclosing Party, as evidenced by the receiving Party’ s written records;

 

2



 

3.                                       Information that is disclosed to the receiving Party in good faith by a third party who has an independent right to such subject matter and information;

 

4.                                       Information that is independently developed by the receiving Party, as evidenced by the receiving Party’s written records;

 

5.                                       Information disclosed to the U.S. Government or others by the disclosing Party with “unlimited rights” or without restrictions by the disclosing Party; or

 

6.                                       Information approved for disclosure by the prior written consent of the disclosing Party.

 

A Party may disclose Confidential Information pursuant to subpoena, judicial action or national, state or local governmental regulations or requirements , provided that the Party so disclosing notifies the other Party of the need for such disclosure within a reasonable time given the circumstances so that such other Party, at its sole cost and expense, may, as it deems appropriate, seek to challenge the required disclosure or seek a protective order.

 

B.                                     A Party receiving Confidential Information hereunder shall protect the Confidential Information using the same safeguards that it employs to protect its own confidential information, but in no event shall such safeguards demonstrate less than a reasonable degree of care.  A Party receiving Confidential Information hereunder shall only use the same for the purpose of performing its obligations under this Contract, and in connection therewith, a Party shall not disclose Confidential Information to persons other than its employees who have been determined to have a need to know, have been made aware of the obligations set forth herein, and is obligated to adhere to those obligations.  Upon termination of this Agreement, the Parties shall surrender any Confidential Information transmitted to them by the other or certify that such information has been destroyed, except that one copy may be retained for archival purposes only.  The Parties’ obligations of confidentiality set forth herein shall survive for a period of five (5) years from the termination of this Contract.

 

C.                                     A Party receiving Confidential Information agrees that it shall remain, at all times, the property of the disclosing Party.  The Parties agree and acknowledge that the disclosing Party, by conveying Confidential Information to the receiving Party, (i) is not granting and does not grant, by implication or otherwise, the receiving Party a license of any kind under any patent, patent application, copyright, trade secret or the like, and (ii) is not making and does not make, by implication or otherwise, any representation, warranty, assurance, or guarantee of inducement to the receiving Party with respect to the infringement of patents or to the rights of others.

 

Exchange of Proprietary and/or Confidential Information by and between the Parties is contemplated throughout the term of this Agreement.  All provisions herein relating to holding in confidence all Proprietary and/or Confidential Information received from the other Party will remain in full force and effect for the period specified in this Article V.

 

ARTICLE VI.       NOTICES

 

Any notice given under this Agreement shall be in writing, shall reference this Agreement, and shall be deemed given when: (a) delivered personally; (b) sent by confirmed telex or facsimile; (c) five (5) days after having been sent by registered or certified mail, return receipt requested, postage prepaid; or (d) one (1) day after deposit with a commercial overnight carrier, with written verification of receipt.  Notwithstanding the foregoing, any notice given pursuant to Article II must be given by (c)

 

3



x

or (d).  All communications will be sent to the addresses and persons set forth below or to such other address and persons as may be designated by a Party upon written notice to the other Party pursuant to this Article VI:

 

If to IITRI:

 

If to the Client:

 

 

 

IIT Research Institute

 

ARIDIS Pharmaceuticals, Inc.

10 West 35 th  Street

 

5941 Optical Court

Chicago, IL 60616-3799

 

San Jose, CA 95138

Attn.: Michael C. McGibbon

 

Attn.:

Vice-President and Director for Administration

 

Telephone:

Telephone: 312-567-4170

 

Facsimile:

Facsimile: 312-567-4106

 

E-mail:

E-mail: mmcgibbon@iitri.org

 

 

 

ARTICLE VII.       RIGHTS IN DATA

 

All reports, logs, field data, field notes, laboratory test data, calculations, estimates, and other technical documents prepared or generated by IITRI in providing research services or conducting studies under this Agreement for the Client (hereinafter collectively referred to as “Technical Data”) shall become the property of the Client and shall be delivered to the Client by IITRI upon completion of the Project, provided that Client grants IITRI a non-exclusive, royalty-free, world-wide license to use such Technical Data for non-commercial educational and research purposes.

 

IITRI will retain, without charge to the Client, all pertinent records relating to the research services performed or studies conducted hereunder for a period of one (I) year following submission of a final report to the Client.  During the one (1) year retention period, the records will be made available to Client at all reasonable times upon reasonable notice to IITRI.  Unless Client requests, in writing, that IITRI continue to retain such documents beyond said one (1) year period and agrees to reimburse IITRI for the costs and expense associated with such additional retention at a fee to be established at the time of such request, IITRI reserves the right, without further notice to the Client, to destroy or otherwise dispose of all retained data.

 

ARTICLE VIII.       PATENT RIGHTS

 

IITRI represents that it has a policy that requires assignment to IITRI of all inventions made by an employee during the course of the employee’s employment.

 

IITRI agrees that if, during the period of this Agreement, any of its employees conceive an invention in the course of working on any research service or studies authorized under this Agreement, IITRI shall promptly make such invention known to Client and, upon the request of Client, shall assign to Client any and all rights to said invention pursuant to the terms and conditions of this Agreement except that Client grants IITRI a non-exclusive, royalty-free, world-wide license to use such inventions for non-commercial educational and research purposes.  Thereafter, IITRI, upon request, shall provide reasonable assistance to Client’s patent attorney or agent in connection with the prosecution of any patent applications, provided that the Parties specifically agree that any expenses incurred by IITRI, such as charges for staff costs, travel, and other expenses incurred in connection

 

4



 

with any assistance requested by Client, Client’s patent attorney or agent in the preparation and prosecution of patent applications, shall be reimbursed to IITRI by Client and that such reimbursement shall be in addition to, and shall not be considered a part of, the principal sum payable under this Agreement for research services or studies.

 

Notwithstanding the foregoing, all pre-existing inventions, patents, copyrights, know-how, trade secret, and such similar property of IITRI shall remain IITRI’s, and IITRI does not intend and does not hereby grant Client any interest in any such pre-existing invention, patent, copyright, know-how , trade secret, or similar property.

 

ARTICLE IX.       PUBLICATION

 

IITRI is a tax-exempt organization under Section 501(c)(3) of the Internal Revenue Code, and in accordance with the provisions of said Section 50l(c)(3) and applicable regulations and rulings thereunder, IITRI must serve public rather than private purposes.  Accordingly, IITRI reserves the right, at its discretion as to time and method, but consistent with the following terms, to timely publish or otherwise make publicly available its research:

 

A.                                     IITRI shall submit a complete copy of the proposed manuscript for publication or presentation materials or other public disclosure (collectively, “Materials”) to the Client at least sixty (60) days prior to any submission for publication or public disclosure.

 

B.                                     If Client determines that the Materials contain Proprietary and/or Confidential Information or patentable information, Client shall notify IITRI in writing within thirty (30) days of receipt of the Materials.  The written notification shall identify the Proprietary and/or Confidential Information or patentable information and may include suggestions designed solely to protect such information from disclosure.  If Client fails to respond within said thirty (30)-day period, IITRI may proceed with publication or public disclosure.

 

C.                                     In the event that Client makes any such suggestions, the parties shall use reasonable efforts to negotiate a mutually acceptable revision within fifteen (15) days after IITRI’s receipt of Client’ s notification.  If IITRI and Client have reasonably concluded that revision is not possible because any revision would still have the effect of prejudicing Client’ s ability to obtain a patent or similar instrument and IITRI reasonably concludes that publication is not possible without such information, IITRI can agree to delay publication but only for such period of time as is reasonably necessary for Client to establish its patent or other ownership rights therein.

 

Subject to the Client’ s consent, IITRI agrees to properly credit the contributions of the Client in any resulting publication.

 

ARTICLE X.       STANDARD OF CARE

 

IITRI shall render all services under this Agreement in a manner consistent with that level of care and skill ordinarily exercised by professionals currently practicing under similar conditions in the area where its services are performed.  IITRI MAKES NO REPRESENTATION, WARRANTY, OR GUARANTEE, EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION THE IMPLIED AT LAW WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE, AS TO ITS FINDINGS, RECOMMENDATIONS, PLANS,

 

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SPECIFICATIONS, DRAWINGS, PROFESSIONAL JUDGMENT, ADVICE, OR ANY OTHER SERVICES FURNISHED BY IITRI TO CLIENT EXCEPT AS PROVIDED IN THE IMMEDIATELY PRECEDING SENTENCE.

 

Client acknowledges that no representation, guarantee, or warranty has been made or given by IITRI to Client regarding IITRI’s services under this Agreement or the results of such services except as set forth in this Article X.  Client’s exclusive remedy against IITRI for any wrongful act or omission of IITRI shall be an action for breach of this limited warranty, and IITRI’s aggregate liability to Client for all breaches of IITRI’s limited warranty shall be limited to the lesser of $100,000 or the amount paid by Client to IITRI under this Agreement.  Client understands and agrees that its agreement to so limit IITRI’s liability was a material inducement to IITRI to provide services to Client under this Agreement at the rates stated in IITRI’s Proposals and that if IITRI’s liability were not so limited , then IITRI either would not have entered into this Agreement or would charge substantially higher rates for services authorized under this Agreement.

 

Any claim made against IITRI for breach of its limited warranty must be made in writing and received by IITRI no more than one (1) year after IITRI has completed performance of services authorized under this Agreement.  If a claim is not received by IITRI within said one (1)-year period, then all such claims shall be deemed waived regardless of whether Client knew of or could have discovered the existence of the basis for such claim within that one (1)-year period.

 

ARTICLE XI.       INDEMNIFICATION

 

IITRI agrees to indemnify and hold Client, its directors, officers, employees, and agents harmless against any claims, arising from injury to or death of any third party or property damage that results from IITRI’s negligence or willful misconduct.  Client agrees to indemnify and hold IITRI, its Board of Governors, officers, employees, and agents harmless against any claims, arising from injury to or death of any third party or property damage that results from Client’ s negligence or willful misconduct.  Neither Party shall be obligated to indemnify the other except for claims, arising from the negligence or willful misconduct of the indemnifying Party.

 

IN NO EVENT SHALL EITHER IITRI OR CLIENT BE LIABLE TO ONE ANOTHER FOR ANY INCIDENTAL, CONSEQUENTIAL, INDIRECT, SPECIAL, PUNITIVE, EXEMPLARY, OR ECONOMIC DAMAGES, INCLUDING LOSS OF BUSINESS OPPORTUNITY, WHATSOEVER, REGARDLESS OF THE LEGAL THEORY UNDER WHICH SUCH DAMAGES ARE INCURRED.

 

ARTICLE XII.       USE OF NAME

 

The name IIT Research Institute, IITRI, or any facsimile thereof shall not be used by Client for purposes of advertising, sales, promotion, or publicity in connection with services performed under this Agreement without IITRI’ s prior written consent.

 

ARTICLE XIII.        FORCE MAJEURE

 

IITRI shall have no liability for any failure to perform or delay in performance due to any circumstances beyond its reasonable control, including, but not limited to, strikes, riots, wars, fires, floods, explosions, acts of nature, acts of government, labor disputes, delays in transportation, or inability to obtain material or equipment.  In the event of any delay in performance due to any such

 

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circumstances, the time for performance of services authorized under this Agreement will be extended by a period of time necessary to overcome the effect of such delay, and Client will not be entitled to refuse performance or otherwise be relieved of any of its obligations under this Agreement.

 

ARTICLE XIV.        COVENANT AGAINST HIRING

 

During the term of this Agreement, including any extension or renewal thereof, and for a period of one (1) year thereafter, neither Party will knowingly solicit for hire any officer or technical or professional employee of the other assigned to render services under this Agreement without the prior written consent of the other Party.

 

Notwithstanding the foregoing, this covenant shall not apply in the event this Agreement is terminated by either Party for Default in accordance with the termination provision for Default contained in Article IV of this Agreement.  In addition , this clause is not intended to restrict employees of either Party from responding to employment advertisements and voluntarily applying for available employment in either Party’s company.

 

ARTICLE XV.       RELATIONSHIP OF PARTIES

 

It is the express intention of the Parties that in all matters, the Parties will act as “Independent Contractors” and not as an employee, agent, joint venture, or partner of the other Party.  Nothing in this Agreement shall be interpreted or construed as creating or establishing the relationship of employer and employee between the Parties, and that:

 

A.                                     The employees or agents of one Party will not be deemed to be employees or agents of the other for any purpose under any federal or state law, including, but not limited to Unemployment Insurance Law, Old Age Benefits Law or Social Security Law, Workman’s Compensation Law, or under Internal Revenue or War Tax Legislation, or under any industrial law or otherwise.

 

B.                                     That neither Party will have any right, power, or authority to create any obligation, express or implied, on behalf of the other except to the extent provided herein.

 

ARTICLE XVI.       ENTIRE AGREEMENT

 

This Agreement, as may be modified in accordance with the provisions of this Agreement by individual Proposals or by mutual written agreement of the Parties, constitutes the entire understanding of the Parties and supersedes any previous communications, oral or written, between the Parties.  No change or modification of this Agreement shall be valid unless contained in a writing signed by a duly authorized representative of each Party.  There are no understandings, agreements, representations, or warranties, express or implied, which are not specified herein respecting the subject matter hereof.  Further, it is the intent of the Parties that the terms and conditions of this Agreement shall prevail notwithstanding any different, conflicting, or additional terms or conditions that may appear on any purchase order, acknowledgement, or other writing not expressly incorporated into this Agreement.

 

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ARTICLE XVII.       APPLICABLE LAW

 

Each Party agrees to timely notify the other Party of any claim, dispute, or cause of action arising under or related to this Agreement, and to negotiate in good faith to resolve any such claim, dispute, or cause of action.  To the extent that such negotiations fail, the Parties agree that any lawsuit or cause of action brought by one Party against the other that arises out of or is related to this Agreement shall be filed and litigated only with a court of competent jurisdiction within the State of Illinois; and the Parties hereby consent and agree to the personal jurisdiction and venue of any state or federal court of competent jurisdiction located within the State of Illinois with respect to any such claim, dispute, or cause of action and waive any defense or objection to the exercise of personal jurisdiction and/or venue by any such court.  The Parties to this Agreement also consent and agree that this Agreement and the obligations of the Parties hereunder, shall be governed by, interpreted, construed, and enforced in accordance with the laws of the State of Illinois, without reference to its principles of conflict of laws.

 

ARTICLE XVIII.       ASSIGNMENT

 

Neither this Agreement nor any interest herein may be assigned, in whole or in part, by either Party without the prior written consent of the other Party, except that, without securing such prior consent, either Party shall have the right to assign this Agreement to any successor of such Party by way of merger or consolidation or the acquisition of substantially all of the assets of such Party; provided, however, that such successor shall expressly assume all of the obligations of such assigning Party under this Agreement.

 

ARTICLE XIX.       SEVERABILITY

 

In the event that any provision of this Agreement should be held void, voidable, or unenforceable, the remaining portions hereof shall remain in full force and effect.

 

ARTICLE XX.       PARTIES TO BENEFIT

 

All work performed and work product generated by IITRI under this Agreement is made exclusively for the benefit of the Client.  Disclosure of any work product generated by IITRI under this Agreement shall be limited solely to the Client, and shall conform to the requirements in ARTICLE V (CONFIDENTIAL INFORMATION) and Article IX (PUBLICATION) of this Agreement.  IITRI and the Client expressly exclude any and all third parties from the benefits of this Agreement.

 

In the event that Client furnishes any IITRI work product to a person who is not a Party to this Agreement, Client agrees to defend, indemnify, and hold harmless IITRI from and against all claims, damages, losses , and expenses brought or sustained by any third party that arise out of, are related to, or are based upon IITRI work product.

 

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IN WITNESS WHEREOF , a duly authorized representative of each Party has approved and executed this Agreement on the date first above written.

 

ARIDIS Pharmaceuticals, , Inc.

 

HT Research Institute

 

 

 

Printed Name

 

Printed Name

 

 

 

Signature

 

Signature

 

 

 

Title

 

Title

 

 

 

Date

 

Date

 

9




Exhibit 10.11

 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

COLLABORATION AND OPTION AGREEMENT

 

This COLLABORATION AND OPTION AGREEMENT (the “ Agreement ”) is made effective as of the “ Effective Date ” by and between ARIDIS PHARMACEUTICALS LLC, a company organized and existing under the laws of California having its registered office at 5941 Optical Court, San Jose, CA, 95138 USA (“ ARIDIS ”), and GLAXOSMITHKLINE BIOLOGICALS S.A. , a company organized and existing under the laws of Belgium under number RPM Nivelles — BE — 0440 872918 and having its registered office at rue de l’Institut 89, 1330 Rixensart, Belgium (“ GSK ”).  ARIDIS and GSK are sometimes referred to herein individually as a “ Party ” and collectively as the “ Parties ”.

 

RECITALS

 

WHEREAS , ARIDIS is a biotechnology company active in the development of new therapies for infectious diseases which controls certain technology relating to (i) stable formulation for live and inactivated vaccines in the form of dried powder and oral thin film formulation, including for live rotavirus vaccines, and (ii) materials developed by ARIDIS;

 

WHEREAS , GSK possesses resources and expertise in the research, development, marketing and commercialization of vaccines, and desires to develop Vaccine Products (as defined below) using ARIDIS’ technology;

 

WHEREAS , GSK and ARIDIS have entered into a Feasibility and Option Agreement dated 9 May 2014 (“ FOA ”), under which the Parties collaborated in a three phases study aimed at evaluating improved formulations for a Rotavirus vaccine using GSK Rotarix® vaccine including dry solids formulations either in a spray dried powder dosage form or as quick dissolving oral thin film;

 

WHEREAS , the third phase of the feasibility study ended on 23 February 2016 with the submission of a report which showed encouraging results in the use of the quick dissolving oral thin film formulation ;

 

WHEREAS , under Section 7.1 of the FOA ARIDIS granted GSK exclusive and nonexclusive option rights on the formulation technologies evaluated under the FOA, such options to be exercised within 6 months from the submission of the final report by ARIDIS.  Following a first amendment to the FOA signed on 14 July 2016, a second one signed on 13 October 2016 and a third one signed on 28 November 2016, the Parties have agreed to extend the option period up to 15 January 2017;

 

WHEREAS , the Parties now intend to collaborate on a research program regarding the application of ARIDIS’ dissolving oral thin film technology in combination with GSK Materials and GSK Know-How to Vaccine Products, as described in Exhibit B, upon the terms and conditions set forth herein; and

 

1



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

WHEREAS , ARIDIS desires to grant to GSK an option to obtain a license as further described in this Agreement with respect to certain of ARIDIS’s intellectual property rights on the terms and conditions set forth herein;

 

NOW, THEREFORE , in consideration of the foregoing premises and the mutual covenants and conditions contained in this Agreement, the Parties agree as follows:

 

ARTICLE 1
DEFINITIONS

 

Unless the context otherwise requires, the terms in this Agreement with initial letters capitalized, shall have the meanings set forth below, or the meaning as designated in the indicated places throughout this Agreement.

 

1.1                                Affiliate ” means, with respect to a particular Party, a person, corporation, partnership, or other entity that controls, is controlled by or is under common control with such Party.  For the purposes of this definition, the word “control” (including, with correlative meaning, the terms “controlled by” or “under common control with”) means the actual power, either directly or indirectly through one or more intermediaries, to direct or cause the direction of the management and policies of such entity, whether by the ownership of fifty percent (50%) or more (or such lesser percentage which is the maximum allowed to be owned by a person, corporation, partnership or other entity in a particular jurisdiction) of the voting stock of such entity, or by contract or otherwise.

 

1.2                                Agreement ” has the meaning set forth in the preamble.

 

1.3                                Alliance Manager ” has the meaning set forth in Section 2.2.

 

1.4                                Anti-Corruption Laws ” means the U.S. Foreign Corrupt Practices Act of 1977 and the UK Bribery Act, and any similar Laws in jurisdictions other than the U.S. and United Kingdom.

 

1.5                                ARIDIS Arising IP ” has the meaning set forth in Section 7.2 (a).

 

1.6                                ARIDIS Background IP ” means ARIDIS Intellectual Property existing as of the date of submission of the Final Report by ARIDIS as defined in and pursuant to Section 5.1(ii) of the FOA or arising outside of the FOA and this Agreement.  For the avoidance of doubt the preparation and negotiation activities preliminary to this Agreement are considered as part of this Agreement and therefore ARIDIS Intellectual Property arising during such period is to be considered as ARIDIS Arising IP and not as ARIDIS Background IP.

 

1.7                                ARIDIS Intellectual Property ” means collectively ARIDIS Patents, ARIDIS Know-How, and ARIDIS Materials.

 

1.8                                ARIDIS Know-How ” means all technical information and Know-How that is (i) Controlled by ARIDIS or its Affiliates as of the Effective Date or during the Term, and (ii) necessary or useful for GSK and/or ARIDIS to carry out their obligations under the

 

2



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

Collaboration Program whether such Know-How has arisen before the performance of the Collaboration Program or arises outside of the performance of the Collaboration Program.  For clarity, ARIDIS Know-How excludes Joint Know-How as well as any information, materials and/or know-how that are generally ascertainable from publicly available information or which ARIDIS cannot license without violating the terms of an agreement with a Third Party that has been entered into prior to the Effective Date.

 

1.9                                ARIDIS Materials ” means the materials described in Schedule 1.9 which Schedule may be amended from time to time during the course of the Collaboration Program and that ARIDIS will deliver to GSK pursuant to this Agreement.

 

1.10                         ARIDIS Patents ” means any Patents that (a) are Controlled by ARIDIS or its Affiliates as of the Effective Date or during the Term, and (b) would be infringed by GSK’s performance of its obligations under the Collaboration Program, absent the license granted hereunder under Section 5.

 

1.11                         Arising IP ” means ARIDIS Arising IP and/or GSK Arising IP and/or Joint Arising IP as the case may be and as further described in Section 7.2.

 

1.12                         Business Day ” means a day on which banking institutions are open for business both in Brussels, Belgium and in San Jose, California, but excluding the nine (9) consecutive calendar days beginning on December 24th and continuing through January 1st of each calendar year during the Term, and all Saturdays and Sundays.

 

1.13                         Chairperson ” has the meaning set forth in Section 2.1(a).

 

1.14                         Change of Control ” means the occurrence of any of the following: (a) a Party enters into a merger, consolidation, sale or transfer of all or substantially all of its assets to which this Agreement relates, or other similar transaction or series of transactions with a Third Party; or (b) any transaction or series of related transactions in which any Third Party or group of Third Parties acquires beneficial ownership of securities of a Party representing more than fifty percent (50%) (or such lesser percentage which is the maximum allowed to be owned by a Third Party in a particular jurisdiction) of the combined voting power of the then outstanding securities of such Party.  Notwithstanding the foregoing, a stock sale to underwriters of a public offering of a Party’s capital stock or a stock sale to Third Parties or current shareholders solely for the purpose of financing or a transaction solely to change the domicile of a Party shall not constitute a Change of Control.

 

1.15                         Claims ” has the meaning set forth in Section 9.1.

 

1.16                         Collaboration ” has the meaning set forth in Section 3.1.

 

1.17                         Collaboration Funding ” has the meaning set forth in Section 3.4.

 

1.18                         Collaboration Program ” means the workplans as described in Exhibit B.

 

3



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

1.19                         Collaboration Term ” has the meaning set forth in Section 3.3(a) (as may be extended pursuant to Section 3.3).

 

1.20                         Collaboration Term Extension ” has the meaning set forth in Section 3.3(c).

 

1.21                         Commercially Reasonable Efforts ” means those efforts that are consistent with the efforts and resources that would be expended by a reasonable Third Party acting in good faith in the research, development and commercialization of a vaccine owned by it or to which it has exclusive rights, with similar product characteristics, which is of similar market potential at a similar stage in its development or product life, taking into account issues of patent coverage, safety and efficacy, product profile, the competitiveness of the marketplace, the proprietary position of the compound or product, the regulatory structure involved, the potential or actual profitability of the applicable products (including pricing and reimbursement status achieved or to be achieved), and other relevant factors, including technical, legal, scientific and/or medical factors.  For purposes of clarity, Commercially Reasonable Efforts would be determined on a market-by-market and indication-by-indication basis for a particular Vaccine Product and it is anticipated that the level of effort may be different for different markets and may change over time, reflecting changes in the status of the Vaccine Product and the market(s) involved.

 

1.22                         Confidential Information ” of a Party means any and all Know-How of such Party that is disclosed to the other Party under this Agreement, whether in oral, written, graphic, or electronic form.  All Know-How disclosed by either Party pursuant to the Confidential Disclosure Agreement between the Parties dated 19 April 2016 (the “Confidentiality Agreement”) shall be deemed to be such Party’s Confidential Information disclosed hereunder.

 

1.23                         Control ” means, with respect to any Material, Research Material, Know-How, Patent or other intellectual property right, that a Party (a) owns or (b) has a license (other than a license granted to such Party under this Agreement) to such Material, Research Material, Know-How, Patent or other intellectual property right and, in each case, has the ability to grant to the other Party access, a license, or a sublicense (as applicable) to the foregoing on the terms and conditions set forth in this Agreement without violating the terms of any then-existing agreement or other arrangement with any Third Party.

 

Subsection to Section 1.23, regarding certain exclusions:

 

With respect to ARIDIS the terms “Control,” “ARIDIS Intellectual Property,” “ARIDIS Know-How,” “ARIDIS Materials,” and “ARIDIS Patents” shall exclude any material, know-how, patent or other intellectual property for which any grant of license or option hereunder would require the payment of royalty or other consideration from ARIDIS to a Third Party.  As of the Effective Date, ARIDIS represents to the best of its knowledge that the following is a complete list of intellectual property relevant to this Agreement and exclude by operation of this subsection (that is, any other excluded intellectual property in-licensed by ARIDIS relates to other product fields with no relevance to this collaboration):

 

·                                           The W003035827 patent family, including PCT application PCT/US02/28320, EPO application 02795489.0, US Patent 7,101,693 and any additional foreign

 

4



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

counterparts thereof (as well as all continuations, continuations-in-part, divisionals and renewals thereof, patents which may be granted thereon, and all reissues, reexaminations and extensions);

 

·                                           Any license rights of ARIDIS in any patent, know-how, material or other intellectual property pursuant to a United States Department of Health and Human Services National Institutes of Health OTT license #L-174-2005/0, effective 07/11/2005, titled “Multivalent Human-Bovine Rotavirus Vaccine —Exclusive and Non-Exclusive.”

 

Should ARIDIS acquire any intellectual property during the Term that is relevant to this Agreement and that would be excluded by operation of this subsection, it shall notify GSK.  ARIDIS shall not knowingly use any third party intellectual property (whether licensed to it or not) in the Collaboration Program without consultation with and agreement from GSK.

 

1.24                         Development Costs ” means the fixed amount for development costs agreed in the budget for each workpackage of the Collaboration Program as set forth in Exhibit B, such as process development costs and toxicology studies costs.

 

1.25                         Effective Date ” means the date of January 15, 2017.

 

1.26                         Executive Officer ” means, with respect to ARIDIS, its CEO, and with respect to GSK, its President or Senior Vice President Vaccines Discovery and Development.

 

1.27                         Field ” means i) the Rotavirus Vaccine Field, and ii) the Rotavirus and Norovirus Combo Vaccine Field.

 

1.28                         GSK Background IP ” means GSK Intellectual Property existing as of the date of submission of the Final Report by ARIDIS as defined in and pursuant to Section 5.1(ii) of the FOA or arising outside of the FOA and this Agreement.  For the avoidance of doubt the preparation and negotiation activities preliminary to this Agreement are considered as part of this Agreement and therefore GSK Intellectual Property arising during such period is to be considered as GSK Arising IP and not as GSK Background IP.

 

1.29                         GSK Arising IP ” has the meaning set forth in Section 7.2(b).

 

1.30                         GSK Intellectual Property ” means collectively GSK Patents, GSK Know-How and GSK Materials.

 

1.31                         GSK Know-How ” means all technical information and Know-How that is (i) Controlled by GSK or its Affiliates as of the Effective Date or during the Term, and (ii) necessary or useful for GSK and/or ARIDIS to carry out their obligations under the Collaboration Program.  GSK Know How shall include without limitation all chemical, pharmacological, toxicological, clinical, assay, control and manufacturing data relevant to the performance of the Collaboration Program.

 

5



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

1.32                         GSK Materials ” means the materials including the Rotarix bulk vaccine described in Schedule 1.32 that will be delivered by GSK to ARIDIS and which are necessary for ARIDIS to conduct the activities under the Collaboration Progam and/or which will be used by ARIDIS to produce the Research Materials to be delivered to GSK in accordance with the Collaboration Program described in Exhibit B and to any subcontractor of GSK or ARIDIS as needed pursuant to this Agreement as well as all progeny and unmodified derivatives of such GSK Materials.

 

1.33                         GSK Patents ” means any Patent that (a) is Controlled by GSK or its Affiliates as of the Effective.  Date or during the Term, and (b) would be infringed by ARIDIS’ performance of its obligations under the Collaboration Program, absent the license granted hereunder under Section 5.

 

1.34                         GLP ” means the then-current good laboratory practice standards promulgated or endorsed by the FDA as defined in 21 C.F.R. Part 58, or comparable regulatory standards promulgated by the EMA or other applicable regulatory authority, as they may be updated from time to time, including applicable quality guidelines promulgated under the International Conference on Harmonisation of Technical Requirements for Registration of Pharmaceuticals for Human Use (ICH).

 

1.35                         ICC ” has the meaning set forth in Section 12.3

 

1.36                         Indemnified Party ” has the meaning set forth in Section 9.1.

 

1.37                         Indemnifying Party ” has the meaning set forth in Section 9.1.

 

1.38                         Indemnitees ” has the meaning set forth in Section 9.1.

 

1.39                         Intellectual Property ” means collectively Patents, Know-How and Materials.

 

1.40                         Joint Arising IP ” has the meaning set forth in Section 7.2(c)

 

1.41                         Joint Collaboration Patents ” means Patents that are claiming Joint Arising IP.

 

1.42                         Joint Materials ” means the Materials described in Schedule 1.42 be produced under this Agreement in collaboration between ARIDIS and GSK using GSK Materials and formulating them in the form of OTF formulation based on ARIDIS and GSK Background IP.

 

1.43                         Joint Steering Committee ” or “JSC” means the committee formed by the Parties as described in Section 2.1.

 

1.44                         Know-How ” means all tangible and intangible: (a) information, techniques, technology, practices, trade secrets, inventions (whether patentable or not), methods, knowledge, know-how, skill, experience, data, results (including pharmacological, toxicological and clinical test data and results), analytical and quality control data, results or descriptions, software and algorithms; and (b) compositions of matter, cells, cell lines, assays, animal models and physical, biological or chemical material.

 

6



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

1.45                         Laws ” means all laws, statutes, rules, regulations, ordinances and other pronouncements having the effect of law of any federal, national, multinational, state, provincial, county, city or other political subdivision.

 

1.46                         Legal Requirement ” has the meaning set forth in Section 10.4(b).

 

1.47                         License Agreement ” means the agreement to be entered into by and between the Parties after exercise of the Option rights under Section 4.1(a), that will include the main terms set forth in Exhibit C.

 

1.48                         Losses ” has the meaning set forth in Section 9.1.

 

1.49                         Materials ” has the meaning set forth in Section 3.5(c)(i).

 

1.50                         Material Receiving Party ” has the meaning set forth in Section 3.5(c)(i).

 

1.51                         Rotavirus Vaccine Field ” means the prevention or treatment of diseases or infections caused by Rotavirus using any type of Rotavirus antigen (alone or in combination with any other active ingredient or adjuvant);

 

1.52                         Rotavirus and Norovirus Combo Vaccine Field ” means the prevention or treatment of diseases or infections caused by Rotavirus and Norovirus using any type of Rotavirus antigen in combination with any type of Norovirus antigen (alone or in combination with any other active ingredient or adjuvant);

 

1.53                         Negotiation Period ” has the meaning set forth in Section 4.1 (c).

 

1.54                         Option ” has the meaning set forth in Section 4.1(a).

 

1.55                         Option Period ” has the meaning set forth in Section 4.1 (b).

 

1.56                         Party ” or “ Parties ” has the meaning set forth in the preamble.

 

1.57                         Patents ” means (a) all patents and patent applications in any country or supranational jurisdiction in the Territory, (b) any substitutions, divisions, continuations, continuations-in-part, provisional applications, patents of addition, reissues, renewals, registrations, confirmations, re-examinations, extensions, supplementary protection certificates and the like of any such patents or patent applications, and (c) foreign counterparts of any of the foregoing

 

1.58                         Personal Information ” has the meaning set forth in Section 8.3.

 

1.59                         Public Statement ” has the meaning set forth in Section 10.4(b).

 

1.60                         Purpose ” has the meaning set forth in Section 3.5(c)(i).

 

7



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

1.61                         Research Materials ” means any product generated by either Party under the performance of the Collaboration Program, including Joint Materials and/or, without limitation, bio-conjugated antigens, antibodies, strains, cell lines and intermediates.

 

1.62                         Sensitive Personal Information ” has the meaning set forth in Section 8.3.

 

1.63                         Term ” has the meaning set forth in Section 11 .1 .

 

1.64                         Territory ” means any and all countries and territories of the world.

 

1.65                         Third Party ” means any entity other than ARIDIS or GSK or their respective Affiliates.

 

1.66                         Transfer Record ” has the meaning set forth in Section 3.5(c)(i).

 

1.67                         Transferring Party ” has the meaning set forth in Section 3.5(c)(i).

 

1.68                         Vaccine Product ” means a biological product that induces an antigen-specific immune response intended to prevent or treat the target disease or condition after administration to a human through any route of delivery, including intramuscular, intradermal, sublingual, intranasal or oral delivery.

 

1.69                         Valid Claim ” means a claim of any issued and unexpired Patent included within ARIDIS Patents, ARIDIS Arising IP or Joint Collaboration Patents, which claim has not been revoked, held invalid or unenforceable by a patent office, court or other governmental agency of competent jurisdiction in a final and non-appealable judgment (or judgment from which no appeal was taken within the allowable time period) and which claim has not been disclaimed, denied or admitted to be invalid or unenforceable through reissue, re-examination or disclaimer or otherwise.

 

1.70                         Interpretation .  In this Agreement, unless otherwise specified:

 

(a)                                  “includes” and “including” shall mean respectively includes without limitation and including without limitation;

 

(b)                                  words denoting the singular shall include the plural and vice versa and words denoting any gender shall include all genders;

 

(c)                                   words such as “herein”, “hereof’, and “hereunder” refer to this Agreement as a whole and not merely to the particular provision in which such words appear; and

 

(d)                                  the Exhibits, Schedules and other attachments form part of the operative provision of this Agreement and references to this Agreement shall include references to the Exhibits, Schedules and other attachments.

 

8



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

ARTICLE 2
GOVERNANCE

 

2.1                                Joint Steering Committee .  Within fifteen (15) days after the Effective Date, the Parties shall establish a joint steering committee (the “ Joint Steering Committee ” or “ JSC ”) to oversee the conduct of the Collaboration Program.  Each Party agrees to keep the JSC informed of its progress and activities under the Collaboration Program as described in this Section 2.

 

(a)                                  Membership .  The JSC shall consist of three (3) representatives of each Party, in each case that have sufficient seniority to make decisions arising within the scope of the JSC’s responsibilities.  Each Party shall communicate to the other Party the names of its representatives within fifteen (15) days from the Effective Date and may replace any or all of its representatives on the JSC at any time upon written notice to the other Party in accordance with Section 13.3.  Each Party may, subject to the other Party’s representatives’ prior approval, invite non-member representatives of such Party to attend meetings of the JSC as non-voting participants, subject to the confidentiality obligations of Article 10.  GSK shall designate a chairperson amongst its representatives (the “ Chairperson ”) to oversee the operation of the JSC.  The Chairperson shall have no additional powers or rights beyond those held by other JSC members.

 

(b)                                  Meetings .  The first scheduled meeting of the JSC shall be held no later than forty-five (45) days after the Effective Date.  Thereafter, prior to the expiration of the Collaboration Term, the JSC shall meet at least once each calendar quarter by teleconference or face-to-face, or more frequently as the Parties mutually deem appropriate, on such dates and at such places and times as provided herein or as the Parties shall agree.  Any Party may also call a special meeting of the JSC by at least ten (10) Business Days prior written notice to the other Party in the event such Party reasonably believes that a significant matter must be addressed prior to the next regularly scheduled meeting, and such Party shall provide the other Party with materials reasonably adequate to enable an informed decision on such matter.  Meetings of the JSC that are held in person shall alternate between the offices of the Parties, or such other location as the Parties may agree.  The members of the JSC also may meet or be polled or consulted from time to time by means of telecommunications, video conferences, electronic mail or correspondence, as deemed necessary or appropriate.  Prior to any JSC meeting, the Chairperson shall prepare and circulate an agenda for such meeting; provided, however, that ARIDIS may propose additional topics to be included on such agenda, prior to such meeting.  Meetings of the JSC shall be effective only if at least two (2) representatives of each Party are present or participating in such meeting.  Each Party will bear all expenses it incurs in regard to participating in all meetings of the JSC, including all travel and living expenses.

 

(c)                                   Minutes .  The Parties shall designate a secretary at each meeting who shall be responsible for preparing and circulating minutes of each meeting of the JSC, setting forth, inter alia, an overview of the discussions at the meeting and a list of any actions, decisions or determinations approved by the JSC and a list of any issues to be resolved by the Executive Officers pursuant to Section 2.1(e)(i).  Such minutes shall be effective only after approved by the Parties in writing.  With the sole exception of specific

 

9



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

items of the meeting minutes to which the members cannot agree and that are escalated to the Executive Officers as provided in Section 2.1(e)(i), definitive minutes of all JSC meetings shall be finalized no later than thirty (30) days after the meeting to which the minutes pertain.

 

(d)                                  Responsibilities .  The JSC shall:

 

(i)                                     provide oversight over the conduct of the Collaboration Program and facilitate communication and discussion between the Parties with respect to the conduct of the Collaboration Program;

 

(ii)                                 nominate members of a joint technical team (number to be determined by the JSC) which will meet regularly by TC to monitor and evaluate the technical progress of the Collaboration Program;

 

(iii)                             review and approve plans and progress of work related to technical and scientific publications according to Section 1 0.3 ;

 

(iv)                              review and approve amendments to the Collaboration Program and associated budgets;

 

(v)                                  review and discuss Arising IP generated by the Parties in the course of performing the Collaboration Program and any further intellectual property matters under Articles 5 and 7 provided that any decision regarding such topic shall be made only if representatives from the IP departments of ARIDIS and GSK attend such meeting as ad-hoc member and have authority to decide on such matter;

 

(vi)                              discuss and resolve any disputes relating to the Collaboration Program;

 

(vii)                          track expenses against agreed budget and ensure compliance with timelines as set forth in the Collaboration Program; and

 

(viii)                      acknowledge and certify the completion of the work packages under the Collaboration Program (at the end of Stage 1 and if extended also the completion of the Collaboration Program at the end of Stage 2 as described in Exhibit B), which shall be done within thirty (30) days of the delivery of final data and results to be delivered by ARIDIS pursuant to the work packages under the Collaboration Program;

 

(ix)                              perform such other functions as agreed by the Parties in writing.

 

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Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

(e)                                   Decision Making; Governance Principles .

 

(i)                                     All decisions of the JSC shall be made by unanimous vote, with ARIDIS’ representatives collectively having one (1) vote and representatives of GSK collectively having one (1) vote.  The JSC shall strive to seek consensus in its actions and decision making process.  If after reasonable discussion and good faith consideration of each Party’s view on a particular matter before the JSC, the representatives on the JSC cannot reach a unanimous decision on such matter within thirty (30) calendar days after such matter was raised to the JSC for resolution, then such disagreement shall be referred to the Executive Officers for resolution.  ARIDIS shall provide GSK final deference on decisions regarding technical matters, provided such decisions are made in accordance with this Agreement and in good faith, and excluding any such matters as may increase ARIDIS’ obligations or decrease its rights hereunder.

 

(ii)                                 GSK shall at all times exercise its final decision-making authority using reasonable scientific and business judgment, in compliance with applicable Laws, and in accordance with its obligations to use Commercially Reasonable Efforts.  To the extent that GSK, determines that amendments to the Collaboration Program are desired, and such amendments would increase or decrease the quantity or the scope of activities to be performed by ARIDIS, then the Parties shall discuss such additional or reduced activities in good faith.  ARIDIS shall use Commercially Reasonable Efforts to accommodate such additional activities, in consideration for additional funding as appropriate, though ARIDIS shall not be obligated to undertake additional activities which would materially increase its obligations hereunder except in its sole discretion.  If additional material financial or other resources are required to fulfil the increased quantity or scope of activities requested by GSK, then the Parties shall discuss the funding of such additional resources.  If the Parties cannot agree on the funding of these costs, then ARIDIS shall not be obligated to perform the increased quantity or scope of activities requested by GSK and GSK shall not be obligated to provide additional funding for such increased scope of activities.  For the avoidance of doubt, nothing herein is intended to prevent the JSC from making non-material amendments to the Collaboration Program that do not impose on ARIDIS additional obligations, including financial obligations.

 

2.2                                Alliance Managers .  Within fifteen (15) days after the Effective Date, each Party shall appoint and notify the other Party of the identity of a representative having the appropriate qualifications, including a general understanding of vaccines research and development issues, to act as its alliance manager under this Agreement (the “ Alliance Manager ”).  The Alliance Managers shall serve as the primary contact points between the Parties and be primarily responsible for facilitating the flow of information and otherwise promoting communication, coordination and collaboration between the Parties.  Each Party may replace its Alliance Manager at any time upon written notice to the other Party.  The Alliance Managers (if not already a member of the JSC) shall attend each meeting of the JSC as non-voting members.

 

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Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

2.3                                Limitation on Committee Power .  the JSC shall only have the powers expressly assigned to it in this Article 2 and elsewhere in this Agreement and shall not have the authority to: (a) modify or amend the terms and conditions of this Agreement; (b) waive either Party’s compliance with the terms and conditions of this Agreement; or (c) determine any such issue in a manner that would conflict with the terms and conditions of this Agreement.

 

ARTICLE 3
RESEARCH COLLABORATION PROGRAM

 

3.1                                Overview .  Subject to the terms and conditions of this Agreement, the Parties agree to to establish an exclusive Collaboration Program as described in Exhibit B for further research on the application of fast dissolving oral thin film technology to Vaccine Products in the Field (the “ Collaboration ”).  During the Term, and during the Option Period and Negotiation Period if triggered by GSK under Section 4.1 (b) and (c), ARIDIS agrees not to collaborate to develop oral thin film formulation(s) with Third Parties for use in the Field while GSK on the contrary shall be free to collaborate with Third Parties in the Field.

 

3.2                                Collaboration Program .  The Parties shall conduct their collaboration pursuant to the Collaboration Program that sets forth specific activities to be pursued by each Party, divided up in several work packages, with pre-agreed criteria specified in the Collaboration Program which is attached to this Agreement as Exhibit B.  The initial Exhibit B, as attached hereto, shall be supplemented with an expanded document detailing the specific activities, reporting, and success criteria for the Parties, encompassed within the work packages for Stage 1 (WP1, WP2, and WP 3) of the Collaboration Program as are set out in the Exhibit B and in accordance with the budgets set out for each; this expanded Exhibit B shall be designed and approved by the JSC in accordance with section 2.1 (d)(iv), and it is expected that the JSC shall complete such Exhibit B at the first meeting noted in section 2.1 (b) or as soon thereafter as is practicable.  Each work package must be met in full prior to initiating a subsequent work package, and budgets and timelines associated with such activities.  As of the Effective Date, the Parties have agreed upon the initial Collaboration Program and associated budget under Exhibit B.  From time to time (at least on an annual basis), the JSC shall review, and as may be needed, and approve amendments to the then-current Collaboration Program and associated budget, provided that any increase of the budget in excess of one hundred and ten percent (110%) of the budgeted Collaboration Funding (as defined below) will also require an amendment to this Agreement to be signed by the Parties.  Once approved by the JSC, such revised Collaboration Program and budget shall replace the prior applicable Collaboration Program and budget.  If the terms of a Collaboration Program contradict, or create inconsistencies or ambiguities with, the terms of this Agreement, then the terms of this Agreement shall govern and control.

 

3.3                                Term .

 

(a)                                  Subject to the extension provided in Section 3.3(b) and 3.3 (c), the term of the Collaboration (the “ Collaboration Term ”) shall commence on the Effective Date and expire twenty-four (24) months thereafter.

 

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Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

(b)                                  If ARIDIS does not diligently perform its responsibilities under the Collaboration Program as specified in the initial Collaboration Program (covering Stage 1 and, if this Agreement is extended to Stage 2, also covering Stage 2) attached as Exhibit B (including but not limited to the timely delivery of information and/or Materials to be provided under the workplans under the Collaboration Program) and such breach of its diligence performance causes a delay in reaching the milestones as set forth in the Collaboration Program (whereby for both preceding elements the burden of proof lies with GSK), then at the option of GSK the Collaboration Ten-n (i) shall be extended by the amount of time completion of the ARIDIS’ activities is delayed provided that such extension shall not cause GSK to incur any additional cost or any other increase in Collaboration Funding or Option Fees or (ii) should such delay exceed 6 months GSK shall have the right to terminate the Agreement pursuant to Section 11.3.

 

(c)                                   GSK shall also have the right to request extension of the Collaboration Term for reasons other than as described in sub-paragraph 3.3 (b) (including in order to proceed to Stage 2 of Exhibit B) above for up to three (3) additional periods (each a “ Collaboration Term Extension ”), each of twelve (12) months if additional scientific work is needed in GSK’s reasonable opinion to reach a successful completion of the Collaboration Program .  In that case the Parties shall negotiate in good faith toward an extension of the Collaboration Program and Collaboration Funding to cover ARIDIS activities during the Collaboration Term Extension and the Option Period shall be extended automatically subject to the payment of the Annual Fee described in Section 6.1 (b) below.

 

(d)                                  GSK may exercise the Collaboration Term Extension by providing written notice to ARIDIS at any time before the expiration of the current Collaboration Term (as may have already been extended as described in 3.3 (b) above); however, no extension is effective until the Parties agree upon terms of the additional Collaboration Funding.

 

3.4                                Collaboration Funding .  GSK shall be responsible for paying ARIDIS’ Development Costs specified in the budget incurred solely in connection with the conduct of the Collaboration Program (and not for activities outside of the conduct of the Collaboration Program or in furtherance of ARIDIS’ existing collaborations with Third Parties) in accordance with the applicable budget agreed upon by the Parties as specified in Exhibit B (the “ Collaboration Funding ”).  GSK shall pay ARIDIS for the Collaboration Funding as set forth in Section 6.2.  For the avoidance of doubt, GSK shall be responsible for all costs and expenses incurred by GSK to conduct the Collaboration Program.

 

3.5                                Conduct of Collaboration .

 

(a)                                  Compliance with Laws .  Each Party shall use Commercially Reasonable Efforts to carry out the activities assigned to it under the Collaboration Program, and shall conduct such activities in good scientific manner and in compliance in all material respects with the principles set forth in the attached Exhibit E (to the extent such principles are applicable to the activities being conducted by that Party) and in

 

13



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

compliance with all applicable Laws, including applicable national and international guidelines such as GLP.

 

(b)                        Data Integrity .  Each of the Parties acknowledges the importance of ensuring that the activities conducted under the Collaboration Program are undertaken in accordance with the following good data management practices, and shall use Commercially Reasonable Efforts to ensure the following:

 

(i)                                     data are being generated using sound scientific techniques and processes;

 

(ii)                                 data are being accurately and reasonably contemporaneously recorded in accordance with good scientific practices by personnel conducting research or development hereunder;

 

(iii)                             data are being analyzed appropriately without bias in accordance with good scientific practices; and

 

(iv)                              data and results are being stored securely and can be easily retrieved.

 

(c)                                   Material Transfer .

 

(i)                                     In order to facilitate activities of the Parties under the Collaboration Program, either Party (referred to in this Section 3.5(c) as the “ Transferring Party ”) may provide to the other Party (referred to in this Section 3.5(c) as the “ Material Receiving Party ”) certain materials, including Research Materials (such materials provided hereunder are referred to, collectively, as “ Materials ”) for use by the Material Receiving Party in furtherance of its rights and the conduct of its obligations under the Collaboration Program and, in the event GSK exercises the Option, in furtherance of its rights under the License, as applicable (the “ Purpose ”).  All transfers of such Materials by the Transferring Party to the Material Receiving Party shall be documented in writing (the “ Transfer Record ”) in the form attached hereto as Exhibit F that sets forth the type and name of the Material transferred, the amount of the Material transferred, the date of the transfer of such Material and the Purpose.

 

(ii)                                 Except as otherwise provided under this Agreement, all such Materials delivered by the Transferring Party to the Material Receiving Party shall remain the sole property of the Transferring Party, shall only be used by the Material Receiving Party in furtherance of the Purpose, and shall be returned to the Transferring Party upon the termination of this Agreement or upon the discontinuation of the use of such Materials (whichever occurs first).  Notwithstanding anything to the contrary herein, Joint Materials will remain jointly owned irrespective of transfer of such Joint Materials between the Parties.  The Material Receiving Party shall not cause the Materials to be used by or delivered to

 

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Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

or for the benefit of any Third Party without the prior written consent of the Transferring Party.

 

(iii)                             At the time the Transferring Party provides Materials to the Material Receiving Party as provided herein and to the extent not separately licensed under this Agreement, the Transferring Party hereby grants to the other Party a non-exclusive license under the Patents and Know-How Controlled by it to use such Materials solely for the Purpose.

 

(iv)                              The Parties agree that the exchanged Materials: (A) shall be used in compliance with applicable Laws; (B) shall not be used in animals intended to be kept as domestic pets; (C) shall not be transferred to a Third Party except if this is provided for and is done in accordance with this Agreement; and (D) shall not be reverse engineered or chemically analyzed, except if this is provided for in the applicable Collaboration Program.

 

(v)                                  THE MATERIALS SUPPLIED BY THE TRANSFERRING PARTY UNDER THIS SECTION 3.5(c) ARE SUPPLIED “AS IS” AND NOT FOR USE IN HUMANS EXCEPT AS EXPRESSLY AGREED BY THE PARTIES IN WRITING, AND THE TRANSFERRING PARTY MAKES NO REPRESENTATIONS AND EXTENDS NO WARRANTIES OF ANY KIND, EITHER EXPRESS OR IMPLIED, INCLUDING WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, OR THAT THE USE OF THE MATERIALS DOES NOT INFRINGE ANY PATENT, COPYRIGHT, TRADEMARK, OR OTHER PROPRIETARY RIGHTS OF A THIRD PARTY.

 

(vi)                              The Material Receiving Party assumes all liability for damages that may arise from its use, storage or disposal of the Materials.  The Transferring Party shall not be liable to the Material Receiving Party for any loss, claim or demand made by the Material Receiving Party, or made against the Material Receiving Party by any Third Party, due to or arising from the use of the Materials, except to the extent such loss, claim or demand is caused by the gross negligence or willful misconduct of the Transferring Party.

 

3.6                                Records and Reports .  With respect to each calendar quarter during the Collaboration Term (as may be extended under Section 3.3) and more or less frequently as the Parties mutually deem appropriate, ARIDIS shall provide detailed progress updates to GSK on the status of its activities under the Collaboration Program, including (i) summaries of data associated with activities allocated to ARIDIS in each work package (ii) a timetable for likely completion of the activities allocated to ARIDIS in each work package and (iii) any other information that has been identified by GSK for inclusion in such updates.  GSK has the right to request from ARIDIS and receive from ARIDIS any raw data generated in the performance of the Collaboration Program.  Upon completion of each work package ARIDIS shall submit to GSK a final report with all data generated as part of such work package (hereinafter “ Final Work Package Report ”)

 

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Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

3.7                                Subcontractors .  Neither Party shall subcontract any portion of the performance of Collaboration Program to a Third Party without the other Party’s prior written approval except for the subcontractors listed in Exhibit B1 for which the Parties have already expressed their approval.  Any approved subcontractor will be required to execute a written agreement which extends all relevant obligations under this Agreement to the subcontractors, including obligations of confidentiality and non-use regarding Confidential Information and an obligation to assign or otherwise grant exclusive, sublicensable rights to all intellectual property developed in the course of performing any such work under the Collaboration Program to the Party retaining such subcontractor.  Each Party shall remain responsible for any obligations under the Collaboration Program that have been delegated or subcontracted to any subcontractor, and shall be responsible for the performance of its subcontractor(s).

 

ARTICLE 4
OPTION RIGHTS

 

4.1                                Options .

 

(a)                                  Subject to the terms and conditions of this Agreement, ARIDIS hereby grants to GSK an exclusive option (the “Option”) to obtain :

 

(i)                                     an exclusive, worldwide, royalty bearing license, with the right to grant sublicenses, under ARIDIS Arising IP and ARIDIS’ s interest in the Joint Arising IP and

 

(ii)                                 a non-exclusive, worldwide, royalty bearing license, with the right to grant sublicenses, under ARIDIS Background IP

 

to research, have researched, develop, have developed, make, have made, use, have used, sell, have sold, offer for sale and import the Vaccine Products in the Field.

 

(b)                                  GSK may exercise the Option by providing written notice to ARIDIS at any time during the Collaboration Term (as may be extended under Section 3.3) and 6 (six) months after the acknowledgment by the JSC of the completion of the Collaboration Program according to Section 2.1(d)(viii) (the “Option Period-).

 

(c)                                   Upon GSK’s exercise of its Option rights under this Section 4.1 (a), the Parties shall negotiate the terms of the License Agreement in good faith within ninety (90) Business Days following notification by GSK of exercise of said Option rights, or for such additional time as may be mutually agreed by the Parties (the “ Negotiation Period ”).  The License Agreement shall include the main terms that are set forth in Exhibit C as well as other usual terms in a license agreement which terms shall be negotiated in good faith by the Parties.

 

(d)                                  Subject to Section 11.5, if as of the expiration of the Term, the License Agreement is not executed between the Parties, then:

 

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Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

(i)                                     Subject to any other provision in this Agreement providing one Party with exclusive rights after the expiration of the Term, each Party and its Affiliates shall have the right (as joint owner and without any requirement of gaining the consent of, or accounting to, the other Party) to practice its interests in any Joint Arising IP and Joint Collaboration Patents in and outside the Field but if a Party decides to grant a license to a Third Party under Joint Arising IP for use in the Field, it shall be required to share equally the revenues of such license (to the extent relating to the license of Joint Arising IP) with the other Party and such license shall be non-exclusive only; and

 

(ii)                                 For the avoidance of doubt, GSK shall have no obligation to enter into discussions with ARIDIS regarding any license or other access to GSK Intellectual Property.

 

(e)                                   Notwithstanding anything to the contrary herein, if GSK exercises the Option in the Field and the Parties execute the License Agreement then, each Party and its Affiliates shall thereafter have the right to practice its interests in the Joint Collaboration Patents and, subject to confidentiality obligations, the Joint Arising IP solely outside the Field as joint owner, without any requirement of gaining the consent of, or accounting to, the other Party but not to grant license to Third Parties in the Field.

 

ARTICLE 5
COLLABORATION LICENSES

 

5.1                                Collaboration License Under ARIDIS Intellectual Property .  Subject to the terms and conditions of this Agreement, ARIDIS hereby grants to GSK a non-exclusive, worldwide license, under the ARIDIS Intellectual Property for the sole purpose of carrying out GSK’s obligations and research rights under the Collaboration Program, which license shall become effective on the Effective Date and shall expire upon the later of the expiration of the Collaboration Term (as may be extended under Section 3.3) or the expiration of the Negotiation Period.

 

5.2                                Collaboration License Under GSK Intellectual Property .  Subject to the terms and conditions of this Agreement, GSK hereby grants to ARIDIS a non-exclusive, worldwide license, under GSK Intellectual Property for the sole purpose of carrying out ARIDIS’ obligations under the Collaboration Program, which license shall become effective on the Effective Date and shall expire upon the expiration of the Collaboration Term (as may be extended under Section 3.3).

 

5.3                                No Implied Licenses .  Except as explicitly set forth in this Agreement, neither Party shall be deemed by estoppel or implication to have granted the other Party any option, license or other right to any intellectual property right of such Party.  Neither Party shall, nor permit any of its Affiliates or sublicensees to, practice any intellectual property rights licensed to it by the other Party outside the scope of the licenses granted to it under this Agreement.

 

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Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

ARTICLE 6
COMPENSATION

 

6.1                                Option Fee Payment .  In consideration of the rights granted to GSK under Articles 4 and 5 hereof, GSK shall pay to ARIDIS

 

(a)                                  a one time Execution Fee of [***] (“Execution Fee”) and

 

(b)                                  an annual payment of [***] (“Annual Fees”) during the Collaboration Term and the Collaboration Term Extension(s).

 

6.2                           Such payments shall be payable by wire transfer of immediately available funds in accordance with wire transfer instructions of ARIDIS provided in writing to GSK on or prior to the Effective Date.  The Execution Fee shall be due only once at Effective Date.  The Annual Fees shall be due annually and being first payable one year after the Effective Date.  Such payments shall be performed by GSK within ninety (90) days from the end of the month of GSK’s receipt of an invoice from ARIDIS, which invoice shall refer to a purchase order number to be supplied by GSK and be sent in paper format to Jean-Marc Karlshausen, GSK finance department, avenue Fleming 20, 1300 Wavre, Belgium, with an electronic copy sent to Anne-Laure Puaux (anne-laure.j.puaux@gsk.com).

 

6.3                                The Parties agree that the Execution Fee and Annual Fees are non-refundable and non-creditable unless following the exercise of rights under Article 4 by GSK the Parties enter into a License Agreement.  In such case the Execution Fee and Annual Fees paid to ARIDIS by GSK under Section 6.1 will be credited against any payment due by GSK to ARIDIS under such License Agreement including without limitation milestone payments and payment for royalties, but expressly excluding the License Initiation Fee that would be payable if GSK enters into a License Agreement with ARIDIS.

 

6.4                                Payment of Collaboration Funding .  In addition to the amounts listed in Section 6.1, GSK shall pay to ARIDIS the Collaboration Funding as agreed in Exhibit B and according to the schedule of payments set out therein.  Subject to the oversight and approval by the JSC under Section 2.1 (d), within fifteen (15) days after the end of each calendar quarter during the Collaboration Term, ARIDIS shall submit to GSK a reasonably detailed report and any additional documentation reasonably requested by GSK, setting forth all amounts under the Collaboration Funding actually incurred by ARIDIS in the conduct of the Collaboration Program and in accordance with the associated budget during such calendar quarter, as detailed in Exhibit B.  GSK shall pay to ARIDIS any Collaboration Funding incurred and not previously paid in advance according to the schedule set out in Exhibit B, as set forth in such report once approved by the JSC; provided, that, any Collaboration Funding incurred in excess of one hundred and ten percent (110%) of the budgeted Collaboration Funding for the applicable quarter shall be borne by ARIDIS unless such overage was approved in advance by the JSC and documented by an amendment to this Agreement signed by the Parties.  GSK shall pay such Collaboration Funding at the end of the month following thirty (30) days after receipt of an invoice from ARIDIS, which invoice shall i) refer to a purchase order number to be supplied by GSK and ii) be sent in paper format to GSK Accounting Service, rue de l’Institut 89, 1330 Rixensart, Belgium with an

 

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Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

electronic copy sent to Stephane Carryn (stephane.x.carryn@gsk.com).  For the avoidance of doubt, the Collaboration Funding paid to ARIDIS by GSK shall be used by ARIDIS solely to cover the costs of the conduct of the Collaboration Program that are incurred after the Effective Date.

 

ARTICLE 7
INTELLECTUAL PROPERTY MATTERS

 

7.1                                Ownership of Background IP .  Except for such rights that are expressly granted by one Party to the other Party hereunder, ARIDIS shall retain all of its rights, title and interest in and to the ARIDIS Background IP and GSK shall retain all of its rights, title and interest in and to the GSK Background IP.

 

7.2                                Ownership of Arising IP .  Notwithstanding Section 7.1, the ownership of all Intellectual Property made by either Party (whether alone or jointly with the other Party) during and as a result of the performance of its obligations under the FOA and the Collaboration Program including any improvement or modification of Patents, Know How and Materials under the Control of either Party and necessary or reasonably useful for the making, having made, using, selling, offering for sale and import of the Vaccine Products, (the “Arising IP”) is as follows:

 

(a)                                  By ARIDIS .  ARIDIS shall solely own all Arising IP that is made solely by or on behalf of ARIDIS and solely related to ARIDIS Background IP (“ ARIDIS Arising IP ”).

 

(b)                                  By GSK .  GSK shall solely own all Arising IP that is made solely by or on behalf of GSK and solely related to GSK Background IP (“ GSK Arising IP ”).

 

(c)                                   Joint Ownership .  Any Arising IP that is not ARIDIS Arising IP and is not GSK Arising IP, shall be jointly owned by the Parties and each Party shall own an equal share of such joint ownership rights (“ Joint Arising IP ”).

 

7.3                                Use and Disclosure of Arising IP .

 

(a)                                  Each Party shall promptly disclose to the other Party under confidentiality all Arising IP owned by it, at the latest before filing a patent application, including any invention disclosures, or other similar documents, submitted to it by its employees, agents or independent contractors describing the inventions.

 

(b)                                  Neither Party shall disclose to, or use with any Third Party any Arising IP before the expiration of the Term.  For clarity, (1) each Party shall have the right to use its own Arising IP and Joint Arising IP for internal research purposes during the Term, (2) neither Party shall have the right to grant nonexclusive or exclusive licenses to any Third Party for any reason to its interests in the Joint Arising IP and the Joint Collaboration Patents during the Term.

 

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Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

7.4                                Prosecution of Patents .

 

(a)                                  ARIDIS Patents .

 

(i)                                     ARIDIS shall have the sole and exclusive right, to prepare, file, prosecute and maintain all ARIDIS Patents at its sole cost and expense.  ARIDIS shall keep GSK duly informed during the course of the Patent process regarding Patents claiming ARIDIS Arising IP.  To the extent that Patents claiming ARIDIS Arising IP contain subject matter that could conflict with Joint Collaboration Patents, such ARIDIS Patents shall be discussed with GSK, and ARIDIS shall inform GSK regarding any material change in protection and consult with GSK how to minimise conflict during patent prosecution provided however that ARIDIS shall have the final say.

 

(ii)                                 If ARIDIS decides to cease the prosecution or maintenance of any Patent claiming ARIDIS Arising IP, it shall notify GSK in writing sufficiently in advance so that GSK may, at its discretion, assume the responsibility for the prosecution or maintenance of such Patent, at GSK’s cost and expense.  GSK shall notify ARIDIS of its decision to assume the responsibility of such prosecution and/or maintenance within thirty (45) days of ARIDIS’ s notice to cease such activities.  If, within such time, ARIDIS has not received notice of GSK’s decision to assume prosecution and maintenance ARIDIS shall be free to cease such prosecution and maintenance.

 

(b)                                  Joint Collaboration Patents .

 

(i)                                     The responsibility and strategy for filing prosecution and maintenance, and for enforcement, of any Joint Collaboration Patents shall rest, at GSK’s option, (1) exclusively with GSK, at its cost, or (2) if desired by GSK and upon agreement by ARIDIS, jointly with GSK and ARIDIS, at joint cost and expense shared equally between the Parties (unless otherwise agreed by the Parties).  GSK shall keep ARIDIS reasonably informed as to material developments with respect to the prosecution and maintenance, and enforcement, of such Joint Collaboration Patents.  GSK shall give ARIDIS a reasonable opportunity to review the application or submission before filing, shall provide a copy thereof to ARIDIS and shall consult ARIDIS with respect thereto and in particular, if at joint cost, with respect to all costs arising (whether to patent attorneys or otherwise) in relation to the prosecution and maintenance, and enforcement, of such Joint Collaboration Patents.  ARIDIS agrees to give GSK its consent to allow GSK to enforce Joint Collaboration Patents vis-à-vis Third Parties in jurisdictions where such consent is required, (except if such Third Parties have been properly licensed by ARIDIS or GSK).

 

(ii)                                 If, during the Term, GSK intends to allow any Joint Collaboration Patent to lapse or become abandoned without having first filed a substitute, GSK shall notify ARIDIS of such intention at least sixty (60) calendar

 

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Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

days prior to the date upon which such Patent shall lapse or become abandoned, and ARIDIS shall thereupon have the right, but not the obligation, to assume responsibility for the prosecution and maintenance, and enforcement, thereof at its sole cost and expense, with counsel of its own choice.  Such prosecution and maintenance by ARIDIS shall be made in the name of ARIDIS (or an Affiliate of ARIDIS) as assignee of GSK, including the conduct of defense of any claims or proceeding related to such claim, patent or patent application and GSK shall assign to ARIDIS its entire right in such claim, patent or patent application.

 

(c)                                   GSK Patents .  GSK shall have the sole and exclusive right to prepare, file, prosecute and maintain GSK Patents at its sole cost and expense.  GSK shall keep ARIDIS reasonably informed during the course of the Patent process regarding Patents claiming GSK Arising IP.  To the extent that Patents claiming GSK Arising IP contain subject matter that could conflict with Patents covering Joint Collaboration Patents, such GSK Patents shall be discussed with ARIDIS, and GSK shall inform ARIDIS regarding any material change in protection and consult with ARIDIS how to minimise conflict during patent prosecution provided however that GSK shall have the final say.

 

(d)                                  Cooperation .  Each Party shall provide the other Party all reasonable assistance and cooperation, at the prosecuting Party’s request, in the patent prosecution efforts provided above in this Section 7.4, including providing any necessary powers of attorney and executing any other required documents or instruments for such prosecution.

 

7.5                                Patent Challenge by Third Parties

 

(i)                                     If a Third Party files a claim challenging the validity or enforceability of the Joint Collaboration Patents, GSK shall have the sole rights to defend and control any action or proceeding at its own cost and with a counsel of its own choice.  ARIDIS shall have the right to be represented in such proceedings at its own cost.  If GSK decides to cease the defence of any Joint Collaboration Patent, it shall notify ARIDIS in writing sufficiently in advance so that ARIDIS may, at its discretion, assume the responsibility for the defence of such Joint Collaboration Patent, at ARIDIS cost and expense.  ARIDIS shall notify GSK of its decision to assume the responsibility of such defence within thirty (30) days of GSK’s notice to cease such defence.  If, within such time, GSK has not received notice of ARIDIS’ decision to assume such defence, GSK shall be free to cease such defence.  In any case the defence of such action or proceeding shall be discussed by the representatives of the Parties at the Joint Steering Committee.

 

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ARTICLE 8
REPRESENTATIONS AND WARRANTIES; COVENANTS

 

8.1                                Mutual Representations and Warranties .  Each Party hereby represents and warrants to the other Party as follows:

 

(a)                                  Corporate Existence .  As of the Effective Date, it is a company or corporation duly organized, validly existing, and in good standing under the Laws of the jurisdiction in which it is incorporated.

 

(b)                                  Corporate Power, Authority and Binding Agreement .  As of the Effective Date, (i) it has the corporate power and authority and the legal right to enter into this Agreement and perform its obligations hereunder; (ii) it has taken all necessary corporate action on its part required to authorize the execution and delivery of this Agreement and the performance of its obligations hereunder; and (iii) this Agreement has been duly executed and delivered on behalf of such Party, and constitutes a legal, valid, and binding obligation of such Party that is enforceable against it in accordance with its terms.

 

8.2                                Additional Representations and Warranties of ARIDIS .  ARIDIS represents and warrants to GSK as follows, as of the Effective Date:

 

(a)                                  To the best of its knowledge it Controls the ARIDIS Background IP, and has all rights necessary under the ARIDIS Background IP to grant the options, licenses and other rights to GSK as purported to be granted pursuant to this Agreement;

 

(b)                                  It has not received any written notice from any Third Party asserting or alleging that the development or practice of the ARIDIS Background IP infringes or misappropriates the intellectual property rights of such Third Party, and it has no knowledge that GSK’s practice of the rights granted to GSK hereunder would infringe the intellectual property rights of any Third Party;

 

(c)                                   There are no pending, and to ARIDIS’ knowledge, no threatened, adverse actions, suits or proceedings against ARIDIS involving the ARIDIS Background IP;

 

(d)                                  It has not granted any right or license to any Third Party relating to any of the ARIDIS Know-How or ARIDIS Patents that would conflict with any of the rights or licenses granted to GSK hereunder and prohibit GSK from exercising such rights;

 

(e)                                   It has disclosed to GSK all material information received by ARIDIS concerning the institution of any interference, opposition, reexamination, reissue, revocation, or nullification or any official proceeding involving any ARIDIS Patent anywhere in the Territory (for the avoidance of doubt, the phrase “official proceeding” as used herein is not intended to mean ordinary prosecution and maintenance activities);

 

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(f)                                    To its knowledge, it is not in violation of any Anti-Corruption Laws;

 

(g)                                  It acknowledges receipt of GSK’s “Prevention of Corruption —Third Party Guidelines” which are attached hereto as Exhibit D, and agrees to perform its obligations under the Agreement in accordance with the principles set out therein;

 

(h)                                  It acknowledges that, in entering into this Agreement, GSK has relied upon information supplied by ARIDIS and information which ARIDIS has caused to be supplied to GSK by ARIDIS’s officers regarding ARIDIS Background IP.  ARIDIS represents and warrants to GSK that, to ARIDIS’ knowledge the information provided to GSK in connection with this Agreement is accurate in all material respects.  ARIDIS further warrants and represents to GSK that it has not, as of the Effective Date, intentionally omitted to furnish GSK with any material information known to ARIDIS concerning ARIDIS Background IP or the transactions contemplated by this Agreement, which would reasonably be considered to have a materially adverse effect on ARIDIS Background IP or the performance of the Collaboration Program.

 

8.3                                ARIDIS Covenant; Mutual Covenants , Compliance .  Each Party and its Affiliates shall comply in all material respects with all applicable Laws in the performance of its obligations under this Agreement, including all applicable Anti-Corruption Laws, and all applicable Laws relating to the privacy and security of Personal Information collected, recorded, used, disclosed, transferred, destroyed or otherwise processed under this Agreement.  “ Personal Information ” shall mean any information or set of information relating to a person that identifies such person or could reasonably be used to identify such person, regardless of the medium in which such information is displayed, including, without limitation, Sensitive Personal Information.  “ Sensitive Personal Information ” shall mean any Personal Information relating to a person where the unauthorized acquisition, use, modification, loss or disclosure of such Personal Information presents a greater risk of harm to such person, including without limitation a person’s race or ethnicity, political opinions, religious or philosophical beliefs, trade union membership, commission of criminal offences (and related proceedings), health, sex life or sexual orientation, government issued identification numbers (e.g. social security numbers or national IDs) or credit or debit card.

 

8.4                                Except as set forth in this Article 9 concerning the ARIDIS Background IP ARIDIS disclaims any warranty or guarantee that the application of the ARIDIS Background IP to Vaccine Products in the Field or the development of Vaccine Products will be successful in whole or in part or that the Vaccine Products will be suitable for commercialization.  EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, EACH PARTY SPECIFICALLY DISCLAIMS ANY GUARANTEE THAT THE CONDUCT OF THE COLLABORATION PROGRAM WILL BE SUCCESSFUL, IN WHOLE OR IN PART.  EXCEPT AS EXPRESSLY STATED IN THIS AGREEMENT, NO REPRESENTATIONS OR WARRANTIES WHATSOEVER, WHETHER EXPRESS OR IMPLIED, INCLUDING WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NON-INFRINGEMENT, OR NON-MISAPPROPRIATION OF THIRD PARTY INTELLECTUAL PROPERTY RIGHTS, ARE MADE OR GIVEN BY OR ON BEHALF OF A PARTY, AND ALL SUCH

 

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Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

REPRESENTATIONS AND WARRANTIES, WHETHER ARISING BY OPERATION OF LAW OR OTHERWISE, ARE HEREBY EXPRESSLY EXCLUDED.

 

ARTICLE 9
INDEMNIFICATION

 

9.1                                Each Party (the “ Indemnifying Party ”) shall defend, indemnify, and hold the Other Party (the “ Indemnified Party ”) and its Affiliates and their respective officers, directors, employees, and agents (the “ Indemnitees ”) harmless from and against any and all liabilities, damages, losses, costs and expenses including the reasonable fees of attorneys (collectively, “ Losses ”), arising out of or resulting from any Third Party suits, claims, actions, proceedings or demands (“ Claims ”) to the extent that such Claims arise out of, are based on, or result from: (a) the breach of any of the Indemnifying Party’s obligations under this Agreement, including Indemnifying Party’s representations and warranties set forth herein; (b) the willful misconduct or grossly negligent acts of Indemnifying Party, its Affiliates, sublicensees, subcontractors, or the officers, directors, employees, or agents of Indemnifying Party or its Affiliates; (c) the negligent conduct of Indemnifying Party’s activities under the Collaboration Program.  The foregoing indemnity obligation shall not apply to the extent that (i) the Indemnitees fail to comply with the indemnification procedures set forth in Section 9.2 and Indemnifying Party’s defense of the relevant Claims is prejudiced by such failure or that (ii) the Indemnitees caused such Losses by their willful misconduct or negligent acts.

 

9.2                                Indemnification Procedures .  The Indemnified Party shall give written notice to the Indemnifying Party promptly after learning of such Claim.  The Indemnified Party shall provide the Indemnifying Party with reasonable assistance, at the Indemnifying Party’s expense, in connection with the defence of the Claim for which indemnity is being sought.  The Indemnified Party may participate in and monitor such defence with counsel of its own choosing at its sole expense; provided, that the Indemnifying Party shall have the right to assume and conduct the defence of the Claim with counsel of its choice.  The Indemnifying Party shall not settle any Claim without the prior written consent of the Indemnified Party, not to be unreasonably withheld.  So long as the Indemnifying Party is actively defending the Claim in good faith, the Indemnified Party shall not settle or compromise any such Claim without the prior written consent of the Indemnifying Party.  If the Indemnifying Party does not assume and conduct the defence of the Claim as provided above, (a) the Indemnified Party may defend against, consent to the entry of any judgment, or enter into any settlement with respect to such Claim in any manner the Indemnified Party may deem reasonably appropriate (and the Indemnified Party need not consult with, or obtain any consent from, the Indemnifying Party in connection therewith), and (b) the Indemnifying Party shall remain responsible to indemnify the Indemnified Party as provided in this Article 9.

 

9.3                                Limitation of Liability .  NEITHER PARTY SHALL BE LIABLE TO THE OTHER FOR ANY SPECIAL, CONSEQUENTIAL, INCIDENTAL, PUNITIVE, OR INDIRECT DAMAGES (INCLUDING ANY LOSS OF PROFITS, EARNINGS, GOODWILL, SAVINGS OR BUSINESS SUFFERED BY ARIDIS OR GSK) ARISING FROM OR RELATING TO ANY BREACH OF THIS AGREEMENT, REGARDLESS OF ANY NOTICE OF THE POSSIBILITY OF SUCH DAMAGES.  NOTWITHSTANDING THE FOREGOING,

 

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Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

NOTHING IN THIS SECTION 9.3 IS INTENDED TO OR SHALL LIMIT OR RESTRICT THE INDEMNIFICATION RIGHTS OR OBLIGATIONS OF ANY PARTY UNDER SECTION 9.1, OR DAMAGES AVAILABLE FOR A PARTY’S BREACH OF CONFIDENTIALITY OBLIGATIONS IN ARTICLE 10.

 

9.4                                Insurance .  Each Party shall procure and maintain insurance, or in GSK’s case, self-insure, consistent with normal business practices of prudent companies similarly situated at all times during the Term of this Agreement which, in the case of ARIDIS, are reasonable and customary in the United States for companies of comparable size in the life sciences industry.  It is understood that such insurance shall not be construed to create a limit of either Party’s liability with respect to its indemnification obligations under this Article 10.  Each Party shall provide the other Party with written evidence of such insurance upon request.  Each Party shall provide the other Party with written notice at least thirty (30) days prior to the cancellation, non-renewal or material change in such insurance.

 

9.5                                Special note regarding limitation of ARIDIS’ liability and limitation of ARIDIS’ indemnification rights.  In no circumstance shall ARIDIS be liable to GSK or any party for any liability under this Agreement in excess of the amounts paid to it by GSK hereunder.  WITH RESPECT TO ANY VACCINE PRODUCT OR OTHER DRUG OR SERVICE CONTEMPLATED BY THIS AGREEMENT OR THE LICENSE OPTIONED UNDER SECTION 4, EXCEPT FOR THE CASE OF ARIDIS’ GROSS NEGLIGENCE OR WILLFUL MISCONDUCT TO THE EXTENT SUCH GROSS NEGLIGENCE OR WILLFUL MISCONDUCT HAVE CONTRIBUTED TO SAID LIABILITY.  IN NO CIRCUMSTANCE SHALL ARIDIS BE LIABLE TO GSK, ITS AFFILIATES, SUBLICENSEES, DISTRIBUTORS OF PRODUCT, AGENTS OR OTHER INDEMNITEES, NOR ANY RECIPIENT, FOR ANY USE OF SUCH VACCINE PRODUCT, DRUG OR SERVICE BY GSK, WHETHER IN CLINICAL TRIAL OR OTHERWISE, AND GSK SHALL INDEMNIFY ARIDIS AGAINST ALL LIABILITIES RESULTING FROM ANY SUCH USE.

 

ARTICLE 10
CONFIDENTIALITY- PUBLICATION- PUBLICITY

 

10.1                         Confidentiality .  Each Party agrees that, during the Term and for a period of ten (10) years thereafter, it shall keep confidential and shall not publish or otherwise disclose and shall not use for any purpose other than as provided for in this Agreement (which includes the exercise of any rights or the performance of any obligations hereunder) any Confidential Information furnished to it by the other Party pursuant to this Agreement, except to the extent expressly authorized by this Agreement or otherwise agreed in writing by the Parties.  The foregoing confidentiality and non-use obligations shall not apply to any portion of the other Party’s Confidential Information that the receiving Party can demonstrate by competent written proof:

 

(a)                                  was already known to the receiving Party or its Affiliate, other than under an obligation of confidentiality, at the time of disclosure by the other Party;

 

(b)                                  was generally available to the public or otherwise part of the public domain at the time of its disclosure to the receiving Party;

 

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Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

(c)                                   became generally available to the public or otherwise part of the public domain after its disclosure and other than through any act or omission of the receiving Party in breach of this Agreement;

 

(d)                                  was disclosed to the receiving Party or its Affiliate on a non-confidential basis by a Third Party who has a legal right to make such disclosure and who did not obtain such information directly or indirectly from the other Party; or

 

(e)                                   was independently discovered or developed by the receiving Party or its Affiliate without access to or aid, application or use of the other Party’s Confidential Information, as evidenced by written records made contemporaneous with such discovery or development and kept in the ordinary course of business, or other similar documentary proof of actual knowledge by the receiving Party.

 

Notwithstanding the definition of “Confidential Information” in Article 1, all Joint Arising IP, shall be treated confidentially by both Parties and shall be owned in accordance with Section 7.3.

 

10.2                         Authorized Disclosure .  Notwithstanding the obligations set forth in Section10.1, a Party may disclose the other Party’s Confidential Information to the extent:

 

(a)                                  such disclosure is reasonably necessary (i) for the filing or prosecuting Patents as contemplated by this Agreement; (ii) in the case of GSK, to comply with the requirements of regulatory authorities with respect to obtaining regulatory approval of a Vaccine Product; or (iii) for pro secuting or defending litigation as contemplated by this Agreement;

 

(b)                                  such disclosure is reasonably necessary to its employees, agents, consultants, contractors, licensees or sublicensees on a need-to-know basis for the sole purpose of performing its obligations or exercising its rights under this Agreement; provided that in each case, the disclosees are bound by written obligations of confidentiality and non-use consistent with those contained in this Agreement; or

 

(c)                                   such disclosure is reasonably necessary to comply with applicable Laws, including regulations promulgated by applicable security exchanges, court order, administrative subpoena or order.

 

Notwithstanding the foregoing, in the event a Party is required to make a disclosure of the other Party’s Confidential Information pursuant to Section 10.2(a) or 10.2(c), such Party shall promptly notify the other Party such required disclosure and shall use reasonable efforts to obtain, or to assist the other Party in obtaining, a protective order preventing or limiting the required disclosure.

 

10.3                         Technical Publication .  Neither Party may publish peer reviewed manuscripts, or give other forms of public disclosure such as abstracts and presentations, of results of studies carried out under the Collaboration Program, without the opportunity for prior review by the other Party and the JSC, except to the extent required by applicable Laws.  A Party seeking publication

 

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Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

shall provide the other Party the opportunity to review and comment on any proposed publication that contains the results of studies carried out under the Collaboration Program at least ninety (90) days prior to its intended submission for publication.  The other Party shall provide the Party seeking publication with its comments in writing, if any, within ninety (90) days after receipt of such proposed publication.  The Party seeking publication shall consider in good faith any comments thereto provided by the other Party and shall comply with the other Party’s request to remove any and all of such other Party’s Confidential Information from the proposed publication.  In addition, the Party seeking publication shall delay the submission for a period up to ninety (90) days after the other Party’s receipt of the proposed publication in the event that the other Party can demonstrate reasonable need for such delay to prepare and file a patent application.  If the other Party fails to provide its comments to the Party seeking publication within such ninety (90) day period, such other Party shall be deemed not to have any comments, and the Party seeking publication shall be free to publish in accordance with this Section 10.3.  The Party seeking publication shall provide the other Party and the JSC a copy of the manuscript at the time of the submission.  Each Party agrees to acknowledge the contributions of the other Party and its employees in all publications as scientifically appropriate.  Disputes among the Parties with regard to technical and scientific publications shall be discussed by the JSC whose decision thereon shall be final and binding for the Parties.

 

10.4                         Publicity; Terms of this Agreement .

 

(a)                                  The Parties agree that the terms of this Agreement are the Confidential Information of both Parties, subject solely to the authorized disclosure provisions set forth in this Section 10.4 and Section 10.2.

 

(b)                                  Neither Party nor such Party’s Affiliates will make any public announcements, press releases, regulatory filing or other public disclosures, written or oral, whether to the public, the press, to GSK’s stockholders or otherwise, concerning this Agreement or the terms or the subject matter hereof, the performance hereof or the Parties’ activities hereunder, or any results or data arising hereunder (a “ Public Statement ”), except: (i) with the prior written consent of the other Party (such consent not to be unreasonably delayed or withheld but may be conditional upon certain restrictions as to the content and/or distribution of such Public Statement to ensure consistency with GSK’s policies, including GSK’s standards for Scientific Engagement); or (ii) for such Public Statements, as in the opinion of the counsel for the Party intending to make such Public Statement, are required to comply with applicable Laws (including the regulations of any stock exchange) (a “ Legal Requirement ”) and which in any event contain only the minimum disclosure necessary to comply with the relevant Legal Requirement.

 

(c)                                   Each Party agrees to provide the other Party with a copy of any proposed Public Statement as soon as reasonably practicable under the circumstances prior to its scheduled release.  Each Party shall provide the other with an advance copy of any such Public Statement at least ten (10) business days prior to its scheduled release; provided, that if the Party proposing such Public Statement cannot provide the reviewing Party with ten (10) business days notice due to extraordinary circumstances beyond that Party’s control, such Party will use reasonable efforts to provide the reviewing Party with

 

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Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

the proposed Public Statement for comment at least forty-eight (48) hours before release.  Each Party furthermore shall have the right to review and recommend changes to any such Public Statement and, except as otherwise required by Legal Requirement, the Party whose Public Statement has been reviewed shall remove any Confidential Information of the reviewing Party that the reviewing Party reasonably deems to be inappropriate for disclosure.

 

(d)                                  In addition to the foregoing each Party agrees to give the other Party a reasonable opportunity (to the extent consistent with Legal Requirements) to review all Public Statements required by Legal Requirements to be filed with the SEC or similar body prior to submission of such filings, and will give due consideration to any reasonable comments by the non-filing Party relating to such filing, including the provisions of this Agreement for which confidential treatment should be sought.

 

10.5                         Equitable Relief .  Each Party acknowledges that its breach of this Article 10 may cause irreparable harm to the other Party, which cannot be reasonably or adequately compensated in monetary damages.  Therefore, each Party agrees that the other Party shall be entitled, in addition to any other remedies it may have under this Agreement or otherwise, to seek preliminary and permanent injunctive and other equitable relief to prevent or curtail any actual or threatened breach of the obligations relating to Confidential Information set forth in this Article 11 by the other Party.

 

ARTICLE 11
TERM AND TERMINATION

 

11.1                         Term .  This Agreement shall become effective on the Effective Date and, unless earlier terminated pursuant to this Article 11, shall remain in effect until i) expiration of the Option Period or, ii) if GSK exercises its Option, until expiration of the Negotiation Period or execution of the License Agreement, whichever is the earliest (the “ Term ”):

 

11.2                         Termination by GSK for Convenience .  GSK may terminate this Agreement for any reason upon at least ninety (90) days prior written notice to ARIDIS.

 

11.3                         Termination for Breach .  GSK shall have the right to terminate the Agreement under Section 3.3(b) in the event ARIDIS’ breach of its diligence performance causes a delay in reaching the milestones as set forth in the Collaboration Program exceeding six (6) months Other than in such case, each Party shall have the right to terminate this Agreement immediately upon written notice to the other Party if the other Party materially breaches its obligations under this Agreement and, after receiving written request to remedy such material breach, which identifies such material breach in reasonable detail, fails to cure such material breach within ninety (90) days from the date of such notice (or within thirty (30) days from the date of such notice in the event such material breach is solely based on the breaching Party’s failure to pay any amounts due hereunder).

 

11.4                         Termination for Bankruptcy .  Each Party shall have the right to terminate this Agreement in its entirety immediately upon written notice to the other Party upon such other

 

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Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

Party’s 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 such other Party (or an equivalent procedure including administration).  Upon the bankruptcy of any Party, the non-bankrupt Party shall further be entitled to a complete duplicate of, or complete access to, any such intellectual property, and such, if not already in its possession, shall be promptly delivered to the non-bankrupt Party, unless the bankrupt Party elects to continue, and continues, to perform all of its obligations under this Agreement.

 

11.5                         Effects of Termination .  Upon any termination or expiration of this Agreement, and in case GSK has not exercised its Option, each Party and their Affiliates shall have the right to practice its interest in the Joint Arising IP in or outside the Field, without any requirement of gaining the consent of, or accounting to, the other Party other than as required pursuant to provisions otherwise included in this Agreement.  Prosecution of Patents covering Arising IP, including Joint Collaboration Patents, shall continue to be as set out in Section 7.  Practice of rights in Arising IP shall be as set out in Section 4.1(d)(i).

 

(a)                                  The following consequences shall apply only in the event of termination by GSK pursuant to Section 11.2 (Termination for Convenience) or by Aridis to Section 11.3 (Termination for Breach), or expiration of the Term:

 

(i)                                     Option .  GSK loses its right to exercise the Option.

 

(ii)                                 Collaboration funding .  GSK shall pay ARIDIS for the Collaboration Funding incurred for activities performed up to the effective date of termination and for all non-cancellable costs according to the budget provided that ARIDIS shall exercise all Commercially Reasonable Efforts to minimize such costs, expenses and commitments.

 

(iii)                             Sole license to Joint Collaboration Patents .  ARIDIS shall have the right to request from GSK a sole license (with GSK and its Affiliates retaining rights for its own purposes), with the right to grant sublicenses, under GSK’s interest in any Joint Arising IP for use in and outside the Field on terms to be negotiated in good faith and agreed between the Parties, and GSK may grant such license or not in its sole discretion.

 

(iv)                              Transfer of Material Data .  GSK shall, at the option of ARIDIS, transfer to ARIDIS a copy of all material data, filings regarding the conduct of the Collaboration Program and ARIDIS will have the non-exclusive right to use such data and filings.  GSK shall, at the Option of ARIDIS, return to ARIDIS, and cease using, all Confidential Information of ARIDIS as well as Research Materials received from ARIDIS, except as required to continue its obligations set forth in this Section 11.5(a).

 

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Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

(b)                                  The following consequences shall apply only in the event of termination by GSK pursuant to Section 11.3 (Termination for Breach):

 

(i)                                     GSK shall retain the right to exercise the Option, pursuant to the terms of this Agreement, in particular Section 4.1;

 

(ii)                                 If GSK exercises the Option:

 

(A)                                Joint Collaboration Patents will continue to be managed as set out in section 7.  GSK shall provide ARIDIS, for its review and comment, with drafts of any material filings or responses to be made to any patent authority with respect to Joint Collaboration Patents at least ten (10) Business Days in advance of intended submission, and shall provide ARIDIS with copies of material filings made with, and communication received from, patent authorities with respect to Joint Collaboration Patents.  GSK shall reasonably consider incorporating ARIDIS’s comments thereto.  ARIDIS may decide, in its sole discretion, to assign all its rights and interests in the Joint Collaboration Patent(s) to GSK, in that event if GSK agrees to such assignment all costs related to the prosecution and maintenance of such Joint Collaboration Patents shall be borne by GSK;

 

(iii)                             ARIDIS shall, at GSK’s request, return to GSK, and cease using, all Confidential Information of GSK as well as Research Materials received from GSK, except as required to continue its obligations set forth in this Section 11.5(b).

 

11.6                         Survival .  Except as otherwise provided herein, termination or expiration of this Agreement shall not affect any rights or obligations of the Parties under this Agreement that have accrued prior to the date of termination or expiration.  Notwithstanding anything to the contrary, the following provisions shall survive any expiration or termination of this Agreement: Article 1, Sections 3.5 (b) and (c), 3.7, 4.1 (d) and (e), 5.3, 7.1, 7.2, 7.3, 7.4, 7.5, 8.4, Articles 9 and 10, Sections 11.5, 11.6, Article 12, Sections 13.1 and Sections 13.3 through 13.11.

 

ARTICLE 12
DISPUTE RESOLUTION

 

12.1                         Disputes .  The Parties recognize that disputes as to certain matters may from time to time arise that relate to either Party’s rights and/or obligations hereunder.  It is the objective of the Parties to establish procedures to facilitate the resolution of disputes arising under this Agreement in an expedient manner by mutual cooperation.  To accomplish this objective, the Parties agree to follow the procedures set forth in this Article 12 to resolve any controversy or claim arising out of, relating to or in connection with any provision of this Agreement, if and when a dispute arises under this Agreement.

 

12.2                         Internal Resolution .  With respect to all disputes arising between the Parties under this Agreement, including any alleged breach under this Agreement or any issue relating to the interpretation or application of this Agreement, if the Parties are unable to resolve such dispute within thirty (30) days after such dispute is first identified by either Party in writing to the other,

 

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the Parties shall refer such dispute to the Executive Officers of the Parties (SVP R&D for GSK Biologicals and CEO for ARIDIS) for attempted resolution by good faith negotiations within thirty (30) days after such notice is received by or referred to the Executive Officers.

 

12.3                         Dispute Resolution .  If the Parties are not able to resolve a dispute referred to them under Section 12.2 (including non-contractual disputes), then subject to Section 12.6, such dispute shall be finally resolved by final and binding arbitration conducted in accordance with the terms of this Section 12.4.  The arbitration will be held in London, United Kingdom according to Rules of Arbitration of the International Chamber of Commerce (“ ICC ”).  The arbitration will be conducted by a single arbitrator with significant experience in the pharmaceutical industry, unless otherwise agreed by the Parties, appointed by ICC within fifteen (15) days after commencement of the arbitration in accordance with applicable ICC rules.  Any arbitration herewith will be conducted in the English language.  The arbitrator will be instructed not to award any punitive or special damages and will render a written decision no later than six (6) months following the selection of the arbitrator, including a basis for any damages awarded and a statement of how the damages were calculated.  Each Party agrees to abide by the award rendered in any arbitration conducted pursuant to this Section 12.4.  With respect to money damages, nothing contained herein will be construed to permit the arbitrator or any court or any other forum to award punitive or exemplary damages.  Each Party will pay its legal fees and costs related to the arbitration (including witness and expert fees); provided, that the arbitrator shall be authorized to determine whether a Party is the prevailing Party, and if so, to award to that prevailing Party reimbursement for its reasonable attorneys’ fees, costs and disbursements.  All proceedings and decisions of the arbitrator shall be deemed Confidential Information of each of the Parties, and shall be subject to Article 10.  From the date of submission of the dispute to the Executive Officers in Section 12.2, until such time as the dispute has become finally settled, the running of the time periods as to which a Party alleged to have breached the Agreement must cure such breach becomes suspended as to any breach that is the subject matter of the dispute.  Judgment on the award so rendered will be final and may be entered in any court having jurisdiction thereof

 

12.4                         Equitable Relief .  Nothing in this Article 12 will preclude either Party from seeking equitable relief or interim or provisional relief from a court of competent jurisdiction, including a temporary restraining order, preliminary injunction or other interim equitable relief, concerning a dispute prior to any arbitration if necessary to protect the interests of such Party or to preserve the status quo pending the arbitration proceeding.

 

12.5                         Excluded Matters .  Notwithstanding Sections 12.2 through 12.4, any dispute, controversy or claim relating to the inventorship, scope, validity, enforceability or infringement of any Patent may be submitted to the jurisdiction of the courts specified by the Brussels Convention or the European Patent Office or the courts in London, United Kingdom, subject to any available appeal including to the Supreme Court of London.

 

ARTICLE 13
MISCELLANEOUS

 

13.1                         Entire Agreement; Amendment .  This Agreement and the Exhibits and Schedules hereto, sets forth the complete, final and exclusive agreement and all the covenants, promises,

 

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Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

agreements, warranties, representations, conditions and understandings between the Parties hereto with respect to the subject matter hereof and supersedes, as of the Effective Date, all prior and contemporaneous agreements and understandings between the Parties with respect to the subject matter hereof, including the Confidentiality Agreement (except to the extent it relates to Information disclosed by or to IntelGenx Corp) and the FOA.  No subsequent alteration, amendment, change or addition to this Agreement shall be binding upon the Parties unless reduced to writing and signed by an authorized officer of each Party.

 

13.2                         Force Majeure .  Both Parties shall be excused from the performance of their obligations under this Agreement to the extent that such performance is prevented by force majeure and the nonperforming Party promptly provides notice of the prevention to the other Party.  Such excuse shall be continued so long as the condition constituting force majeure continues and the nonperforming Party takes reasonable efforts to remove the condition.  For purposes of this Agreement, force majeure shall include conditions beyond the control of the Parties, including an act of God, war, terrorist act, labor strike or lock-out, epidemic, and fire, earthquake, storm or like catastrophe.  If a force majeure persists for more than ninety (90) days, then the Parties will discuss in good faith the modification of the Parties’ obligations under this Agreement in order to mitigate the delays caused by such force majeure.

 

13.3                         Notices .  Any notice required or permitted to be given under this Agreement shall be in writing, shall specifically refer to this Agreement, and shall be addressed to the appropriate Party at the address specified below or such other address as may be specified by such Party in writing in accordance with this Section 13.3, and shall be deemed to have been given for all purposes (a) when received, if hand-delivered or sent by confirmed facsimile or a reputable courier service, or (b) five (5) Business Days after mailing, if mailed by first class certified or registered airmail, postage prepaid, return receipt requested.

 

If to ARIDIS:

 

If by courier to:

ARIDIS
5941 Optical Court,
San Jose, CA 95138,
USA
Attention: CEO

 

If by facsimile:

 

+1 (408) 960-3822

 

If to GSK:

 

If by courier:

 

GlaxoSmithKline Biologicals S.A.

 

32



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

Rue de l’Institut 89
1330 Rixensart, Belgium
Attention: Senior Vice President, Business Development

 

If by facsimile:

 

+32 10 85 33 84

 

With a copy to (which shall not constitute notice):

 

GlaxoSmithKline Biologicals S.A.
Avenue Fleming, 20
1300 Wavre
Attention: Legal
Telephone: +32 10 85 24 35
Facsimile: +32 10 85 33 84

 

13.4                         No Strict Construction; Headings .  This Agreement has been prepared jointly by the Parties and shall not be strictly construed against either Party.  Ambiguities, if any, in this Agreement shall not be construed against any Party, irrespective of which Party may be deemed to have authored the ambiguous provision.  The headings of each Article and Section in this Agreement have been inserted for convenience of reference only and are not intended to limit or expand on the meaning of the language contained in the particular Article or Section.

 

13.5                         Assignment .  Neither Party may assign or transfer this Agreement or any rights or obligations hereunder without the prior written consent of the other (not to be unreasonably withheld or delayed), except that a Party may make such an assignment without the other Party’s consent to (i) an Affiliate (for so long as such entity remains an Affiliate) or (ii) a Third Party in connection with a Change of Control of such Party (such Third Party, an “Acquiror”).  Any successor or assignee of rights or obligations permitted hereunder shall, in writing to the other Party, expressly assume performance of such rights or obligations.  Any permitted assignment shall be binding on the successors of the assigning Party.  Any assignment or attempted assignment by either Party in violation of the terms of this Section 13.5 shall be null, void and of no legal effect.

 

13.6                         Further Actions .  Each Party agrees to execute, acknowledge and deliver such further instruments, and to do all such other acts, as may be necessary or appropriate in order to carry out the purposes and intent of this Agreement.

 

13.7                         Severability .  If any one or more of the provisions of this Agreement is held to be invalid or unenforceable by any court of competent jurisdiction from which no appeal can be or is taken, the provision shall be considered severed from this Agreement and shall not serve to invalidate any remaining provisions hereof.  The Parties shall make a good faith effort to replace any invalid or unenforceable provision with a valid and enforceable one such that the objectives contemplated by the Parties when entering this Agreement may be realized.

 

33



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

13.8                         No Waiver .  Any delay in enforcing a Party’s rights under this Agreement or any waiver as to a particular default or other matter shall not constitute a waiver of such Party’s rights to the future enforcement of its rights under this Agreement, except with respect to an express written and signed waiver relating to a particular matter for a particular period of time.

 

13.9                         Independent Contractors .  Each Party shall act solely as an independent contractor, and nothing in this Agreement shall be construed to give either Party the power or authority to act for, bind, or commit the other Party in any way.  Nothing herein shall be construed to create the relationship of partners, principal and agent, or joint-venture partners between the Parties.

 

13.10                  English Language; Governing Law .  This Agreement was prepared in the English language, which language shall govern the interpretation of, and any dispute regarding, the terms of this Agreement.  This Agreement and all disputes arising out of or related to this Agreement (including non-contractual disputes) or any breach hereof shall be governed by and construed under the laws of England and Wales, without giving effect to any choice of law principles that would require the application of the laws of a different state.

 

13.11                  Counterparts .  This Agreement may be executed in one (1) or more counterparts, by original, facsimile or PDF signature, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

 

{Signature page follows}

 

34


 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

IN WITNESS WHEREOF, the Parties have executed this Agreement by their duly authorized officers as of the Effective Date.

 

GLAXOSMITHKLINE BIOLOGICALS S.A.

 

ARIDIS

 

 

 

 

 

 

 

 

By:

/s/ Antoon Loomans

 

By:

/s/ Vu Trong

Name:

Antoon Loomans

 

Name:

Vu Trong

Title:

Senior Vice President Legal Affairs

 

Title:

Chief Executive Officer

 

 

 

 

 

 

 

 

 

 

By:

/s/Emmanuel Hanon

 

 

 

Name:

Emmanuel Hanon

 

 

 

Title:

Senior Vice President

 

 

 

 

Vaccines Discovery & Development

 

 

 

 

 

 

 

 

Date:

January 15, 2017

 

 

 

 

35



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

LIST OF EXHIBITS:

 

Exhibit A:

Existing ARIDIS Patents

 

 

Exhibit B:

Collaboration Program, Budget, Schedule of Payments and Timelines

 

 

Exhibit B1

List of approved subcontractors

 

 

Exhibit C:

Main License Agreement Terms

 

 

Exhibit D:

Third Party Guidelines

 

 

Exhibit E:

R&D Principles

 

 

Exhibit F :

Material Transfer Record

 

 

Schedule 1.9:

ARIDIS Materials

 

 

Schedule 1.32:

GSK Materials

 

 

Schedule 1.42:

Joint Materials

 

36



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

EXHIBIT A
EXISTING ARIDIS PATENTS

 

Aridis Ref

 

Attorney
Docket
Number

 

CC

 

Status

 

Application Number/
Publication No

 

Application
Date

 

Patent Number

 

Grant
Date

 

Title

 

Expiration
Date

P108USp

 

136-000200US

 

US

 

Inactive

 

60/995,291

 

9/25/2007

 

 

 

 

 

Formulations for Preservation of Rotavirus

 

 

P108EPCH

 

136-000210CH

 

CH

 

Inactive

 

8834341,3
EP219728381

 

9/24/2008

 

2197283

 

7/17/2013

 

 

 

 

P108EPDE

 

136-000210DE

 

DE

 

Granted

 

8834341,3
EP2197283B1

 

9/24/2008

 

2197283

 

7/17/2013

 

 

 

9/24/2028

P108EP

 

136-000210EP

 

EP

 

Granted

 

8834341,3
EP2197283B1

 

9/24/2008

 

2197283

 

7/17/2013

 

 

 

9/24/2028

P108EPFR

 

136-000210FR

 

FR

 

Granted

 

8834341,3
EP2197283B1

 

9/24/2008

 

2197283

 

7/17/2013

 

 

 

9/24/2028

P108EPGB

 

136-000210GB

 

GB

 

Granted

 

8834341,3
EP2197283B1

 

9/24/2008

 

2197283

 

7/17/2013

 

 

 

9/24/2028

P108EPIT

 

136-0002101T

 

IT

 

Granted

 

8834341,3
EP2197283B1

 

9/24/2008

 

2197283

 

7/17/2013

 

 

 

9/24/2028

P108PC

 

136-000210PC

 

PCT

 

Inactive

 

PCT/US2008/01
1169

 

9/24/2008

 

 

 

 

 

 

 

 

P108US

 

136-000210US

 

US

 

Granted

 

12/733,920

 

9/24/2008

 

8,241,886

 

8/14/2012

 

 

 

4/30/2029

P112USprov

 

136-001100US

 

US

 

provisional

 

62347009

 

6/7/2016

 

 

 

 

 

Method for Preparation of Quick Dissolving Thin Films Containing Bioactive Material With Enhanced Thermal Stability

 

 

 

37



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

Patent number

 

Publication date

 

Application number

 

 

 

 

 

AU2002360245A1

 

20030506

 

AU2002360245A

 

 

 

 

 

CA2458794A1

 

20030501

 

CA2458794A

 

 

 

 

 

CA2458794C

 

20130122

 

CA2458794A

 

 

 

 

 

EP1430117A2

 

20040623

 

EP02795489A

 

 

 

 

 

EP1430117A4

 

20060125

 

EP02795489A

 

 

 

 

 

US2004014164A1

 

20040122

 

US19906102A

 

 

 

 

 

US7101693B2

 

20060905

 

US19906102A

 

38



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

EXHIBIT B

 

Collaboration Program, Budget (including Go/No Go criteria), Schedule of Payments and Timelines

 

 

39


 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

verable,success criteria and constraints rabl e elop thenro-stable OTF whiCh complies wth the following crlena· bjl!tv: Minim.al :12Uo ..s•c folowed 24Uo +JO'C.and 3 day'Sat ...co•c (accod&.g to WHO) Optimal:36Mo +30"C (kovel3).arid 24Uo at +37'C (m.atch toSII), and 6Mo +40 C (match 10 F size: ma11et tMn 2:2'-20mm (e.g 15•15tnmOf 22"'11 rnm equrvalent based 011 p. e flf!otS s.cze) solut!on tme o more tlw150 seconds but duly 1().1$ seconds {method to be de!'!"'td) ky behavior(method to be demed) trai nts e of GRAS and non-animalongfl exclplents mulation COI'I1)8tlble wrthlrarge scale manutadumg process e oftraceable Raw Matenalftti'lg with quaificabonlvaildationGSK requirements sesstechnicalreprodudbily.,ts ... stones (technical) 1 (!NP 1-2-3)-Go/No Go -Stage 2 (Tech transfertto CMO for GMP) Act1v1t1es l nd1ca Durati (montn Aridis AridisiGSK First screening-manufacturing 2-First screening-characterization 2-Aridis AridisiGSK 1-Second screening-manufacturing-optimization Second screening-characterization 2-Aridis AridisiGSK 1-Best candidates selection & repro lot manufacturing Repro lots - characterization (without realtime stability) 2-- 2 Repro lots -realtime stability GSK CMO selection Tb ech tra nsferto Cl.10 Tb Who

 

40


 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

st stage:Formulation Development : First screening p miinary work import permit ava.i li iilty supply Rotavirusoono=ntrated d-:velopm=nt purpose t scraning :n\anufacturing Series of OTF cancfdates Wxd on agre:d excni ts. (10-40 cancf""t.s) OTF surface pH OTF dissolution time Dim=nsions & th.ickness Pouch . ng conditions {T... atmospttere composition, OOiding t me before pouch.ing) Pouch. ntegrity test k tt\awing to pouching} t scre:ning:ct\aracrtiz: ation Buffer cap.acity ·ith. BRR m applyaoo:erated stabiilty conditions {Arrh..ennus) and m:asureinfect vityus ng t potency m:tt.od on candid. m=:ting tM BRR spec. isture content OTF dissolution t me(Ph..U Sel:ction of candicf.at:s for sec scre:nir.Q Budget :600. 000 USS st stage:Formulation Development : Secondscreening p ond scre:nir.g : Op t mization of Selected OTF candicf.at:s{e.g.exc pi=nt concentration, drying process oonditiollS} OTF surfao:pH OTF <frssoJtrtion time Oin'tensjons & th:ickness Pouching ooncfrtions{T'". atmosphere oom ion, OOJcfu-rg tim:-: before pouciUng) Pouctl integrity t-est nufactur ng{bulk tt\ a :, ing to h.ing) oncl scre:n:ing: Suffer capacity witt.BRR m acterization applyaooel:rat-:<:1 stability ooncfrtions {Arrttenn:ius) an measure infect vityusing t pot-:ncy mett.ocl. Moisture content OTF <frssoJtrtion tim:-:{Ph.U Pre clinical t-est inPig mod sel:ct-:<:1cancfdat-=s. Sel:ction of cancfdat-=s for reprodooibility lots Budget :500. 000 USS And S And S

 

41


 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

t stage:Formulation Development Reproducibility lots p o lots:manufactur ng Produce 3 repro lots{ ·ittl rotavirus bu ks}of eactl sel;>ct:d candid.ates {nux 3candid.ai:S} OTF surface pH OTF <frssoJution tin't:o: Oin'teftS,jons & tttickness PouctUng ooncfrtions {F. atmosphere oompositio'l, Suffer capacity witt. BRR m o lots:ctwacterization Applyaoo:l:rated stability ooncfrtions {Arrttennius) an measure infect vityusing t potency mett.ocl. Moisture content OOJcflflg time before pou,tUng Pouctl int-egrity test OTF <frssoJution tin't:o:{Ph.U Pre clinical test inPig mOO 4 Rtim= c;,t.=.hility initi.:ltirlort Conclusjonof ttt.e ftrSt stag-eo oollaboration witt. Aricfrs. Budget::WO.OOO USS ipients contributions ci pients knownby GSK vaccine toincrease Rotavi rus stab iity: pH 6.5 Sucrose 1Ww/v Calcium SmU H.istidineo,z,w-/v Arginine 0.w/v rHSA 0.w/v TPGS 1m:M {int-:raction withI nfect vity tes6ng} Polymer for ttteOTF structure to be defined Travasol {amino acid pooi) tacids:CaC03. adioic acid. Ca citrate.comb:nat ons ing process: ) And S

 

42


 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

ytical strategy t ng plan has been discussed with Aridis imal tes t ngplan willbe: Potency by FFU onFmlSulk and FrulContainer {R&DPteclinicJ.I) Suff etcap.acity by &by Roset-Rice mod on DP{TRD OP) Dissolutiontirn:on DP - shotAd besta.nd.atd pharmacopeia method{both teams). Moisture content byF on OP{TRD OP) pH ofdissolvedOTFandlotOTF surface{to bediscussedwith Aricfis{m:thodand R&R) OTF dimension:size and thic:kns$s

 

43

 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

Schedule of Payments to finance the Collaboration Program :

 

GSK agrees to make advance payments to ARIDIS corresponding to [***] of the Collaboration Funding (for the corresponding WP) at initiation of each of WP 1, WP2, and WP 3 above.  Thus, upon initiation of WP1: [***] (on the Effective Date); initiation of WP2: [***] ; initiation of WP3: [***] ; with the remaining [***] [***] — upon completion of Stage 1.

 

The Parties shall agree the Collaboration Funding for Stage 2 at least sixty (60) days before the commencement of Stage 2.

 

44



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

EXHIBIT B1
LIST OF APPROVED SUBCONTRACTORS

 

(None at this time: any subcontractors will be presented to the Joint Steering

 

Committee for review prior to subcontracting.)

 

45



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

EXHIBIT C

 

MAIN LICENCE AGREEMENT TERMS

 

Licensed IP ” is Intellectual Property subject to the Option Rights granted to GSK as defined in the Collaboration and Option Agreement (“ Agreement ”) section 4.1(a) namely ARIDIS Background IP, ARIDIS Arising IP and ARIDIS’ s interest in Joint Arising IP.

 

In the event GSK exercises the Option under Section 4.1(a) of the Agreement the Parties shall enter into a license agreement based on the following terms and conditions (“ License Agreement ”).  Unless specified otherwise herein the meaning of capitalized terms in this Exhibit C is the same as in the Agreement. :

 

(A)                                License Initiation Fee

 

A license initiation fee of six hundred thousand dollars [***] shall be due by GSK to ARIDIS within thirty (30) days from the execution of the License Agreement.

 

(B)                                Milestone Payments

 

GSK shall make the following milestone payments to ARIDIS:

 

·                                           Upon successful completion of the first phase I clinical trial conducted by GSK with the first Product: [***]

 

·                                           Upon successful completion of the first phase II clinical trial conducted by GSK with the first Product: [***]

 

·                                           Upon successful completion of the first phase Ill clinical trial conducted by GSK with the first Product: [***]

 

·                                           Upon the first PLA approval of the first Product in the EU: [***]

 

·                                           Upon the first PLA approval of the first Product in the US : [***]

 

For the purpose of the above milestone payments the term “ PLA ” shall mean a Product Licence Application.

 

Each milestone payment set forth above shall be payable only once.

 

For the avoidance of doubt and in accordance with Section 6.3 of the Agreement the Execution Fee and all Annual Payments paid by GSK pursuant to the Agreement shall be fully creditable against the milestones payments described above and against royalties to be paid by GSK as described below but shall however not be creditable against the License Initiation Fee.

 

The term “ Product ” shall be defined in the License Agreement and shall include any Vaccine Product in the Field which comprises, contains, incorporates, is covered by or is developed through

 

46



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

the use of any Licensed 1P.  GSK’s non-exclusive and exclusive rights to develop, manufacture, market and distribute Products in the Field and Territory are as described in section 4.1 of the Agreement.

 

(C)                                Royalties

 

GSK shall pay the following royalties on Net Sales (as such term is defined below in Section D of this Exhibit C) to ARIDIS:

 

·                                           (i) For any Product which, in the absence of the license granted by ARIDIS, would infringe a Valid Claim of any Patent falling within ARIDIS Patents, ARIDIS Arising IP and/or ARIDIS’ interest in Joint Arising IP (in the case of Joint Arising IP, including Products which would, in the absence of either a license granted by ARIDIS or ownership of Joint Arising IP by GSK, infringe a Valid Claim of any Joint Collaboration Patent) (in each case such Product being hereinafter referred to as “Patented Product”) :

 

[***] on Net Sales

 

·                                           (ii) Net Sales of any Product sold under contract or arrangement with GAVI or UNICEF (or similar GAVI contractor) in all countries qualifying as GAVI countries at the time of sales of the relevant Product :

 

[***] on Net Sales

 

·                                           (iii) For any Product that does not fall within the categories described in sub-paragraph (i) or (ii) above but comprises, contains, incorporates, or is developed through the use of any ARIDIS Know-How and/or ARIDIS Materials :

 

[***] on Net Sales

 

·                                           In the event that a license to patents owned and/or controlled by Third Parties is necessary for GSK in order to avoid infringement in practicing ARIDIS Intellectual Property under the License Agreement, [***] of the royalties payable by GSK to such Third Parties under such license shall be deducted from the royalties due under the License Agreement provided however that such deductions shall not cause the royalties due under the License Agreement to be reduced by more than [***] .  (Note: This royalty reduction applies only to Third Party licenses required for the practice of Licensed IP; not for Third Party licenses as may be otherwise required for Product.)

 

·                                           GSK’s obligation to pay royalties under the License Agreement shall commence on the date of first commercial sale of the Product in the first country of the Territory and, shall continue until the later of:

 

·                                           10 years from first commercial sale in the U.S. or the E.U. or in a major market country (such term to be defined in the License Agreement, though in any case this

 

47



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

term shall be no shorter than at least 8 years from the first commercial sale in the U.S. or E.U.) of the Territory (and other than GAVI/UNICEF countries); or

 

·                                           If longer, with respect to Patented Products, in each country of the Territory, the last to expire of any licensed Patent falling within ARIDIS Patents, ARIDIS Arising IP and/or ARIDIS’ interest in Joint Arising IP.

 

(D)                                Net Sales

 

Net Sales shall be calculated on the gross receipts from sales of Product by GSK, sublicensees or their Affiliates in the Territory minus the following standard deductions:

 

·                                           [***] of the gross receipts (the purpose of this percentage is to cover transportation charges, including insurance charges, and other similar charges);

 

·                                           Sales and excise taxes, which shall include actual payment of contributions and payments required by any governmental authorities as liability provisions and/or made pursuant to injury compensation schemes and duties paid or allowed by a selling party and any other governmental charges imposed upon the production, importation, use or sale of Product where noted on customer invoices;

 

·                                           Trade, quantity and cash discounts actually taken and other GSK standard rebates actually paid, including without limitation rebates given to the federal government such as MEDICAID and federal supply schedule rebates; and

 

Allowances or credits to customers or charge backs from customers actually paid on account of rejection or return of Product subject to royalty under the License Agreement or on account of retroactive price reductions affecting such Product.

 

48



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

EXHIBIT D

 

PREVENTION OF CORRUPTION — THIRD PARTY GUIDELINES

 

The GSK Anti-Bribery and Corruption Policy (POL-GSK-007) requires compliance with the highest ethical standards and all anti-corruption laws applicable in the countries in which GSK (whether through a third party or otherwise) conducts business.  POL-GSK-007 requires all GSK employees and any third party acting for or on behalf of GSK to ensure that all dealings with third parties, both in the private and government sectors, are carried out in compliance with all relevant laws and regulations and with the standards of integrity required for all GSK business.  GSK values integrity and transparency and has zero tolerance for corrupt activities of any kind, whether committed by GSK employees, officers, or third-parties acting for or on behalf of the GSK.

 

Corrupt Payments — GSK employees and any third party acting for or on behalf of GSK, shall not, directly or indirectly, promise, authorise, ratify or offer to make or make any “payments” of “anything of value” (as defined in the glossary section) to any individual (or at the request of any individual) including a “government official” (as defined in the glossary section) for the improper purpose of influencing or inducing or as a reward for any act, omission or decision to secure an improper advantage or to improperly assist the company in obtaining or retaining business.

 

Government Officials — Although GSK’s policy prohibits payments by GSK or third parties acting for or on its behalf to any individual, private or public, as a “quid pro quo” for business, due to the existence of specific anticorruption laws in the countries where we operate, this policy is particularly applicable to “payments” of “anything of value” (as defined in the glossary section), or at the request of, “government officials” (as defined in the glossary section).

 

Facilitating Payments — For the avoidance of doubt, facilitating payments (otherwise known as “greasing payments” and defined as payments to an individual to secure or expedite the performance of a routine government action by government officials) are no exception to the general rule and therefore prohibited.

 

GLOSSARY

 

The terms defined herein should be construed broadly to give effect to the letter and spirit of the ABAC Policy.  GSK is committed to the highest ethical standards of business dealings and any acts that create the appearance of promising, offering, giving or authorizing payments prohibited by this policy will not be tolerated.

 

Anything of Value : this term includes cash or cash equivalents, gifts, services, employment offers, loans, travel expenses, entertainment, political contributions, charitable donations, subsidies, per diem payments, sponsorships, honoraria or provision of any other asset, even if nominal in value.

 

Payments : this term refers to and includes any direct or indirect offers to pay, promises to pay, authorizations of or payments of anything of value.

 

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Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

Government Official shall mean:

 

·                                           Any officer or employee of a government or any department, agency or instrument of a government;

 

·                                           Any person acting in an official capacity for or on behalf of a government or any department, agency, or instrument of a government;

 

·                                           Any officer or employee of a company or business owned in whole or part by a government;

 

·                                           Any officer or employee of a public international organization such as the World Bank or United Nations;

 

·                                           Any officer or employee of a political party or any person acting in an official capacity on behalf of a political party; and/or

 

·                                           Any candidate for political office.

 

50



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

EXHIBIT E

 

R&D POLICY PRINCIPLES

 

A.                                     Ethical Conduct Requirements

 

Ethical Conduct

 

The Parties are committed to the highest standards of conduct in all aspects of their respective businesses and to conduct their business with honesty and integrity, and in compliance with all applicable legal and regulatory requirements.

 

·                                           Always act with integrity and honesty and protect the Parties’ public image and reputation in relationships with customers, competitors, suppliers, business partners and staff

 

·                                           Promptly raise any concerns about possible unethical or illegal conduct

 

·                                           Be free from actual or potential conflicts of interest that might influence, or appear to influence their judgment or actions when performing duties on behalf of the Parties

 

·                                           The Parties’ reputation and the respect of those who deal with the Parties must not be put at risk by acceptance of any entertainment, gifts or favors intended or perceived by others to influence their business judgment

 

·                                           Communications with external audiences, i.e., Investors and the Media, should be managed through appointed company spokespersons to minimize risk to the Parties’ reputation

 

·                                           Provide accurate and reliable information in records submitted, safeguard the Company’s confidential information, and respect the confidential information of other parties with whom the Company does business or competes

 

Care and Ethical Treatment of Animals in Research

 

·                                           Animals should be used in research only when required by regulatory authorities or where there are no alternatives through adherence to the “3R” Principles—reducing the number of animals used, replacing animals with non-animal methods whenever possible and refining the research techniques used.  In addition, the Parties include two more R’s: Responsibility and Respect for animals involved in animal research.

 

·                                           The Parties believe in using the highest standards for the humane care and treatment of all animals used in research, development and testing, including adherence to the principles (listed below), and all applicable legal and regulatory requirements, with a default to which ever is more stringent.

 

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·                                           Access to species appropriate food and water

 

·                                           Access to species specific housing, including species appropriate temperature and humidity levels

 

·                                           Access to humane care and a program of veterinary care

 

·                                           Animal housing that minimizes the development of abnormal behaviors and allows for normal species specific behavior,

 

·                                           Adherence to principles of replacement, reduction and refinement in the design of in vivo studies

 

·                                           Study design reviewed by institutional ethical review panel

 

·                                           Commitment to minimizing pain and distress during in vivo studies

 

·                                           Work performed by appropriately trained staff

 

·                                           No Great Apes should be used for research

 

B.                                     Requirements for Engaging External Experts and Healthcare Professionals

 

Use of External Experts within R&D

 

The Parties believe that the engagement of external experts in R&D should be done in accordance with the following principles:

 

·                                           There must be a legitimate need for the services of the expert that cannot be fulfilled in-house, and the minimum number of experts needed should be used

 

·                                           Selection of experts should be based solely on the expert’s qualifications and expertise in the subject matter for which such expert is retained

 

·                                           The expert’s services must be documented in a written signed agreement

 

·                                           Compensation must be based on fair market value for the services provided

 

·                                           Reimbursement or pre-payment for costs associated with travel, lodging, meals and hospitality (i.e. refreshments, background music at meetings) for an expert are acceptable if permitted by all law for the location in which the services are rendered and are modest in value

 

·                                           Experts shall not receive any gifts of any value, especially where the expert is also a healthcare professional

 

52



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

·                                           Gift includes anything of value, regardless of amount, given to show friendship, appreciation, or support, including meals, entertainment or recreational activities (excludes fair market value for services rendered).

 

·                                           Healthcare Professionals includes, but is not limited to, physicians, their allied health professionals, and medical office staff This term also applies to pharmacists and employees of pharmacy benefit managers.

 

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Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

EXHIBIT F

 

MATERIAL TRANSFER RECORD

 

[ Aridis Pharmaceuticals LLC
(“[ Providing or Receiving] Party ”)

 

to

 

GlaxoSmithKline Biologicals SA

(“[ Receiving or Providing] Party ”)

 

The Material described below is supplied by the Providing Party to the Receiving Party subject to the terms and conditions of the Collaboration and Option Agreement between Aridis Pharmaceuticals LLC (“ Aridis ”) and GlaxoSmithKline Biologicals SA (“ GSK ”) dated as of the      day of              , 201    (“ Agreement ”).  Duplicate originals of this form shall be executed and one fully-executed form shall be given to the Providing Party and one to the Receiving Party.

 

Description of Material:

 

Quantity of Material provided to the Receiving Party:

 

Purpose of the transfer :

 

In signing below, the Receiving Party acknowledges that it understands and will abide by the terms and conditions under which the Material is provided.

 

Date of Material Sent/Provided to Receiving Party:

 

 

 

(Signature) Providing Party:

 

 

Name:

 

Date :

 

 

 

(Signature) Receiving Party:

 

 

Name:

 

Date:

 

 

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Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

Schedule 1.9: ARIDIS Materials

 

·                   Any specific excipients or material jointly agreed to be supplied by ARIDIS to GSK

 

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Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

Schedule 1.32: GSK Materials

 

·                             Rotavirus purified bulks: 3 different lots will be provided

·                             DMEM medium: different lots could be supplied as the shelf-life is about 1 month

·                             Specific excipients: for example: recombinant Human Serum Albumin

·                             Any specific excipients or material jointly agreed to be supplied by GSK to ARIDIS

 

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Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

Schedule 1.42: Joint Materials

 

·                   OTF containing rotavirus

·                   OTF corresponding placebo (non-containing Rotavirus)

·                   Liquid formulations corresponding to OTF containing Rotavirus

·                   Liquid formulations corresponding to OTF corresponding placebo (non-containing Rotavirus)

·                   Any formulation intermediates needed for the liquid formulations or OTF development

 

57




Exhibit 10.12

 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

CO-EXCLUSIVE LICENSE AGREEMENT
BETWEEN THE UNIVERSITY OF CHICAGO AND ARIDIS PHARMACEUTICAL FOR STAPH ALPHA TOXIN TECHNOLOGY

 

This License Agreement (“Agreement”), dated June 13, 2017 (the “Effective Date”), is between The University of Chicago, an Illinois not-for-profit corporation (“University”), and Aridis Pharmaceuticals, Inc., a Delaware Corporation, having an address at 5941 Optical Court, San Jose, CA (“Company”). Each hereunder may be referred to separately as the “Party”, or together as the “Parties”.

 

WHEREAS, University has certain Licensed Patents arising from the disclosure entitled, “Vaccine protection against Staphylococcus aureus pneumonia” regarding the work of Professors Juliane Bubeck Wardenburg and Olaf Schneewind, funded in part by the U.S. government;

 

WHEREAS, Company wishes to obtain a co-exclusive license under such Licensed Patents to diligently develop and commercialize Licensed Products; and

 

WHEREAS, University is willing to grant such rights in accordance with the terms and conditions of this Agreement to afford the public access to Licensed Products.

 

NOW, THEREFORE, for good and valuable consideration, the Parties agree as follows:

 

1.                                       Definitions

 

The capitalized terms listed below and used in this Agreement will have the following meanings:

 

A.                                     “Affiliate” means: (i) with respect to University, any corporation or other entity that directly or indirectly controls, is controlled by, or is under common control with, University where “control” means direct or indirect ownership of, or other beneficial interest in, fifty percent (50%) or more of the voting stock, other voting interest, or income of a corporation or other entity or the ability to direct the affairs of such other entity through contract rights or otherwise; and (ii) with respect to any entity other than University, any corporation or other entity that directly or indirectly controls, is controlled by, or is under common control with, another corporation or entity. Control means direct or indirect ownership of, or other beneficial interest in, fifty percent (50%) or more of the voting stock or other voting interest of a corporation or other entity.

 

B.                                     “BLA” means (i) a Biologics License Application filed with the FDA for marketing approval of a Licensed Product or any successor applications or procedures, and all supplements and amendments that may be filed with respect to the foregoing, and (ii) similar filings in the rest of the world with applicable regulatory authorities, including but not limited to the EMA.

 

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Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

C.                                     “Calendar Quarter” means each of the four, three-month periods ending on March 31 st , June 30 th , September 30 th , and December 31 st .

 

D.                                     “Commence” or “Commencement” means, with respect to any clinical trial, the first dosing of the first patient in such clinical trial.

 

E.                                      “EMA” means the European Medicines Agency or any successor agency thereto.

 

F.                                       “FDA” means the United States Food and Drug Administration or any successor agency thereto.

 

G.                                     “Field” means all fields of use in human patients.

 

H.                                    “First Commercial Sale” means the first sale, lease, provision of service, use, or transfer of a Licensed Product by a Licensed Entity to a non-Licensed Entity third party for human use for consideration.

 

I.                                         “Licensed Entity” means Company, an Affiliate of Company, or a Sublicensee.

 

J.                                         “Licensed Patents” means, to the extent owned and/or controlled by University, the patents and patent applications listed on Schedule A attached hereto, including all divisions, continuations, continuations-in-part, foreign counterparts, and any patents which may issue from such patent applications and any reexamination, reissues, substitutions, extensions of or to or supplementary protection certificates referencing any such patents or patent applications.

 

K.                                     “Licensed Product” means: (i) any product, device, system, article of manufacture, machine, composition of matter, process, or service (or component thereof); (ii) any method of using any of the foregoing; or (iii) any process for making any of the foregoing, that, in the case of (i), (ii), or (iii), is covered by a Valid Claim of the Licensed Patents.

 

L.                                      “NDA” means (i) a New Drug Application filed with the FDA for marketing approval of a Licensed Product or any successor applications or procedures, and all supplements and amendments that may be filed with respect to the foregoing, and (ii) similar filings in the rest of the world with applicable regulatory authorities.

 

M.                                  “Net Sales” means the gross amount actually received from third parties for sales, leases or other transfers, provision of service, or use of Licensed Products after deduction of all the following in accordance with generally recognized principles of accounting, in each case, solely to the extent documented to University as directly attributable to Licensed Products:

 

i.                                           customary trade, quantity, or cash discounts and rebates actually allowed and taken;

 

2



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

ii.                                        amounts repaid or credited to customers on account of rejections or returns;

 

iii.                                     sales tax or other governmental customs charges paid by or on behalf of a Licensed Entity; and

 

iv.                                    reasonable charges for delivery or transportation and insurance relating to such delivery or transportation provided by and paid by a Licensed Entity to a third party (excluding amounts reimbursed).

 

Net Sales also includes the fair market value of any non-cash consideration received by a Licensed Entity for the sales, leases, or other transfers or use of Licensed Products, or any right, title, or interest in Licensed Products. Fair market value will be calculated as of the time of transfer of such non-cash consideration to Licensed Entity. Transfer of a Licensed Product within or between Licensed Entities for sale by the transferee will not be considered a Net Sale for purposes of calculating Royalties. In such circumstances, the gross sales price and resulting Net Sales price will be based upon the sale of the Licensed Product by the transferee.

 

N.                                     “Non-Commercial Research Purposes” means academic research or other not-for-profit scholarly purposes which are undertaken at a non-profit or government institution and publishing in connection therewith.

 

O.                                     “Phase III Clinical Trial” means a human clinical trial, in any country, that would satisfy the requirements of 21 C.F.R.3 12.21(c).

 

P.                                       “Regulatory Approval” means, with respect to a Licensed Product in a particular jurisdiction, all approvals, licenses, registrations or authorizations necessary for the marketing and sales of such Licensed Product in the Field within such jurisdiction, including approval of a BLA, and approval of labeling and satisfaction of all applicable regulatory and notification requirements in such jurisdiction. For clarity, Regulatory Approval does not require pricing approval, no matter the applicable law.

 

Q.                                     “Royalty(ies)” means all amounts payable under Section 3.B of this Agreement.

 

R.                                     “Sublicense” means any agreement entered into by Company with any third party pursuant to which: (i) any right, title, or interest to the Licensed Patents is granted, including any rights to make, offer for sale, use, sell, or import Licensed Products; or (ii) Company covenants not to sue for the practice or use of any part of the Licensed Patents.

 

S.                                       “Sublicensee” means any person, company, or other entity granted a Sublicense by Company.

 

3



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

T.                                      “Territory” means worldwide.

 

U.                                     “Valid Claim” means an issued claim of any unexpired Licensed Patent or a claim of any pending Licensed Patent that has not been held unenforceable, unpatentable, or invalid by a decision of a court or governmental body of competent jurisdiction in a ruling that is unappealable or unappealed within the time allowed for appeal.

 

2.                                       Grant

 

A.                                     Grant .  Subject to and conditioned on Company’s and all other Licensed Entities’ continuing compliance with the terms and conditions of this Agreement, University hereby grants to Company and Company on behalf of itself and its Affiliates accepts a co-exclusive, royalty-bearing license under the Licensed Patents in the Field and Territory to make, have made, use, import, have sold, offer to sell and sell Licensed Products within the Field and within the Territory.

 

B.                                     Ongoing Obligations of Former Affiliates .  While an entity is entitled to the benefits of an Affiliate under this Agreement for only the period of time the entity qualifies as an Affiliate under the definition (in accordance with Section 7.C), all obligations under this Agreement that accrued to such entity while an Affiliate will survive until fulfilled even though the entity no longer qualifies as an Affiliate.

 

C.                                     Sublicense .  Subject to the terms and conditions of this Agreement and Company’s and Sublicensee’s compliance therewith, Company (but not an Affiliate) will have the right to grant Sublicenses. Company will only grant a Sublicense pursuant to a valid and binding written agreement that expressly states that such Sublicense is subject to, and the applicable Sublicensee must comply with, all the terms and conditions of this Agreement applicable to the Company (including the terms providing for termination of such Sublicense in the event this Agreement terminates and providing that University is a third-party beneficiary to such Sublicense); provided, that such Sublicensee may not grant further sublicenses or otherwise transfer such Sublicense, except to (i) have Licensed Products made, packaged and labeled by third party contractor(s) on behalf of the Sublicensee or its Affiliates and delivered to Sublicensee or its Affiliates for sale by Sublicensee or its Affiliates, (ii) have third party contractor(s) manage or assist in development of Licensed Products on behalf of Company, Affiliates or Sublicensees (such as clinical trial management) or (iii) distribute Licensed Products on behalf of Sublicensee or its Affiliates. In the event of any inconsistency between the Sublicense and this Agreement, this Agreement will control. Any Sublicense that does not comply with the terms and conditions of this Agreement is null and void ab initio. Company will provide University with a copy of each Sublicense and amendment thereof. Upon the termination of this Agreement, University will, upon the request of a Sublicensee in good standing,

 

4



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

offer for a period of ninety (90) days a license directly from University on the same terms as provided to Company herein to the extent of the field and territory as granted that sublicensee by Company. If no agreement is accepted within such ninety (90) day period, University will have no further obligation to such Sublicensee.

 

D.                                     Reservation of Rights .  University reserves the worldwide right to: (i) practice or have practiced, and to grant to third parties the right to practice or have practiced, the Licensed Patents, including tangible property embodying the same, for Non-Commercial Research Purposes; and (ii) permit its Affiliates (including the University of Chicago Medical Center (“UCMC”)), contractors, and consultants to do any of the activities set forth in (i) in connection with the operations of University and its Affiliates (including UCMC). For the avoidance of doubt, the rights retained by University include the right of University and its Affiliates to practice the Licensed Patents for their respective healthcare operations and patient care.

 

E.                                      Global Access .  After First Commercial Sale, Company and University will cooperate to provide Licensed Products to LDC(s) (as defined below in this Section 2.E), which cooperation may include, subject to reasonable commercial efforts, efforts to promote contracting with governmental or nongovernmental agencies (e.g., WHO or UNICEF) for the provision of Licensed Products into LDC(s).

 

If Company or its Licensed Entities provide Licensed Product into LDC(s) under arrangements providing such product at or below the cost of production and shipping, then University agrees to waive all Royalties and fees otherwise due under this Agreement solely with respect to Net Sales of such Licensed Product in such LDC(s).

 

If Company is not providing Licensed Product into LDC(s) for sale at or below the cost of production and shipping, and University determines in its reasonable discretion that licensing a Qualified Licensee (as such term is defined below in this Section 2.E) will provide improved access to Licensed Products in LDC(s) at or below the cost of production and shipping, then Company agrees that it shall Sublicense the Licensed Patents, in an agreement made jointly among University, Company, and the Qualified Licensee. Such Sublicense shall be without compensation or royalty for either Party, and shall be restricted to Humanitarian Purposes ( as described below in this Section 2.E).

 

“Qualified Licensee” means a third party that (i) has the means to develop, obtain Regulatory Approval for, and distribute Licensed Products into LDC(s); (ii) that agrees to exercise the Licensed Patents solely for Humanitarian Purposes only in LDC(s) to be designated by the Parties; and (iii) that agrees to provide all Licensed Products at or below its cost of production and shipping.

 

5



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

“LDC” means a country designated as a “Least Developed Country” by the United Nations Conference on Trade and Development as of the date of First Commercial Sale.

 

“Humanitarian Purposes” means (a) the use of Licensed Products for research and development purposes by any third party anywhere in the world that has the express and sole purpose of developing the products for use in an LDC, and (b) the provision and use of such Licensed Products in the Field in an LDC.

 

F.                                       U.S. Government Rights .  Company understands that this Agreement is subject to any rights of or obligations to the U.S. Government, including under 35 U.S.C. § 200 et seq., 37 C.F.R. § 401 et seq. (“Bayh-Dole Act”), or any other applicable law or regulation, including but not limited to the grant to the U.S. Government of a nonexclusive, nontransferable, irrevocable, paid-up license to practice or have practiced any Subject Invention (as defined in the Bayh-Dole Act) for or on behalf of the U.S. Government throughout the world. Company agrees to comply and permit University to comply with the Bayh-Dole Act, including to provide the reporting required and to substantially manufacture Subject Inventions and products produced through the use of Subject Inventions in the United States (to the extent required by such laws), unless waived. University will cooperate with Company in its efforts to obtain any required waiver, subject to Company reimbursement of any out of pocket expenses.

 

G.                                     No Other Rights .  No rights in and to the Licensed Patents other than those provided in this Section 2, express or implied, are conveyed by University. No rights to any patents except those included in the Licensed Patents are conveyed by University. Nothing contained in this Agreement or a party’s performance hereunder will be construed as conferring, by implication, estoppel or otherwise, upon any Licensed Entity, any party in privity with any Licensed Entity, or any customer of any of the foregoing, any right, title or interest under any intellectual or tangible property right at any time, except for those rights expressly granted in this Agreement.

 

H.                                    Responsibility for Licensed Entities .  Any act or omission taken or made by a Licensed Entity will be deemed an act or omission by Company under this Agreement. Any act, error, or omission of a Licensed Entity that would be a breach of this Agreement if done by Company will be deemed to be a breach of this Agreement by Company. In the event that any Licensed Entity does any act, error, or omission that would be a breach of this Agreement if done by Company, Company will promptly notify University thereof.

 

I.                                         Coexclusivity .  Subject to the reservations in Sections 2.D, 2.E and 2.F above, University hereby agrees, during the term of this Agreement, to grant further licenses under the Licensed Patents solely to a single third party in the Field (referred to as the “Co-Licensee” in this Section 2.1), which potential Co-Licensee

 

6



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

has been identified by University, and for which license discussions or negotiations have been initiated. After the effective date of a license agreement with the Co-Licensee, the potential Co-Licensee shall be identified to Company; University shall also confirm that the license with that party has been completed, when such occurs. With respect to its license to a Co-Licensee, University agrees: (i) the license shall be to a single third party and its Affiliates; (ii) if the license has not been executed by the parties by December 31, 2018 it will so notify Company in writing, and Company shall have the option, within thirty (30) days after such notification, to convert this Agreement to an exclusive license by making a one-time payment of [***] and adjusting the Royalty of Section 3.B to [***] ; (iii) the license shall not conflict with or limit any of the rights granted to Company herein; (iv) the license may only permit sublicensing in conjunction with grants of rights to Licensed Products created and developed by the Co-Licensee, and shall not permit sublicensing of Licensed Patents for the purpose of the independent development of product by any sublicensee; and (v) the Co-Licensee shall pay a pro rata (one half) share of all Patent Costs noted under Section 6, including all expenses incurred by University prior to the effective date of that license. To the extent Company has paid for Patent Costs under Section 6, and University later receives a pro rata share of such Patent Costs from Co-Licensee, Company shall receive a payment equal to the amount of the pro rata share provided by the Co-Licensee.

 

3.                                       Payments

 

A.                                     Upfront Payment .  Company will pay University concurrently with execution of this Agreement the sum of [***] .

 

B.                                     Royalties .  Company will pay to University [***] (unless adjusted to [***] subject to Section 2.1) of Net Sales by Licensed Entities of Licensed Products in countries in which the Licensed Patents include a Valid Claim. Royalties due under this Section 3.B will be payable on a country-by-country and Licensed Product-by-Licensed Product basis until the expiration of the last-to-expire of the Licensed Patents covering such Licensed Product in such country.

 

C.                                     License Maintenance Fees .  Company will pay to University a fee of [***] per calendar year until the year in which a First Commercial Sale occurs. Such fee will be due on December 31’ of each year in which the fee is owed, starting in 2017.

 

D.                                     Minimum Royalties .  Beginning with the year in which a First Commercial Sale occurs, Company will pay to University a minimum royalty in each calendar year. The minimum royalties shall be as follows:

 

i.                                           in the year of First Commercial Sale: [***] ;

 

7



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

ii.                                        in the first year following: [***] ;

 

iii.                                     in the second year following: [***] ;

 

iv.                                    in the fourth year following: [***] ;

 

v.                                       in each year thereafter during this Agreement: [***] .

 

Such minimum royalties will be due for each year or part thereof during which this Agreement is in effect, against which any Royalty paid for the same calendar year will be credited. The minimum royalty for a given year will be due at the time payments are due for the last Calendar Quarter of such year; provided, that, upon termination or expiration of this Agreement, any minimum royalties owed will be due within thirty (30) days of such termination or expiration. It is understood that the minimum royalties will apply on a calendar year basis, and that sales of Licensed Products requiring the payment of Royalties made during a prior or subsequent calendar year will have no effect on the annual minimum royalty due University for any other given calendar year. In the event that this Agreement is in effect for only a portion of any calendar year, the minimum royalty payments set forth in this Section 3.D will be prorated for such portion.

 

E.                                      Milestone Payments .  Company will immediately notify University when each of the following events are accomplished regarding each Licensed Product by a Licensed Entity and will pay to University the following amounts:

 

i.                                           [***] upon Commencement of a Phase III Clinical Trial for a Licensed Product, which sum is nonrefundable and noncreditable against Royalties.

 

ii.                                        [***] upon Regulatory Approval in U.S. or Europe for a Licensed Product, which sum is nonrefundable and noncreditable against Royalties.

 

iii.                                     [***] upon First Commercial Sale in the U.S., which sum is nonrefundable and noncreditable against Royalties.

 

iv.                                    [***] upon First Commercial Sale in any country of the European Union, China, Japan or South Korea, which sum is nonrefundable and noncreditable against Royalties.

 

v.                                       [***] upon Regulatory Approval of a new indication for a Licensed Product, which sum is nonrefundable and noncreditable against Royalties.

 

The payments described in 3.E.i-iv shall be payable only on the first occurrence of the event on a Licensed Product-by-Licensed Product basis. The payment described in 3.E.v shall only be paid the first four (4) times a Licensed Product receives Regulatory Approval for a new indication (for the avoidance of doubt, “new indication” is not intended to capture minor label change approvals such as

 

8



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

dosing or patient age ranges, provided, however, that the first pediatric indication (as defined by the FDA) of a given Licensed Product will be considered a new indication).

 

F.                                       Payment and Reporting .

 

i.                                           Company will pay Royalties owing to University on a quarterly basis, with such amounts due and received by University on or before the sixtieth (60 th ) day following the end of the Calendar Quarter in which such amounts were earned.

 

ii.                                        Except as otherwise directed, Company will pay all amounts owing to University under this Agreement in U.S. dollars to University at the address provided in Section 9.D or paid via wire transfer, if agreed upon. Any necessary conversion of currency into United States dollars will be at the applicable rate of exchange of Citibank, N.A. (or its successor), in New York, New York, on the last day of the Calendar Quarter in which such transaction occurred. University is exempt from paying income taxes under U.S. law. Therefore, Company will make all payments due under this Agreement without deduction for taxes, assessments, or other charges of any kind which may be imposed on University by any government outside of the United States or any political subdivision of such government with respect to any amounts payable to University pursuant to this Agreement. Company or the applicable Licensed Entity will assume all such taxes, assessments, or other charges that may reduce University’s net royalties, such as bank transfer fees.

 

iii.                                     Company will submit to University a full accounting showing how any amounts owing to University under Section 3 have been calculated along with each such payment therefore. For Royalties, such accounting will be on a per country and product line, model, or tradename basis and will be summarized on the form shown in Schedule B of this Agreement. In the event no payment is owed to University, within sixty (60) days after the end of each Calendar Quarter, Company will provide to University a statement setting forth that fact.

 

iv.                                    Regardless of the circumstances, no payment made to University is refundable and only Royalty payments are creditable toward the minimum royalty as set forth in Section 3.D.

 

G.                                     Sublicense Revenue .  Company will pay to University [***] of all compensation received in any form by Company attributable to a grant of sublicense of any of the rights granted to Company hereunder, excluding any consideration included within or based on Net Sales or earned royalties on Licensed Products. Payments will be made within sixty (60) days of the end of the Calendar Quarter in which

 

9


 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

such payments were received and an accounting shall be made with the Calendar Quarter accounting for that period. For the purpose of this Section 3.G, the term “compensation” includes all fees, minimum royalties, milestone payments, option fees and other payments or consideration of any kind received by Company or its Affiliates including without limitation in-kind payments, equity amounts taken by Company in lieu of cash, or discounts below fair market value of an equity purchase by Company.

 

H.                                    Overdue Payments .  Any payments by Company that are not received by University on or before the date such payments are due under this Agreement will accrue interest at the lesser of: (i) two percent above the prime rate in effect as reported by the Wall Street Journal on the due date; and (ii) the maximum rate allowed by law. Interest will accrue beginning on the first day following the due date for payment and will be compounded monthly. Payment of such interest by Company will not limit, in any way, University’s right to exercise any other remedies University may have as a consequence of the lateness of any payment. Company will be responsible for all costs of collection incurred by University including attorney’s fees and court costs.

 

I.                                         Extension of Reporting and Payment Due Dates .  With respect to all payments and reporting required in this Section 3, the due dates shall be extended from the 60 th  day to the 90 th  day following the end of the Calendar Quarter, provided that Company demonstrates to University’s reasonable satisfaction that such extension is necessary in order to provide for the receipt of accountings, reports, and payments from Affiliates and Sublicensees.

 

J.                                         Royalty Forecasts .  After the commencement of Royalty payments hereunder, Company shall meet by teleconference at University’s request, up to once per year, in order to discuss potential Licensed Product markets and potential Royalty payments. No royalty or payment forecasting shall be binding upon Company.

 

4.                                       Diligence

 

A.                                     Development Obligations .  Company will diligently develop and bring Licensed Products to market. Company will use best commercially reasonable efforts to meet the development obligations for commercialization of the invention(s) claimed in the Licensed Patents in the form of Licensed Products in accordance with Schedule C attached hereto.

 

B.                                     Development Plan .  Simultaneously with the execution of this Agreement, Company will provide University with a detailed development plan for the commercialization of one or more Licensed Products. Such plan will include research and development plans (including proposed expenses for such activities), estimated timetables for achieving milestones and necessary government or regulatory approvals, market research information on competitors and market

 

10



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

size, and sales and marketing plans for the twelve (12) months following the Effective Date as well as an estimated timetable for achieving milestones and Company’s strategic development plans for the following two years. Company will revise the development plan on an annual basis and provide University with such revised plan within ninety (90) days of June 30 th , concurrent with the progress report due under Section S.B. Upon request, Company will meet with University in a timely manner to review any such development plan. Company will perform in substantial compliance with the then-current development plan.

 

C.                                     Promotion and Marketing .  Company will use best commercially reasonable efforts (and in no event less effort or relative expense than the level of resources and talent as is customary for other products with similar market potential) to promote, advertise, and sell the Licensed Products.

 

D.                                     Failure to Commercialize .  If there is a delay in achieving a development objective set forth in a development plan subject to section 4.B, then Company may nonetheless establish that it is using best commercially reasonable efforts if Company submits to University evidence:

 

i.                                           that such delay is due to one or more of (a) government legislation or rules, (b) decisions or actions by regulatory entities with authority relating to the development, manufacture or commercialization of Licensed Products or (c) negative scientific or clinical developments or outcomes; or

 

ii.                                        that the total expenditures by Licensed Entities to develop or market Licensed Products are at least [***] in any calendar year after the Effective Date; or

 

iii.                                     such other demonstration of best commercially reasonable efforts as the parties may agree in good faith.

 

5.                                       Records and Review

 

A.                                     Full and Accurate Records .  University may from time to time and at any reasonable time, not exceeding once every twelve (12) months, through auditors as University may designate, inspect and copy the books and records of any Licensed Entity in order to verify the payments due hereunder, the accuracy of any reported statement by Company, or of any other obligation under this Agreement. Company will keep, and will cause each other Licensed Entity to keep, continuous, full and accurate books and records in sufficient detail so that Company’s compliance with its obligations under this Agreement can be properly determined without undue delay or difficulty. Such books and records will be maintained for at least five (5) years after the activity or Royalty reporting period(s) to which they relate. Books and records will include any records

 

11



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

reasonable required for University to confirm the accuracy of payments and satisfaction of any other obligations under this Agreement. Company will, and will cause all other Licensed Entities to, comply with this Section 5.A.

 

Such inspection will be made at the expense of University, unless such examination discloses a discrepancy of five percent (5%) or more in the amount of payments due University. In such case Company will be responsible for reimbursing University for the examination fee and expenses charged by the auditor along with the underpayment. Any underpayment will bear interest as described in Section 3.H. Company will pay past due payments for any error, including any payment deficiency for periods prior to the period under inspection, within sixty (60) days of written notice thereof. University and the auditor will maintain in confidence such inspection and the resulting report. The auditor may from time to time consult University and any of its employees or third party counsel on questions as they relate to this Agreement. The auditor may not disclose financial or proprietary information except as required to conduct the inspection, to report and substantiate the results, as otherwise permitted by this Agreement, or if the information is already publicly known. Neither Party is required to enter into any separate confidentiality, non-disclosure, or similar agreement in connection with any such inspection.

 

B.                                     Progress Reports .  Within sixty (60) days of each December 31s t  during the term of this Agreement, Company will deliver a written report to University in substantially the form of Schedule D attached hereto. The report will describe the progress of Company toward achieving the goals of the development plan and bringing Licensed Products to market (and any proposed revisions to the plan developed during the preceding twelve months). Company will promptly notify University in writing upon the First Commercial Sale of each Licensed Product and when Company’s obligation to begin making Royalty payments begins. Upon the First Commercial Sale of each Licensed Product, Company will provide in writing to University the following information: the date of First Commercial Sale, the generic name, and the tradename of each commercial product.

 

6.                                       Patents

 

A.                                     Prosecution, Defense and Maintenance .  University will control the preparation, filing, prosecution, defense (including oppositions, post-grant proceedings and declaratory judgment actions), maintenance and abandonment of the Licensed Patents. Company will cooperate, and cause each other Licensed Entity to cooperate, with University in a timely manner in the preparation, filing, prosecution and maintenance of the Licensed Patents by disclosing such information as may be requested by University and by promptly executing such documents as University may reasonably request in connection therewith. Company will, and will cause each other Licensed Entity to, bear its own costs in connection with their cooperation with University under this Section 6.A.

 

12



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

University will provide, or will have its legal counsel provide, Company copies of all documents received or prepared by University in the filing, prosecution and maintenance of the Licensed Patents, including all copies of any communications to or from the United States Patent and Trademark Office or any foreign equivalent, with reasonable time to allow for review and comment by Company, and University shall give due consideration to the comments and requests of Company and its patent counsel in all such matters.

 

B.                                     Patent Costs .  Company will pay a pro rata share (with respect to the number of licensees of the Licensed Patents; i.e., [***] [no Co-Licensee] or [***] [one Co-Licensee]) of all necessary and reasonable fees and expenses incurred by University relating to the Licensed Patents and Licensed Products, including for the preparation, filing, prosecution, defense and maintenance of the Licensed Patents (“Patent Costs”).

 

i.                                           Company will pay a pro rata share of all unreimbursed Patent Costs incurred by University prior to the Effective Date. For the purpose of clarity, as of May 17, 2017, previously incurred, unreimbursed costs are approximately [***] . University shall confirm the amount of unreimbursed Patent Costs as of the Effective Date with appropriate documentation thereto, and Company shall reimburse such amounts in three (3) equal payments, the first payment due thirty (30) days after the Effective Date, and the second and third payments due three (3) and six (6) months after the first, respectively.

 

ii.                                        Payment for fees and expenses incurred by University on or after the Effective Date will be invoiced to Company and Company will pay such invoices within thirty (30) days of the date on the invoice.

 

iii.                                     Upon request by University, Company will make timely estimated advanced payments for the filing of applications. University will specify the amount of any such advanced payments on an invoice provided to Company. Company will pay all advance payments of Patent Costs to University on or before the date specified by University on the invoice. Invoices for advanced payments will be reconciled with the advance payments made by Company every six (6) months. Any excess payment by Company will be credited to future Patent Costs specified in this Section 6.B.

 

iv.                                    If Company decides to discontinue its support of Patent Costs for a specific Licensed Patent(s), Company will notify University in writing one-hundred and eighty (180) days prior to any such discontinuation. Company will be responsible for reimbursing University for any Patent Costs associated with such Licensed Patent(s) that University incurs up to one-hundred and eighty (180) days after the date of the receipt of notice,

 

13



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

whether or not such costs were invoiced to University during such period. After such period, such Licensed Patent(s) shall no longer be included in the definition of Licensed Patents herein.

 

v.                                       It is not expected that University shall discontinue prosecution or maintenance of any Licensed Patent or claim therein which for which Company reasonably desires that support continue (and for which it provides expense reimbursement as provided herein). If such discontinuance is required by University for any reason, it shall provide sufficient advance notice (and no less than 90 days’ notice) to Company, and shall cooperate with Company in order to maximize the protection of Company’s rights and its investment in the Licensed Patents herein, which may include allowing Company to take over such prosecution or maintenance, if needed, and providing such reasonable assistance (subject to reimbursement by Company for out of pocket expenses) as may be necessary to effect such transfer.

 

C.                                     Challenges .  During the term of this Agreement Company shall not bring, nor cause to be brought, an action or proceeding seeking a declaration or ruling that any claim of the Licensed Patents is invalid or unenforceable.

 

D.                                     Infringement .

 

i.                                           Notice .  In the event either Party becomes aware of any possible or actual infringement, misappropriation, or other violation of any Licensed Patents in the Field in the Territory (an “Infringement”), that Party will promptly notify the other Party and provide it with details regarding such Infringement.

 

ii.                                        Company’s Right to Bring Infringement Action .  Company will have the first right, but not the obligation, to take action in the prosecution, prevention, or termination of any infringement in the Field. Before Company commences an action with respect to any infringement, Company will consider in good faith the views of University and potential effects on the public interest in making its decision whether to sue. In the event that a third party has received a license to the Licensed Patents, University will notify Company regarding the existence of such license in confidence, and Company will consult with the third party before commencing an action with respect to any infringement. Company will keep University reasonably informed of the progress of the prosecution, prevention and/or termination of actions and will give University a reasonable opportunity in advance to consult with Company and offer its views about major decisions. Company will give careful consideration to those views, but will have the right to control the action regarding infringement; provided, however, that if Company fails to defend in good

 

14



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

faith the validity and/or enforceability of the Licensed Patents in the action, or if Company’s license to a Valid Claim in the suit terminates, then University may elect, but shall not be obligated, to take control of the action and any recovery will be apportioned in the same manner as an action initiated by University pursuant to Section 6.D.iii. Any and all expenses, including reasonable attorneys’ fees for counsel selected by University, incurred by University with respect to the prosecution, prevention, termination, adjudication and/or settlement regarding a Licensed Patent initiated by Company, including any related appeals, will be paid for entirely by Company and Company will hold University free, clear and harmless from and against any and all such expenses. Company will not compromise or settle any action without the prior written consent of University, which consent will not be unreasonably withheld or delayed. In the event Company controls the action pursuant to this Section 6.D.ii, it will first reimburse itself from any sums recovered in such suit or in settlement thereof for all out-of-pocket and documented costs and expenses, including reasonable attorneys’ fees, necessarily incurred in the prosecution of any such suit. If, after such reimbursement, any funds remain, then University will receive an amount equal to twenty percent (20%) of such funds and the remaining eighty percent (80%) of such funds will be retained by Company.

 

iii.                                     University’s Right to Bring Infringement Action .  If Company does not take action in the prosecution, prevention, or termination of any Infringement pursuant to Section 6.D.ii above, and has not commenced negotiations with the infringer for the discontinuance of said Infringement within ninety (90) days after it becomes aware of such Infringement or, at any time thereafter, ceases to diligently continue such prosecution, prevention, or termination, University may elect, but is not obligated, to do so. Should University elect to bring suit against an infringer, Company will cooperate fully with University, including joining as party plaintiff in any such suit if requested by University. In the event University controls the action pursuant to this Section 6.D.iii, it will first reimburse itself from any sums recovered in such suit or in settlement thereof for all out-of-pocket and documented costs and expenses, including reasonable attorneys’ fees, necessarily incurred in the prosecution of any such suit. If, after such reimbursement, any funds remain, then Company will receive an amount equal to twenty percent (20%) of such funds and the remaining eighty percent (80%) of such funds will be retained by University. No settlement or other disposition of any Infringement may include any grant of rights by University that would be inconsistent with the grant of exclusive or co-exclusive rights granted to Company under this Agreement.

 

15



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

iv.                                    Own Counsel .  Each Party will always have the right to be represented by counsel of its own selection and at its own expense in any suit instituted by the other Party under this Section 6.D.

 

v.                                       Cooperation .  Each Party will cooperate fully in any action under this Section 6.D that is controlled by the other Party, provided that the controlling Party reimburses the cooperating Party promptly for any costs and expenses incurred by the cooperating Party in connection with providing such assistance.

 

vi.                                    Declaratory Judgement .  If a declaratory judgment action is brought naming any Licensed Entity as a defendant and alleging invalidity or unenforceability of any claims within the Licensed Patents, Company will promptly notify University in writing and University will have the right to control such action pursuant to Section 6.A.

 

7.                                       Term and Termination

 

A.                                     Term .  This Agreement and the rights and licenses hereunder will take effect on the Effective Date and will expire on the expiration date of the last to expire of the Licensed Patents.

 

B.                                     University’s Right to Terminate .  Without limiting other rights, University will have the right to terminate this Agreement as follows, in addition to all other available remedies:

 

i.                                           If Company fails to make any payment when due, this Agreement will terminate effective thirty (30) days after University’s written notice to Company describing such failure, unless Company makes such payment within such thirty (30) days.

 

ii.                                        If Company or any other Licensed Entity breaches any material obligation of this Agreement (including obligations of diligence under Section 4) other than an obligation to make a payment when due, this Agreement will terminate in its entirety, or with respect to such Licensed Entity, as specified by University, effective ninety (90) days after University’s written notice to Company describing such failure, unless Company or such Licensed Entity cures such failure to the reasonable satisfaction of University within such thirty (30) days.

 

iii.                                     If Company files, or has filed against it, a petition under any bankruptcy or insolvency law, Company will immediately notify University. If such petition is not dismissed within one hundred eighty (180) days of filing thereof, or if Company makes an assignment of all or substantially all of its assets for the benefit of its creditors, then, unless prohibited by

 

16



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

applicable law, this Agreement will automatically terminate at the end of such one hundred eighty (180) day period with respect to Company unless University provides written notice to Company within such one hundred eighty (180) day period.

 

iv.                                    If Company or any other Licensed Entity will be dissolved, liquidated or otherwise ceases to exist, other than for reasons specified in Section 7.B.iii, unless prohibited by applicable law, this Agreement will automatically terminate with respect to Company or such Licensed Entity as of: (a) the date articles of dissolution or a similar document is filed and finally accepted on behalf of Company or such Licensed Entity with the appropriate governmental authority; or (b) the date of establishment of a liquidating trust or other arrangement for the winding up of the affairs of Company or such Licensed Entity.

 

If Company, prior to the fifth (5 th ) anniversary of the Effective Date of this Agreement, has failed to Commence a Phase III Clinical Trial for at least one Licensed Product, University may terminate this Agreement at any time thereafter on written notice to Company.

 

C.                                     Termination and Affiliates .

 

i.                                           For the avoidance of doubt, if this Agreement expires or terminates for any reason, the rights and licenses granted to Company’s Affiliates hereunder will expire or terminate to the same extent as such rights and licenses expire or terminate with respect to Company.

 

ii.                                        In the event that any entity ceases to be an Affiliate of Licensee, whether as the result of a sale, merger, corporate reorganization, or otherwise, the licenses granted to such entity pursuant to Section 2.A shall automatically and immediately terminate. This shall not, however, preclude Company from sublicensing such entities in accordance with this Agreement.

 

D.                                     Company’s Right to Terminate .  In the event Company desires to terminate this Agreement, Company will provide written notice to University thereof and this Agreement shall terminate at the end of ninety (90) days following the date of such notice.

 

E.                                      Survival .  The rights and obligations accruing prior to any termination or expiration of this Agreement for any reason will survive, including: (i) all causes of action accruing to either Party under this Agreement; (ii) Company’s obligation to pay amounts payable under this Agreement accrued prior to the date of termination or expiration, including Royalties and Patent Costs; (iii) Company’s obligation to report Net Sales and keep records, as required by Sections 3.F and 5; (iv) University’s right to audit under Section 5.A; (v) any obligation to abate an

 

17



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

Infringement that arose prior to the date of termination or expiration under Section 6; and (vi) Sections 5 (records and review), 7.E (survival), 7.F (post-termination obligations of Company), 8 (representations and warranties), and 9 (miscellaneous) of this Agreement and Schedule C until their purposes are fulfilled.

 

F.                                       Post Termination, Post Expiration Obligations of Company .  Upon the termination of this Agreement for any reason, all rights of Company to use the Licensed Patent(s) will immediately thereafter cease and revert to University and Company will not practice the Licensed Patents. Except to the extent set forth in Section 7.E, any other rights conferred to Company by this Agreement will also immediately thereafter cease. Company will not thereafter operate or conduct business in any manner that might tend to create the impression that this Agreement is still in force, or that Company has any right to use any one or more of Licensed Patents. Upon termination, all payments including fees and costs due under this Agreement and not yet paid will become immediately due and payable.

 

8.                                       Representations, Warranties, Disclaimers; Indemnification; Insurance; Primary Responsibility

 

A.                                     Representations, Warranties and Covenants of Company .  Company hereby represents, warrants and covenants that:

 

i.                                           Company is a corporation duly organized, validly existing and in good standing under the laws of Delaware, has the corporate power and authority to execute and deliver this Agreement, including on behalf of its Affiliates, and perform all obligations under this Agreement.

 

ii.                                        The execution, delivery and performance have been duly and validly authorized by Company, and upon execution and delivery by Company, this Agreement will constitute a valid, enforceable and binding agreement of Company and of its Affiliates.

 

iii.                                     Company has no other agreements that conflict with the obligations undertaken and rights and licenses granted in this Agreement.

 

iv.                                    Company will comply and require all other Licensed Entities to comply with applicable laws, including to ensure that any manufacture of Licensed Product(s) by a Licensed Entity, and/or its respective vendor(s), suppliers agents or contractors, will comply with and conform with applicable law and to all applicable specifications required by any regulatory body and/or market approval granted.

 

v.                                       Company will make all payments to University as and when required by this Agreement.

 

18



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

B.                                     Disclaimer of Warranties .  THE LICENSED PATENTS ARE PROVIDED AS IS AND WHERE IS. UNIVERSITY MAKES NO REPRESENTATIONS OR WARRANTIES OF ANY KIND, WHETHER EXPRESS, STATUTORY, IMPLIED OR OTHERWISE. IN PARTICULAR, UNIVERSITY DISCLAIMS ALL REPRESENTATIONS AND WARRANTIES, INCLUDING ABOUT (I) THE VALIDITY, SCOPE OR ENFORCEABILITY OF ANY OF THE LICENSED PATENTS; (II) THE ACCURACY, SAFETY OR USEFULNESS FOR ANY PURPOSE OF ANY INFORMATION PROVIDED BY UNIVERSITY TO ANY LICENSED ENTITY; (III) WHETHER THE PRACTICE OF ANY CLAIM CONTAINED IN ANY OF THE LICENSED PATENTS WILL OR MIGHT INFRINGE INTELLECTUAL PROPERTY RIGHTS ; (IV) THE PATENTABILITY OF ANY INVENTION CLAIMED IN THE LICENSED PATENTS; (V) THE ACCURACY, SAFETY, OR USEFULNESS FOR ANY PURPOSE OF ANY PRODUCT OR PROCESS MADE OR CARRIED OUT IN ACCORDANCE WITH OR THROUGH THE USE OF THE LICENSED PATENTS; AND (VII) ANY IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.

 

C.                                     Indemnification .  Company agrees, and will cause each other Licensed Entity, to indemnify, defend and hold harmless University, its Affiliates and the trustees, directors, officers, students, employees, fellows and agents of any of the foregoing (collectively the “Indemnified Persons”) from and against any and all claims, demands, liabilities, losses, damages, penalties, costs and/or expense (including attorneys’ and witnesses’ fees and court costs) of any kind or nature, based upon, arising out of, or otherwise relating to this Agreement and/or a Sublicense, including without limitation (i) any claim arising from the development, production, use, sale, export, import or other disposition of any Licensed Product and all activities associated therewith, or (ii) any use of information provided by University to any Licensed Entity. Company agrees, and will cause each other Licensed Entity to agree, not to sue any Indemnified Person in connection with the development, production, use, sale or other disposition of Licensed Products and all activities associated therewith. University will be entitled to participate at its option and expense through counsel of its own selection, and may join in any legal actions related to any such claims, demands, losses, damages, costs, expenses and penalties. No Licensed Entity will enter into any settlement affecting any rights or obligations of any Indemnified Person or which includes an express or implied admission of liability, negligence or wrongdoing by any Indemnified Person, without the prior written consent of such Indemnified Person.

 

D.                                     Assumption of Risk .  The entire risk as to the performance, safety and efficacy of any subject matter claimed in any Licensed Patent and of any Licensed Product is assumed by the Company on behalf of the Licensed Entities.

 

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Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THIS AGREEMENT, UNIVERSITY WILL NOT BE LIABLE TO ANY LICENSED ENTITY OR ANY OTHER PERSON OR ENTITY FOR INDIRECT, INCIDENTAL, SPECIAL, CONSEQUENTIAL, EXEMPLARY, PUNITIVE OR ANY OTHER DAMAGES OR LOSSES OF ANY KIND OR NATURE, WHETHER IN CONTRACT, TORT (INCLUDING NEGLIGENCE), PRODUCTS OR STRICT LIABILITY OR ANY OTHER FORM OF ACTION; AND IN NO EVENT WILL UNIVERSITY’S TOTAL AGGREGATE LIABILITY UNDER OR IN CONNECTION WITH THIS AGREEMENT TO ALL LICENSED ENTITIES AND OTHER PERSONS AND ENTITIES EXCEED THE TOTAL AMOUNTS PAID BY COMPANY TO UNIVERSITY HEREUNDER. The above limitations on liability apply even though the Indemnified Person may have been advised of the possibility of such injury, loss or damage. Company will not, and will cause all other Licensed Entities not to, make any agreements, statements, representations or warranties or accept any liabilities or responsibilities whatsoever with regard to any person or entity which are inconsistent with this Section 8.D.

 

E.                                      Insurance .  Company agrees, and will cause each other Licensed Entity to agree to continuously maintain during the term of this Agreement and beyond liability insurance that will cover its obligations hereunder, including any claims for bodily injury, property, or other damage alleged to relate to Licensed Products or activities undertaken in connection with this Agreement, Licensed Patents, or Licensed Products, including the development, manufacture, use, sale or other disposition of Licensed Products and all activities associated therewith. Each Licensed Entity will list University and its Affiliates, at such Licensed Entity’s expense, as additional named insureds under each liability insurance policy (including excess or umbrella liability policies) that such Licensed Entity has or will obtain, that includes any coverage of claims relating to Licensed Products. Such insurance will be primary and noncontributory to any insurance University and its Affiliates may have. At University’s request, Company will supply University from time to time with copies of each such policy, and will notify University in writing at least thirty (30) days prior to any termination of or change in coverage under any such policies.

 

9.                                       Miscellaneous

 

A.                                     Marking .  Company will mark all Licensed Products (or their packaging, as appropriate) sold, offered for sale, imported, or otherwise disposed of in such a manner not inconsistent with the requirements of the patent laws and practices of the country to which such products are shipped or in which such products are manufactured or sold, including, if in the U.S., 35 U.S.C. § 287.

 

B.                                     Export Regulations .  Without limiting Section 8.A, Company will comply with United States export control and asset control laws, regulations, and orders, as

 

20



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

they may be amended from time to time, applicable to the export, re-export, or import of goods or services, including software, processes, or technical data to foreign countries. Such regulations include but are not limited to the International Traffic in Arms Regulations (22 C.F.R. § 120 et seq.), the Export Administration Regulations (15 C.F.R. § 730 et seq.), the regulations administered by the Treasury Department’s Office of Foreign Assets Control (31 C.F.R. § 500 et seq.), and the Anti-Boycott Regulations (15 C.F.R. § 760).

 

C.                                     Entire Agreement, Amendment .  This Agreement together with the schedules attached hereto constitutes the entire agreement between the Parties regarding the subject matter hereof, and supersedes all prior written or oral agreements or understandings (express or implied) between them concerning the same subject matter. In entering into this Agreement, no Party has relied upon another person’s statement, representation, warranty or agreement except for those expressly contained in this Agreement. The only conditions precedent to this Agreement’s effectiveness are those expressly stated in it. This Agreement cannot be amended or modified except in a document signed by duly authorized representatives of each Party.

 

D.                                     Notice .  Any notice required or otherwise made under this Agreement               be in writing, sent by registered or certified mail properly addressed, or by facsimile with confirmed answer-back, to the other Party at the address set forth below or at such other address as may be designated by written notice to the other Party. Notice will be deemed effective three (3) business days following the date of sending such notice if by mail, on the day following deposit with an overnight courier, if sent by overnight courier, or upon confirmed answer-back if by facsimile.

 

If to University:

Technology Commercialization and Licensing

 

Polsky Center for Entrepreneurship and Innovation

 

The University of Chicago

 

1452 E 53rd St, 2 nd  floor

 

Chicago, Illinois 60615

 

 

 

Attention: Director

 

 

If to Company:

Aridis Pharmaceuticals

 

5941 Optical Court

 

San Jose, CA 95138

 

 

 

Attn: Office of the CEO

 

E.                                      Assignment .  This Agreement will be binding on the Parties and upon their respective successors and assigns and inure to the benefit of the Parties and their

 

21



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

respective permitted successors and assigns. Company may at any time, upon written notice to University, assign or transfer this Agreement to a successor to all or substantially all of its business pertaining to this Agreement. Any such assignment will be conditioned on and will not be effective until the assignee or transferee has executed and delivered a written agreement assuming and undertaking all of the duties and obligations of Company under this Agreement. Except as provided above, Company will not assign, transfer or delegate any right or obligation hereunder without the prior written consent of University, which consent shall not be unreasonably withheld, and any attempted conveyance in violation of any term of this Agreement will be null and void. University may assign or transfer this Agreement or its rights and obligations hereunder at any time to a University Affiliate on written notice to Company. In the event of an assignment by University, the assignee will be substituted for University as a party hereto, and University will no longer be bound hereby.

 

F.                                       Governing Law .  Illinois law (without regard to any jurisdiction’s conflict-of-laws principles) exclusively governs all matters based upon, arising out of, or relating in any way to this Agreement, including, without limitation, all disputes, claims or causes of action arising out of or relating to this Agreement as well as the interpretation, construction, performance and enforcement of this Agreement. The Parties will bring and litigate all actions or proceedings arising out of or relating to this Agreement in courts located within Chicago, Cook County, Illinois, and the Parties hereby consent to the jurisdiction of such courts. Without limiting the foregoing, any dispute regarding the validity or enforceability of any of the Licensed Patents, or whether any product would infringe (but for this Agreement) any claim in the Licensed Patents, will be litigated exclusively in the U.S. District Court for the Northern District of Illinois situated in Cook County, Illinois, and each Party will submit to the exclusive jurisdiction of such court, and waives any objection to venue, for such purposes.

 

G.                                     Independent Contractors .  The Company is an independent contractor under this Agreement. This Agreement does not, is not intended to, and will not be construed to, establish a partnership or joint venture, nor does this Agreement create or establish an employment, agency or any other relationship. Company has no right, power or authority, nor will it represent itself or allow another Licensed Entity to represent itself as having any authority to assume, create or incur any expense, liability or obligation, express or implied, on behalf of the University, or otherwise act as an agent for the University for any purpose.

 

H.                                    No Use of Name .  Company will not to use, and will prohibit each other Licensed Entity from using, the name, insignia, or symbols of University in any commercial activity, marketing, advertising or sales brochures except with the prior written consent of University, which consent may be granted or withheld at University’s sole discretion. Company agrees not to use, and will prohibit each

 

22



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

other Licensed Entity from using, the name of any University employee(s) in any commercial activity, marketing, advertising or sales brochures.

 

I.                                         Waiver .  No term or provision of this Agreement will be waived and no breach excused unless such waiver or consent is in writing and signed by the Party claimed to have waived or consented. No waiver of a breach will be deemed to be a waiver of a different or subsequent breach. No delay in enforcing a term or provision will be deemed a waiver thereof.

 

J.                                         Construction .  Each Party has consulted counsel of their choice regarding this Agreement, and each acknowledges and agrees that this Agreement will be construed without regard to the Party or Parties responsible for the preparation of the same and will be deemed as prepared jointly by the Parties. Any ambiguity or uncertainty existing herein will not be interpreted or construed against any Party. No course of dealing, course of performance, or usage of trade may be considered in the interpretation or enforcement of this Agreement. Both Parties waive any right they may have to introduce any such evidence.

 

K.                                     Execution .  This Agreement may be executed by the Parties in any number of identical counterparts, each of which, for all purposes will be deemed to be an original, and all of which will constitute, collectively, one instrument.

 

L.                                      Severability .  If any provision of this Agreement is held to be invalid, illegal, unenforceable, or in conflict with any laws of any federal, provincial, state, or local government that may exercise jurisdiction over this Agreement, the validity and enforceability of the remaining portions or provisions will not be affected thereby nor the validity and enforceability of such provision where valid, legal, enforceable and not in such a conflict. Any invalid or unenforceable provision will be promptly reformed by the Parties to effectuate their intent as evidenced on the Effective Date.

 

M.                                  Third Party Beneficiaries.   Except with respect to Section 8.0 and as otherwise expressly set forth in this Agreement, all rights, benefits and remedies under this Agreement are solely intended for the benefit of University and Company, and no other person or entity will have any rights whatsoever to (i) enforce any obligation contained in this Agreement; (ii) seek a benefit or remedy for any breach of this Agreement; or (iii) take any other action relating to this Agreement under any legal theory, including but not limited to, actions in contract, tort (including but not limited to negligence, gross negligence and strict liability), or as a defense, setoff or counterclaim to any action or claim brought or made by the Parties.

 

N.                                     Materials Access.   Two hybridoma cell lines, specified as (1) PTA-121360 = Mouse Hybridoma 7B8 6/2014, and (2) PTA-121613 = Hybridoma Cell Line 1A9 8/2014, were developed by University and relate to Licensed Patents. University

 

23



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

will provide (or arrange for the provision of) samples of these materials to Licensee for internal research and uses consistent with Licensee’s practice of the license rights granted under Section 2, as soon as reasonably practicable. Company will reimburse out-of-pocket costs for handling and shipping.

 

IN WITNESS WHEREOF, the Parties hereto have caused this agreement to be executed by their respective duly authorized officers or representatives on the Effective Date.

 

University

Aridis Pharmaceuticals

 

 

 

 

 

 

By:

/s/ Nancy Harvey

 

By:

/s/ Vu Truong

Nancy Harvey,

 

Vu Truong

Director, Technology Commercialization and Licensing

 

Chief Executive Officer

Polsky Center for Entrepreneurship and Innovation

 

 

 

Date of signature:

6/13/17

 

Date of signature:

6/13/17

 

24



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

Schedule A

 

Licensed Patents

 

Status

 

Application
Number

 

Patent Number

 

Territory

 

Date
Issued

Issued

 

13/742,155

 

9,181,329

 

United States

 

11/12/2015

Issued

 

12/675,597

 

8,840,906

 

United States

 

9/24/2014

Issued

 

2014-157658

 

6018140

 

Japan

 

10/7/2016

Issued

 

2010-523163

 

5658564

 

Japan

 

12/5/2014

Issued

 

08828277.7EPO

 

2185190

 

Europe

 

6/25/2015

Issued

 

200880113312.6

 

 

 

China

 

 

Issued

 

2008292897

 

2008292897

 

Australia

 

5/7/2015

Pending

 

14/842,192

 

 

 

United States

 

 

Granted

 

08828277.7GB

 

08828277.7

 

United Kingdom

 

 

Issued

 

10-2015-7009851

 

10-1661946

 

Republic of Korea

 

9/27/2016

Pending

 

2016-190589

 

 

 

Japan

 

 

Granted

 

08828277.7IT

 

08828277.7

 

Italy

 

 

Pending

 

10106657.9

 

 

 

Hong Kong

 

 

Granted

 

08828277.7DE

 

602008038715.1

 

Germany

 

6/24/2015

Granted

 

08828277.7FR

 

08828277.7

 

France

 

 

Granted

 

13160878.8EPO

 

2666784

 

Europe

 

4 / 5 /2017

Granted

 

13160878.8EPO

 

 

 

France

 

 

Granted

 

13160878.8EPO

 

 

 

Germany

 

 

Granted

 

13160878.8EPO

 

 

 

United Kingdom

 

 

Granted

 

13160878.8EPO

 

 

 

Switzerland

 

 

Pending

 

201510736991.4

 

 

 

China

 

 

Pending

 

2,697,538

 

 

 

Canada

 

 

Pending

 

PI0815775.8

 

 

 

Brazil

 

 

Pending

 

08828277.7BE

 

08828277.7

 

Belgium.

 

 

 

25



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

Pending

 

2015200932

 

 

 

Australia

 

 

Expired

 

PCT/US08/74849

 

 

 

United States

 

 

Expired

 

60/969,514

 

 

 

United States

 

 

 

26



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

Schedule B

 

UNIVERSITY OF CHICAGO ROYALTY REPORT

 

Company:

 

 

Agreement No:

 

Period Covered: From:

 

 

Through:

 

Prepared By:

 

 

Date:

 

Approved By:

 

 

Date:

 

 

Following First Commercial Sale of a second Licensed Product, please prepare a separate report for each. Then combine all Licensed Products into a summary report.

 

Report Type:

o

Single Product Line Report:

 

o

Multiproduct Summary Report. Page 1 of       Pages

 

o

Product Line Detail. Line:        Tradename:       Page

 

 

 

Report Currency:

o

U.S. Dollars

o

Other:

 

 

 

Gross

 

 

 

 

 

 

 

 

 

 

Country

 

Invoiced
Amount

 

* Less
Allowances

 

Net Sales

 

Royalty
Rate

 

Period Royalty Amount

This Year

 

Last Year 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

TOTAL:

 

 

 

 

 

 

 

 

 

 

 

 

Total Royalty:                 Conversion Rate:        Royalty in U.S. Dollars: $

 


* On a separate page, please indicate the reasons for returns or other adjustments if significant. Also, note any unusual occurrences that affected royalty amounts during this period. To assist University’s forecasting, please comment on any significant expected trends in sales volume.

 

27


 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

Schedule C

 

Product Development Plan

 

AR-301 (Salvecin TM )
ARIDIS PHARMACEUTICALS
RESEARCH AND DEVELOPMENT PLANNING
CONFIDENTIAL

 

Overview

 

AR-301, which we also refer to as Salvecin TM , is a fully human mAb of isotype immunoglobulin G1, or IgGl, for the treatment of lung infections due to Staphylococcus aureus, or S. aureus, including multi-drug resistant strains.  AR-301 was discovered by screening the B-cell immune response repertoire generated against S.  aureus infection.  A Phase 2a clinical trial with AR-301 was recently completed as an adjunctive therapy with standard-of-care antibiotics to treat hospital acquired pneumonia (HAP) and ventilator associated pneumonia (VAP) caused by S. aureus.  The clinical study was a randomized, double-blind, placebo-controlled study in 48 patients comparing the safety and efficacy of AR-301 as adjunctive therapy with standard-of-care antibiotics versus antibiotics alone.  AR-301 is designed to be effective on bacterial infections whether or not they are resistant to conventional antibiotics.  Commercially available rapid diagnostic tests based on polymerase chain reaction, or PCR, technology can be used to identify methicillin resistant S. aureus, or MRSA, strains.

 

The overall safety profile was favorable, with few (2.8%) adverse events (AEs) deemed related, and no serious adverse events (SAEs) found to be related to AR-301 treatment.  Deaths were explained by factors independent of the safety of AR-301, based on the case histories.  PK results are pending.  Exploratory efficacy results are supportive of continuing the clinical development of AR-301.  The primary efficacy conclusions were that although standard-of-care antibiotics were effective, the results suggest that AR-301 treatment increases the rate of eradication, while reducing time to eradication, time under mechanical ventilation and overall duration of hospital stay.  Time ventilated was reduced to a statistically significant level in the subset of patients with VAP.  The size of the study population did not allow for further interpretation of clinical outcomes or statistical significance.  AR-301 has been granted orphan drug designation in the European Union.  We believe AR-301 can positively impact the outcome of S.  aureus infections by improving survival rates and/or shortening the duration of overall hospital stays or the time a patient spends in the intensive care unit, or ICU.

 

Background and Mechanism of Action; Market Comparables

 

AR-301 is targeted against S.  aureus alpha-toxin, which is a toxin produced by most S.  aureus strains to attack and cause

 

 

28



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

destruction of human cells and tissues (see Figure 7).  AR-301 was discovered by screening B-cell lymphocytes of a patient with confirmed S.  aureus infection, which were then immortalized by Epstein-Barr virus, or EBV, transformation and fusion with the mouse-human heteromyeloma cell line LA55 to obtain the AR-301 producing hybridoma cell line.  AR-301 binds to alpha toxin with high affinity and prevents its assembly into an active complex.  This prevents alpha toxin-mediated breakdown of the membrane, or lysis, of erythrocytes, human lung cells and immune cells such as lymphocytes which protect animals from pneumonia and systemic infections caused by S. aureus.  There is no anti-infective on the market that specifically neutralizes the pathogenic affects brought about by S. aureus toxins.  We believe that this mechanism of action complements the bacterial killing properties of many conventional antibiotics, as the bacterial toxins left behind following antibiotic-mediated killing can still be neutralized by AR-301.  Additional indications for AR-301 may include all S.  aureus infections, particularly surgical site infections, blood stream infections, endocarditis, and skin and soft tissue infections such as diabetic ulcers and non-healing wounds.

 

Preclinical Development Summary

 

In vitro studies demonstrated the specific binding of AR-301 to alpha-toxin as well as the ability of AR-301 to neutralize toxin effects on several cell models.  Antigen specificity and alpha-toxin binding was confirmed by performing binding assays using purified bacterial toxins from varied sources, bacterial cell supernatants of the most prevalent epidemic MRSA strains worldwide, and bacterial cell supernatants of an extensive panel of MRSA and MSSA clinical isolates.  AR-301 was shown to bind greater than 95% of all S. aureus clinical isolates tested (greater than 110 tested).

 

Preclinical testing in an experimental acute S. aureus pneumonia mouse model and sepsis model showed that AR-301 can prophylactically and therapeutically prevent infection-associated morbidity and mortality when delivered intravenously as a stand-alone treatment.  For example, in the prophylactic murine lung infection model (see Figure 2), we evaluated the ability of AR-301 to protect against disease when administered prior to the onset of infection.  Groups of 15 mice received an intraperitoneal injection of either isotype control antibody (human IgG1) or AR-301 two hours prior to the time of intranasal infection with bacterial strains of interest.  Animals were then monitored over 72 hours for lethal disease.  The studies were conducted with three distinct S.  aureus strains, including Newman, a methicillin-sensitive clinical isolate that maintains a stable virulence phenotype in the laboratory; USA100, a methicillin-resistant hospital isolate; and USA300/LAC, a methicillin-resistant epidemic clone that is the most widely circulated clearly acquired MRSA strain in the U.S.  As demonstrated in Figure 2, AR-301 conferred in a dose-dependent manner a significant protection against mortality induced by an acute infection with Newman (A), USA100 (B) and USA300 (C).

 

29



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

 

In therapeutic mouse pneumonia studies, AR-301 demonstrated protection against fatal outcome of infections caused by both the methicillin-sensitive S. aureus, or MSSA, strain Newman (Figure 3A) and the MRSA strain USA100 (Figure 3B), even when AR-301 was applied up to 12 hours post infection.  Overall, mortality increased in the groups of late antibody application and with duration of the observation period, thereby suggesting that alpha-toxin may be essential for an early stage of pathogenesis.  We believe an extrapolation of these findings to human disease implies that treatment with AR-301 early in the course of S. aureus pneumonia has the potential to delay disease progression, providing a much-needed window of opportunity to enhance the utility of antimicrobial and supportive therapies.

 

 

30



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

To understand the mechanism by which lethal disease was averted by AR-301, bacterial loads in the lungs of mice treated with isotype control IgG1 or AR-301 were assessed 24 hours post-infection.  Treatment with AR-301 prior to the time of infection leads to a marked reduction in S. aureus burden in the lungs of mice.  Importantly, this reduction in bacterial loads was apparent upon infection with S. aureus Newman, USA100 and USA300, which supports the hypothesis that by neutralizing alpha toxin, AR-301 may mitigate alpha toxin-mediate killing of immune cells, thereby preserving the immune system’s natural ability to reduce bacterial burden.

 

We believe AR-301 has a favorable safety profile based on in vitro toxicity data showing the absence of cross-reactivity with human tissue and the absence of both spontaneous human complement activation and pro-inflammatory cytokine stimulation.  The toxicology program for AR-301 determined that there was no toxicity in the dose-range pilot study and the repeat-dose toxicity study performed in mice.  Further, no treatment-related microscopic changes at the injection sites were observed, thereby confirming good local tolerance of the AR-301.  We intend to determine in consultation with the FDA whether additional animal safety testing may be required to support regulatory approval in the U.S.

 

Clinical Development Summary

 

We recently completed patient enrollment of a randomized, double-blind, placebo-controlled, single ascending dose Phase 2a clinical trial to assess the safety, tolerability, pharmacokinetics, efficacy and pharmacodynamics of a single intravenous administration of AR-301 in patients with severe pneumonia caused by S.  aureus.  48 patients were enrolled in the study and completed the study protocol.  Eight patients were enrolled in the first cohort (1 mg/kg), twelve in the second (3 mg/kg), 15 in the third (10 mg/kg) and 13 in the fourth (20 mg/kg).  The final Phase 2a clinical trial included four patient cohorts, with a total of 48 patients who were treated according to the dosing schedule as outlined in Figure 4.  This clinical trial included 30 sites located across Belgium, France and Spain and the U.S.  There are multiple endpoints that can be used to assess the clinical outcome in pneumonia, including mortality, clinical cure rate, reduction in antibiotic use and reduction in number of hospital or ICU days.  This Phase 2a clinical trial was designed primarily to address the safety and pharmacokinetics of AR-301.  Additionally, data was collected to evaluate the clinical effects of this drug in HAP and VAP patients, including time to clinical resolution of pneumonia, time to extubation (removal of ventilator), reduction in ICU or hospital days, antibiotics utilization during the treatment period, and all-cause mortality.

 

Figure 4
Treatment Allocation and Number of Subjects by Study Group

 

 

The Phase 2a clinical trial was double-blinded, so differentiation cannot be made among the study cohorts.  However, overall, the safety and tolerability of AR-301 seems to be favorable in all

 

31



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

groups.  The primary safety conclusion from this study is that AR-301 appears safe when used as directed in addition to antibiotics in the treatment of severe pneumonia due to S. aureus.  The overall safety profile is favorable, with few (2.8%) adverse events (AEs) deemed related, and no serious adverse events (SAEs) found to be related to AR-301 treatment.  Deaths were explained by factors independent of the safety of AR-301, based on the case histories.  PK results are pending.  Exploratory efficacy results are supportive of continuing the clinical development of AR-301.  The primary efficacy conclusions were that although standard-of-care antibiotics were effective, the results suggest that AR-301 treatment increases the rate of eradication, while reducing time to eradication, time under mechanical ventilation and overall duration of hospital stay.  Time ventilated was reduced to a statistically significant level in the subset of patients with ventilator associated pneumonia (VAP).  The size of the study population did not allow for further interpretation of clinical outcomes or statistical significance.  The pharmacokinetics, immunogenicity, pharmacokinetic/pharmacodynamic, and inflammatory biomarkers studies are ongoing.

 

Manufacturing

 

A clinical manufacturing scale cell culture and purification process has been developed and successfully transferred to a clinical manufacturer (Rentschler Biotechnologie, Laupheim, Germany) to produce GMP phase 2a clinical trial material.  During the Phase 2a clinical studies we optimized the cell culture process by creating a new CHO (Chinese Hamster Ovary) cell line to maximize production quantities and to scale up the manufacturing process.  CHO cell lines are the most widely used cells in the biotechnology industry to produce biologicals and are compatible with most existing clinical and commercial cell culture manufacturing facilities.  We now have generated a high producing CHO cell line that was used to develop a large scale manufacturing process.

 

Planned Development Activities

 

The new CHO manufacturing process is being used to produce clinical material at 1,000L scale at Catalent Pharma Solutions LLC (Somerset, NJ).  This material will be available by 4Q 2017 to be used in the next phase 2b or 2b/3 clinical trial.  In order to have a sufficient scale process to support the pivotal phase 3 clinical trial and commercial launch, the CHO manufacturing process will be further increased to 4,000-10,000L scale.  This manufacturing process will be validated to ensure a sufficiently robust process to support a consistent supply of commercial grade material prior to the phase 3 clinical trial.  Similarly, the fill/finish operations to produce the final drug product will be scaled-up at LSNE (Bedford, NH) and the filling process will be validated at scale to ensure a robust commercial ready process.

 

Since the cell line and manufacturing process is being changed, a comparison between the initial clinical material and the new CHO clinical material will be performed.  This “comparability study” will consist of an in vitro comparison of the chemical composition and structure of the two materials and an in vivo pharmacokinetic comparison of the two materials in an animal model.  If the materials are deemed comparable, then the human clinical dose will remain the same.  If not comparable, then the dose may need to be adjusted.

 

32



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

Based on the favorable results of Phase 2a clinical trial, we believe the next clinical trial will be a phase 2b or 2b/3 followed by a full Phase 3 trial in pneumonia patients that combined will be sufficient for regulatory approval in the U.S. and Europe.  The Phase 2b or 2b/3 may be characterized as partially a “Phase 3” clinical trial, but it is not expected to stand-alone as an enabling clinical trial; for purposes of our license with UC we expect the follow-on full Phase 3 trial to be the fully enabling registration trial, and expect to measure milestone payments and diligence requirements based upon commencement of that enabling trial.  We anticipate the design of the Phase 2b/3 clinical trial to be a randomized, double-blind, placebo-controlled study to compare AR-301 in addition to antibiotic therapy to antibiotic therapy alone.  We plan to enroll 108 HAP/VAP microbiologically evaluable patients to achieve 80% power for p<0.05 significance with a 20% difference in primary endpoint.  There will be an estimated 90 clinical sites in over 15 countries.  Patients will receive standard of care antibiotics plus AR-301 (20 mg/kg) or placebo.  This trial will be a supportive trial for the purpose of licensure.  It will contribute to the safety database and may provide supplemental pivotal data for efficacy.  Prior to the second trial the manufacturing process for AR-301 will be scaled-up to commercial scale so that the commercial scale material can be tested in clinical trials.  The second trial will be the final, full Phase 3 pivotal study, which will be a double-blind, placebo-controlled trial with agreed upon (FDA and EMA) efficacy endpoints for the purpose of licensure.  This will also increase the safety database to the required sample size.  Efficacy endpoints will include clinical cure, mortality, rate of eradication, reduction in time to eradication, time under mechanical ventilation and overall duration of hospital stay.  Safety endpoints will include immunogenicity and other adverse events compared to placebo.

 

Regulatory

 

At this point the clinical trials have been performed in the United States under an IND (investigational new drug application) and in Europe under an IMPD (Investigational Medicinal Product Dossier).  Clinical sites in future trials may also include Asia (China, Taiwan, and South Korea), Australia, New Zealand and South America with the required regulatory submissions necessary to perform clinical trials in these regions.  Following completion of the phase 3 clinical trial all of the required information will be compiled into a biological license application (BLA) and a marketing authorization application (MAA) for submission to the FDA and EMA, respectively.  Regulatory filings in other regions will be submitted on a case-by-case analysis of the market opportunity.

 

33



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

Estimated Timelines (Provisional)

 

 

Estimated expenditures for the activities listed above are dependent upon a number of factors, but we expect that: 2017 expenses will be at least $5M, and dominated by manufacturing costs; 2018 expenses will total at least $7.5M, primarily for Phase 2b/3 commencement; and 2019 expenses will total no less than $10M, including clinical trial expenses, scale-up, and also fill/finish processes. These numbers may be significantly higher if we have opportunity to accelerate any components of the timeline.

 

34



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

Schedule D

 

Progress Report Form

 

For the time period                 to                 regarding the Agreement, effective [Date] between The University of Chicago and                 (University of Chicago reference number AGR [Fill in Agreement Number] UCHI No.1625)

 

Please fill out the fields below to the extent that they are relevant. Any additional documents that may be helpful for illustration may be sent along as attachments. In some cases a conversation with University’s Polsky Center for Entrepreneurship & Innovation (773-702-1692) may be useful as a follow-up.

 

Company Contact Name:

 

Company Contact Address & Phone:

 

Summary

 

Accomplishments during this time period regarding Licensed Products:

 

Objectives for the next time period regarding Licensed Products:

 

Research & Development

 

Current status of Licensed Products in development:

 

Plans for future research and development regarding Licensed Products:

 

Products & Marketing

 

Licensed Products launched (include tradenames) and estimate for time to the market for future Licensed Products:

 

Sales:

 

Projected sales:

 

Market development:

 

35



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

Sublicenses (If appropriate, have there been any new Sublicenses or progress in previous Sublicenses?):

 

Industry News (mergers & acquisitions, development partnerships, company expansion, etc.)

 

Financing & Corporate Development (non-dilutive capital, fundraising, diligence materials)

 

36




Exhibit 10.13

 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

Execution Version

 

LICENSE AGREEMENT

 

This License Agreement (the “ Agreement ”) is made and entered into effective as of January 6, 2010 (the “ Effective Date ”), by and between Aridis Pharmaceuticals, LLC a corporation organized and existing under the laws of California (hereinafter “ Aridis ”) and Emergent Product Development Gaithersburg Inc., a Delaware corporation (hereinafter “ Emergent ”).  Aridis and Emergent each may be referred to herein individually as a “ Party ,” or collectively as the “ Parties .”

 

WITNESSETH:

 

W HEREAS , Aridis is a pharmaceutical and biotechnology company specialized in formulation stabilizing technologies;

 

W HEREAS , Emergent is a biopharmaceutical company engaged in the development, manufacture, and commercialization of vaccines and biologics;

 

W HEREAS , in connection with the development and commercialization of such vaccines and biologics, Emergent desires to receive from Aridis, and Aridis desires to grant to Emergent, licenses under certain technology of Aridis, all on the terms and conditions set forth herein; and

 

W HEREAS , Emergent and Aridis shall concurrently execute and enter into a Subcontract setting forth their agreement with respect to the Aridis’ services relating to its formulation stabilizing technologies; and

 

N OW , T HEREFORE , in consideration of the foregoing premises and the mutual promises and covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereby agree as follows:

 

ARTICLE I
Definitions

 

When used in this Agreement, capitalized terms will have the meanings as defined below and throughout the Agreement:

 

1.1                                “Affiliate” shall mean a legal entity that, directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with a Party.  For purposes of this definition only, “control” and, with correlative meanings, the terms “controlled by” and “under common control with” means (a) the possession, directly or indirectly, of the power to direct the management or policies of a legal entity, whether through the ownership of voting securities or by contract relating to voting rights or corporate governance, or (b) the ownership, directly or indirectly, of more than 50% of the voting securities or other ownership interest of a legal entity (or, with respect to a limited partnership or other similar entity, its general partner or controlling entity); provided , however , if local law restricts foreign ownership, control will be

 



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

established by direct or indirect ownership of the maximum ownership percentage that may, under such local law, be owned by foreign interests.

 

1.2                                “Agreement” shall have the meaning set forth in the preamble hereto.

 

1.3                                “Applicable Law” shall mean all laws, rules, regulations applicable to the Exploitation of the Licensed Products, including any such rules, regulations, guidelines, or other requirements of the Regulatory Authorities, that may be in effect from time to time in the Territory.

 

1.4                                “Aridis” shall have the meaning set forth in the preamble hereto.

 

1.5                                “Aridis Information and Inventions” shall have the meaning set forth in Section 8.3.4.

 

1.6                                “Aridis Know-How” shall mean all Information and Inventions, to the extent not generally known, that Aridis or its Affiliates own or otherwise Control as of the Effective Date (a) that are necessary or useful for the practice of Aridis’ plasticization, foam drying, spray drying or other stabilizing formulation technologies to the extent relating to stabilization of vaccines or biologics or (b) that comprise Project Technology developed pursuant to the Subcontract (or that comprise technology developed pursuant to any future contract for work between Emergent and Aridis).  Without limitation of the foregoing, the Aridis Know-How shall include those Information and Inventions listed in Schedule 1.6 to this Agreement.

 

1.7                                “Aridis Patents” shall mean all of the Patents that Aridis or its Affiliates own or otherwise Control as of the Effective Date (a) that disclose, claim or cover any plasticization, foam drying, spray drying, or other stabilizing formulation technologies to the extent relating to stabilization of vaccines or biologics (including claims or coverage of products resulting from the use of such technologies to the extent relating to stabilization of vaccines or biologics), (b) that comprise Project Technology developed pursuant to the Subcontract (or that comprise technology developed pursuant to any future contract for work between Emergent and Aridis) or (c) that are Improvements.  Without limitation of the foregoing, the Aridis Patents shall include those Patents listed on Schedule 1.7 to this Agreement, and any substitutions, divisions, continuations, continuations-in-part, reissues, renewals, registrations, confirmations, re- examinations, extensions, supplementary protection certificates, and any international or foreign equivalent of any Patent listed in Schedule 1.7 to this Agreement.

 

1.8                                “Aridis Regulatory Documentation” shall have the meaning set forth in Section 8.3.4.

 

1.9                                “Biodefense Indications” means the Exclusive Indications and the Non-Exclusive Indications.

 

1.10                         “BLA” means a Biologics License Application filed with the FDA or other regulatory authority in conformance with applicable laws and regulations, or the equivalent application filed in jurisdictions outside the United States of America.

 

2



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

1.11                         “Breaching Party” shall have the meaning set forth in Section 10.4.

 

1.12                         “Business Day” shall mean a day other than a Saturday or Sunday on which banking institutions in the United States are open for business.

 

1.13                         “BYU License” shall mean the License and Option Agreement between Brigham Young University and Aridis, LLC effective July 24, 2005 and any related agreements.

 

1.14                         “BYU Technology” shall mean any technology licensed by Aridis under the BYU License.

 

1.15                         “Calendar Quarter” shall mean the respective periods of three (3) consecutive calendar months ending on March 31, June 30, September 30 and December 31.

 

1.16                         “Calendar Year” shall mean each successive period of twelve (12) months commencing on January 1 and ending on December 31.

 

1.17                         “Clinical Trials” shall mean, with respect to a Licensed Product, all tests and studies in patients that are required by the Regulatory Authorities, from time to time, pursuant to Applicable Law or otherwise, for Regulatory Approval of such product.

 

1.18                         “Combination Product” shall mean a vaccine, biopharmaceutical or pharmaceutical which comprises a Licensed Product that is used or intended to be used for the indications included in the Field and one or more other products that, standing alone, would not be Licensed Products, whether or not co-formulated and whether or not administered simultaneously or sequentially in accordance with an established regimen.  (For example: a product that comprises two vaccines for two indications, one vaccine component incorporating Aridis Knowhow or Aridis Patents hereunder, and one vaccine not incorporating Aridis Knowhow or Aridis Patents, would be a Combination Product.)

 

1.19                         “Complaining Party” shall have the meaning set forth in Section 10.4.

 

1.20                         “Component” means a component for use in a vaccine or biologic, including but not limited to (i) an antigen(s), (ii) an adjuvant(s), or (iii) other active or inactive ingredients, which component, when administered either alone or in combination with other components, elicits or enhances an antigen specific immune response.

 

1.21                         “Confidential Information” shall have the meaning set forth in Section 4.1.1.

 

1.22                         “Confidentiality Agreements” shall mean the Confidential Disclosure Agreement dated May 15, 2009 between the Parties and the Mutual Confidentiality Agreement dated August 28, 2009 between Emergent, Aridis and Oxford-Emergent Tuberculosis Consortium Limited and any subsequent Confidential Disclosure Agreement between the Parties and any Confidential Disclosure Agreement dated November 4, 2009 between Emergent, Aridis and Brigham Young University.

 

3



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

1.23                         “Control” shall mean, with respect to any Information and Invention, Patent, Trademark or other intellectual property right, possession of the right, whether directly or indirectly, and whether by ownership, license or otherwise, to assign, or grant a license, sublicense or other right to or under, such Information and Invention, Patent, Trademark or right as provided for herein without violating the terms of any written agreement with any Third Party.

 

1.24                         Development” shall mean all activities related to research, preclinical and other non-clinical testing, test method development, process development, manufacturing scale-up, qualification and validation, quality assurance/quality control and Clinical Trials, including manufacturing in support thereof, statistical analysis and report writing, the preparation and submission of any application for Regulatory Approval, regulatory affairs with respect to the foregoing and all other activities necessary or reasonably useful or otherwise requested or required by a Regulatory Authority as a condition or in support of obtaining or maintaining a Regulatory Approval.  When used as a verb, “Develop” shall mean to engage in Development.

 

1.25                         “Diligent Efforts” means the carrying out of obligations or tasks in a manner consistent with the efforts a Party devotes to a research, development or marketing project for a product or products of similar market potential at a similar stage in its life cycle, taking into consideration its safety and efficacy, its cost to develop, the competitiveness of alternative products, its proprietary position, the likelihood of regulatory approval, its profitability, and all other relevant factors.

 

1.26                         “Diligence Obligations” shall mean the obligations of Emergent pursuant to Section 2.2.

 

1.27                         “Disclosing Party” shall have the meaning set forth in Section 4.1.1.

 

1.28                         “Effective Date” shall have the meaning set forth in the preamble hereto.

 

1.29                         “Emergent” shall have the meaning set forth in the preamble hereto.

 

1.30                         “EU Member State” shall mean any one of the sovereign states that have acceded to the European Union.

 

1.31                         “Exclusive Indications” shall mean any of the following indications: anthrax, botulism, plague, and small pox; provided , however that, with respect to plague and small pox, if Development has not occurred pursuant to Section 2.2, then at the expiration of the two year anniversary of the Effective Date, such indication shall become a Non-Exclusive Indication.

 

1.32                         “Exclusive Field Aridis Patents” shall mean any and all Aridis Patents in which the claimed subject matter is limited to exploitation of a Licensed Product within one or more Exclusive Indications.  For clarity and the avoidance of doubt, the Exclusive Field Aridis Patents are a sub-set of the Aridis Patents.

 

1.33                         “Exploit” shall mean to make, have made, import, use, sell, or offer for sale, including to research, Develop, register, modify, enhance, improve, Manufacture, have

 

4



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

Manufactured, store, formulate, export, transport, distribute, promote, market, or otherwise dispose of.

 

1.34                         “Exploitation” shall mean the making, having made, importation, use, sale, offering for sale or disposition of a product or process, including the research, Development, registration, modification, enhancement, improvement, Manufacture, storage, formulation, optimization, import, export, transport, distribution, promotion, marketing or other disposition of a product or process.

 

1.35                         “FDA” shall mean the United States Food and Drug Administration and any successor agency thereto.

 

1.36                         “FFDCA” shall mean the United States Federal Food Drug and Cosmetic Act, as amended from time to time.

 

1.37                         “Field” shall mean all human use of Licensed Products, intended for the prevention or treatment of infection or illness caused by Biodefense Indications, for all routes of administration and delivery systems and devices, with or without excipients and adjuvants.

 

1.38                         “First Sale” shall mean, with respect to any Licensed Product, the first commercial sale for end use or consumption of such Licensed Product in a country.

 

1.39                         “Formulation Project Technology” shall have the meaning set forth in the Subcontract.

 

1.40                         “Future Contract” shall mean a contract awarded after the Effective Date for the Development of Licensed Products under which Aridis may be awarded a subcontract to provide services.

 

1.41                         “GAAP” shall mean United States generally accepted accounting principles, consistently applied.

 

1.42                         “Government Procurement Contract” shall mean a United States government or foreign government contract awarded to Emergent for the purchase of Licensed Product.

 

1.43                         “HHS” shall mean the United States Department of Health and Human Services.

 

1.44                         IDE shall mean an investigational device exemption as defined in the regulations promulgated by the FDA for authorization to commence Clinical Trials, and its equivalent in other countries or regulatory jurisdictions in the Territory.

 

1.45                         “Improvement” shall mean any modification, variation or revision to a discovery, technology, device, process or formulation related to the Aridis Patents; provided , that such modification, variation or revision is potentially patentable, including, to the extent commercially significant, any (a) enhancement in the efficiency, operation, Manufacturing, ingredients, preparation, presentation, formulation, means of delivery, packaging or dosage, (b) discovery or

 

5



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

development of any new or expanded indications or (c) discovery or development that improves the stability, safety or efficacy.

 

1.46                         “IND” shall mean an investigational new drug application filed with the FDA for authorization to commence Clinical Trials, and its equivalent in other countries or regulatory jurisdictions in the Territory.

 

1.47                         “Indemnification Claim Notice” shall have the meaning set forth in Section 7.3.1.

 

1.48                         “Indemnified Party” shall have the meaning set forth in Section 7.3.1.

 

1.49                         “Information and Inventions” shall mean all technical, scientific and other know-how, show-how and information, trade secrets, knowledge, technology, means, methods, processes, practices, formulas, instructions, skills, techniques, procedures, experiences, ideas, technical assistance, designs, drawings, assembly procedures, computer software, apparatuses, specifications, data, cell lines, seed stock and other biological materials, Pre-Clinical and Clinical Trial results, Manufacturing procedures, test procedures and purification and isolation techniques, in written, electronic or any other form now known or hereafter developed, whether to the foregoing or otherwise, and other discoveries, developments, inventions, and other Intellectual Property, but excluding the Regulatory Documentation.

 

1.50                         Intellectual Property” shall mean statutory and other proprietary rights in respect of Patents, trademarks, copyrights, design rights, database rights, confidential information, and all other Intellectual Property rights as defined in Article 2 of the Convention Establishing the World Intellectual Property Organisation of July 1967.

 

1.51                         “Licensed Product” shall mean a vaccine or biologic that comprises one or more Components, (A) the Exploitation of which vaccine or biologic would infringe an Aridis Patent in the absence of a license, or (B) which vaccine or biologic incorporates Aridis Know-How.

 

1.52                         “Losses” shall have the meaning set forth in Section 7.1.

 

1.53                         “Manufacture” and “Manufacturing” shall mean, with respect to a product, the manufacturing, processing, formulating, packaging, finishing, filling, labeling, holding and quality control testing of such product.

 

1.54                         “Marketing Authorization” shall mean a New Drug Application or BLA, each as defined in the FFDCA, and the regulations promulgated thereunder, or any corresponding foreign application, registration or certification, necessary or reasonably useful to market a Licensed Product in the Territory, but not including pricing and reimbursement approvals.

 

1.55                         “Net Sales” shall mean, for any period, the gross amount invoiced by Emergent, its Affiliates or sublicensees for the sale of the Licensed Products to any Third Party (and in all cases amounts actually received to the extent not invoiced), less (to the extent otherwise included in amounts invoiced) any: (a) normal and customary trade, quantity and cash discounts and sales returns and allowances, including (i) those granted on account of price adjustments, billing errors,

 

6



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

rejected goods, damaged goods, returns and rebates, (ii) administrative and other fees and reimbursements and similar payments to wholesalers and other distributors, buying groups, pharmacy benefit management organizations, health care insurance carriers and other institutions, (iii) allowances, rebates and fees paid to distributors and (iv) chargebacks; (b) freight, postage, shipping and insurance expenses to the extent that such items are included in the gross amount invoiced; (c) payments for customs and excise duties and other duties related to the sales to the extent that such items are included in the gross amount invoiced; (d) rebates and similar payments made with respect to sales paid for by any governmental or regulatory authority such as, by way of illustration and not in limitation of the Parties’ rights hereunder, Federal or state Medicaid, Medicare or similar state program or equivalent foreign governmental program; (c) payments for sales and other taxes and duties directly related to the sale or delivery of the Licensed Products (but not including taxes assessed against the income derived from such sale); (f) distribution expenses to the extent that such items are included in the gross amount invoiced; and (h) any such invoiced amounts that are not collected.  Any of the deductions listed above that involves a payment by Emergent or its Affiliates shall be taken as a deduction in the Calendar Quarter in which the payment is accrued by such entity.  Deductions pursuant to clause (h) above shall be taken in the Calendar Quarter in which such sales are no longer recorded as a receivable.  For purposes of determining Net Sales, the Product(s) shall be deemed to be sold when invoiced and delivered under a procurement contract and a “sale” shall not include transfers or dispositions for charitable or promotional purposes or for clinical, manufacturing, testing qualification or regulatory purposes, including delivery of Licensed Products to third parties for research and development.  Sales shall also include consideration other than cash received for a Licensed Product.  Where the consideration received for a Licensed Product is not cash, then the “Net Sales” for that Licensed Product for purposes of computing royalties or other amounts due under the Agreement shall be deemed to be the fair market value for such Licensed Product.  In determining fair market value, appropriate weight shall be given to any arms-length transaction by Emergent involving the same or similar Licensed Product.

 

For purposes of calculating Net Sales, only the final sale by Emergent, its Affiliates or sublicensees to Third Parties shall be included in the computation of Net Sales, and intermediate sales between or among Emergent, its Affiliates, and its sublicensees shall be excluded from the computation of Net Sales.

 

In the event that a Licensed Product is sold in any country in the form of a Combination Product, the appropriate adjustment to the Net Sales of such Combination Product for purposes of royalty calculations hereunder shall be negotiated by the Parties in good faith based upon the relative contributions of the Licensed Product component of such Combination Product and the other indication product components of such Combination Product to the selling price thereof.

 

1.56                         “Non-Exclusive Indications” shall mean tularemia and VHF indications; provided , however that a Non-exclusive Indication shall become an Exclusive Indication immediately upon payment of [***] by Emergent to Aridis made within five (5) years of the Effective Date, subject to existing rights granted by Aridis as of the time of payment.

 

1.57                         “Notice Period” shall have the meaning set forth in Section 10.4.

 

7



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

1.58                         “Other Aridis Patents” shall mean all those Aridis Patents that are not Exclusive Field Aridis Patents.  For clarity and the avoidance of doubt, the Other Aridis Patents are a subset of the Aridis Patents.

 

1.59                         “Other Technology” shall have the meaning set forth in the Subcontract.

 

1.60                         “Patents” means (a) all patents and patent applications in any country or supranational jurisdiction (including all priority applications and all other applications, whether or not pending, to or through which a patent or pending application claims priority benefit directly or indirectly), (b) any provisionals, substitutions, divisions, continuations, continuations in part, reissues, renewals, registrations, confirmations, reexaminations, extensions, supplementary protection certificates and the like, of any such patents or patent applications, (c) any foreign or international equivalent of any of the foregoing and (d) all patents granted or issuing on or claiming priority to or through the patents and patent applications within (a), (b), and (c).

 

1.61                         “PCT” shall mean the Patent Cooperation Treaty, opened for signature June 19, 1970, 28 U.S.T. 7645.

 

1.62                         “Person” shall mean an individual, sole proprietorship, partnership, limited partnership, limited liability partnership, corporation, limited liability company, business trust, joint stock company, trust, unincorporated association, joint venture or other similar entity or organization, including a government or political subdivision, department or agency of a government.

 

1.63                         “Phase I Trial” means, as to a specific pharmaceutical product, a controlled and lawful study in humans of the safety of a pharmaceutical product that is prospectively designed to generate sufficient data (if successful) to commence a Phase II Trial (or foreign equivalent) of such product, as further defined in United States Federal Regulation 21 C.F.R. §312.21 or the corresponding regulation in jurisdictions other than the United States.

 

1.64                         “Phase II Trial” means, as to a specific pharmaceutical product, a controlled and lawful study in humans of the feasibility, safety, dose ranging and efficacy of such product, which study is prospectively designed to generate sufficient data (if successful) to commence a Phase III Trial of such product, as further defined in United States Federal Regulation 21 C.F.R. §312.21 or the corresponding regulation in jurisdictions other than the United States.

 

1.65                         “Phase III Trial” shall mean a human clinical trial of the Licensed Product designed to establish that a pharmaceutical product is safe and efficacious for its intended use and to determine warnings, precautions and adverse reactions that are associated with such pharmaceutical product in the dosage range to be prescribed, which trial is intended to support marketing approval of the Licensed Product, including all tests and studies that are required by the FDA from time to time, pursuant to Applicable Law or otherwise, including the trials referred to in 21 C.F.R. §312.21(c), as amended.

 

1.66                         “Pre-Clinical Trial” means, as to a specific pharmaceutical product, non-clinical studies in support of a Regulatory Approval.

 

8



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

1.67                         “Prime Award” means Cooperative Agreement 1U01AI082224-01 awarded by the National Institute of Allergy and Infectious Disease, National Institutes of Health to Emergent with Sukjoon Park, PhD, as the Principal Investigator.

 

1.68                         “Project Technology” shall have the meaning set forth in the Subcontract.

 

1.69                         “Receiving Party” shall have the meaning set forth in Section 4.1.1.

 

1.70                         “Regulatory Approval” shall mean any and all approvals (including pricing and reimbursement approvals), governmental licenses, registrations or authorizations of any Regulatory Authority, necessary for the Exploitation of the Licensed Products in the Field in a country in the Territory, including any (a) approval of any Licensed Product (including any INDs, IDEs, Marketing Authorizations and supplements and amendments thereto); (b) pre- and post-approval marketing authorizations (including any prerequisite Manufacturing approval or authorization related thereto); (c) labeling approval; and (d) technical, medical and scientific licenses.

 

1.71                         “Regulatory Authority” shall mean any applicable supra-national, federal, national, regional, state, provincial or local regulatory agencies, departments, bureaus, commissions, councils or other government entities regulating or otherwise exercising authority with respect to the Exploitation of the Licensed Products in the Field in the Territory.

 

1.72                         “Regulatory Documentation” shall mean all applications, registrations, governmental licenses, authorizations and approvals (including all Regulatory Approvals), all correspondence submitted to or received from Regulatory Authorities (including minutes and official contact reports relating to any communications with any Regulatory Authority) and all supporting documents and all clinical studies and tests, relating to any Licensed Product or component thereof, and all data contained in any of the foregoing, including all INDs, IDEs, Marketing Authorizations, regulatory drug lists, advertising and promotion documents, adverse event files, complaint files and Manufacturing records and any Drug Master Files.

 

1.73                         “Statement of Work” shall mean the scope of work set forth in Appendix A of the Subcontract.

 

1.74                         “Subcontract” shall mean that certain subcontract under the Prime Award entered into by and between the Parties effective January 6, 2010 attached hereto in Exhibit A and as such subcontract may be amended from time to time in accordance with its terms.

 

1.75                         “Territory” shall mean all the countries of the world.

 

1.76                         “Third Party” shall mean any Person other than Emergent, Aridis and their respective Affiliates.

 

1.77                         “Third Party Claim” shall have the meaning set forth in Section 7.3.2.

 

9



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

1.78                         “Trademark” shall include any word, name, symbol, color, designation or device or any combination thereof, including any trademark, trade dress, brand mark, trade name, brand name, logo or business symbol.

 

1.79                         “USPTO” shall mean the United States Patent and Trademark Office and any successor agency thereto, or the equivalent entity in other countries or regulatory jurisdictions in the Territory.

 

1.80                         “Vaccine Project Technology” shall have the meaning set forth in the Subcontract.

 

1.81                         “Valid Patent Claim” means (a) a claim of a pending patent application that has been filed, and is being prosecuted in good faith, that has not been canceled, withdrawn, abandoned or pending for more than ten (10) years from the earliest claimed priority date, or (b) an issued patent that has not expired or been canceled, been declared invalid or unenforceable by a decision of a court or other appropriate body of competent jurisdiction, from which no appeal is or can be taken, been admitted to be invalid or unenforceable through reissue, disclaimer or otherwise, or been abandoned or disclaimed.

 

1.82                         “VHF” means viral hemorrhagic fever.

 

ARTICLE II
Development and Commercialization

 

2.1                                Development and Commercialization Activities .  Emergent and its Affiliates shall have the exclusive right to Exploit the Licensed Products in the Field in the Territory, and shall be solely responsible for any costs and expenses it incurs in connection with such Exploitation.

 

2.2                                Diligence Obligations.  Emergent shall make Diligent Efforts to Exploit at least one Licensed Product for each of the Exclusive Indications.  Prior to receipt of the first Marketing Authorization for a Licensed Product in each Exclusive Indication, “Diligent Efforts” in this Section shall require, and be deemed satisfied if, Emergent (directly or through Affiliates or sublicensees) either: (a) demonstrates the allocation of resources to Development under a product development plan, and uses commercially reasonable efforts to progress under such plan; or (b) or secures or uses commercially reasonable efforts to secure (by filing good faith responses to requests for proposals issued by the United States government or other foreign governments, or otherwise), a governmental contract or award for purchase of Licensed Products in an indication, and in good faith considers Aridis as development subcontractor in such filings and awards.  Emergent shall share details regarding its Development plans and Exploitation efforts with Aridis periodically upon request; provided , however that such requests shall not exceed one (1) time per year.  For the avoidance of doubt, Emergent has made Diligent Efforts with respect to anthrax and botulism and thus Emergent’s diligence obligations have been met for anthrax and botulism.

 

2.3                                Communications with Regulatory Authorities .  Emergent or its designee shall have the sole right (except where Aridis is legally so required) to conduct all communications with

 

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Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

the Regulatory Authorities with regard to the Exploitation of the Licensed Products in the Field in the Territory.

 

2.4                                Regulatory Approvals .  Emergent or its designee shall have the sole right to prepare and maintain all regulatory submissions and respond to all inquiries from Regulatory Authorities with respect to (a) Regulatory Approvals for Licensed Products in the Field in the Territory and (b) Development activities that are conducted in support of such Regulatory Approvals.  All INDs, IDEs, Marketing Authorizations and other filings, applications or requests made pursuant to or in connection with the Regulatory Approvals shall be made in the name of Emergent or its designee, unless Applicable Law requires that a Regulatory Approval be granted solely or jointly (with Emergent) in the name of Aridis or its Affiliates, in which case Aridis shall, or shall cause its Affiliates to, as applicable, take such actions as may be required to effect the assignment of such Regulatory Approval to Emergent to the extent permitted by Applicable Law.  Emergent or its designee shall prepare, file, maintain and hold all regulatory filings for the Licensed Products and shall keep Aridis informed of the initial filing, and final approval of, any application for Regulatory Approval of a Licensed Product in the Territory.  Upon Emergent’s request and at its expense (if any; such expenses shall be discussed by the Parties in advance in good faith), Aridis shall, and shall cause its Affiliates to, provide to Emergent or its designee all information in the possession of Aridis or its Affiliates that is reasonably necessary to support any and all applications for Regulatory Approval of the Licensed Products in the Territory.

 

2.5                                Reports .  Emergent shall furnish to Aridis within 60 days after the end of each year until the year after the year of the First Sale, annual progress reports describing the Development activities with respect to the Licensed Products that Emergent has performed or has caused to be performed.

 

2.6                                Rights and Obligations .  Any and all rights of Emergent under this ARTICLE II are intended, and shall be construed, to benefit such of its Affiliates and sublicensees as and to the extent Emergent may designate from time to time.  Further, Emergent shall have the right to satisfy any or all of its obligations under this ARTICLE II through one or more of its Affiliates or permitted sublicensees.

 

ARTICLE III
License Grants

 

3.1                                Grants to Emergent .  Subject to ARTICLE X, Aridis hereby grants to Emergent and its Affiliates, and shall cause Aridis’ Affiliates to grant to Emergent and its Affiliates:

 

(a)                                  an exclusive, perpetual, royalty-bearing license under the Aridis Patents and Aridis Know-How (excluding the BYU Technology) to Exploit Licensed Products for the Exclusive Indications in the Field in the Territory;

 

(b)                                  an exclusive royalty-bearing license to the Aridis’ rights to the BYU Technology to Exploit Licensed Products for the Exclusive Indications in the Field in the Territory;

 

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Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

(c)                                   a non-exclusive, royalty-bearing license under the Aridis Patents and Aridis Know-How to Exploit Licensed Products for the Non-exclusive Indications in the Field in the Territory; and

 

(d)                                  a non-exclusive, fully paid up license and right of reference, under any Regulatory Documentation owned or Controlled by Aridis or any of its Affiliates, to Exploit Licensed Products in the Field in the Territory.

 

3.2                                Sublicenses .  Emergent and its Affiliates may grant sublicenses (through multiple tiers of sublicensees) under the licenses granted in Section 3.1, for the purpose of enabling Third Parties to Exploit the Licensed Products in the Field.  All sublicenses granted by Emergent, directly or through tiers, shall be subject to the terms and conditions of this Agreement and the BYU License, and shall be under written agreement with express provisions to this effect.  No sublicense shall relieve Emergent of any responsibilities under this Agreement.  Emergent shall forward a copy of each sublicense agreement within thirty (30) days of execution.

 

ARTICLE IV
Confidentiality and Nondisclosure

 

4.1                                Confidential Information .

 

4.1.1                      Defined During the Term and subject to the terms and conditions of this Agreement, a Party (the “Disclosing Party”) may communicate to the other Party (the “Receiving Party”) information in connection with the discussions and negotiations pertaining to this Agreement or the performance of its obligations under this Agreement, including, without limitation, any information regarding Licensed Products; know-how and any tangible embodiments thereof; reports provided pursuant to this Agreement; data; knowledge; practices; protocols; standard operating procedures; processes; ideas; research plans; engineering designs and drawings; research data; manufacturing processes and techniques; scientific and manufacturing information and plans, marketing and business plans, and financial and personnel matters relating to a Party or its present or future products, sales, suppliers, customers, employees, investors or business (collectively, “Confidential Information”).

 

4.1.2                      Exclusions .  Notwithstanding the foregoing, any information of a Party will not be deemed Confidential Information with respect to the Receiving Party for purposes of this Agreement if such information:

 

(a)                                  was already known or available to the Receiving Party or its Affiliates, other than under an obligation of confidentiality or non-use to the Disclosing Party, at the time of disclosure to the Receiving Party, as evidenced by the Receiving Party’s written records;

 

(b)                                  was generally available or known to parties reasonably skilled in the field to which such information pertains, or was otherwise part of the public domain, at the time of its disclosure to the Receiving Party;

 

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Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

(c)                                   became generally available or known to parties reasonably skilled in the field to which such information pertains, or otherwise became part of the public domain, after its disclosure to the Receiving Party through no fault of or breach of its obligations by the Receiving Party;

 

(d)                                  was disclosed to the Receiving Party, other than under an obligation of confidentiality or non-use, by a Third Party who had no obligation to the Party that Controls such information not to disclose such information to others; or

 

(e)                                   was independently discovered or developed by the Receiving Party or its Affiliates, as evidenced by their written records, without the use of, and by personnel who had no access to, Confidential Information belonging to the Party that Controls such information.

 

Specific aspects or details of Confidential Information shall not be deemed to be within the public domain or in the possession of a Party merely because the Confidential Information is embraced by more general information in the public domain or in the possession of such Party.  Further, any combination of Confidential Information shall not be considered in the public domain or in the possession of a Party merely because individual elements of such Confidential Information are in the public domain or in the possession of such Party unless the combination and its principles are in the public domain or in the possession of such Party.

 

4.2                                Disclosure and Use Restriction.  Except as expressly provided herein, the Parties agree that, during the term of this Agreement and for ten (10) years thereafter, each Party and its Affiliates and sublicensees shall keep completely confidential and shall not publish or otherwise disclose any Confidential Information of the other Party, its Affiliates or sublicensees.  Neither Party may use any Confidential Information of the other Party without such other Party’s consent, except as expressly permitted by this Agreement.

 

4.3                                Authorized Disclosure.  Each Party may use and disclose Confidential Information of the other Party to the extent that such use and disclosure is:

 

4.3.1                      made in response to a valid order of a court of competent jurisdiction or other governmental or regulatory body of competent jurisdiction; provided , however , that such Party shall first have given notice to such other Party and given such other Party a reasonable opportunity to quash such order and to obtain a protective order requiring that the Confidential Information and documents that are the subject of such order be held in confidence by such court or governmental or regulatory body or, if disclosed, be used only for the purposes for which the order was issued; and provided , further , that if a disclosure order is not quashed or a protective order is not obtained, the Confidential Information disclosed in response to such court or governmental order shall be limited to that information which is legally required to be disclosed in response to such court or governmental order;

 

4.3.2                      otherwise required by law; provided , however , that the Disclosing Party shall provide such other Party with notice of such disclosure in advance thereof to the extent practicable;

 

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Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

4.3.3                      made by such Party to the regulatory authorities as required in connection with any filing of requests for Regulatory Approvals, or similar applications; provided , however , that reasonable measures shall be taken to assure confidential treatment of such information;

 

4.3.4                      made by such Party, in connection with the performance of this Agreement, to Affiliates, permitted sublicensees, research parties, employees, consultants, advisors, representatives or agents, (including, for Aridis or BYU) each of whom prior to disclosure shall be bound by obligations of confidentiality and non-use at least equivalent in scope to those set forth in this Article IV;

 

4.3.5                      made by such Party to existing or potential acquirers or merger candidates; existing or potential pharmaceutical collaborators (to the extent contemplated under this Agreement); or Affiliates, each of whom prior to disclosure must be bound by obligations of confidentiality and non-use at least equivalent in scope to those set forth in this Article IV;

 

4.3.6                      made in a patent application filed in conformance with this Agreement, with the requirement that the Party who did not draft the patent application shall have a reasonable time to review the patent application but under no circumstances less than thirty (30) days prior to the filing of the patent application;

 

4.3.7                      made in satisfaction of such Party’s duty of candor and good faith dealing with the USPTO as set forth in 37 C.F.R. §1.56 or any foreign equivalent thereof; or

 

4.3.8                      made by such Party in satisfaction of a USPTO requirement of submission of information as set forth in 37 C.F.R. §1.105 or any foreign equivalent thereof.

 

4.3.9                      made in a development report submitted to a government agency in satisfaction of a reporting requirement of a government license.

 

4.4                                Terms of Agreement to be Maintained in Confidence.  Subject to the provisions of this Section, the Parties agree that the terms of this Agreement are deemed Confidential Information of both Parties and are subject to the restrictions on use and disclosure set forth herein.  The Parties agree that Aridis shall provide a copy of this Agreement to Brigham Young University as provided in Section 2.4 of the BYU License.  Aridis agrees to act with diligence to execute a three way Confidential Disclosure Agreement with Emergent and Brigham Young University prior to the disclosure of the terms and conditions of this Agreement to Brigham Young University.

 

4.5                                Use of Name.  Neither Party shall make public use of the other Party’s name except (a) in connection with announcements and other permitted disclosures relating to this Agreement and the activities contemplated hereby, (b) as required by Applicable Law, and (c) otherwise as agreed in writing by such other Party; provided , however , that Emergent and its Affiliates and sublicensees shall have the right to use the name of Aridis to the extent reasonably necessary in connection with the Exploitation of the Licensed Products with the prior consent of Aridis, which shall not be unreasonably withheld, conditioned or delayed.

 

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Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

4.6                                Press Releases; Publication.  The Parties shall cooperate with respect to the timing and content of communications with the public regarding the activities contemplated by this Agreement.  Subject to 4.3.2, the content of any press releases pertaining to this Agreement shall require the prior written approval of both Parties.

 

ARTICLE V
Payments and Reports

 

5.1                                Up-Front Payments.  In partial consideration of the licenses and other rights granted herein, subject to the terms and conditions set forth in this Agreement, Emergent shall make the following non-refundable, non-creditable payments to Aridis within thirty (30) days of receipt by Emergent from Aridis of a written invoice thereof:

 

5.1.1                      [***] within thirty (30) days of execution of this Agreement;

 

5.1.2                      [***] within thirty (30) days of execution of this Agreement as an additional milestone for Emergent’s receipt of the Prime Award;

 

5.1.3                      [***] on the six month anniversary of the Effective Date; and

 

5.1.4                      [***] on the nine month anniversary of the Effective Date.

 

5.2                                Regulatory Milestone Payments.  Emergent shall promptly inform Aridis of the achievement of each of the milestones set forth below by Emergent or any of its Affiliates or, if applicable, any Emergent sublicensee.  In partial consideration of the licenses and other rights granted herein and subject to the terms and conditions set forth in this Agreement, Emergent shall make the following non-refundable milestone payments to Aridis within thirty (30) days of receipt by Emergent from Aridis of a written invoice therefor:

 

5.2.1                      [***] at the first dosing of the first subject in the first Phase I Clinical Trial of a Licensed Product;

 

5.2.2                      [***] at the first dosing of the first subject in the first Phase II Clinical Trial of a Licensed Product;

 

5.2.3                      [***] upon the earlier of (i) the first dosing of the first subject in the first Phase III Clinical Trial of a Licensed Product and (ii) award of a contract executed by HHS, or any successor agency thereto, for the manufacture and delivery of a Licensed Product for placement in the Strategic National Stockpile;

 

5.2.4                      [***] upon the first submission of a Marketing Authorization in the United States, Japan or any EU Member State with respect to a Licensed Product;

 

5.2.5                      [***] upon the First Sale after receipt of the first Marketing Authorization for a Licensed Product;

 

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Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

Emergent shall make the foregoing milestone payments to Aridis for the first Licensed Product per Biodefense Indication within the Field.  These payments will be made only once per Licensed Product per Biodefense Indications within the Field.

 

5.3                                Sales-Based Milestone Payments.  Emergent shall promptly inform Aridis of the achievement of each of the milestones set forth below by Emergent or any of its Affiliates or, if applicable, any Emergent sublicensee.  In partial consideration of the licenses and other rights granted herein and subject to the terms and conditions set forth in this Agreement, Emergent shall make the following non-refundable milestone payments to Aridis within thirty (30) days of receipt by Emergent from Aridis of a written invoice therefor:

 

5.3.1                      [***] upon achieving annual Net Sales of an aggregate amount of One Hundred Million Dollars ($100,000,000);

 

5.3.2                      [***] upon achieving annual Net Sales of an aggregate amount of Two Hundred Million Dollars ($200,000,000); and

 

5.3.3                      [***] upon achieving annual Net Sales of an aggregate amount of Five Hundred Million Dollars ($500,000,000).

 

5.4                                Emergent Royalty Payments .  Subject to Sections 5.5, 5.6, and 5.7, in partial consideration of the licenses and other rights granted herein and subject to the terms and conditions set forth in this Agreement, Emergent, on a Licensed Product-by-Licensed Product basis, shall pay to Aridis on account of sales of such Licensed Product by Emergent or its Affiliates or sublicensees, commencing upon the First Sale of such Licensed Product in such country, royalties in an amount equal to:

 

5.4.1                      [***] on that portion of annual Net Sales of such Licensed Product in such country in such Calendar Year up to [***] ,

 

5.4.2                      [***] on that portion of annual Net Sales of such Licensed Product in such country in such Calendar Year that exceeds [***] but is not more than [***] provided , however that if BYU Technology is used, then the rate shall be [***] and

 

5.4.3                      [***] on that portion of annual Net Sales of such Licensed Product in such country in such Calendar Year that exceeds [***] provided , however that if BYU Technology is used, then the rate shall be [***].

 

5.5                                Royalty Step-Down .  The royalties payable pursuant to Section 5.4 shall be reduced to [***] on a country by country basis, during any period in which there are no Valid Claims of any Aridis Patent that would be infringed by the Exploitation of such Licensed Product in such country in the absence of the license and sublicense grants hereunder.

 

5.6                                Royalty Stacking.  Emergent may reduce the amount of royalties payable to Aridis under Sections 5.4, 5.5 and 5.7 by an amount of up to [***] of any other royalties paid to a Third Party by Emergent or its Affiliates or sublicensees in connection with the Exploitation of a Product

 

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Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

in the Field, in order to practice the Aridis Patents and/or Aridis Know-How; provided (a) the other royalties must be for a stabilization technology incorporated into the Licensed Product, (b) the royalty paid by Emergent to Aridis may be reduced by no more than [***] and (c) the royalty paid by Emergent to Aridis shall not be less than [***].

 

5.7                                Reduction in Royalties for Compulsory Licenses .  In the event that a court or a governmental agency of competent jurisdiction requires Emergent or one of its Affiliates or sublicensees to grant a compulsory license to a Third Party permitting such Third Party to make and sell a Licensed Product in a country in the Territory, then all Net Sales of such Licensed Product sold by such Third Party in such country shall be excluded from the royalty calculations set forth in Section 5.4, and the royalty rate to be paid by Emergent on such Net Sales shall automatically be reduced to the lesser of (a) the applicable royalty rate calculated in accordance with Sections 5.4, 5.5, and 5.6 with respect to such Net Sales, or (b)  [***] of the royalty rate under such compulsory license, during the time period when such compulsory license is in effect and being exercised.

 

5.8                                Royalty Term .  Emergent’s royalty obligations under Sections 5.4, 5.5 and 5.6 shall terminate, on a Licensed Product-by-Licensed Product basis, on the later to occur of (i) the tenth (10th) anniversary of the First Sale of such Licensed Product in such country and (ii) the expiration date in such country of the last to expire of any Aridis Patent that includes at least one Valid Patent Claim covering the Manufacture (if such Licensed Product is Manufactured in such country), use or sale of such Licensed Product in such country.  Upon termination of the royalty obligations of Emergent under this Section 5.8 with respect to a Licensed Product in a country, the license grants to Emergent in Section 3.1 shall become fully paid-up with respect to such Licensed Product in such country.

 

5.9                                Third Party Royalties .  Except for payments for BYU Technology set forth under Section 5.4, in the event that the practice of Aridis Know-How and Aridis Patents as licensed hereunder in the Exploitation of Licensed Products by Emergent, its Affiliates or its sublicensees triggers any payment obligations (whether in the form of royalties or other amounts) on the part of Aridis to one or more Third Parties pursuant to any license or other agreements entered into between Aridis and such Third Party(ies), Aridis shall be solely responsible for such payments.  Nothing in this Agreement shall be construed as an obligation upon Aridis to obtain any licensing rights from any Third Parties for any technology; provided however that Aridis shall have the obligation to use its best efforts to maintain those license rights it has which are needed to satisfy its obligations under this Agreement and the Subcontract..

 

5.10                         Sales to Brigham Young University.  Any sales of Licensed Product to Brigham Young University pursuant to the BYU License shall be excluded from the sales milestones and royalty calculations set forth in Sections 5.3 and 5.4.

 

5.11                         Reports; Payments .  Following the First Sale, Emergent shall furnish to Aridis a written report for each Calendar Quarter showing (a) invoiced sales and Net Sales (for all of Emergent, Affiliates, and sublicensees), (b) the number of units of each Licensed Product sold on a country-by-country basis during the applicable Calendar Quarter, and (c) the amount owed to such Party pursuant to Section 5.4, 5.5, 5.6, and 5.7, as the case may be.   Reports shall be due and

 

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Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

amounts owed to Aridis shall be due and payable sixty (60) days following the close of each Calendar Quarter.

 

5.12                         Audits .

 

5.12.1               Upon the written request of Aridis and not more than once in each Calendar Year, Emergent shall permit an independent certified public accounting firm of internationally recognized standing selected by Aridis, and reasonably acceptable to Emergent, to have access during normal business hours, and upon reasonable prior written notice, to such of the records of Emergent as may be reasonably necessary to verify the accuracy of the reports provided in accordance with Section 5.11, for any Calendar Year ending not more than thirty-six (36) months prior to the date of such request.  The accounting firm shall disclose to the Parties only whether the financial statements and any related invoices are correct or incorrect and the specific details concerning any discrepancies.  If such accounting firm concludes that Emergent owed additional amounts to Aridis during such period, Emergent shall pay Aridis the difference between the amount actually owed, as determined by the accounting firm, and the amount actually paid by Emergent, with interest from the date originally due at the rate provided in Section 5.13, within thirty (30) days after the date on which such accounting firm’s written report is delivered to Aridis.  If such accounting firm concludes that Emergent has overpaid Aridis during such period, Aridis shall pay such difference to Emergent within thirty (30) days after the date of delivery of such report.  If, and only if, Emergent has underpaid Aridis during such period, and the amount of the underpayment is greater than [***] of the total actual amount owed as determined by the accounting firm, Emergent shall bear all costs related to such audit.  In all other cases, Aridis shall bear the cost of such audit.

 

5.12.2               Emergent shall include in each sublicense granted by it pursuant to this Agreement a provision requiring the sublicensee to make reports to Emergent, to keep and maintain records of sales made pursuant to such sublicense and to grant access to such records by Aridis’ independent accountant to the same extent required of Emergent under Section 5.12.1.  Upon the expiration of thirty-six (36) months following the end of any Calendar Year, the calculation of amounts payable with respect to such year shall be binding and conclusive upon Aridis, and Emergent and its licensees or sublicensees, as applicable, shall be released from any liability or accountability with respect to amounts payable for such year.

 

5.12.3               Aridis shall treat all information subject to review under this ARTICLE V in accordance with the confidentiality provisions of ARTICLE IV and shall cause its accounting firm to enter into a reasonably acceptable confidentiality agreement with Emergent obligating such firm to retain all such financial information in confidence pursuant to such confidentiality agreement.

 

5.13                         Payment; Interest .

 

5.13.1               All payments to be made by a Party to the other Party under this Agreement shall be made in United States dollars by wire transfer in immediately available funds to

 

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Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

such bank account designated in writing by the receiving Party from time to time.  Payments shall be free and clear of any taxes (other than withholding and other taxes imposed on the receiving Party, which shall be for the account of such Party), fees or charges, to the extent applicable.  With respect to payments in currencies other than United States dollars, payments shall be calculated based on currency exchange rates for the month in which the invoice is received.  For each month and each currency, such exchange rate shall equal the arithmetic average of the daily exchange rates for such month listed in The Wall Street Journal , Eastern United States Edition, or, if not so available, as otherwise agreed by the Parties.

 

5.13.2               Any payments or portions thereof due hereunder which are not paid on the date such payments are due under this Agreement will bear interest at the prime rate, as published in The Wall Street Journal , Eastern United States Edition, on the last Business Day preceding such date.

 

5.14                         Condition to Emergent Payment .  All the provisions of this Article V are subject to the condition that Aridis successfully amend the BYU License as requested by Emergent in order to allow Aridis to sub-license the BYU Technology to Emergent under the terms that Emergent has requested (the “Condition”).  The Condition shall be removed by written agreement once Emergent is satisfied in its sole discretion that such amendment has been completed.  If the Condition has not been removed within thirty (30) days of execution of this Agreement (“Amendment Deadline”), Emergent shall have the right to terminate this Agreement and shall have no payment obligations to Aridis; provided, however that if the Condition has not been removed by the Amendment Deadline, but Emergent does not provide a notice of termination to Aridis within five (5) days after the expiration of the Amendment Deadline, (a) the Condition shall be deemed satisfied and shall be removed and (b) Emergent shall be required henceforth to satisfy all subsequent payment obligations set forth in this Article V; provided , however that the fees payable under this Article V shall be reduced as agreed upon by the parties to take into account the unavailability of the BYU Technology.  For the avoidance of doubt, the license upfront fees under 5.1.1 and 5.1.2 above shall not accrue unless and until satisfaction or removal of the condition as set out in this section, and shall be payable only 30 days after that satisfaction or removal, upon receipt of a written invoice from Aridis.

 

ARTICLE VI
Complaints, Adverse Event Reporting and Product Recall

 

6.1                                Complaints .  Each Party shall maintain a record of any and all complaints it receives with respect to the Licensed Products.  Each Party shall notify the other Party in reasonable detail of any complaint received by it within thirty (30) days and in any event in sufficient time to allow such other Party to comply with any and all regulatory and other requirements imposed upon it in any country in which the Licensed Products are being marketed or distributed.

 

6.2                                Adverse Event Reporting .  Each Party shall provide the other Party with all information necessary for such other Party to receive in order to comply with all Applicable Law relating to adverse event reporting with respect to the Licensed Products.

 

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Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

6.3                                Product Recall .

 

6.3.1                      Notification and Recall .  Emergent shall have the sole right to decide, in its discretion, whether to conduct a recall of any Licensed Product (except in the case of a government-mandated recall) and the manner in which any such recall shall be conducted.

 

6.3.2                      Recall Expenses .  Emergent shall bear the expenses of any recall of a Licensed Product arising out of its Exploitation of such Licensed Product in the Field in the Territory.

 

ARTICLE VII
Indemnity

 

7.1                                Indemnification of Emergent .  Subject to Section 7.3, Aridis shall indemnify Emergent, its Affiliates and its and their respective directors, officers, employees and agents, and defend and save each of them harmless, from and against any and all losses, damages, liabilities, costs and expenses (including reasonable attorneys’ fees and expenses) in connection with any and all suits, investigations, claims or demands (collectively, “Losses”) arising from or occurring as a result of (a) any material breach by Aridis of this Agreement or (b) any gross negligence or willful misconduct of Aridis, its Affiliates or its other permitted subcontractors in performing Aridis’ obligations under this Agreement or (c) any willful misappropriation of Patents or other Intellectual Property of any Third Party impacting the exercise by Emergent or its Affiliates or sublicensees of rights granted in this Agreement to Exploit the Aridis Patents and Aridis Know- How, except for those Losses for which Emergent has an obligation to indemnify Aridis pursuant to Section 7.2, as to which Losses each Party shall indemnify the other to the extent of their respective liability for the Losses.

 

7.2                                Indemnification of Aridis.  Subject to Section 7.3, Emergent shall indemnify Aridis, its Affiliates and their respective directors, officers, employees and agents, and defend and save each of them harmless, from and against any and all Losses arising from or occurring as a result of (a) any material breach by Emergent of this Agreement, (b) the gross negligence or willful misconduct of Emergent, its Affiliates or its other subcontractors in performing Emergent’s obligations under this Agreement, or (c) the Exploitation of Licensed Products by Emergent or any of its Affiliates or sublicensees, except for those Losses under Section 7.2 (a) and (b) for which Aridis has an obligation to indemnify Emergent and its Affiliates pursuant to Section 7.1, as to which Losses each Party shall indemnify the other to the extent of their respective liability for the Losses.

 

7.3                                Indemnification Procedure .

 

7.3.1                      Notice of Claim .  The indemnified Party shall give the indemnifying Party prompt written notice (an “Indemnification Claim Notice”) of any Losses or discovery of fact upon which such indemnified Party intends to base a request for indemnification under Section 7.1 or 7.2, In no event shall the indemnifying Party be liable for any Losses that result from any delay in providing such notice.  Each Indemnification Claim Notice must contain a description of the claim and the nature and amount of such Loss (to the extent

 

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Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

that the nature and amount of such Loss is known at such time).  The indemnified Party shall furnish promptly to the indemnifying Party copies of all papers and official documents received in respect of any Losses.  All indemnification claims in respect of a Party, its Affiliates or their respective directors, officers, employees and agents shall be made solely by such Party to this Agreement (the “Indemnified Party”).

 

7.3.2                      Third Party Claims .  The obligations of an indemnifying Party under this ARTICLE VII with respect to Losses arising from claims of any Third Party that are subject to indemnification as provided for in Sections 7.1 or 7.2 (a “Third Party Claim”) shall be governed by and be contingent upon the following additional terms and conditions:

 

(a)                                  Control of Defense .  At its option, the indemnifying Party may assume the defense of any Third Party Claim by giving written notice to the Indemnified Party within thirty (30) days after the indemnifying Party’s receipt of an Indemnification Claim Notice.  The assumption of the defense of a Third Party Claim by the indemnifying Party shall not be construed as an acknowledgment that the indemnifying Party is liable to indemnify any Person seeking indemnification in respect of the Third Party Claim, nor shall it constitute a waiver by the indemnifying Party of any defenses it may assert against any such claim for indemnification.  Upon assuming the defense of a Third Party Claim, the indemnifying Party may appoint as lead counsel in the defense of the Third Party Claim any legal counsel selected by the indemnifying Party.  In the event the indemnifying Party assumes the defense of a Third Party Claim, the Indemnified Party shall immediately deliver to the indemnifying Party all original notices and documents (including court papers) received by any indemnified Party in connection with the Third Party Claim.  Should the indemnifying Party assume the defense of a Third Party Claim, the indemnifying Party shall not be liable to the Indemnified Party or any other indemnified Party for any legal expenses subsequently incurred by such indemnified Party in connection with the analysis, defense or settlement of the Third Party Claim.  In the event that it is ultimately determined that the indemnifying Party is not obligated to indemnify, defend or hold harmless an indemnified Party from and against the Third Party Claim, the Indemnified Party shall reimburse the indemnifying Party for any and all costs and expenses (including attorneys’ fees and costs of suit) and any Losses incurred by the indemnifying Party in its defense of the Third Party Claim with respect to such indemnified Party.

 

(b)                                  Right to Participate in Defense .  Without limiting Section 7.3.2(a), any Indemnified Party shall be entitled to participate in, but not control, the defense of such Third Party Claim and to employ counsel of its choice for such purpose; provided , however , that such employment shall be at the Indemnified Party’s own expense unless (i) the employment thereof has been specifically authorized by the indemnifying Party in writing or (ii) the indemnifying Party has failed to assume the defense and employ counsel in accordance with Section 7.3.2(a) (in which case the Indemnified Party shall control the defense).

 

(c)                                   Settlement .  With respect to any Losses relating solely to the payment of money damages in connection with a Third Party Claim and that will not result in the Indemnified Party’s becoming subject to injunctive or other relief or otherwise adversely affect the business of the Indemnified Party in any manner, and as to which the indemnifying Party shall have acknowledged in writing the obligation to indemnify the Indemnified Party hereunder, the

 

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Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

indemnifying Party shall have the sole right to consent to the entry of any judgment, enter into any settlement or otherwise dispose of such Loss, on such terms as the indemnifying Party, in its sole discretion, shall deem appropriate.  With respect to all other Losses in connection with Third Party Claims, where the indemnifying Party has assumed the defense of the Third Party Claim in accordance with Section 7.3.2(a), the indemnifying Party shall have authority to consent to the entry of any judgment, enter into any settlement or otherwise dispose of such Loss provided it obtains the prior written consent of the Indemnified Party (which consent shall not be unreasonably withheld or delayed).  The indemnifying Party shall not be liable for any settlement or other disposition of a Loss by an Indemnified Party that is reached without the written consent of the indemnifying Party.  Regardless of whether the indemnifying Party chooses to defend or prosecute any Third Party Claim, no Indemnified Party shall admit any liability with respect to, or settle, compromise or discharge, any Third Party Claim in a manner that has a materially adverse effect on the indemnifying Party without the prior written consent of the indemnifying Party.

 

(d)                                  Cooperation .  Regardless of whether the indemnifying Party chooses to defend or prosecute any Third Party Claim, the Indemnified Party shall, and shall cause each other indemnified Party to, cooperate in the defense or prosecution thereof and shall furnish such records, information and testimony, provide such witnesses and attend such conferences, discovery proceedings, hearings, trials and appeals as may be reasonably requested in connection therewith.  Such cooperation shall include access during normal business hours afforded to indemnifying Party to, and reasonable retention by the Indemnified Party of, records and information that are reasonably relevant to such Third Party Claim, and making indemnified Parties and other employees and agents available on a mutually convenient basis to provide additional information and explanation of any material provided hereunder, and the indemnifying Party shall reimburse the Indemnified Party for all its reasonable out-of-pocket expenses in connection therewith.

 

(e)                                   Expenses .  Except as provided above, the costs and expenses, including fees and disbursements of counsel, incurred by the Indemnified Party in connection with any claim shall be reimbursed on a Calendar Quarter basis by the indemnifying Party, without prejudice to the indemnifying Party’s right to contest the Indemnified Party’s right to indemnification and subject to refund in the event the indemnifying Party is ultimately held not to be obligated to indemnify the Indemnified Party.

 

7.4                                LIMITATION ON DAMAGES.  SUBJECT TO SECTIONS 7.1 AND 7.2, EXCEPT IN CIRCUMSTANCES OF GROSS NEGLIGENCE OR INTENTIONAL MISCONDUCT, NONE OF EMERGENT, ARIDIS OR ANY OF THEIR RESPECTIVE AFFILIATES SHALL BE LIABLE FOR SPECIAL, INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES OF THE OTHER (INCLUDING FOR LOST PROFITS, MILESTONES OR ROYALTIES), WHETHER IN CONTRACT, WARRANTY, NEGLIGENCE, TORT, STRICT LIABILITY OR OTHERWISE, ARISING OUT OF (A) ANY BREACH OF OR FAILURE TO PERFORM ANY OF THE PROVISIONS OF THIS AGREEMENT, OR (B) THE EXPLOITATION BY EMERGENT OF THE LICENSED PRODUCTS.

 

7.5                                Insurance .  Each Party shall have and maintain such type and amounts of liability insurance (or program of self-insurance) covering the Exploitation of the Licensed Products as is

 

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Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

normal and customary in the pharmaceutical industry generally for a company similarly situated, and shall upon request provide the other Party with a copy of its certificates of insurance in that regard, along with any amendments and revisions thereto.

 

7.6                                Emergent acknowledges that the provisions of BYU License Section 15, product liability and general indemnification, apply to it as sublicensee, and that Emergent, Affiliates and sublicensees shall have the obligations of “LICENSEE” therein with respect to Licensed Products hereunder, notwithstanding any provision in this Agreement that may be inconsistent.

 

ARTICLE VIII
Representations and Warranties

 

8.1                                Representations and Warranties .  Each Party hereby represents, warrants and covenants to the other Party as of the Effective Date as follows:

 

8.1.1                      Such Party (a) has the corporate power and authority to enter into this Agreement and perform its obligations hereunder, and (b) has taken all necessary corporate action on its part required to authorize the execution and delivery of this Agreement and the performance of its obligations hereunder.

 

8.1.2                      This Agreement has been duly executed and delivered on behalf of such Party and constitutes a legal, valid and binding obligation of such Party and is enforceable against it in accordance with its terms subject to the effects of bankruptcy, insolvency or other laws of general application affecting the enforcement of creditor rights and judicial principles affecting the availability of specific performance and general principles of equity, whether enforceability is considered a proceeding at law or equity.

 

8.1.3                      The execution and delivery of this Agreement and the performance of such Party’s obligations hereunder (a) do not conflict with or violate any requirement of any provision of the articles of incorporation, bylaws or any similar instrument of such Party in any material way, and (b) do not conflict with, violate, or breach or constitute a default or require any consent under, any contractual obligation or court or administrative order by which such Party is bound.

 

8.1.4                      All necessary consents, approvals and authorizations of all regulatory and governmental authorities and other Persons required to be obtained by such Party in connection with the execution and delivery of this Agreement and the performance of its obligations hereunder have been obtained.

 

8.2                                Additional Representations, Warranties and Covenants of Emergent .   Emergent represents, warrants and covenants to Aridis that:

 

(a)                                  Emergent is a corporation duly organized and in good standing under the laws of the State of Delaware, and has full power and authority and the legal right to own and operate its property and assets and to carry on its business as it is now being conducted and as it is contemplated to be conducted by this Agreement.

 

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Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

(b)                                  Neither Emergent nor any of its Affiliates has been debarred or is subject to debarment.  Neither Emergent nor any of its Affiliates will use in any capacity, in connection with the performance of its obligations or the exercise of its rights under this Agreement, any Person who has been debarred pursuant to Section 306 of the FFDCA or who is the subject of a conviction described in such section.  Emergent will inform Aridis in writing immediately if it or any Person who is performing any such 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 Emergent’s knowledge, is threatened, relating to the debarment or conviction of Emergent, any of its Affiliates or any other Person performing such activities.

 

8.3                                Additional Representations, Warranties and Covenants of Aridis .  Aridis represents, warrants and covenants to Emergent that:

 

8.3.1                      Aridis is a corporation duly organized, validly existing and in good standing under the laws of California, and has full power and authority and the legal right to own and operate its property and assets and to carry on its business as it is now being conducted and as it is contemplated to be conducted by this Agreement.

 

8.3.2                      Neither Aridis nor any of its Affiliates has been debarred or is subject to debarment.  Neither Aridis nor any of its Affiliates will use in any capacity, in connection with the performance of its obligations or the exercise of its rights under this Agreement, any Person who has been debarred pursuant to Section 306 of the FFDCA or who is the subject of a conviction described in such section.  Aridis will inform Emergent in writing immediately if it or any Person who is performing any such 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 Aridis’ knowledge and belief, is threatened, relating to the debarment or conviction of Aridis, any of its Affiliates or any other Person performing such activities.

 

8.3.3                      To Aridis’ knowledge, (a) it is the sole and exclusive owner of all right, title and interest in and to the Patents listed on Schedule 1.7 with the exception of those Patents identified on Schedule 1.7 as being those owned by Brigham Young University and licensed to Aridis pursuant to the BYU License; (b) except as provided in Schedule 1.7, such rights are not subject to any encumbrance, lien or claim of ownership by any Third Party; and (c) with the exception of the Patents identified as those owned by Brigham Young University and licensed to Aridis pursuant to the BYU License, the grant, use or practice of the licenses granted in Section 3.1 will not trigger any payment obligations of Aridis or any of its Affiliates to any of Aridis’ Affiliates or to any Third Party; Schedule 1.7 is a complete and accurate list as of the Effective Date of all Patents owned or otherwise Controlled by Aridis and its Affiliates and Aridis has disclosed or made available to Emergent all Aridis Know-How in existence as of the Effective Date.

 

8.3.4                      To Aridis’ knowledge, the Aridis Patents as of the Effective Date are subsisting and are not invalid or unenforceable, in whole or in part.  To Aridis’ knowledge and belief, the Information and Inventions owned or Controlled by Aridis or its Affiliates (the “Aridis Information and Inventions”), the Aridis Patents, the Aridis Know-How and

 

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Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

any Regulatory Documentation owned or Controlled by Aridis or its Affiliates (the “Aridis Regulatory Documentation”), existing as of the Effective Date have not constituted or involved the misappropriation of trade secrets or other Intellectual Property or other rights of any Third Party.  Aridis has complied and at all applicable times during the term of this Agreement, will comply with the duties of disclosure, candor and good faith dealing with the USPTO as required by 37 C.F.R. §1.56 and with any foreign equivalents thereto imposed by foreign national or supranational patent offices.  Aridis has complied and at all applicable times during the term of this Agreement will comply with any notice requirements imposed by the United States law and regulations for Aridis Patents conceived as the result of funding by the United States government.  There are no claims, judgments or settlements against or amounts with respect thereto owed by Aridis or any of its Affiliates relating to the Aridis Information and Inventions, the Aridis Patents, the Aridis Know-How or the Aridis Regulatory Documentation,.  No claim or litigation has been brought or threatened by any Person alleging, and Aridis is not aware of any claim, whether or not asserted, that (i) the Aridis Patents are invalid or unenforceable or (ii) the Aridis Information and Inventions, the Aridis Patents, the Aridis Know-How, or Aridis Regulatory Documentation or the disclosing, copying, making, assigning, or licensing of the Aridis Information and Inventions, the Aridis Patents, or the Aridis Know-How, Aridis Regulatory Documentation, or the Exploitation of products embodying the Aridis Information and Inventions, the Aridis Patents, the Aridis Know-How, or the Aridis Regulatory Documentation, including the Exploitation of any Licensed Product, violates, infringes or otherwise conflicts with any intellectual property or proprietary right of any Third Party.

 

8.3.5                      Except for the license grants in Section 3.1, neither Aridis nor any of its Affiliates has, directly or indirectly, expressly or by implication, by action or omission or otherwise (i) assigned, transferred, conveyed or otherwise encumbered any right, title or interest in or to the Aridis Patents, the Aridis Know-How or the Aridis Regulatory Documentation in the Field; (ii) granted any license or other right, title or interest in or to the Aridis Patents, the Aridis Know-How or the Aridis Regulatory Documentation in the Field; or (iii) agreed to or is otherwise bound by any covenant not to sue for any infringement, misuse or otherwise with respect to the Aridis Patents, the Aridis Know-How or the Aridis Regulatory Documentation in the Field.

 

8.3.6                      Aridis agrees not to, and agrees to cause its Affiliates not to, directly or indirectly, expressly or by implication, by action or omission or otherwise (i) assign, transfer, convey or otherwise encumber any right, title or interest in or to the Aridis Patents, the Aridis Know-How or the Aridis Regulatory Documentation, (ii) grant any license or other right, title or interest in or to the Aridis Patents, the Aridis Know-How or the Aridis Regulatory Documentation in any manner, or (iii) agree to or otherwise become bound by any covenant not to sue for any infringement, misuse or other action or inaction with respect to the Aridis Patents, the Aridis Know-How or the Aridis Regulatory Documentation, in each case ((i), (ii), and (iii)) that is inconsistent with the grants, assignments and other rights reserved to Emergent and its Affiliates under this Agreement.

 

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Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

8.3.7                      To the knowledge of Aridis and its Affiliates, there is no actual or threatened infringement by a Third Party of the Aridis Patents, the Aridis Know-How or the Aridis Regulatory Documentation.

 

8.4                                DISCLAIMER OF WARRANTY .  EXCEPT FOR THE EXPRESS WARRANTIES SET FORTH IN SECTIONS 8.1, 8.2 AND 8.3, NEITHER PARTY MAKES ANY REPRESENTATIONS OR GRANTS ANY WARRANTIES, EXPRESS OR IMPLIED, EITHER IN FACT OR BY OPERATION OF LAW, BY STATUTE OR OTHERWISE, AND EACH PARTY SPECIFICALLY DISCLAIMS ANY OTHER WARRANTIES, WHETHER WRITTEN OR ORAL, OR EXPRESS OR IMPLIED, INCLUDING ANY WARRANTY OF QUALITY, MERCHANTABILITY OR FITNESS FOR A PARTICULAR USE OR PURPOSE OR ANY WARRANTY AS TO THE VALIDITY OF ANY PATENTS OR THE NON-INFRINGEMENT OF ANY INTELLECTUAL PROPERTY RIGHTS OF THIRD PARTIES.

 

ARTICLE IX
Intellectual Property Provisions

 

9.1                                Ownership of Project Technology.  Ownership of Project Technology shall be determined by Article 11 of the Subcontract.  All Project Technology owned by Aridis, including Formulation Project Technology and Other Technology, shall be included in the licenses granted in this Agreement.  For avoidance of doubt, Aridis Patents shall include Patents owned by Aridis pursuant to the terms of the Subcontract, and Aridis Know-How shall include know-how owned by Aridis pursuant to the terms of the Subcontract.

 

9.2                                Ownership of Other Intellectual Property .  For Patents and know-how conceived or reduced to practice during the term of this Agreement and which are not Project Technology, all right, title and interest shall vest according to inventorship as provided by United States patent law.

 

9.3                                Ownership of Regulatory Documentation and Approvals .  Subject to the licenses and rights of reference granted hereunder, as between the Parties, each Party shall own all right, title and interest in and to any Regulatory Approvals granted to, and any Regulatory Documentation developed by, or on behalf of such Party, its Affiliates, or sublicensees.

 

9.4                                Development and Use of Trademarks .  Emergent shall have the sole right to select the trademarks to be used with respect to the commercialization of the Licensed Products.  Without the express permission of Emergent, Aridis shall not, and shall not permit its Affiliates to use in their respective businesses, any trademark that is confusingly similar to, misleading or deceptive with respect to, or that dilutes any such trademark selected by Emergent, or any part of such trademarks.

 

9.5                                Prosecution of Aridis Patents .

 

9.5.1                      Reporting of New Inventions Aridis shall promptly report to Emergent in writing any new inventions which encompass Aridis Know-How or Aridis Patents and which may be reasonably deemed necessary or useful to Exploit Licensed Product in the

 

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Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

Field during the term of this Agreement.  Emergent shall have the opportunity to review and comment on any patent applications relating to such new inventions prior to filing.

 

9.5.2                      Prosecution Aridis shall provide Emergent once per year with an updated list of all Aridis Patents, which shall include their filing date, priority date, grant date and filing status.

 

(a)                                  Subject to Section 9.5.5 and unless otherwise instructed by Emergent, Aridis shall diligently file and prosecute the Exclusive Field Aridis Patents in the countries and regions specified in Schedule 9.5.2 ( provided that this obligation shall not apply to the BYU Technology or any other Aridis Patents which have already entered national phase prosecution prior to the Effective Date of this Agreement).  On issuance and unless otherwise instructed by Emergent, Aridis shall maintain Exclusive Field Aridis Patents in full force in such countries.  Emergent shall reimburse Aridis for the reasonable costs and expenses of filing, prosecution and maintenance of Exclusive Field Aridis Patents.  Aridis will, and will instruct its counsel to, cooperate fully with Emergent with respect to patent prosecution matters relating to Exclusive Field Aridis Patents.  Aridis shall provide Emergent with copies of all material submissions and correspondence with any patent authorities for the Exclusive Field Aridis Patents, and shall provide Emergent with an opportunity to comment upon any such correspondence such that Emergent will have a reasonable time to respond to such submissions, such period to be no less than thirty (30) days to the extent reasonably possible.  The aforementioned notwithstanding, with respect to applications that relate to BYU technology Aridis shall only be required to provide Emergent with such submissions, correspondence, and commenting rights if the applications are in its possession or control and all obligations herein (throughout this article 9) apply only to the extent of Aridis’ rights under the BYU License.

 

(b)                                  With respect to the Other Aridis Patents, Aridis shall be responsible, at its sole cost and expense, for obtaining, prosecuting and maintaining the Other Aridis Patents unless otherwise agreed.  Aridis shall use commercially reasonable efforts to obtain, prosecute and maintain Other Aridis Patents which are necessary or reasonably useful to Aridis in developing one or more Licensed Products and to Emergent in Exploiting one or more Licensed Products.  Aridis shall keep Emergent reasonably informed of the filing status and prosecution of such patents by forwarding copies of any material correspondence from patent authorities relating thereto indicating that patent rights in any given jurisdiction are granted, lost, forfeited, extended, restored, or terminated or otherwise altered.

 

9.5.3                      Interference, Opposition, Re-examination and Reissue of Aridis Patents .  In addition to Aridis’ other obligations pursuant to this Section 9, for the Aridis Patents:

 

(a)                                  Aridis shall inform Emergent of any request for, or filing or declaration of, any interference, opposition, revocation or re-examination, or equivalent to any of the foregoing actions, relating to any Aridis Patents within thirty (30) days of such event.  Aridis shall consult with Emergent to determine the appropriate course of action with respect to such proceeding;

 

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Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

(b)                                  Aridis shall not institute any re-examination, or reissue proceeding relating to any Exclusive Field Aridis Patent without the prior written consent of Emergent, which consent shall not be unreasonably withheld;

 

(c)                                   in connection with any interference, opposition, reissue, revocation or reexamination proceeding relating to Exclusive Field Aridis Patents or Other Aridis Patents that may be reasonably deemed necessary or useful to Exploit Licensed Product in the Field, whether commenced prior to the Effective Date or at any time prior to termination or expiration of this Agreement, Emergent and Aridis shall cooperate fully and shall provide each other with any information or assistance that either may reasonably request.  Aridis shall keep Emergent informed of developments in any such action and proceeding, including, to the extent permissible, the status of any settlement negotiations and the terms of any offer related thereto; and

 

(d)                                  each Party shall bear its own expense of any interference, opposition, reexamination, or reissue proceeding relating to the Aridis Patents.

 

9.5.4                      Patent Term Restoration .

 

(a)                                  For Exclusive Field Aridis Patents, Aridis shall seek patent term restoration where such term restoration appears to be available pursuant to 35 USC § 156 and/or pursuant to the equivalent provisions of other national intellectual property laws or supplemental protection certificates or their equivalents in any country in the Territory where applicable Aridis Patents have issued.

 

(b)                                  For Other Aridis Patents which may be reasonably deemed necessary or useful to Exploit Licensed Product in the Field, Emergent may request that Aridis seek patent term restoration where such term restoration appears to be available pursuant to 35 USC § 156 and/or pursuant to the equivalent provisions of other national intellectual property laws or supplemental protection certificates or their equivalents in any country in the Territory where applicable Aridis Patents have issued, provided however , that Aridis may refuse to seek such restoration if and when procuring such restoration is not deemed commercially reasonable.  In the event that Aridis refuses to seek patent term restoration under this section, Emergent may pay for such restoration to be pursued on Aridis’s behalf.  To the extent that such restoration is successful, the term for the extended patents (to the extent such term is thereby extended) shall be treated as Aridis Know-How for the purposes of Section 5 and subject to the royalty step- down provisions of Section 5.5

 

9.5.5                      Election not to File, Prosecute or Maintain .

 

(a)                                  For Exclusive Field Aridis Patents, if Aridis elects not (i) to pursue in any country the filing, prosecution (including any interferences, re-issue proceedings or re-examination) or maintenance (including the defense of oppositions) of such Aridis Patents; or (ii) to take any other action with respect to such Aridis Patents in a country that is necessary or useful to establish or preserve rights thereto, then Aridis shall notify Emergent promptly in writing to enable Emergent to meet any deadline by which an action must be taken to establish or preserve a right in such Aridis Patents in such country; provided, however, that the written notice shall be made at least thirty (30) days prior to such deadline.  Emergent shall have the right, but not the

 

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Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

obligation, to pursue the filing or registration, or support the continued prosecution or maintenance, of such Aridis Patents in such country through patent attorneys of its choice.  If Emergent elects to pursue such filing or registration, as the case may be, or continue such support, then Emergent shall notify Aridis of such election and Aridis shall reasonably cooperate with Emergent in this regard.  Such filings and registrations (including any rights that would have lapsed but for action taken by Emergent) with respect to the Exclusive Field Aridis Patents shall be treated as Aridis Know-How for the purposes of Section 5 and subject to the royalty step-down provisions of Section 5.5.

 

9.6                                Enforcement of Aridis Patents .

 

9.6.1                      Rights and Procedures .  If either Party determines that any Aridis Patent or Aridis Know-How is being infringed or misappropriated by a Third Party’s activities and that such infringement or misappropriation could affect the exercise by Emergent of its rights and obligations under this Agreement, it shall notify the other Party in writing and provide it with any evidence of such infringement or misappropriation that is reasonably available.  Aridis and Emergent shall meet and discuss in good faith the infringement, misappropriation or certification, and, if desired by Emergent and to the extent not inconsistent with rights granted by Aridis to Third Parties, shall in good faith negotiate terms under which Emergent may pursue infringement proceedings against the infringing, misappropriating, or certification filing Third Party.  Such negotiation shall take into account the scope of rights granted under this Agreement and allow pursuit of infringement to the extent impacting the rights granted hereunder, and shall provide appropriate sharing of any awards and settlement (in the case of BYU technology, including sharing with BYU), including any Emergent lost sales or lost profits, and appropriate reimbursement of Aridis and Affiliate and BYU and Emergent costs, if any.  All costs of such proceedings shall be borne by the instigating Party and recovered first out of any settlement or award.

 

9.6.2                      Certification Under FFDCA .  Aridis shall inform Emergent of any certification regarding any Aridis Patents that Aridis receives pursuant to either 21 U.S.C. §§355(b)(2)(A)(iv) or (j)(2)(A)(vii)(IV) or such similar laws as may exist in jurisdictions other than the United States, and shall provide Emergent with a copy of such certification within five (5) days of receipt.  Aridis’ and Emergent’s rights with respect to the initiation and prosecution of any legal action as a result of such certification or any recovery obtained as a result of such legal action shall be as defined in Section 9.6.1.

 

9.6.3                      Certification Under Drug Price Competition and Patent Restoration Act .  Aridis and Emergent each shall immediately give notice to the other of any certification of which they become aware that a Third Party files under the United States Drug Price Competition and Patent Term Restoration Act of 1984 claiming that Aridis Patents covering Licensed Products are invalid or that infringement will not arise from the manufacture, use or sale of Licensed Products by such Third Party.  Aridis’ and Emergent’s rights with respect to the initiation and prosecution of any legal action as a result of such certification or any recovery obtained as a result of such legal action shall be as defined in Section 9.6.1.

 

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Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

9.7                                Infringement of Third Party Rights Notification of Aridis Litigation .  In the event that a Third Party institutes a suit against Aridis or its Affiliates for Patent infringement, a declaratory action of noninfringement and/or invalidity, trade secret misappropriation or other Intellectual Property-related action, Aridis shall notify Emergent in writing within thirty (30) days of learning of such suit.

 

ARTICLE X
Term; Termination; Remedies

 

10.1                         Term and Expiration .  This Agreement shall become effective as of the Effective Date and unless terminated earlier pursuant to this ARTICLE X shall continue in effect until expiration of all royalty obligations hereunder, following which Emergent shall have a fully paid, nonexclusive, irrevocable license under the Aridis Know How to Exploit Licensed Products.

 

10.2                         Termination by Emergent without Cause .  Emergent shall have the right to terminate this Agreement in its entirety or with respect to one or more countries and with respect to one or more Licensed Products, at any time in its sole discretion, upon thirty (30) days’ written notice to Aridis.

 

10.3                         Termination by Mutual Agreement of the Parties .  This Agreement may be terminated by mutual agreement of the Parties at any time during the term of this Agreement for any reason.

 

10.4                         Consequences of a Material Breach by Either Party .

 

10.4.1               In the event that either Party (the “Breaching Party”) shall be in material breach in the performance of any of its material obligations under this Agreement, in addition to any other right and remedy the other Party (the “Complaining Party”) may have, the Complaining Party shall be entitled to the remedies set forth in this Section 10.4 if such material breach remains uncured ninety (90) days’ after receipt by the Breaching Party of a notice of breach, specifying the breach; provided , however that if such breach cannot be cured within ninety (90) days but the Breaching Party is making a bona fide effort to cure such breach, the commencement of the remedies set forth in Section 10.4 shall be delayed in order to permit the Breaching Party a reasonable period of time to remedy the breach, which shall be negotiated in good faith by the Parties.

 

10.4.2               Any dispute between the Parties as to whether a material breach has occurred by one Party shall be resolved in accordance with Section 11.8.

 

10.4.3               In the event that it is determined pursuant to Section 10.4 and/or Section 11.8 that a material breach has occurred, the Complaining Party shall be entitled to the following:

 

(a)                                  In the event that Emergent is the Complaining Party and it is determined that Aridis has committed a material breach, the Parties agree that the royalties required pursuant to Section 5.4 shall be reduced by [***] and all subsequent milestone payment requirements

 

30



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

pursuant to Sections 5.2 and 5.3 shall be held until determination of monetary damages by a single arbitrator pursuant to the Commercial Arbitration Rules of the American Arbitration Association then in effect (subject to the limitation of liability set out in Section 7.4)

 

(b)                                  In the event that Aridis is the Complaining Party and it is determined that Emergent has committed a material breach, the Parties agree that the remedy shall be monetary compensation; provided , however that Aridis in all circumstances retains the right to: (i) terminate this Agreement in the event that Emergent: (x) challenges the validity or enforceability of one of the Aridis Patents unless such challenge is in defense of a claim of or action for infringement or misappropriation brought by Aridis, (y) fails to pay five (5) consecutive payments required under Section 5 hereunder that are finally judicially determined to be due and owing or (z) fails to satisfy indemnification payment obligations that are finally judicially determined to be due and owing or (ii) pursue specific performance of obligations of Emergent in the event of a material breach of Article 3, Article 6, Article 7, and Section 8.2 (for avoidance of doubt, the Parties agree that Aridis retains all rights in law (to enforce patents, pursue infringement, or otherwise) whether pertaining to Emergent or any sublicensee or any other Third Party with respect to any practice of Aridis Know-how or Aridis Patents that is not authorized by the scope of the license grant in Article 3).  For a material payment breach, Aridis shall be entitled to an amount equal to any payment amounts outstanding plus [***] of the total outstanding payment amount.  For any other material breach, Aridis shall be entitled to an amount to be determined by a single arbitrator pursuant to the Commercial Arbitration Rules of the American Arbitration Association then in effect (subject to the limitation of liability set out in Section 7.4).

 

10.4.4               Rights Cumulative .  The rights and remedies in this Section 10.4 shall be cumulative and in addition to any other rights or remedies that may be available hereunder.

 

10.5                         Accrued Rights; Survival; Work in Progress .

 

10.5.1               Accrued Rights .  Termination or expiration of this Agreement for any reason shall be without prejudice to any rights that shall have accrued to the benefit of a Party prior to such termination or expiration.  Such termination or expiration shall not relieve a Party from obligations that are expressly indicated to survive the termination or expiration of this Agreement.

 

10.5.2               Survival .  Sections 4, 5.11, 5.12, 5.13, 10.7, 11.3, 11.5, 11.6, 11.7, 11.9, 11.11, 11.13, and this Section 10.5, and ARTICLE IV, VI, and VII, shall survive the termination or expiration of this Agreement for any reason.  In addition, Section 10.4 shall survive the termination of this Agreement by Emergent.

 

10.5.3               Work-in-Progress .  Upon termination of this Agreement by Aridis pursuant to Section 10.4, Emergent shall be entitled to (i) finish any work-in-progress for a period of one hundred eighty (180) days following termination, (ii) deliver Licensed Product under a Government Procurement Contract, and (iii) for the duration of the shelf-life of any inventory of the Licensed Products that remains on hand as of the date of the termination, sell such inventory so long as Emergent pays Aridis the royalties applicable

 

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Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

to said subsequent sales in accordance with the terms and conditions set forth in this Agreement.

 

10.6                         Termination upon Insolvency .  Either Party may terminate this Agreement upon thirty (30) days’ written notice if the other Party shall file in any court or agency pursuant to any statute or regulation of any state, country or jurisdiction, a petition in bankruptcy or insolvency or for reorganization or for an arrangement or for the appointment of a receiver or trustee of that Party or of its assets, or if the other Party proposes a written agreement of composition or extension of its debts, or if the other Party shall be served with an involuntary petition against it, filed in any insolvency proceeding, and such petition shall not be dismissed within sixty (60) days after the filing thereof, or if the other Party shall propose or be a Party to any dissolution or liquidation, or if the other Party shall make an assignment for the benefit of its creditors.

 

10.7                         Rights in Bankruptcy .  All rights and licenses granted under or pursuant to this Agreement by Aridis are, and shall otherwise be deemed to be, for purposes of Section 365(n) of the United States Bankruptcy Code, licenses of right to “intellectual property” as defined under Section 101 of the United States Bankruptcy Code.  The Parties agree that Emergent and its Affiliates, as licensees of such rights under this Agreement, shall retain and may fully exercise all of their rights and elections under the United States Bankruptcy Code.  The Parties further agree that, in the event of the commencement of a bankruptcy proceeding by or against Aridis under the United States Bankruptcy Code, Emergent shall be entitled to a complete duplicate of (or complete access to, as appropriate) any such intellectual property and all embodiments of such intellectual property, which, if not already in Emergent’s possession, shall be promptly delivered to it (a) upon any such commencement of a bankruptcy proceeding upon Emergent’s written request therefor, unless Aridis elects to continue to perform all of its obligations under this Agreement or (b) if not delivered under clause (a) above, following the rejection of this Agreement by or on behalf of Aridis upon written request therefor by Emergent.

 

ARTICLE XI
Miscellaneous

 

11.1                         Force Majeure .  Neither Party shall be held liable or responsible to the other Party or be deemed to have defaulted under or breached this Agreement for failure or delay in fulfilling or performing any term of this Agreement, when such failure or delay is caused by or results from causes beyond the reasonable control of the non-performing Party, including fires, floods, embargoes, shortages, epidemics, quarantines, war, acts of war (whether war be declared or not), insurrections, riots, civil commotion, strikes, lockouts or other labor disturbances, acts of God or acts, omissions or delays in acting by any governmental authority.  The non-performing Party shall notify the other Party of such force majeure as soon as practicable after such occurrence by giving written notice to the other Party stating the nature of the event, its anticipated duration, and any action being taken to avoid or minimize its effect.  The suspension of performance shall be of no greater scope and no longer duration than is necessary and the non- performing Party shall use commercially reasonable efforts to remedy its inability to perform; provided , however , that in the event the suspension of performance continues for one hundred and eighty (180) days after the date of the occurrence, the Parties shall meet and discuss in good faith how best to proceed.

 

32


 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

11.2                         Export Control Regulations .  The rights and obligations of the Parties under this Agreement shall be subject in all respects to United States laws and regulations, as shall from time to time govern (i) the license and delivery of technology and products between the United States and other countries in the Territory, or (ii) the disclosure in the United States to a foreign national, unless such individual has been granted U.S. citizenship, permanent residence, or asylee status (a “deemed export,” as that term is defined in 15 C.F.R. § 734.2(b)(2)(ii)), including in each case ((i) and (ii)) the United States Foreign Assets Control Regulations, Transaction Control Regulations and Export Control Regulations, as amended, and any successor legislation issued by the Department of Commerce, International Trade Administration, Office of Export Licensing.  Without in any way limiting the provisions of this Agreement, each Party agrees that, unless prior authorization is obtained from the Office of Export Licensing, it shall not export, re-export, transship, or “release” (as that term is defined in 15 C.F.R. § 734.2(b)(3)), directly or indirectly, to any country, any of the Information and Inventions or Confidential Information disclosed to it by the other Party if such export would violate the laws of the United States or the regulations of any department or agency of the United States Government.

 

11.3                         Assignment .  Without the prior written consent of the other Party, neither Party shall sell, transfer, assign, delegate, pledge or otherwise dispose of, whether voluntarily, involuntarily, by operation of law or otherwise, this Agreement or any of its rights or duties hereunder; provided , however , that either Party may, without such consent, assign the benefit of this Agreement and its rights hereunder to an Affiliate; provided , further , that either Party may, without the consent of the other, assign this Agreement and its rights and duties hereunder to the purchaser of all or substantially all of its assets associated with the business to which this Agreement relates, or any Third Party pursuant to or in connection with any agreement and plan of merger, acquisition, consolidation, reorganization, spin-off, split-up, liquidation or other similar corporate transaction.  Any attempted assignment or delegation in violation of the preceding sentence shall be void and of no effect.  Any assignment intended to be made by Aridis to an entity that at the time of such assignment is a competitor of Emergent with respect to the Exclusive Indications (“Competitor”) shall be contingent upon Aridis receiving written confirmation from the assignee of its agreement to abide by the obligations of Aridis hereunder.  In the event of a merger, acquisition, consolidation or other similar corporate transaction between Aridis and a Competitor, Aridis shall return to Emergent any documents, Information and Inventions, data and materials received from Emergent or relevant for the Exploitation of the Licensed Products.  All validly assigned and delegated rights and obligations of the Parties hereunder shall be binding upon and inure to the benefit of and be enforceable by and against the successors and permitted assigns of Emergent or Aridis, as the case may be.  In the event either Party seeks and obtains the other Party’s consent to assign or delegate to a Third Party its rights or obligations to the other Party, the assignee or transferee shall assume all obligations of its assignor or transferor under this Agreement.

 

11.4                         Severability .  If any provision of this Agreement is held to be illegal, invalid or unenforceable under any present or future law, and if the rights or obligations of any Party under this Agreement will not be materially and adversely affected thereby, (a) such provision shall be fully severable, (b) this Agreement shall be construed and enforced as if such illegal, invalid or unenforceable provision had never compromised a part hereof, (c) the remaining provisions of this

 

33



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

Agreement shall remain in full force and effect and shall not be affected by the illegal, invalid or unenforceable provision or by its severance herefrom, and (d) in lieu of such illegal, invalid or unenforceable provision, there shall be added automatically as a part of this Agreement a legal, valid and enforceable provision as similar in terms to such illegal, invalid or unenforceable provision as may be possible and reasonably acceptable to the Parties herein.  To the fullest extent permitted by applicable law, each Party hereby waives any provision of law that would render any provision hereof prohibited or unenforceable in any respect.

 

11.5                         Notices .  All notices or other communications which are required or permitted hereunder shall be in writing and sufficient if delivered personally, sent by facsimile (promptly confirmed by personal delivery or courier as provided herein) or sent by overnight courier, addressed as follows:

 

if to Aridis, to:
Aridis Pharmaceuticals
5941 Optical Ct.
San Jose, CA 95138
Attn:  Vu L. Truong, PhD
Facsimile: 408-960-3822

 

with a copy for legal matters to:

 

if to Emergent, to:
Emergent Product Development Gaithersburg Inc.
300 Professional Drive
Gaithersburg, MD 20879, U.S.A.
Attn:  President
Facsimile:

 

with a copy to:
Emergent BioSolutions Inc.
2273 Research Blvd. Suite 400
Rockville, MD 20850
Attention: General Counsel
Facsimile No.: +1-301-795-1899

 

or to such other address as the Party to which notice is to be given may have furnished to the other Party in writing in accordance herewith.  Any such communication shall be deemed to have been given when delivered if personally delivered on a Business Day, when transmitted if sent by facsimile (in accordance with this Section 11.5) on a Business Day, and on the second Business Day after dispatch if sent by internationally-recognized courier.  It is understood and agreed that this Section 11.5 is not intended to govern the day-to-day business communications necessary between the Parties in performing their duties, in due course, under the terms of this Agreement.

 

34



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

11.6                         Governing Law .  This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, without reference to the rules of conflict of laws thereof.  Either Party commencing an action, suit or proceeding under this Agreement may do so in a venue of the States of Delaware or California and the Parties consent to the jurisdiction of the courts of those States.

 

11.7                         Equitable Relief .  The Parties acknowledge and agree that the restrictions set forth in ARTICLE IV of this Agreement are reasonable and necessary to protect the legitimate interests of the other Party and that such other Party would not have entered into this Agreement in the absence of such restrictions, and that any violation or threatened violation of any provision of ARTICLE IV will result in irreparable injury to such other Party.  Each Party also acknowledges and agrees that in the event of a breach or threatened breach of any provision of ARTICLE IV, the non-breaching Party shall be entitled to preliminary and permanent injunctive relief, without the necessity of proving irreparable injury or actual damages and without the necessity of having to post a bond, as well as to an equitable accounting of all earnings, profits and other benefits arising from any such violation.  The rights provided in the immediately preceding sentence shall be cumulative and in addition to any other rights or remedies that may be available to such Party.  Nothing in this Section 11.7 is intended, or should be construed, to limit either Party’s right to preliminary and permanent injunctive relief or any other remedy for a breach of any other provision of this Agreement.

 

11.8                         Dispute Resolution .  In the event that either Party provides the other with notice specifying a material breach or notice of intent to terminate this Agreement pursuant to Section 10.4, the Parties shall meet to resolve the matter by good faith negotiations after the delivery of the notice of breach.  If the matter has not been resolved within six (6) Business Days of either Party requesting negotiations, then either Party may elect to refer the matter to expert resolution, by submission to a neutral and qualified subject matter expert reasonably acceptable to both Parties.  The Parties shall agree with the expert on the terms of his/her appointment.  Such expert shall act as an expert and not an arbitrator.  The expert shall be obligated and expected to treat both Parties fairly in the process and both Parties shall have reasonable access rights to such expert.  The Parties shall cooperate with the expert’s reasonable requests for assistance in connection with its evaluation hereunder.  The expert shall make determination as to the presence or absence of material breach.  The decision of the independent expert shall be given in writing.  The Parties shall be bound by the expert’s determination, absent partiality or manifest error.

 

11.9                         No Benefit to Third Parties .  Except as expressly set forth in Section 2.6, the representations, warranties, covenants and agreements set forth in this Agreement are for the sole benefit of the Parties and their successors and permitted assigns, and they shall not be construed as conferring any rights on any other Persons.

 

11.10                  Further Assurances .  Each Party shall duly execute and deliver, or cause to be duly executed and delivered, such further instruments and do and cause to be done such further acts and things, including the filing of such assignments, agreements, documents and instruments, as may be necessary or as the other Party may reasonably request in connection with this Agreement or to carry out more effectively the provisions and purposes hereof, or to better assure and confirm the rights and remedies of the other Party under this Agreement.

 

35



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

11.11                  English Language .  This Agreement shall be written and executed in the English language.  Any translation into any other language shall not be an official version thereof, and in the event of any conflict in interpretation between the English version and such translation, the English version shall control.

 

11.12                  References .  Unless otherwise specified, (a) references in this Agreement to any Article, Section, Paragraph, Schedule or Exhibit shall mean references to such Article, Section, Paragraph, Schedule or Exhibit of this Agreement, (b) references in any section to any clause are references to such clause of such section, and (c) references to any agreement, instrument or other document in this Agreement refer to such agreement, instrument or other document as originally executed or, if subsequently varied, replaced or supplemented from time to time, as so varied, replaced or supplemented and in effect at the relevant time of reference thereto.

 

11.13                  Independent Contractors .  It is expressly agreed that Aridis and Emergent shall be independent contractors and that the relationship between the Parties shall not constitute a partnership, joint venture or agency.  Neither Aridis nor Emergent 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, without the prior consent of the other Party.  All persons employed by a Party shall be employees of such Party and not of the other Party and all costs and obligations incurred by reason of any such employment shall be for the account and expense of such Party.

 

11.14                  Waiver .  Any term or condition of this Agreement may be waived at any time by the Party that is entitled to the benefit thereof, but no such waiver shall be effective unless set forth in a written instrument duly executed by or on behalf of the Party waiving such term or condition.  The waiver by either Party of any right hereunder or of the failure 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.

 

11.15                  Counterparts .  The Agreement may be executed in two (2) or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

 

11.16                  Construction .  Except where the context otherwise requires, wherever used, the singular shall include the plural, the plural the singular, the use of any gender shall be applicable to all genders and the word “or” is used in the inclusive sense.  The captions of this Agreement are for convenience of reference only and in no way define, describe, extend or limit the scope or intent of this Agreement or the intent of any provision contained in this Agreement.  The term “including” as used herein shall mean including, without limiting the generality of any description preceding such term.  The language of this Agreement shall be deemed to be the language mutually chosen by the Parties, and no rule of strict construction shall be applied against either Party.

 

11.17                  Entire Agreement; Modifications .  This Agreement, together with the Schedules hereto, and together with the Subcontract and Confidentiality Agreement between the Parties, sets forth and constitutes the entire agreement and understanding between the Parties with respect to the subject matter hereof and all prior agreements, understanding, promises and representations, whether written or oral, with respect thereto are superseded hereby.  Each Party confirms that it is

 

36



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

not relying on any representations or warranties of the other Party except as specifically set forth herein.  No amendment, modification, release or discharge hereof shall be binding upon the Parties unless in writing and duly executed by authorized representatives of both Parties.

 

[SIGNATURE PAGE FOLLOWS.]

 

37



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

IN WITNESS WHEREOF , the Parties have executed this Agreement as of the date first set forth above.

 

Emergent Product Development Gaithersburg Inc.

Aridis Pharmaceuticals

 

 

 

 

 

 

By:

/s/ Daniel Abolun-Nabi

 

By:

/s/ Eric Patzer

 

 

Name: Daniel Abolun-Nabi

Name: Eric Patzer

 

 

Title: President and Chief Operating Officer

Title: President

 

Aridis License Signature Page

 



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

Schedule 1.6

 

Aridis Know-How

 

·                                           Excipients blending sequence involved in blending lead formulations for bovine rotavirus vaccine, Ad5 adenovirus vaccine, measles virus vaccine, and salmonella Ty21a bacteria vaccine

 

·                                           Optimal foam drying processing parameters related to chamber pressure and shelf temperature required to stabilize for bovine rotavirus vaccine, measles virus vaccine, and salmonella Ty21a bacteria vaccine

 

·                                           Optimal spray drying processing parameters related to atomization pressure, feed rate, inlet temperature, and outlet temperature required to stabilize for bovine rotavirus vaccine, measles virus vaccine, and salmonella Ty21a bacteria vaccine

 

·                                           Analytical methods to titer live rotavirus and live measles vaccines using fluorescent focus assay

 

·                                           Optimal plasticizers concentration range required to stabilize vaccines

 



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

Schedule 1.7

 

Aridis Patents

 

Patent Appl. No.

 

Filing Date

 

Country File Type

 

Status

 

Owner

 

Title

10/199,061

 

July 22, 2002

 

US non-provisional which claims priority to U.S. Prov. App.
60/317,881, filed Sept. 7, 2001

 

Issued : 09/05/2006 7,101,693

 

BYU

 

Plasticized Hydrophilic Glasses for Improved Stabilization of Biological Agents

CA 2458794

 

September 6, 2002

 

Canadian National Phase PCT/2002/028320 which claims priority to US Prov. App.
60/317,881 (filed September 7, 2001) and U.S. Pat. App.
10/199,061

 

Pending

 

BYU

 

Plasticized Hydrophilic Glasses for Improved Stabilization of Biological Agents

EP 20020795489

 

September 6, 2002

 

European National Phase PCT/2002/028320 which claims priority to US Prov. App.
60/317,881 (filed September 7, 2001) and U.S. Pat. App.
10/199,061

 

Pending

 

BYU

 

Plasticized Hydrophilic Glasses for Improved Stabilization of Biological Agents

60995291

 

September 25, 2007

 

US & PCT

 

Conversion to utility patent September 24th, 2008

 

Aridis

 

Formulations for Preservation of Rotavirus

12266493

 

November 7th, 2007

 

US & PCT

 

Conversion to utility patent November, 2008

 

Aridis

 

Sonic Low Pressure Spray Drying

61/133,672

 

June 25th, 2007

 

US & PCT

 

Conversion to utility patent June 25 th , 2008

 

Aridis & Johns Hopkins Univ.

 

Quick-dissolving Oral Thin Film for Targeted Delivery of Therapeutic Agents

61175457

 

July 15th, 2008

 

US & PCT

 

Conversion to utility occurred on May 4th, 2009

 

Aridis

 

Inhalable Process & Formulation for Gallium Compounds

61242376

 

Sept. 14th, 2009

 

US

 

Conversion to utility patent July, 2010

 

Aridis

 

Formulation For Room Temperature Stabilization Of Live Vaccines

61247860

 

October 1st, 2009

 

US

 

Conversion to utility patent October 1st, 2010

 

Aridis

 

Methods and Compositions for Stabilization of Virus Vaccines

 



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

Schedule 9.5.2

 

Aridis Patent Filing Countries and Regions

 

United States

European Patent Office (with validation of granted patents in UK, Germany, France, Italy, Belgium, Switzerland, Ireland)

Japan

India

China

 



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

EXHIBIT A

 

Subcontract

 



 

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended

 

IN WITNESS WHEREOF , the Parties have executed this Agreement as of the date first set forth above.

 

Emergent Product Development Gaithersburg Inc.

Aridis Pharmaceuticals

 

 

 

 

 

 

By:

 

 

By:

 

 

 

Name:

Name:

 

 

Title:

Title:

 

Aridis License Signature Page

 




Exhibit 10.14

 

EXECUTION COPY

CONFIDENTIAL

 

 


 

JOINT VENTURE CONTRACT

 

 

IN RESPECT OF

 

 

SHENZHEN ARIMAB BIOPHARMACEUTICALS CO., LTD.

 

 


 

BY AND BETWEEN

 

 

SHENZHEN HEPALINK PHARMACEUTICAL GROUP CO.,

 

 

LTD. AND

 

 

ARIDIS PHARMACEUTICALS INC.

 

 

February 11, 2018

 



 

深圳市海普瑞药业股份集团有限公司

 

 

 

 

ARIDIS PHARMACEUTICALS INC.

 

.

 

关于

 

 

深圳市瑞迪生物医药有限公司

 

 

 

合资经营合同

 

 

201 8                       

 



 

TABLE OF CONTENTS  目录

 

TABLE OF CONTENTS 目录

3

 

 

BACKGROUND

7

 

 

CHAPTER 1 GENERAL PROVISION

8

 

 

1 总则

8

 

 

Article 1 Definitions

8

 

 

1 定义

8

 

 

CHAPTER 2 ESTABLISHMENT AND LEGAL STANDING

13

 

 

2 成立和法律地位

13

 

 

Article 2 Establishment and Legal Standing of the JV Company

13

 

 

2 合资公司的成立和法律地位

13

 

 

CHAPTER 3 PURPOSE AND BUSINESS SCOPE

15

 

 

3 宗旨和经营范围

15

 

 

Article 3 Purpose and Business Scope

15

 

 

3 宗旨和经营范围

15

 

 

CHAPTER 4 TOTAL AMOUNT OF INVESTMENT AND REGISTERED CAPITAL

16

 

 

4 投资总额和注册资本

16

 

 

Article 4 Total Investment

16

 

 

4 投资总额

16

 

 

ARTICLE 5 REGISTERED CAPITAL

16

 

 

5 注册资本

16

 

 

CHAPTER 5 BUSINESS OPERATION OF JOINT VENTURE

22

 

 

5 合资公司的业务经营

22

 

 

Article 6 Business Operation of Joint Venture

22

 

 

6 合资公司的业务经营

22

 



 

CHAPTER 6 RESPONSIBILITIES OF EACH PARTY AND REPRESENTATIONS AND WARRANTIES

23

 

 

6 各方的责任和陈述与保证

23

 

 

Article 7 Responsibilities of Each Party

23

 

 

7 各方的责任

23

 

 

ARTICLE 8 REPRESENTATIONS AND WARRANTIES

25

 

 

8 陈述与保证

25

 

 

CHAPTER 7 THE BOARD AND SUPERVISORS OF THE JV COMPANY

26

 

 

7 合资公司的董事会和监事

26

 

 

Article 9 Board

26

 

 

9 董事会

26

 

 

ARTICLE 10 POWER OF THE BOARD

28

 

 

10 董事会的权力

28

 

 

ARTICLE 11 MEETINGS OF THE BOARD

31

 

 

11 董事会会议

31

 

 

ARTICLE 12 SUPERVISORS

35

 

 

12 监事

35

 

 

ARTICLE 13 MANAGEMENT PERSONNEL

36

 

 

13 管理人员

36

 

 

ARTICLE 14 EMPLOYEES AND UNION

38

 

 

14 员工和工会

38

 

 

ARTICLE 15 FINANCING AND ACCOUNTING

39

 

 

15 财务和会计

39

 

 

ARTICLE 16 PROFIT DISTRIBUTION

43

 

 

16 利润分配

43

 

 

CHAPTER 8 NON-COMPETITION AND CONFIDENTIALITY

45

 

 

8 竞业禁止与保密

45

 



 

Article 17 Non-Competition

45

 

 

17 竞业禁止

45

 

 

Article 18 Confidentiality

45

 

 

18 保密

45

 

 

CHAPTER 9 BUSINESS TERM

48

 

 

9 经营期限

48

 

 

Article 19 Business Term

48

 

 

19 经营期限

48

 

 

CHAPTER 10 TERMINATION

49

 

 

10 合同终止

49

 

 

Article 20 Termination

49

 

 

20 合同终止

49

 

 

Article 21 FORCE MAJEURE

51

 

 

21 不可抗力

51

 

 

CHAPTER 11 LIABILITIES FOR BREACH OF CONTRACT

53

 

 

11 违约责任

53

 

 

Article  22 Breach of Contract

53

 

 

22 违约

53

 

 

Article 23 Defaults and Remedies

53

 

 

23 违约与救济

53

 

 

Article 24 Liabilities for Breach

54

 

 

24 违约责任

54

 

 

CHAPTER 12 GOVERNING LAW AND DISPUTE RESOLUTION

54

 

 

12 法律管辖和争议解决

54

 

 

Article 25 Governing Law

54

 

 

25 法律管辖

54

 

 

Article 26 Dispute Resolution

54

 



 

26 争议解决

54

 

 

CHAPTER 13 MISCELLANEOUS

55

 

 

13 其他规定

55

 

 

Article 27 Miscellaneous

55

 

 

27 其他规定

55

 


 

This Joint Venture Contract (this “ Contract ”) is entered into by and between the following parties on        , 2018 in Shenzhen, the People’s Republic of China.

 

合资经营合同 (“ 本合同 ”) 由以下 各方 2018         日在中国深圳签订。

 

Shenzhen Hepalink Pharmaceutical Group Co., Ltd , a listed company limited by shares incorporated under the PRC Laws , with its registered office at 21 Langshan Road, Songpingshan, Nanshan District, Shenzhen, the PRC (“ Hepalink ”); and

 

深圳市海普瑞药业股份集团有限公司 ,一家根据 中国法律 成立的上市股份有限公司, 其注册地址为中国深圳市南山区松坪山郎山路 21 ( 海普瑞 ) ;和

 

Aridis Pharmaceuticals Inc. , a Delaware, USA based private company with a business address at 5941 Optical Court, San Jose, California 95138, the USA (“ Aridis ”).

 

Aridis Pharmaceuticals Inc. ,一家总部位于 美国特拉华州 的公司,地址为: 5941 Optical Court, San Jose, California, the USA 邮编 : 95138 Aridis )。

 

Hepalink and Aridis are hereinafter referred to as “ Parties ” collectively, or a “ Party ” individually.

 

海普瑞 Aridis 以下合称为 各方 双方 ,或单独称为 一方

 

BACKGROUND

 

签约背景

 

Hepalink and its affiliates and subsidiaries have significant experience and resources in pharmaceutical product development. Aridis focuses on the development of novel, differentiated therapies for infectious diseases. Hepalink and Aridis have discussed the possibility and benefits of establishing an equity joint venture  in  the  PRC   for  developing  and  commercializing  the  products  of  therapies for infectious diseases.

 

海普瑞 及其下属企业在药品研发发面拥有丰富的经验和资源。 Aridis 致力于开发针对传染疾病的新颖的、不同的治疗方法。 海普瑞 Aridis 已商讨在 中国 建立合资公司以开发针对传染疾病的治疗产品并进行市场推广的可能性并获取收益。

 

7



 

NOW, THEREFORE, the Parties hereby agree to enter into this Contract as follows:

 

现此 各方 兹同意签订 本合同 如下:

 

CHAPTER 1 GENERAL PROVISION

 

1 总则

 

Article 1 Definitions

 

1 定义

 

The capitalized terms as used in this Contract shall have the following meanings:

 

本合同 中所使用的以粗体标示的术语具有如下含义:

 

AIC ” shall mean the Administration for Industry and Commerce of the PRC or its delegated local counterpart.

 

工商局 中国 国家工商行政管理总局或其授权的地方部门。

 

Articles of Association ” shall mean the articles of association of the JV Company in the form attached hereto as Appendix A, which may be amended by the Parties from time to time pursuant to the provisions thereof.

 

章程 指如 本合同 附录 A 所示格式的 合资公司 的章程,其可由 各方 根据其规定不 时修订。

 

Affiliate ” shall mean any business entity, which directly or indirectly,

 

controls, is controlled by, or is under the common control with, Hepalink or Aridis , at the relevant time; For the purposes of this definition, a business entity shall be deemed to “ control ” another entity if more than fifty percent (50%) of the voting stock of the latter business entity, ordinarily entitled to vote in the election of directors (or, if there is no such stock, more than fifty percent (50%) of the ownership of or control in the latter business entity) is held by and consolidated in the annual accounts of the controlling business entity.

 

关联公司 指在相关时点直接或间接地控制 海普瑞 Aridis 、受 海普瑞 Aridis 控制、或与 海普瑞 Aridis 受共同控制的任何商业实体。为本定 义之目的, 控制 指某商业实体持有另一商业实体超过百分之五十 (50%) 有权投 票选举董事的股份(或者在该等股份缺失的情形下,持有另一商业实体超过百分 之五十 (50%) 的所有权或控制权),且该等股份被并入前一商业实体的年度财务 报表。

 

Bankruptcy Event ” means the filing by the JV Company of a petition in bankruptcy according to the PRC Laws or the decision of a competent PRC court that bankruptcy procedures concerning the JV Company shall be initiated upon

 

8



 

application of any creditor(s) of the JV Company .

 

破产事件 指由 合资公司 根据 中国法律 提交破产申请书,或者有管辖权的 中国 院根据 合资公司 之任何债权人的申请而作出 合资公司 须开始其破产程序的裁决。

 

Board ” shall have the meaning set forth in Article 9.1.

 

董事会 具有第 9.1 款中规定的含义。

 

Board Meetings ” shall mean meetings of the Board convened in accordance with the provisions of this Contract and the Articles of Association , including both Regular Board Meetings and Interim Board Meetings .

 

董事会会议 指根据 本合同 章程 之规定召开的 董事会 的会议,包括 例行董事会会议 临时董事会会议

 

Business Day ” shall mean a day that is not a Saturday, a Sunday or any public holiday in the PRC and the United States of America.

 

营业日 指除周六、周日或 中国 和美国的公众假日之外的日子。

 

Business License ” shall mean the business license of the JV Company issued by the competent AIC evidencing the incorporation of the JV Company .

 

营业执照 指主管 工商局 签发的、证明 合资公司 成立的、 合资公司 的初始营业执照。

 

Business Plan ” shall have the meaning set forth in Article 10.2.

 

经营计划 具有第 10.2 款中规定的含义。

 

Business Term ” shall have the meaning set forth in Article 16.1.

 

经营期限 具有第 16.1 款中规定的含义。

 

CEO ” shall have the meaning set forth in Article 13.1.

 

CEO 具有第 13.1 款中规定的含义。

 

Chairman ” shall have the meaning set forth in Article 9.2.

 

董事长 具有第 9.2 款中规定的含义。

 

Deadlock ” shall have the meaning set forth in Section 11.10.

 

僵局 具有第 11.10 款中规定的含义。

 

Director(s) ”  shall  mean  an individual director or all the  directors  of  the  Board   as  respectively appointed  by  the  Parties   in accordance with this Contract and the Articles of Association .

 

董事 各方 根据 本合同 章程 委派的 董事会 的董事。

 

Election Notice ” shall have the meaning as set forth in Article 5.10.

 

选择通知 应具有第 5.10 条规定的含义。

 

9



 

Electing Party ” shall have the meaning as set forth in Article 5.10.

 

选择方 应具有第 5.10 条规定的含义。

 

Equity Interest(s) ” shall mean, with respect to any Person , an ownership interest in the registered capital, capital reserve, capital stock or the corresponding distribution of the JV Company .

 

股权利益 指就任何 而言,在 合资公司 的注册资本、资本公积、股本或相应分配中拥有的所有者权益。

 

Establishment Date ” shall  mean  the date on which the JV Company ’s Business License is issued by the competent AIC evidencing its incorporation.

 

成立日期 指主管 工商局 颁发证明 合资公司 成立之 合资公司 营业执照 之日。

 

Fair Market Value ” shall have the meaning as set forth in Article 5.4.

 

公平市场价格 应具有第 5.4 条规定的含义。

 

“Field of Use” shall mean all uses, including the diagnosis, prevention and treatment of diseases and other conditions, in all indications related to infections in humans.

 

使用领域 应指包括对疾病和其他健康状况的诊断、预防和治疗在内的所有关于人类传染相关的一切适应症中的使用。

 

Force Majeure Event ” shall have meaning as set forth in Article 21.

 

不可抗力事件 应具有第 21 条所规定的含义。

 

Governmental Entity(ies) ” shall mean any court or government or governmental agency, commission, entity, instrumentality or governmental subdivision or its delegated counterparts.

 

政府机构 指任何法院或政府、或政府机构、委员会、实体、部门或政府分部或 其授权的相应部门。

 

Hindered Party ” shall have the meaning as set forth in Article 21.

 

受阻方 应具有第 21 条规定的含义。

 

HKIAC ” shall have the meaning set forth in Article 26.2.

 

香港国际仲裁中心 具有第 26.2 款中规定的含义。

 

Interim Board Meeting ” shall have the meaning set forth in Article 11.4.

 

临时董事会会议 具有第 11.4 款中规定的含义。

 

JV Company ” shall   mean   the   Sino-foreign   equity   joint   venture   company

 

10



 

contemplated to be incorporated by the Parties in accordance with this Contract .

 

合资公司 各方 拟根据 本合同 的约定设立的一家中外合资经营企业。

 

Laws ” shall mean all national, provincial, local or foreign laws, ordinances, rules, statutes and regulations.

 

法律 指所有国家的、省级的、地方的或外国的法律、法令、法规、规章和规定。

 

Liabilities ” shall mean with respect to any Person , means any liabilities of such Person of any kind, whether accrued or absolute, contingent or otherwise, matured or unmatured.

 

负债 指就任何 而言,指它所承担的债务,无论何种性质,无论是衍生的、绝对的、或有的或其他性质的,也无论是到期或将到期的。

 

“Licensed Technology” shall mean “Licensor Technology” as defined in the Technology License and Collaboration Agreement .

 

被许可技术 应具有 《技术许可和合作协议》 规定的 许可人技术 含义。

 

Meeting Agenda ” shall have the meaning set forth in Article 11.5.

 

会议议程 具有第 11.5 款中规定的含义。

 

Offered Price ” shall have the meaning as set forth in Article 5.10.

 

要约价格 应具有第 5.10 条规定的含义。

 

Offer Notice ” shall have the meaning as set forth in Article 5.10.

 

要约通知 应具有第 5.10 条规定的含义。

 

Offered Securities ” shall have the meaning as set forth in Article 5.10.

 

要约股权 应具有第 5.10 条规定的含义。

 

“Offering Party” shall have the meaning as set forth in Article 5.10.

 

要约方 应具有第 5.10 条规定的含义。

 

Officers ” shall have the meaning set forth in Article 13.1.

 

高级管理人员 具有第 13.1 款中规定的含义。

 

Permitted Transferee (s)” shall mean any Affiliate of a Party equity interest; provided, that in no event shall any Transfer be made to a competitor of the JV Company without the consent of the Board .

 

许可的受让方 一方 关联公司 ;但前提是任何 转让 不得在未得到 董事会 同意的情况下转让于合资公司的竞争者。

 

Person ” shall  mean  any  individual,  partnership,  joint  venture,  limited

 

11



 

liability company, corporation, trust, unincorporated organization or other entity.

 

指任何个人、合伙、合资企业、有限责任公司、公司、信托组织、非公司 社团或组织。

 

PRC ” or “ China ” shall mean the People’s Republic of China, and solely for purpose of this Contract , excluding Hong Kong Special Administrative Region, Macau Special Administrative Region and Taiwan.

 

中国 指中华人民共和国,且仅为 本合同 之目的,不包括香港特别行政区、澳门 特别行政区和台湾。

 

Proposed Transferee ” shall have the meaning as set forth in Article 5.10.

 

拟受让方 具有第 5.10 条规定的含义。

 

Record-filing Authority ” shall mean the PRC Ministry of Commerce or its delegated local counterpart.

 

备案 机关 指有权批准本合同及其任何修订案的 中国 商务部或者其授权的地方机关。

 

Regular Board Meeting ” shall have the meaning set forth in Article 11.3.

 

例行董事会会议 具有第 11.3 款中规定的含义。

 

Renminbi ” or “ RMB ” shall mean Renminbi yuan, the legal tender of the PRC .

 

人民币 指人民币元, 中国 的法定货币。

 

Reserved Matters ” shall have the meaning set forth in Article 10.2.

 

保留事项 具有第 10.2 款中规定的含义。

 

Right of First Refusal ” shall have the meaning set forth in Article 5.10.

 

优先购买权 具有第 5.10 款中规定的含义。

 

Refusal Period ” shall have the meaning set forth in Article 5.10.

 

优先期 具有第 5.10 款中规定的含义。

 

Supervisor(s) ” shall have the meaning set forth in Article12.1.

 

监事 具有第 12.1 款中规定的含义

 

Technology License and Collaboration Agreement ” shall mean the Technology License and Collaboration Agreement to be entered into by and between Aridis and the JV Company , the form of which is attached hereto as Appendix B.

 

技术许可与合作协议 Aridis 合资公司 之间拟 签署的格式如附件 B 所示

 

12



 

的《技术许可和合作协议》。

 

Territory ” shall mean the Greater China area, for the purpose of this Contract , including Mainland China , Hong Kong, Macau, and Taiwan.

 

区域 指大中华区域,为 本合同 之目的,包含 中国 大陆、香港、澳门和台湾地区。

 

Transfer means any direct or indirect sale, transfer, assignment, pledge, mortgage, exchange, hypothecation, grant of a security interest, other disposition or encumbrance of an interest (whether with or without consideration, whether voluntarily or involuntarily or by operation of the Laws ) or the acts thereof or other conveyance of legal or beneficial interest, including rights to vote and to receive dividends or other income with respect thereto, or any agreement or commitment to do any of the foregoing, including a change of control of any Party (or any one or more parent entities of such Party ) that results in an indirect Transfer of ownership.

 

转让 指任何直接或间接以出售 、转让、让与、质押、抵押、交换、抵押索赔、授予担保权益、或其他处置或者担保方式处置一项权益(不论是否有对价,不论自愿或非自愿或由于 法律 而为)或者其行为或者其他构成法律上或者受益上的权益(包括与其相关的投票权和收到分红或者其他收入的权利),或者任何可以执行任何上述行为的协议或者承诺,包括可导致间接 转让 所有权的 任何一方 的控制改变(或 该方 的任何一个或多个的母公司)。

 

USD ” shall mean U.S. Dollar, the legal tender of the United States of America.

 

美元 指美元,即美国的法定货币。

 

CHAPTER 2 ESTABLISHMENT AND LEGAL STANDING

 

2 成立和法律地位

 

Article 2 Establishment and Legal Standing of the JV Company

 

2 合资公司的成立和法律地位

 

2.1                The Parties agree to jointly establish the JV Company according to the PRC Laws , this Contract , and the Articles of Association in Appendix A.

 

各方 同意根据 中国 法律 本合同 章程 共同成立 合资公司

 

2.2                The Parties shall sign and deliver the Articles of Association upon execution of this Contract and submit it to the competent Record-filing Authority together with this Contract for record filing. If there is any discrepancy between the Articles of Association and  this   Contract ,  the  provisions  under  this

 

13



 

Contract shall  prevail. Further, in that event, the Parties shall promptly amend the Articles of Association to conform to the provisions of this Contract .

 

各方 应在签署 本合同 之时签署和交付 章程 ,并将 章程 本合同 一并提交至 备案机关 备案。若 章程 本合同 之间存在任何不一致之处,应以 本合同 项下的规定为准。此外,在该等情况下, 各方 应立即修订 章程 ,以使其符合 本合同 的规定。

 

2.3                The name of the JV Company shall be 深圳市瑞迪生物医药有限公司 in Chinese and Shenzhen Arimab Biopharmaceuticals Co., Ltd. in English.  The name of the JV Company shall be subject to the name clearance with the competent AIC .

 

合资公司 的中文名称为深圳市瑞迪生物医药有限公司,英文名称为 Shenzhen Arimab Biopharmaceuticals Co., Ltd. 合资公司 的名称以主管 工商局 进行的名称预核准为准。

 

2.4                The registered address of the JV Company shall be at Room 5044, No. 21, Langshan Lu, Song Ping Shan, Nanshan District, Shenzhen, China. The definitive registered address of the JV Company shall be the address as the competent AIC approves.

 

合资公司 的注册地址为中国深圳市南山区松坪山朗山路 21 5044 合资公司 的注册地址最终将以 工商局 核准的地址为准。

 

2.5                The JV Company shall be a legal-person enterprise under the Laws . The JV Company shall comply with Laws , and its benefits are protected by the Laws .

 

合资公司 应为 中国 法律 规定的企业法人。 合资公司 应遵守 中国法律 ,其权益 中国 法律 保护。

 

2.6                The JV Company is a limited liability company.  The JV Company shall be liable for all of its Liabilities and obligations to the extent of its own assets.  Each Party is only liable to the JV Company up to the share of the registered capital of the JV Company that such Party shall subscribe for as set forth hereunder.  Creditors of the JV Company (including taxation or other authorities) shall have no recourse whatsoever against either Party for the Liabilities of the JV Company .  The JV Company shall indemnify and hold each Party harmless against any and all losses, damages, or Liabilities suffered by such Party in respect of any third party claims arising out of the operation of the JV Company except to the extent arising from the breach by such Party of this Contract .

 

14


 

合资公司 应组建为一家在中国法律下具有法人地位的有限责任公司,以其所有资产为限向其债权人承担责任。在任何情况下, 每一方 合资公司 或其债务或责任而言的责任,应以该方在 本合同 项下认缴的 合资公司 注册资本金额 为限。 合资公司 的债权人(包括税务或者其他政府机关)不得因任何愿意就公司的责任向任何 一方 行使任何追索权。 合资公司 应当就 一方 遭受的任何第三方就 合资公司 经营而提起的请求而造成的任何损失、损害、或者责任赔偿该方,并使该方免受此类损害,除非是源于该方在 本合同 项下的违约所产生。

 

CHAPTER 3 PURPOSE AND BUSINESS SCOPE

 

3 宗旨和经营范围

 

Article 3 Purpose and Business Scope

 

3 宗旨和经营范围

 

3.1                The Parties contemplated that the purpose of the JV Company is for the development and commercialization of the Licensed Technology for the Field of Use in the Territory , and for the purpose of engaging in all activities and transactions that are necessary in furtherance of that purpose.  JV Company shall not engage in any other activity except as set forth above or otherwise provided under the Technology License and Collaboration Agreement , unless approved by the Board and subject to the unanimous consent provisions of Article 10.2 below.

 

双方 拟定 合资公司 的宗旨为在 区域 内的为 使用领域 被许可技术 进行开发和商业化,以及为实现该宗旨而必须的所有行动及交易。 合资公司 不得在上述宗旨或 技术许可和合作协议 规定之外经营任何其他活动,除非根据 本合同 10.2 条规定获得 董事会 的批准。

 

3.2                For the purpose of the business registration of the JV Company with the competent AIC only and without prejudice to the other provisions of this Contract , all provisions of the Articles of Association (as set forth in Appendix A hereto), and all provisions of the Technology License and Collaboration Agreement (as set forth in Appendix B hereto), the business scope of the JV Company is  “[develop, manufacture, import and distribute of the products of AR-101 and AR-301]” (detailed description of the business scope and business operation are subject to the specific requirements of the competent AIC , without any modifications or conditions that are reasonably unacceptable to either Party ).

 

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仅为 合资公司 向主管 工商局 进行商事登记的目的,在不影响 本合同 其它条款 及附件 A 章程 和附件 B 技术许可和合作协议 中所有条款的前提下, 合资公司 的经营范围是 【开发、生产、进口和经销 AR-101 AR-301 产品。】    ( 营业范围和业务经营的详细描述,须根据主管 工商局 的具体要求而定,但不得强加任意 一方 合理不可接受的任何更改或者条件 )

 

CHAPTER 4 TOTAL AMOUNT OF INVESTMENT AND REGISTERED CAPITAL

 

4 投资总额和注册资本

 

Article 4 Total Investment

 

4 投资总额

 

4.1                The total investment of the JV Company shall be US$29,000,000.

 

合资公司 的投资总额为 2900 美元

 

ARTICLE 5 REGISTERED CAPITAL

 

5 注册资本

 

5.1                The registered capital of the JV Company shall be USD 11,760,000, among which:

 

合资公司 的注册资本为 1176 美元 ,其中:

 

(a)                               Hepalink subscribes for and shall contribute USD 6 million (in equivalent RMB amount according to the applicable RMB - USD exchange rate published by People’s Bank of China on the date hereof) in cash, and shall comprise fifty-one percent (51%) of the total registered capital of the JV Company ;

 

海普瑞 认缴出资 600 美元 现金或现汇(或 本合同 签署当日 中国 人民银行发布的 人民币 美元 的适用汇率折算的等额人民币) , 合资公司 总注册资本的百分之五十一( 51% )。

 

(b)                               Aridis subscribes for and shall contribute USD 5.76 million, among which (i)  USD 1 million will be contributed in cash, and (ii) the remaining USD 4.76 million will be contributed through the grant to the JV Company of a license for the Field of Use of the Licensed Technology (which includes cell lines for AR301 and  AR101 production,   culture media, purification process and product technology, surrounding formulation technology, current and future know-how and clinical data and similar) in accordance with the terms and conditions of the Technology License and Collaboration Agreement (as

 

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set forth in Appendix B hereto) and shall comprise forty-nine percent (49%) of the total registered capital of the JV Company ;

 

Aridis 认缴出资 576 美元 ,其中 :( 1 100 美元 以现金形式出资,( 2 )其余 476 美元 ,根据 技术许可和合作协议(附件 B 项下的条款和条件,以授予 合资公司 为了 使用领域 被许可技术 的许可(该许可包括了 AR301 AR101 生产的细胞系、培养基、提纯过程和产品技术、周边配方技术、现有的和未来的专有技术和临床数据及其类似 )的方式出资 , 合资公司 总注册资本的百分之四十九( 49%

 

5.2                The initial capital contributions to be made by the Parties shall be paid by each Party within sixty (60) days of the Establishment Date .

 

各方 认缴的合资公司的初始出资额应在 成立日期 之日起 60 日内缴清。

 

5.3                The JV Company shall not borrow any funds from domestic or international banks or other financial institution or any third party, unless unanimously approved by the Board according to Article 10.2.   Unless otherwise provided under this Contract , neither Party shall be obligated to lend funds to the JV Company or to guarantee loans from third parties or financial institutions.

 

合资公司 不得向国内或国际银行或其他金融机构或任何第三方借取任何资金,除非根据第 10.2 条经由 董事会 一致同意。除非 本合同 另有规定,任何 一方 无义务给予 合资公司 贷款或者为其向第三方或金融机构的贷款提供担保。

 

5.4                In the event the JV Company proceeds with its future capital fundraising, which (i) should not be earlier than Jan 1, 2019, (ii) top-line clinical trial results of the first global AR-301 Phase 3 study is available, (iii) CFDA approval for phase III clinical trial in China mainland is granted, and (iv)  Aridis has not breached any of its representations, warranties and covenants under Article 9 of the Technology License and Collaboration Agreement that could trigger termination of such Technology License and Collaboration Agreement , and as approved by the Board according to Article 10.2,  Hepalink is obligated to make further investment of US$9,000,000 (or equivalent RMB amount) into the JV Company .  Upon closing of such US$9,000,000 investment by Hepalink , the percentages of Equity Interests of Hepalink and Aridis at the JV Company shall be accordingly adjusted according to the following formula:

 

合资公司 继续其未来的股份融资,只要( 1 )该融资不得早于 2019 1 1 日,( 2 )可获得第一次全球 AR-301 3 阶段研究的临床试验结果

 

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的关键性总结,( 3 中国 大陆的临床试验第 3 阶段已获得 中国 国家药监局批准,且( 4 Aridis 不存在任何可能导致 技术许可和合作协议 终止的违反该协议第 9 条之陈述、保证和承诺的行为,那么根据 董事会 依据第 10.2 条的批准, 海普瑞 有义务向 合资公司 进一步投资 900 美元 (或等额人民币)。 海普瑞 的该等 900 美元 投资交割后, 海普瑞 Aridis 合资公司 股权 利益的比例应根据下面的公式进行相应调整:

 

·                   Hepalink adjusted Equity Interest =  (51% * Fair Market Value + US$9 million) / ( Fair Market Value + US$9 million);

 

海普瑞 调整后的 股权 利益 =  (51% * 公平市场价格 + 900 美元 ) / ( 公平市场价格 + 900 美元 )

 

·                   Aridis adjusted Equity Interest =  (49% * Fair Market Value ) / ( Fair Market Value + US$9 million)

 

Aridis 调整后的 股权 利益 =  (49% * 公平市场价格 ) / ( 公平市场价格 + 900 美元 )

 

Fair Market Value ” means the fair market value of the JV Company as a whole assuming a full and fair marketing process and shall be determined by an independent, nationally recognized valuation firm mutually agreed to by the Parties The valuation of the third party valuation firm shall be binding on them and all expenses related to such valuation shall be borne by the JV Company .

 

公平市场价格 指假设存在一个完全的和公平的市场交易过程时 合资公司 作为一个整体的公平的市场价格,且该公平市场价值须有一家 双方 共同同意的独立的、全国公认的评估事务所来决定。该第三方评估事务所的评估对 各方 存在约束力,且所有相关评估的费用由 合资公司 来承担。

 

5.5                A Party shall not mortgage or otherwise encumber all or any part of its contribution to the registered capital of the JV Company without of the prior written consent of the other Parties .

 

未经 另一方 的书面同意, 一方 不得将其出资的 合资公司 的注册资本全部或者任何部分设定抵押或以其他方式提供担保

 

5.6                The JV Company shall issue to each Party investment certificate based upon the capital they subscribed respectively. The investment certificates shall include the following items:

 

合资公司 应根据 各方 分别认缴的出资数额向 各方 出具出资证明书,出资 证明书应载明以下事项:

 

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(a)               name of the JV Company ;

 

合资公司 的名称;

 

(b)               registered capital of the JV Company ;

 

合资公司 的注册资本;

 

(c)                Establishment Date of the JV Company ;

 

合资公司 成立日期

 

(d)               date and amount of the capital contribution;

 

出资日期和出资金额;

 

(e)                date of issuance and the numbering of the investment certificate;

 

出资证明书的签发日期和编号;

 

(f)                 seal of the JV Company ; and

 

合资公司 的公章;以及

 

(g)                signature of the Chairman of the Board

 

董事长 的签名。

 

5.7                 The JV Company shall record the shares held by the Parties in its shareholders’ register. The shareholders’ register shall include information such as name and address, capital contribution, and the number of the investment certificates  of respective Parties . In the event of any change to such information, the JV Company shall promptly update the shareholders’ register and, where required under the Laws , file such change with the competent AIC in a timely manner.

 

合资公司 应在其股东名册中记载 各方 的持股情况。股东名册应包含 各方 各自的名称及地址、出资额和出资证明书编号等信息。如果此类信息发 生任何变更, 合资公司 应立即更新股东名册,并在 中国法律 要求时及时 向主管 工商局 就该等变更进行备案。

 

5.8                 Should a Party fail to perform any capital contribution obligation under this Article 5 and further fail to rectify it within thirty (30) days of the due date, that Party shall pay to the JV Company default interest for the overdue payment at a rate equal to the then applicable interest rate of one (1) year term loans as published by the People’s Bank of China and pay to the other Parties default penalty for the overdue payment at the rate of 0.05% per day of default, both from the first day of overdue until the overdue payment is fully made. If the defaulting Party fails to pay such default interest, the JV Company will be entitled to deduct such interest from the profit or any other amounts payable to

 

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that Party.  If a Party does not contribute the registered capital it subscribes for in full within sixty (60) days of the due date, the other Parties shall have the right to, upon the written notice to the first Party the JV Company within thirty (30) days after the expiry of the aforesaid sixty(60) day period, terminate this Contract according to Article 20, or subscribe for and contribute all or any portion of the pro rata registered capital not contributed by the first Party the shareholding percentage of the Parties in the registered capital of the JV Company shall be adjusted accordingly.

 

如果 一方 未能履行本第 5 条项下的任何出资义务,且未能于该出资期限到期 后三十 (30) 天内改正,则 该方 应就逾期款项向 合资公司 支付违约利息,利率 相当于中国人民银行公布的届时适用的一 (1) 年期定期贷款基准利率;并就逾 期款项向其他方支付违约罚金,利率为每日 0.05% ,违约利息和违约罚金均 自逾期首日起计算直至该逾期款项足额缴付之日。如违约一方未能支付该等 违约利息, 合资公司 有权从应向该方支付的利润或任何其他款项中扣除该等 利息。如果 一方 未能于出资期限届满后六十 (60) 天内缴足其认缴的注册资本, 其他方有权在上述六十 (60) 天过后的三十 (30) 天内向 前一方 合资公司 发出 书面通知,依据第 17.1 条终止 本合同 ,或对 前一方 未缴付的按比例认缴的注册资本中的全部或任何部分予以认缴并出资,并且 各方 合资公司 注册资本 中所占的股权利益比例应相应调整。

 

5.9                No Party may Transfer (or offer or agree to Transfer ) all or any part of any interest in any Equity Interest except (i) with the prior written consent of the other Party , which consent may be withheld in its sole description, and (ii) in accordance with this Contract , and (iii) to such Party ’s Permitted Transferees .  Each transferee of Equity Interests shall, as a condition prior to such Transfer , execute and deliver to the JV Company a joinder (in form and substance reasonably acceptable to the Board ) of or counterpart to this Contract pursuant to which such transferee shall agree to be bound by the provisions of this Contract .

 

一方 不得 转让 (或要约或同意 转让 股权 利益的全部或者任何部分,除非:( 1 )得到另 一方 的事先书面同意,但该同意可以根据该方自行判断而拒绝给予;( 2 )根据 本合同 规定,和( 3 转让 给该方的 许可的受让方 。各作为 转让 的先决条件, 股权 利益的受让人应签署并向 合资公司 递交一份加入 本合同 或者作为 本合同 附件的补充合同(按照 董事会 和合理接受的格式和内容),根据该补充合同,该受让人应当同意受 本合同 条款约束。

 

5.10         Except for Transfers to Permitted Transferees , a Party seeking to effect a Transfer (such Party, the “ Offering Party ”) of any Equity Securities (the “ Offered Securities ”) shall first give to the JV Company and  the other Party

 

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written noticed signed by the Offering Party (a “ Offer Notice ”) stating (a) the Offering Party ’s bona fide intention to Transfer such Offered Securities ; (b) the number of Offered Securities ; (c) the name, address and relationship, if any, to the Offering Party of the proposed transferee (the “ Proposed Transferee ”); and (d) the bona fide cash price or, in reasonable detail, other consideration for which the Offering Party proposes to Transfer such Offered Securities (the “ Offered Price ”).  The other Party shall have the right, but not the obligation, to purchase the Offered Securities (the “ Right of First Refusal ”). If the other Party (the “ Electing Party ”) desires to purchase the Offered Securities , then the Electing Party must, within fifteen (15) days of receipt of the Offer Notice (the “ Refusal Period ”), give written notice (the “ Election Notice ”) to the Offering Party of the Electing Party ’s election to purchase the Offered Securities . The Right of First Refusal shall automatically expire at the end of the Refusal Period unless exercised prior to the end of the Refusal Period . The purchase price for the Offered Securities purchased by the Electing Party shall be the Offered Price , and shall be made within thirty (30) days after the Election Notice .  If the other Party declines to exercise the Right of First Refusal , then the Offering Party may Transfer the Offered Securities to the Proposed Transferee at the Offered Price .  If a Party declines to exercise its Right of First Refusal , then the Offering Party may transfer the applicable portion of the Offered Shares to the Proposed Transferee at no less than the Offered Price , but only if such transfer occurs within ninety (90) days after expiration of the Refusal Period .

 

转让 许可的受让方 外,寻求出售 股权利益 ( 以下简称 要约股权 ”) 一方 ( 以下简称 要约方 ”) 应首先向公司和 另一方 发出一份由 要约方 签署的书面通知 ( 以下简称 要约通知 ”) ,其中说明 (a)  要约人系善意 转让 要约股份; (b)  要约股份的数目; (c)  拟受让方 ( 以下简称 拟受让方 ”) 的名称、地址和其与 要约方 的关系(如有); (d)  要约方 转让 要约股份的每股价格 ( 以下简称 要约价格 ”) ,该价格应当全部为现金。 另一方 ( 按其各自的股份份额 ) 应有权而不是有义务购买要约股份 ( 以下简称 优先购买权 ”) 。如果另一方 ( 以下简称 选择方 ”) 意欲按其持有的股份比例购买要约股权的, 选择方 应当在收到 要约通知 之日起的三十 (30) ( 以下简称 优先期 ”) 内,将决定购买该部分要约股份的书面通知 ( 以下简称 选择通知 ”) 提供给 要约方 优先购买权 应当在 优先期 届满时自动终止,除非该股东在拒绝期到期前行使其权利。 选择方 购买要约股份的购买价格应与上述 要约价格 一致,并应在发出 选择通知 后的六十 (60) 天内支付。如果 一方 当事人拒绝行使 优先购买权 ,则 要约方 可将要约股份的相应部分以不低于 要约价格 的价格转让给 拟受让方 ,但仅限于当该等转优先拒绝期届满之日后的九十 (90) 天内发生。

 

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5.11         Any increase or decrease of the registered capital of the JV Company must be: (a) approved unanimously by the Board and (b) submitted to the competent Record-filing Authority for approval or filing for recordation.  Upon such approval or filing for recordation, the JV Company shall register the increase or  decrease of the registered capital with the competent Governmental Entity .  Unless otherwise agreed by the Parties , each Party shall contribute to any increase or bear its proportionate share of the decrease in proportion to its Equity Interest at the time of the increase or decrease of the registered capital.

 

公司注册资本的任何增加或减少均须 (i) 到会公司 董事 表决一致赞成通过,或是全体 董事 以书面决议形式一致赞成通过;及 (ii) 提交给相关 政府机构 审批或备案。经批准或备案后,公司应向注册机构登记所述增资或减资。除非 双方 另有约定, 每一方 均应按照其届时在公司注册资本中持有的 股权 利益百分比进行增资或承担其相应比例的减资。

 

CHAPTER 5 BUSINESS OPERATION OF JOINT VENTURE

 

5 合资公司的业务经营

 

Article 6 Business Operation of Joint Venture

 

6 合资公司的业务经营

 

6.1                The JV Company under this Contract will focus on the development and commercialization of the Licensed Technology for the Field of Use in the Territory , as licensed by Aridis under Technology License and Collaboration Agreement in Appendix B.

 

合资公司 本合同 项下 将注重根据 Aridis 技术许可与合作协议 的许可,在 区域 内为 使用领域 开发和商业化 被许可技术

 

6.2                As soon as practicable after the establishment of the JV Company , Hepalink or its Affiliate shall enter into a lease agreement with the JV Company in the form attached hereto as Appendix C, under which Hepalink or its Affiliate provides the JV Company with office space and laboratory facilities at the Hepalink headquarter in Shenzhen of approximately 200m 2  at a reasonable market rental rate for [ten (10) years].  Subject to the lease agreement the form of which is set forth as Appendix C hereto, (i) the initial rental fee for the office space is predicted to be RMB 120-140 per square meter per month, while laboratory equipment rental is subject to the amount of device to rented, and (ii) the JV Company may early terminate the lease at its discretion subject to the approval by the Board .

 

合资公司 成立后, 海普瑞 或其 关联公司 将与 合资公司 尽快签署格式如附

 

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C 所示的租赁协议, 在该租赁协议项下, 海普瑞 或其 关联公司 将向 合资公司 提供位于 海普瑞 深圳总部的大约 200 平方米的办公室空间和实验室场地,按照合理市场租赁价格,租期为 3 年。根据该租赁协议(格式详见 本合同 附件 C ),( 1 )初始的办公室空间的租赁费用约为每月每平方米 120-140 人民币 ,实验室设备租赁将视实际租赁的设备数量而定;( 2 合资公司 可根据其自身选择,依据 董事会 的批准,提早终止该租赁。

 

6.3                Upon the formation of the JV Company , Hepalink shall provide the JV Company with PRC clinical and regulatory personnel services for clinical and regulatory review, application and filing procedures in the Territory (such services are expected to comprise no more than 5 senior staff and no more than 100 hours per month total), and Aridis shall provide the JV Company with clinical and regulatory personnel services to assist in coordination of the execution of the clinical study in China , and also with CMC personnel services for drug supply and manufacturing planning (to the extent such services are reasonably required by JV Company ; such services are expected to comprise no more than 100 hours per month total).  If personnel services are required by the JV Company in excess of the total expectations noted above, then the Parties shall meet and agree upon hourly or other compensation by the JV Company to the Party supplying such services. .

 

一旦 合资公司 设立后 海普瑞 将就 区域 内的临床和政府规制审查、申请和备案程序等方面向 合资公司 提供 中国 临床和政府规制方面的专业人员服务,该服务预计包含不多于 海普瑞 5 名资深专家每月总数不超过 100 小时的服务。 Aridis 应向向 合资公司 提供 中国 临床和政府规制方面的专业服务,以协调协助在 中国 临床研究的实施,以及向 合资公司 提供药物供应和生产计划方面的 CMC 专业人员服务,根据 合资公司 合理需求,且预计每月总数不超过 100 小时。若 合资公司 实际需求专业人员服务小时数超过上述预期数,则 双方 应协商确定按小时计或其他形式计算由合资支付给提供服务方相应补偿。

 

CHAPTER 6 RESPONSIBILITIES OF EACH PARTY AND REPRESENTATIONS AND WARRANTIES

 

6 各方的责任和陈述与保证

 

Article 7 Responsibilities of Each Party

 

7 各方的责任

 

7.1                The Parties shall cooperate with each other and with the JV Company in order to achieve the objective of the JV Company in accordance  with  this  Contract . Hepalink and Aridis shall cause its appointed Directors to take all  the necessary

 

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actions and cause all the necessary actions to be taken so that the Parties may exercise and fully enjoy its rights and interests under this Contract .

 

各方 应相互合作,并与 合资公司 合作,以根据 本合同 实现 合资公司 的目标。 海普瑞 Aridis 应促成其任命的 董事 采取一切必要的行动,并促成一切必要的行动被采取,以使 各方 可以行使并充分享有其在 本合同 项下的权利和利益。

 

7.2                Hepalink    shall   assist   the   JV Company    in properly   proceeding   with   the applications with competent Governmental Entities and assisting the JV Company in properly obtaining any and all approvals, registrations or licenses required for the establishment and operation of the JV Company in the manner contemplated by this Contract .

 

海普瑞 应当协助 合资公司 向主管 政府机构 办理申请,并协助 合资公司 取得 本合同 项下成立和经营 合资公司 所需的所有审批,登记和许可。

 

7.3                Aridis shall provide necessary reasonable assistance to Hepalink to obtain the approvals, registrations or licenses mentioned in Article 7.2 above.

 

Aridis 应当为合资公司取得本合同项下成立和经营合资公司所需的所有审批,登记和许可提供合理协助。

 

7.4                Subject to other provisions contained in this Contract , any expenses incurred by a Party due to its performance of the foregoing responsibilities or otherwise prior to the establishment of the JV Company (except for the expenses that for preparing and concluding this Contract , the Technology License and Collaboration Agreement by the Parties , and obtaining the approvals and registration of the establishment of the JV Company , which shall be borne by the JV Company ) shall be borne solely by that Party shall not be charged to the JV Company , unless otherwise agreed upon by all Parties expressly in this Contract or separately in writing. Any expenses in relation to the operation of the JV Company subsequent to its establishment shall be borne by the JV Company .

 

受限于 本合同 的其他规定,除非 各方 本合同 或另行签订的其它书面文件 中明确约定, 一方 因履行其上述责任而发生的或在 合资公司 成立之前另行 发生的任何费用 ( 各方 筹备和缔结 本合同 以及 技术许可和合作协议 以及获取 合资公司 成立之审批和登记的必要费用,应由 合资公司 承担之外 ) 应由 该方 独自承担,并且不得向 合资公司 收取。 合资公司 成立后,任何与 合资公司 运营相关的费用应由 合资公司 承担。

 

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ARTICLE 8 REPRESENTATIONS AND WARRANTIES

 

8 陈述与保证

 

8.1                Each Party represents and warrants to the other Party that: (i) it is a duly organized and validly existing legal person in its jurisdiction of formation and has the full power and right to conduct its business in accordance with its business licenses, articles of association or similar corporate constitutional documents; (ii) it possesses full power and authority to enter into this Contract and to perform its obligations hereunder; (iii) its representative whose signature is affixed hereto has been fully authorized to sign this Contract and to bind the respective Party hereby; (iv) as of the effective date hereof, the provisions of this Contract constitute its legal, valid and binding obligations (except as limited by applicable bankruptcy Laws affecting enforcement of creditors’ rights generally and similar Laws ); (v) its execution and delivery of this Contract and the fulfillment of its obligations hereunder do not and will not (a) conflict with or result in default of the business license, articles of association and similar constitutional documents of such Party , (b) result in any breach, default, conflict, non-performance or non-performance event under any contract, agreement or license to which it is a party or its assets or operation is subject, or (c) conflict with or result in default of any Laws applicable to such Party ; and (vi) except the consents that have been obtained or that are expressly provided herein, none of (a) its execution, delivery or performance of this Contract , nor (b) the consummation of any transaction contemplated hereunder will require such Party to make or obtain any consent, waiver, approval, authorization, exemption, registration, license or announcement.

 

每一方 分别向其他 一方 陈述并保证:( i 该一方 是在其成立地司法管辖区合法组建并有效存续的独立法人,并且有充分的能力和权利依照其营业执照、公司章程或类似的公司组建文件开展其业务;( ii 该一方 拥有充分的能力和权力签署 本合同 并履行 本合同 规定的其各项义务;( iii )在 本合同 上签字的 该一方 代表已被充分授权签订 本合同 的权利并对该方产生约束力;( iv )自 本合同 生效之日起, 本合同 各项规定应成为 该一方 合法的、有效的和有约束力的义务(但必须服从普遍影响到债权人权利的破产 法律 及类似 法律 所规定的各项限制);( v 该一方 签署并交付 本合同 以及履行 本合同 规定的其各项义务在现在和将来均不会( a )抵触或导致违反 该一方 营业执照、公司章程或类似的公司组建文件的任何规定,( b )在以 该一方 为一方或对该一方资产或经营有约束力或影响的任何合同、协议或许可的条款项下,导致任何违反、违约、抵触、不履约或不履约事件,或( c )抵触或导致违反适用于 该一方 的任何 法律 ;以及( vi )除已经取得的同意或者 本合同 明确规定的同意之外,该一方( a )签署、交付或履行 本合同 ,或( b )完成 本合同 所预期的任何交易,不要求 该一方 做出或取得任何同意、弃权、批准、授权、豁

 

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免、登记、许可或宣告。

 

CHAPTER 7 THE BOARD AND SUPERVISORS OF THE JV COMPANY

 

7 合资公司的董事会和监事

 

Article 9 Board

 

9 董事会

 

9.1                The JV Company shall establish a board of directors (the “ Board ”). The Board shall consist of 5 Directors , among which Hepalink shall appoint three (3)  Directors , Aridis shall appoint the remaining two (2)  Directors .   The term of office of each Director shall be four (4) years.   Each Party may remove any of the Directors it appointed from time to time, provided that it shall simultaneously appoint a new Director to replace the one removed and shall notify the other Party and the JV Company in writing of such replacement. If a Director dies, resigns or is removed prior to the end of his/her term of office, the Party appointing that Director shall forthwith appoint a replacement for that Director and shall notify the other Party and the JV Company in writing of such appointment.  Parties further agree that in the event that the composition or size of the Board is changed as a result of future financing or equity sale of the JV Company , both Parties , at their best efforts, will secure that Hepalink hold at least 3 seats and Aridis holds at least 2 seats, at the adjusted Board .

 

合资公司 应设董事会 (“ 董事会 ”) 董事会 由五 (5) 董事 组成,其中 海普瑞 应委派三 (3) 董事 Aridis 应委派其余两 (2) 董事 。每一 董事 的任期为 (4) 年。每 一方 可不时免职其委派的任何 董事 ,但其应同时委派一名新 董事 以替代被免职的 董事 ,并应向其他 各方 合资公司 书面通知该等更换事宜。如某一 董事 在其任期结束前死亡、辞职或被免职,则委派该 董事 一方 应立即委派一名 董事 ,以替代该死亡、辞职或被免职的 董事 ,并应向其他 各方 合资公司 书面通知该等更换事宜。 双方 进一步同意若 董事会 的组成或者规模由于 合资公司 未来融资或者股权出售而改变,则 双方 应尽其最大努力保证在调整后的 董事会 海普瑞 掌握至少 3 席董事, Aridis 掌握至少 2 席董事。

 

9.2                The Board shall have a chairman (the “ Chairman ”), who will be nominated by Hepalink , and a vice chairman, who will be nominated by Aridis . The Chairman shall serve as the legal representative of the JV Company and has the powers outlined below and other powers delegated to him/her pursuant to the applicable Laws , resolution by the Board and/or written agreement among the Parties :

 

董事会 设董事长一名 (“ 董事长 ”) ,由 海普瑞 任命;设副董事长一名,由

 

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Aridis 任命。 董事长 合资公司 的法定代表人且具有下述权力,以及 依照相关 法律 董事会 决议和 / 各方 书面协议所授予的其它权力 :

 

(a)                  be responsible for convening and presiding over meetings of the Board ; if the Chairman is unable to convene or preside over a meeting of the Board , the Chairman shall designate another Director , with the same power and authority, to convene and preside over that meeting;

 

董事长 负责召集并主持 董事会 的会议。如果 董事长 未能召集或主持某一 董事会 会议, 董事长 应授权另一名 董事 以相同的权力和权限召集并主持该会议;

 

(b)                  to exercise the same authority as each other Director of the JV Company , such as casting one (1) vote equal in weight to the votes of each other Director at meetings of the Board ; and

 

董事长 有权行使与 合资公司 其他 董事 同等的权力,包括在 董事会 的会议上投与其他 董事 投票效力相同的一 (1) 票;且

 

(c)                   other rights stipulated by the Laws , regulations, and the Articles of Association of the JV Company .

 

其他 法律 、法规和 合资公司章程 所规定的其他权利。

 

For avoidance of doubt, the Chairman shall have no right to an additional or casting vote.

 

为免疑议, 董事长 无额外投票权或投决定票的权利。

 

9.3                Each Party shall cause each of its appointed Directors to perform his/her duties in good faith and in accordance with the applicable Laws , this Contract and Appendix A with the care that an ordinarily prudent person in a like position would exercise under similar circumstances.

 

合同 各方 均应促成其委派的每一名 董事 ,根据适用 法律 本合同 和附件 A 的规定,以一名担任同类职务的一般正常谨慎人员在相似情况下会尽到的注意,秉诚履行其职责。

 

9.4                The JV Company shall provide reimbursement to the Directors for any reasonable travel expenses actually incurred for attending Board Meetings . Apart from such reimbursement, the Directors are not entitled to any salary or any form of fringe benefits, awards or reimbursements for their position as a Director .

 

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合资公司 应报销各 董事 为出席 董事会会议 实际发生的合理的差旅费用。在此报销费用以外,各 董事 不应就其 董事 职位而获得任何工资或其他形式的福利、奖励或者报销。

 

ARTICLE 10 POWER OF THE BOARD

 

10 董事会的权力

 

10.1         The Board is the highest authority of the JV Company and shall have the powers and duties for the overall management and operation of the JV Company as set forth in the applicable Laws , this Contract , Appendix A. Any resolutions (except for the Reserved Matters provided under Article 10.2) shall be adopted by an affirmative vote of at least simple majority of  the Directors present (in person or by proxy) at a duly convened Board Meeting , among which shall include at least one (1)  Director of Hepalink and one (1)  Director of Aridis .

 

董事会 合资公司 的最高权力机关,具有相关 法律 本合同 和附属合同 A 中规定的全面管理和经营 合资公司 的权力和职责。任何决议 ( 10.2 款项下规定的保留事项除外 ) 应由正式召开的 董事会会议 的与会 董事 (无论是亲自或派代理人参加)投票表决通过,中至少简单多数(即超过半数)投票表决通过,其中须包括至少一( 1 )名 海普瑞 董事 和一( 1 )名 Aridis 董事

 

10.2         Unless otherwise agreed among the Parties in writing, the following matters (the “ Reserved Matters ”) shall require an unanimous approval of the Board :

 

除非合同 各方 另有书面约定,对下列事项 (“ 保留事项 ”) 的批准应由 董事会 一致同意:

 

(1)                                  approval of any agreements, documents or other arrangements between or involving the JV Company and any shareholder or affiliate thereof, as well as any amendment, consent or waiver with respect to such arrangements;

 

批准涉及 合资公司 和任何股东或其关联公司的任何协议、文件或其他安排,以及任何想关于该安排的修订、同意或弃权;

 

(2)                                  removal of a Director other than by the Party which designated the Director to be removed;

 

董事 的免职(由原提名该 董事 一方 要求免职的除外);

 

(3)                                  approval of the appointment of the members of any committee established by the Board ;

 

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批准 董事会 设立的任何委员会成员的任命;

 

(4)                                  terms of any employment agreements with the Officers of the JV Company ;

 

批准 合资公司高级管理人员 任何劳动合同的条款;

 

(5)                                  approval of, and amendment to, any budgets, assessments or financial plans of any applicable fiscal period, or commercial and operational plan of the JV Company (collectively, the “ Business Plan ”);

 

批准任何适用财务期间的任何预算、评估或财务计划,或 合资公司 的商业和营业计划(合称为” 经营计划 ”)及其修订;

 

(6)                                  approval of agreements providing for the payment or receipt in excess of US$100,000 which is out of the Business Plan approved by the Board ;

 

批准 董事会 批准的 经营计划 以外的超过100,000 美元 的付款或者收款的协议;

 

(7)                                  all transactions regarding buildings and land, including the lease, purchase, sale and mortgage thereof;

 

所有关于建筑和土地的交易,包括租赁、购买、出售和担保;

 

(8)                                  individual plans and projects which are capital in nature and for which the anticipated expenditure will exceed US$100,000 which is out of the Business Plan approved by the Board ;

 

董事会 批准的 经营计划 以外的单个资本性计划或项目且预期费用超过100,000 美元

 

(9)                                  providing loans, guarantees, or other extensions of credit other than in the ordinary course of business;

 

正常业务以外提供贷款、保证,或者其他授信;

 

(10)                           amendment of the Articles of Association of the JV Company ;

 

修改 合资公司 章程

 

(11)                           merger into or with or acquisition of all or part of the business of another person or entity; sale, lease, transfer, or other disposition of the assets of the

 

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JV Company having a fair market value, sale price, or book value at time of disposition greater than US$100,000 which is out of the Business Plan approved by the Board ;

 

被另一个人或者实体全部或部分的业务兼并,或与之合并,或收购该另一个人或者实体全部或部分的业务; 董事会 批准的 经营计划 以外出售、出租、转让、或以其它方式处置 合资公司 的资产,其处置时的 合资公司 市场公允价格、或出售价格、或账面价值超过100,000 美元

 

(12)                           liquidation, dissolution, winding up or any Bankruptcy Event of the JV Company ;

 

合资公司 的清算、解散、关停或任何 破产事件

 

(13)                           fixing compensation of the Officers , including bonuses;

 

确定 高级管理人员 的的薪酬,包括奖金;

 

(14)                           declaration and distribution of dividends (except as otherwise provided under Article 16.3 below);

 

宣布和派发红利(下文第16.3条另有约定除外);

 

(15)                           appointment, removal or change of any Officer;

 

任命、免除或更换任何 高级管理人员

 

(16)                           any material change in the business of the JV Company ;

 

任何 合资公司 业务上的实质性改变;

 

(17)                           issuance, purchase or redemption by the JV Company of any securities of the JV Company and any increase or reduction in the capitalization of the JV Company ;

 

合资公司 发行、购买或者回购 合资公司 的任何证券,以及增加或者减少 合资公司 的股本;

 

(18)                           any financing, fundraising, or borrowing of funds by the JV Company greater than US$100,000, as long as the Equity Interests of both Parties remain unchanged; and

 

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合资公司 任何超过100,000 美元 的融资 、募资、或借取资金,但 双方 股权 利益不得改变;和

 

(19)                           Any engagement of business , or attempt to engage such business, exceeding the scope specified under Article 3.1 above.

 

从事或试图从事任何超过 本合同 3.1 条规定之范围的业务。

 

ARTICLE 11 MEETINGS OF THE BOARD

 

11 董事会会议

 

11.1         The quorum for a Board Meeting shall require the presence in person or by proxy of at least four-fifth (4/5) of all Directors including one Director appointed by Hepalink and Aridis respectively. Resolutions adopted by any Board Meeting shall be invalid unless the quorum is satisfied. In the event of failure to constitute the quorum in this Article, the Chairman shall have the right to call a second meeting of the Board and any director absent from this second meeting without legitimate reason and without a proxy is deemed to have attended the meeting but to have abstained from voting.

 

董事会会议 应由全体 董事 中至少三分之二 (2/3)( 包括至少一 (1) 名分别由 海普瑞 Aridis 委派的 董事 ) 亲自出席或委托代理人出席方构成法定人数。 如出席 董事 未达到上述要求, 董事会会议 通过的任何决议均为无效。若未达到本条所规定的法定人数, 董事长 应有权提请召开第二次 董事会 ;任何无合法理由缺席第二次 董事会 且未委托代理人出席的董事,将被视作已经实际出席了该董事会会议,但无权参加投票。

 

11.2         Each Director shall cast one (1) equal vote on each matter to be resolved by the Board . Any Director may attend a Board Meeting by proxy, provided that such Director shall, prior to the meeting, deliver to the Chairman the written power of attorney, in which the name and authority of the proxy shall be specified. The proxy may be another Director or any other representative authorized by the Director using the proxy.

 

每一 董事 董事会 每一决议事项享有一 (1) 票同等表决权。任何 董事 均可委托代理人出席 董事会 会议 ,但前提是该 董事 应在会议之前将载明代理人姓 名和权限的书面授权提交 董事长 。代理人可以是另一名 董事 或使用代理人 的该名 董事 授权的任何其他代表。

 

11.3         A regular annual Board Meeting shall be convened within thirty (30) days after the issuance of the audited annual financial report of the JV Company or four

 

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(4) months after the end of each fiscal year, whichever comes first (“ Regular Board Meeting ”).

 

年度例行 董事会 会议 应于 合资公司 经审计的年度财务报告出具之后三十 (30) 天或每一财务年度结束后四 (4) 个月之内 ( 以较早者为准 ) 召开 (“ 例行董事 会会议 ”)

 

11.4         Upon the request of any two (2)  Directors or one (1) of the Supervisors or otherwise pursuant to this Contract and the Articles of Association , the Chairman shall convene an interim Board Meeting (“ Interim Board Meeting ”).

 

经任意两 (2) 董事 或一 (1) 监事 要求,或另行根据 本合同 章程 的规定, 事长 应召集临时董事会会议 (“ 临时 董事会会议 ”)

 

11.5         Unless otherwise expressly provided in this Contract , for any Board Meeting , a written notice of the time, place of the meeting shall be delivered by the Chairman to each Director by hand, email or telecopy at least three (3)  Business Days prior to the meeting or such other period as agreed upon by all Directors . The written notice shall include an agenda of businesses to be transacted at the Board Meeting (“ Meeting Agenda ”). For any businesses a Director intends to transact at the Board Meeting , it shall submit such businesses to the Chairman for the Chairman to include in the Meeting Agenda . The Board Meeting shall not discuss any matters outside the Meeting Agenda , unless otherwise agreed by all Directors in office unanimously in writing. Any meeting notice to a Director shall be deemed received if delivered to the address or the telecopy number or the email address designated by that Director in writing. Unless otherwise provided in  this Contract or approved by all Directors in writing, resolutions or decisions adopted or made in a Board Meeting shall not be valid unless proper meeting notices have been delivered in accordance with this Article 11.5.

 

除非 本合同 中另有明确规定,就任何 董事会 会议 而言,一份列明会议时间、地点的书面通知应由 董事长 于会议前至少三 (3) 营业日 或全体 董事 同意的其他期限内通过专人递送、电子邮件或传真的方式递交至每一 董事 。书面会议通知应包括 董事会会议 待议事项的议程 (“ 会议议程 ”) 。如果有董事有意在 董事会会议 上讨论任何事项,其应当将该事项提交 董事长 ,由 董事长 列入 会议议程 。除全体在任 董事 一致书面同意外, 董事会 会议 不得讨论 会议议程 之外的事项。 致某一 董事 的任何会议通知,若已递交至该 董事 书面指定的地址、传真号码或电子邮件地址,则应被视为已由该 董事 收讫。除非 本合同 中另行规定或全体 董事 另行书面批准, 董事会 会议 通过或作出的决议或

 

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决定,仅在适当的会 议通知已根据本第 11.5 款递交的情况下方为有效。

 

11.6         In case that an urgent Board Meeting needs to be convened, the requirement on prior notice of Board Meetings provided in Article 11.5 may be waived by unanimous consent by all Directors . Furthermore, in respect of a Director who has not received the meeting notice before a Board Meeting , (a) such Director may waive the meeting notice in writing before or after the meeting; and (b) such Directo r’s presence at that meeting in person or by proxy shall constitute a waiver of notice of that meeting, unless such Director attends that meeting for the express purpose of objecting, at the beginning of the meeting, to the improper notice on that meeting.  For the avoidance of any doubt, when a meeting notice is waived for any Board Meeting , the meeting shall still proceed in accordance with the Meeting Agenda .

 

如果需要召集紧急 董事会 会议 ,经全体 董事 一致同意,可以豁免第 11.5 款规 定的 董事会 会议 之前的事先通知要求。此外,就未于 董事会 会议 前收到会议通知的某一 董事 而言, (a) 董事 可于会议之前或之后以书面方式放弃会议通知;及 (b) 董事 亲自出席或委托代理人出席该会议应构成对该会议之通知的放弃,除非该 董事 出席该会议的明确目的就是为了在会议开始时对该会议的不适当通知提出异议。为避免疑义,任何已豁免会议通知的 董事会 会议 ,仍应按照 会议议程 进行。

 

11.7         A Board Meeting may be held via conference telephone, video conference or similar communications equipment by means of which all persons present at the meeting is audible to each other. The resolutions adopted by the Board Meeting held in the aforesaid manner shall be signed in writing by all the Directors present at the meeting.

 

董事会 会议 可通过电话会议、视频会议或者使用全部与会人士可互相听到 的类似通讯设备进行。采用上述方式举行的 董事会 会议 通过的决议应经所 有与会的 董事 书面签署

 

11.8         The minutes and/or resolutions of each Board Meeting shall be prepared in both Chinese and English languages and a transcript of the minutes and/or resolutions shall be delivered to each Director , as well as to each Party , within ten (10)  Business Days after the meeting, unless otherwise agreed to by all Directors present at that meeting in person or by proxy. Both the Chinese and English language versions of the minutes and/or resolutions shall be equally authentic and be of the same legal effect. The original copy of the minutes and/or resolutions shall be kept in the JV Company .

 

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除非全体 董事 另行同意,每一次 董事会 会议 的会议记录和 / 或决议应同时以 中文和英文制备,并且,该等会议记录和 / 或决议的一份誊本应在会议后的 (10) 营业日 内交付至各 董事 以及合同 各方 。中文和英文文本的会议记录 / 或决议应同等可信,并具有相同的法律效力。会议记录和 / 或决议的正本 应由 合资公司 保管。

 

11.9         The Board shall hold the first Board Meeting within sixty (60) Business Days after the Establishment Date . At the first meeting, the Directors shall discuss, among other things, the following matters:

 

董事会 应在 成立日期 后三十 (30) 营业日 之内召开第一次 董事会 会议 。在第 一次会议上,除其他事项外, 董事 应当讨论下述事项:

 

(a)                                  the initial financial and accounting system of the JV Company ;

合资公司 初始的财务和会计系统;

 

(b)                                  to approve the initial Business Plan and budgets of the JV Company ;

批准 合资公司 的初始年度 经营计划 和预算;

 

(c)                                   to decide on the remuneration, management authority and appointment of the Officers ; and

决定对 高级管理人员 的薪酬、管理权限以及任命事项;及

 

(d)                                  other matters to be discussed and decided by the Board

董事会 决定讨论的其他事项。

 

11.10 If any Party fails to obtain the support of a sufficient number of the Board appointed by the other Party for a resolution requiring unanimous vote of the Board , and such Party notifies the other Party in writing that such failure will materially adversely affect the JV Company (“ Deadlock ”), the Chairman shall prepare and deliver a full report regarding the unsuccessfully resolved matter to the chief executives of each of the Parties within thirty (30) days from the date of above notice. The chief executives of the Parties shall have an additional thirty (30) days from the date of receipt of such report or such longer period as they may agree to successfully conciliate such matter. If the chief executives of the Parties do not successfully resolve such matter during such relevant period, then the following procedures may be elected:

 

若任何 一方 无法就某一需要 董事会 一致通过的议案争取到 另一方 足够 董事会

 

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数支持,且该方书面通知 另一方 该投票失败将对 合资公司 产生实质不利影响的( 僵局 ), 董事长 应准备一份完整的关于该无法达成一致的问题的报告,并在上述通知之日起三十( 30 )日内递交 各方 的主要高管。 各方 的主要高管应在收到该报告后三十( 30 )天或者 各方 可以同意的更长的期限内以圆满调解该问题。如果 各方 的主要高管无法在上述期限内圆满的解决该问题,则下列程序可被适用:

 

(a)               Either Party may file arbitration pursuant to Article 27.1 below; or

任何 一方 可根据第 27.1 条提起仲裁;或

 

(b)               Either Party may terminate this Contract pursuant to Article 20.1 below.

任何 一方 可根据第 20.1 条终止 本合同

 

ARTICLE 12 SUPERVISORS

 

12 监事

 

12.1         The JV Company shall have two (2)  individual  supervisors  (“ Supervisors ”). Each of Hepalink and Aridis shall appoint one (1)  Supervisor . The term of office of each Supervisor shall be three (3) years.  A Director or an Officer of the JV Company cannot be a Supervisor .

 

合资公司 设两 (2) 名个人监事 (“ 监事 ”) 海普瑞 Aridis 每一方各委派一 (1) 监事 。每一 监事 的任期为三 (3) 年。 合资公司 董事 高级管理人员 不可兼任 监事

 

12.2         Each Supervisor shall exercise the following powers:

 

监事 履行以下职权:

 

(a)               to check on the financial affairs of the JV Company ;

 

检查 合资公司 的财务事项;

 

(b)               to monitor performance of duties by the Directors and Officers of the JV Company , and to propose to the Parties and the JV Company the dismissal of any Director or Officer who has committed any act in contravention of any Law , this Contract , or the Articles of Association ;

 

合资公司 董事 高级管理人员 执行职务的行为进行监督,对

 

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于违反任何 法律 本合同 章程 规定的任何 董事 高级管理人员 ,向 各方 合资公司 提出罢免的建议;

 

(c)                to propose convening of Interim Board Meetings , and to attend any Board Meeting and submit motions, questions or proposals at the meeting (but the Supervisors shall not have any voting power at any Board Meeting ); and

 

提议召开 临时董事会会议 ,出席任何 董事会会议 并在会议上提交提 案、询问或建议 ( 监事 在任何 董事会会议 上不享有任何表决权 )

 

(d)               to request the Directors and/or Officers of the JV Company to correct their actions that harm the interests of the JV Company .

 

要求 合资公司 董事 / 高级管理人员 纠正其损害 合资公司 利益的行为。

 

12.3         Each Supervisor is entitled to attend the Board meetings, and may raise questions or suggestions about the matters to be decided by the Board . If a Supervisor finds that the JV Company is running abnormally, then such Supervisor may conduct investigations. If necessary, a Supervisor may hire an accounting firm, at the JV Company ’s expense, to help.

 

监事 可以列席 董事会 会议,并对 董事会 决议事项提出质询或者建议。 监事 发现公司经营情况异常,可以进行调查;必要时,可以聘请会计师事务所等协助其工作,费用由公司承担。

 

12.4         The Supervisors shall keep minutes on the resolutions of the issues with signatures of present Supervisors .

 

监事 对所议事项应当采用书面形式,并由 监事 签字后备案于公司。

 

12.5         The JV Company shall bear all costs incurred by the Supervisors in connection with the performance of their duties.

 

监事 行使职权所必需的费用,由公司承担。

 

ARTICLE 13 MANAGEMENT PERSONNEL

 

13 管理 人员

 

13.1         The senior officers of the JV Company (“ Officers ”), the office term of each

 

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of whom shall be three (3) years, shall include:

 

合资公司 的高级管理人员 (“ 高级管理人员 ”) 包括下列人员,每名高级管理人 任期( 3 )年:

 

(a)               a CEO, to be in charge of the ordinary operation and management of the JV Company (“ CEO ”), approved by unanimous consent of the Board ;

 

CEO 一名 (“ CEO ”) ,主管 合资公司 的日常经营管理,由 董事会 一致决定。

 

(b)               a CFO, to be in charge of finance, accounting, finance related internal control and tax,  selected by the CEO and approved by unanimous consent of the Board ;

 

副总经理一名,主管财务、会计、财务相关内部控制和税务,由 CEO 提名, 董事会 一致通过;

 

(c)                department managers, to be in charge of respective department of the JV Company , selected and approved by the CEO ;

 

部门经理若干 ,分管 合资公司 的各个部门,由 CEO 提名并批准

 

13.2         Except for the Reserved Matters and other matters requiring consent by the Board according to this Contract and the Articles of Association , and under the authorization resolution by the Board , the CEO shall be responsible to the Board directly, carry out the decisions of the Board and manage the daily operations of the JV Company for following matters:

 

本合同 和公司 章程 规定的由 董事会 保留的权力之外,基于 董事会 的授权, CEO 应向 董事会 直接负责,执行 董事会 的决议,负责下列 合资公司 的日常运作:

 

(a)               Implementing the annual Business Plan ;

实施年度 经营计划

 

(b)               Implementing the Board resolutions;

执行 董事会 决议;

 

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(c)                Nominating other managerial personnel;

提名其他管理人员;

 

(d)               Appointing and removing employees of the JV Company except for the Officers ;

任免 高级管理人员 之外的 合资公司 员工;

 

(e)                Directing and supervising the other Officers which shall report to him/her according to this Contract , the Articles of Association and the resolutions of the Board ;

指导和监督依据 本合同 章程 的规定以及 董事会 的决定向其报告的 其他 高级管理人员

 

(f)                 Developing and maintaining customers;

开发客户并维持客户;

 

(g)                Formulating  and  submitting  to  the  Board   for  approval  the  internal organizational and management structure of the JV Company ; and

制定 合资公司 的内部组织和管理架构,并提交 董事会 批准;及

 

(h)               Other powers as delegated by the Board according to this Contract .

董事会 根据 本合同 授予的其它权力。

 

13.3         All Officers must have customary non-compete obligation under their employment contracts that prohibits any direct or indirect competition against the JV Company or its shareholders.

 

所有 高级管理人员 均须在其劳动合同中附有惯常的竞业禁止义务 ,以禁止直接或者间接的与 合资公司 或者其股东相竞争的行为。

 

ARTICLE 14 EMPLOYEES AND UNION

 

14 员工和工会

 

14.1         The CEO shall prepare the outlines regarding the employment, termination, salary, labor insurance, benefits and incentive plans of the employees of the JV

 

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Company in accordance with the applicable Laws , and shall submit the outlines to the Board for approval. The CEO shall implement the outlines approved by the Board in respect of employment related matters.

 

CEO 应按照相关 法律 拟定有关 合资公司 员工的雇佣、终止雇佣、工资、劳 动保险、福利和激励计划的纲要,并将纲要提交 董事会 审批。 CEO 应实施 董事会 批准的有关劳动相关事宜的纲要。

 

14.2         The Parties acknowledge that the staff and workers of the JV Company shall have the right to establish a trade union in accordance with the applicable PRC Laws . The activities of the trade union shall not interfere with the normal operations of the JV Company and shall comply with applicable PRC Laws .

 

各方 确认: 合资公司 的职员和员工有权按照适用的 中国 法律 建立工会。 工会的活动不得干扰 合资公司 的正常运营,并应遵守适用的 中国法律

 

14.3         Each Party may recommend to the JV Company certain management or technical personnel to be employed by the JV Company . The terms of the employment contracts between the JV Company and such personnel shall be consistent with the outlines approved by the Board .

 

每一方 均可向 合资公司 推荐待由 合资公司 雇佣的某些管理或技术人员。合 资公司 与该等人员之间的劳动合同条款应由 董事会 批准的纲要相一致。

 

14.4         All employees of the JV Company shall execute Confidentiality and Invention Assignment Agreements.  Each Party shall, at all times during the term of the JV Company and thereafter, use its reasonable efforts to safeguard the secrecy of any of the JV Company ’s confidential information, including marketing plans, customer information, technical information, or financial information.

 

所有 合资公司 的员工必须签署保密和发明转让协议。在 合资公司 的存续期间及以后, 各方 应尽其合理努力对 合资公司 的保密信息予以保密,包括营销计划、客户信息、技术信息或财务信息。

 

ARTICLE 15 FINANCING AND ACCOUNTING

 

15 财务和会计

 

15.1         Financial and Accounting System.

 

财务和会计制度

 

(a)               The finance and accounting of the JV Company shall be handled in accordance with the regulations formulated by the Ministry of Finance of the People’s

 

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Republic of China .

 

公司的财务会计按照中华人民共和国财政部制定的相关规定办理。

 

(b)               The fiscal year of the JV Company shall be calendar year from January 1 to December 31.  All vouchers receipts accounting statements and reports and accounting books shall be written in Chinese and English.

 

公司会计年度采用日历年制,从每年一月一日起至十二月三十一日止为一个会计年度。记帐凭证、单据、报表、帐薄,用中文与英文双语书写。

 

(c)                The JV Company adopts RMB as its accounts keeping unit. The conversion of RMB into other currency shall be in accordance with the exchange rate of the converting day published by the State Administration of Foreign Exchange Control of the People’s Republic of China .

 

公司应采用 人民币 为记帐的本位货币。人民同其它货币折算,按实际发生之日中华人民共和国外汇管理局公布的汇价计算。

 

(d)               The JV Company shall adopt the internationally used accrual basis and debit and credit accounting system

 

公司采用国际通用的权责发生制和借贷记帐法记帐。

 

(e)                The JV Company shall, based on sound business practices, maintain its books and records and implement and maintain an adequate system of procedures and controls with respect to finance, management, and accounting that meets international standards of good practice and is reasonably satisfactory to both Parties to provide reasonable assurance that: (i) transactions by it are executed in accordance with management’s general or specific authorization, (ii) transactions by it are recorded as necessary to permit preparation of financial statements in conformity with the PRC Accounting Principles and to maintain asset accountability; (iii) access to its assets is permitted only in accordance with management’s general or specific authorization, (iv) the recorded inventory of assets is compared with the existing tangible assets at reasonable intervals and appropriate action is taken with respect to any material differences, (v) segregating duties for cash deposits, cash reconciliation, cash payment, proper approval is established, and (vi) no personal asset or bank account of any employee, director or officer of the JV Company is mixed with the asset or bank account of the JV Company and the JV Company will not use the personal bank account of any of its employees, directors or officers in the course

 

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of its business operation.  The JV Company shall also prepare management accounts in accordance with the forms approved by the Board (including the management accounts prepared according to US GAAP for Aridis ) and enter the financial information into the financial reporting system of each Party on a monthly basis. Each Party has the right, upon reasonable request, to copies of the JV Company ’s tax returns and reports, if any, and copies of the monthly, quarterly and year-end financial statements of the JV Company .

 

合资公司 应根据健全的商业运作模式保管其账簿和财务记录,并就其财务、管理和会计事项建立并实行符合国际标准且令 各方 合理满意的适当的监管机制和程序,以合理确保 (i) 合资公司 开展的交易均获得管理层的一般或特别授权, (ii) 为按照 中国 会计准则编制财务报表及维系资产会计责任之目的就 合资公司 开展的交易进行了必要的记录, (iii) 必须经管理层的一般或特别授权方可接触公司资产, (iv) 合资公司 依合理的间隔定期就其所记录的资产明细与实际资产进行核对,并就任何重大出入采取合理的措施, (v) 分立与银行存款、现金对账和现金支付相关的义务并就其实行适当的批准制度,和 (vi) 任何员工、董事、管理人员的任何个人资产或银行账户不与公司资产或银行账户相混合且 合资公司 在其业务经营过程中不会使用任何员工、董事、管理人员的个人银行账户。 合资公司 亦应当根据 董事会 批准的格式准备管理报表(包括为 Aridis 根据美国 GAAP 制作的管理报表)并每月根据每方的财务报告系统输入相应财务信息。 每一方 有权在经过合理要求后获得 合资公司 报税回执以及报告(若有的话)的复印件以及月度、季度和年度公司的财务报表。

 

15.2         Auditing.

 

审计

 

(a)               Each Party may examine (including using third parties to assist with such examination) the books and records of the JV Company at such Party’s own expense. The JV Company shall fully and promptly cooperate with such examination.

 

双方 有权自费聘请审计师查阅公司帐簿。查阅时, 合资公司 应提供方便。

 

(b)               The Board shall each year select and appoint as its independent auditor (the “Auditor”) an accounting firm registered in the PRC that is acceptable to both Parties to audit its financial statements and other relevant documents, which Auditor shall be capable of performing accounting and auditing work meeting both PRC domestic accounting standards and the international accounting standards. The JV Company shall be solely responsible for all the costs and

 

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expenses relating to such independent audit.  The results of the Auditor’s examination shall be reported to the Board and the general manager within three (3) months of the end of each financial year. The aforesaid financial reports shall be prepared in both Chinese and English.

 

董事会 每年应挑选并聘请一家经 各方 认可的、在 中国 登记的会计师事务所担任其独立审计师(以下简称 审计师 )对其财务报表及其它相关文件进行审计,该会计师事务所应能完成既符合 中国 国内会计标准又符合国际会计准则的会计审计工作。 合资公司 应全额自行承担与该等独立审计相关的费用和支出。

 

15.3         Tax.

 

税务

 

(a)               The JV Company and the Parties shall pay the various taxes in accordance with the Laws of the PRC relating to foreign invested enterprises, treaties or multilateral agreements to which the PRC government is a party.  The JV Company ’s Chinese and foreign employees shall pay personal income taxes in accordance with the Laws and regulations of the PRC .

 

合资公司 双方 应按照与外商投资企业有关的 中国法律 及由 中国 政府作为 一方 缔结的有关条约或多边协议缴纳各类税款。 合资公司 的中方和外籍员工应按照适用的 中国法律 法规缴纳个人所得税。

 

(b)               The depreciation period for the fixed assets of the JV Company shall be decided in accordance with the Law of the People’s Republic of China on Enterprise Income Tax by the Board .

 

合资公司董事会 根据《中华人民共和国企业所得税法》的规定决定合营公司固定资产的折旧年限。

 

(c)                The Parties shall use reasonable efforts to obtain for the JV Company , the Parties and all personnel thereof all relevant tax exemption and reduction, privilege and preferential treatment available currently or subsequently under the Laws of the PRC or any international treaty or agreement the PRC has concluded or will conclude to which the PRC is a party.

 

双方 应努力为 合资公司 双方 及其所有的人员获取根据 中国法律 中国 已经或将来缔结的有关条约或国际协议现在或将来可以享受的一切有关的免税、减税、特权及优惠待遇。

 

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15.4         Foreign Exchange

 

外汇

 

All matters concerning foreign exchange shall be handled in accordance with the Regulations of the People’s Republic of China on Foreign Exchange Control and other relevant regulations.

 

合资公司 的一切外汇事宜,按照《中华人民共和国外汇管理条例》和有关规定办理 .

 

15.5         Bank Accounts.

 

银行帐户

 

The JV Company shall open accounts in RMB and foreign currency with Bank of China or other banks approved by the Bank of China.

 

合资公司 在中国银行或中国银行同意的其它银行开立 人民币 及外币帐户。

 

15.6         Insurance.

 

保险

 

The JV Company shall, at its own expense and at all times, purchase and maintain from reputable insurance companies within the PRC full and adequate insurance customarily required for the JV Company ’s business against loss or damage by fire and such other risks as may be decided by the Board or are customarily insured against.

 

合资公司 应始终向 中国 境内信誉良好的保险公司购买并维持公司业务惯常需要的充分、足够的保险,以为公司抵御火灾及 董事会 确定的或通常投保的其他风险所带来的损失和损害,所需费用由公司承担。

 

ARTICLE 1 6 PROFIT DISTRIBUTION

 

1 6 利润分配

 

16.1         The JV Company shall allocate reserve funds expansion funds, and bonuses and welfare funds for staff from the after-tax profits.  The proportions of the allocation shall be decided by the Board according to the situation of the JV Company annually.

 

合资公司 从缴纳所得税后的利润中提取储备基金、企业发展基金和职工奖励及

 

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福利基金。 董事会 根据 合资公司 经营情况讨论确定每年提取的比例。

 

16.2         The Parties distribute the after-tax-and-fund profits according to the proportion of each Party’s contribution in the registered capital.

 

双方 按照 双方 在注册资本中的出资比例对税后利润进行分配。

 

16.3         Distribution of profit shall be at the discretion of the Parties subject to the Board ’s approval in accordance with Article 10.2 above.  Should either Hepalink or Aridis requests distribution of profit in any applicable fiscal year, the Parties and the JV Company and its Board shall all not unreasonably withhold consent to such distribution, provided that JV Company retains sufficient assets to reasonably execute the Business Plan .

 

利润的分配须根据 董事会 依据第 10.2 条之批准由 双方 根据其选择决定。若 海普瑞 或者 Aridis 中一方要求分配所适用财年的利润,则 双方 合资公司 及其 董事会 均不得不合理的拒绝批准该分配要求,但前提是 合资公司 保有执行 经营计划 之充沛资产。

 

16.4         Losses of the previous fiscal year shall be covered before profit distribution of the JV Company .  Undistributed profits of the previous fiscal year may be incorporated into the current fiscal year profits.

 

合资公司 上一个会计年度亏损未弥补前不得分配利润。上一个会计年度未分配的利润,可并入本会计年度利润分配。

 

16.5         The Parties declare that it is their intention to distribute the maximum amount possible by way of dividends. In evaluating any board resolution for the award of dividends, the Board shall take into consideration, inter alia, the following factors in respect of the JV Company , namely: long and short term liquidity requirements; cash flow requirements and projections; current, contingent and long term liabilities; and generally, the financial stability and well being of the JV Company .

 

双方 认可,获取可获得的最高额度分红系 双方 共同愿望。 董事会 在评估关于分红的决议时,应考虑 合资公司 的以下各个因素:长期和短期的流动性要求;现金流的要求和规划;当前、紧急和长期的负债;以及 合资公司 总体上的财务稳定和良好状况。

 

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CHAPTER 8 NON-COMPET ITION AND CONFIDENTIALITY

 

8 竞业禁止 与保密

 

Article 17 Non-Compet ition

 

17 竞业禁止

 

17.1         For the purpose of this Contract , each Party undertakes that during the term of this Contract :

 

本合同 之目的, 各方 保证在 本合同 存续期间:

 

(a)                  it will not, and will procure none of its Affiliate , whether directly or indirectly, engage in the same or similar business related to AR301 and AR101 targeting indication as that of the JV Company , solely or in cooperation with others in the Territory with respect to the Field of Use ;

 

其不会,并促使其 关联公司 均不会,在 区域 内与 使用领域 相关,直接或间接从事与本合同项下的 AR301 AR101 相同适应症 相同或相类似的业务,无论其是独资经营或与其他方合作经营 ;

 

(b)                  it will procure none of its staff relating to Licensed Technology and product development expertise, whether directly or indirectly, engage in the same or similar business as that of the JV Company , solely or in cooperation with others in the Territory with respect to the Field of Use ; and

 

其将促使其与 被许可技术 和产品开发特长相关的员工不会在 区域 内与 使用领域 相关,直接或间接从事与 本合同 项下的业务相同或相类似的业务,无论其是独资经营或 与其他方合作经营

 

(c)                   it will not sell the same or similar products as that of the JV Company in the Territory with respect to the Field of Use , even if it may engage in the same or similar business outside the Territory .

 

即使其在 区域 外与 使用领域 相关,从事相同或相类似的商业活动,其不会直接或间接 生产与 合资公司 相同或相类似的产品在 区域 内销售。

 

Article 18  Confidentiality

 

18   保密

 

18.1         All technology, know-how, techniques, trade secrets, trade practices, methods, specifications, designs and other proprietary information disclosed by either Party to the JV Company or any other Party under the terms of this Contract or any other Transaction Document, or developed by the JV Company , as well as the terms of this

 

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Contract and other confidential business and technical information (collectively, “ Confidential Information ”) shall be used by the JV Company and any Party , as well as their respective Affiliates or Representatives , solely for the JV Company ’s account and purposes.  Each Party and the JV Company shall maintain the secrecy of all Confidential Information that may be disclosed or furnished to it by the JV Company or the other Party , and it shall not disclose or reveal any such Confidential Information to any third party absent explicit written authorization from the Board or the relevant disclosing Party , as the case may be.  Confidential Information shall exclude information that the receiving Party can demonstrate by reasonably detailed written documentation: (a) was independently developed by the receiving Party without any use of or access to the disclosing Party ’s Confidential Information ; (b) became known to the receiving Party , without restriction, from a source (having a right to disclose such information) other than the disclosing Party without breach of this Contract ; (c) was generally available in the public domain at the time it was disclosed or enters the public domain through no act or omission of the receiving Party ; (d) was rightfully known by the receiving party, without restriction, at the time of disclosure; or (e) was approved for disclosure by the disclosing Party beforehand and in writing.

 

合资公司 及任意 一方 及其 关联方 代表 只有为公司的利益和目的才能使用任何 一方 根据 本合同 或任何其他交易文件的条款或因其他原因透露给公司或任意其他一方的,或由公司开发的所有技术、技巧、工艺、行业秘密、行业惯例、方法、规格、设计和其他专有资料,以及 本合同 的条款及其他保密的商业和技术信息(以下合称 保密信息 )。 每一方 合资公司 合资公司 另一方 可能向其透露或提供的所有 保密信息 应负责保密,未得 董事会 或有关一方(视情况而定)明确的书面授权,不得将此种 保密信息 透露或泄露给任何第三者。 保密信息 不应包括接受方能用足够详细的书面文件证明属于如下情况的信息:( a )接受方未通过使用或获取披露方的 保密信息 而独立开发的信息;( b )接受方在未违反 本合同 的情况下从披露方之外的来源(其有权利披露此等信息)不受限制地知晓的信息;( c )披露时已为公众广泛了解的信息或非因接受方的行为或不作为而进入公众领域的信息;( d )披露时已由接受方不受限制地合理知晓的信息; 或( e )经披露方事先书面批准披露的信息。

 

18.2         Notwithstanding the foregoing, Confidential Information obtained by a Party that is restricted hereunder may be disclosed by such Party to its Affiliates , or the Representatives of such Party or its Affiliates , or the investors or prospective investors of the funds prepared for or managed currently or in the future by such Party or its Affiliates and the advisors and agents thereof.  In that event, the receiving Party shall take reasonable precautions to prevent such Affiliates or representatives, or the investors or potential investors of the existing and future funds under

 

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establishment or management by such Party or Affiliates and the consultants and agents thereof from using Confidential Information for their personal benefit and to prevent any unauthorized disclosure of such Confidential Information to any third party.

 

尽管有前述规定,任何 一方 可将其得到的受 本合同 限制的 保密信息 透露给其 关联方 该方 或其 关联方 代表 以及现在和今后所筹建或管理的基金的投资人或潜在投资人及其顾问和代理人。在此情况下,得到资料的一方应采取一切合理的预防措施防止前述关联方或代表或现在和今后所筹建或管理的基金的投资人或潜在投资人及其顾问和代理人为个人利益使用 保密信息 ,并防止其擅自向任何第三方透露 保密信息

 

18.3         The Parties shall also ensure that the JV Company shall take all reasonable precautions, including the conclusion of confidentiality agreements with its employees, to prevent its employees from using Confidential Information for their personal benefit and to prevent any unauthorized disclosure of such Confidential Information to any third party.

 

双方 还应确保公司采取一切合理的预防措施,包括与其雇员订立保密协议,以防止其雇员为个人利益使用 保密信息 ,并防止擅自向任何第三方透露 保密信息

 

18.4         Notwithstanding the foregoing, the Parties and the JV Company may with prior written approval of the Party who disclosed the Confidential Information reveal Confidential Information to government personnel to the extent necessary to obtain any required government approval , and to outside lawyers, accountants and consultants to the extent necessary for them to provide their professional assistance; provided that outside individuals shall be requested to undertake to respect the confidentiality provisions of this Contract .

 

尽管有上述规定, 双方 合资公司 为取得必需的 政府批准 ,在事先得到披露 保密信息一方 书面同意的情况下,可将 保密信息 向政府人员作必要透露,也可向提供专业协助的公司外聘的律师、会计师和顾问作必要透露,但据此透露的书面 保密信息 必须标明其为保密,并应要求 合资公司 外的人士承诺遵守 本合同 的保密条款。

 

18.5         Notwithstanding the foregoing, if necessary, the Parties and the JV Company may make necessary disclosure to relevant regulatory authorities or other Governmental Entities any information that (a) is required to be disclosed under any Laws or rules of listing regulators or stock exchanges binding or governing a Party , (b) is reasonably required to be disclosed for Tax purpose or required to be disclosed by relevant Tax regulatory authority, or (c) is required to be disclosed under any Laws ,

 

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any biding ruling, award or provision by any court, regulatory authority, or any other competent Governmental Entity ; provided that such disclosure shall be made to the extent practicable, through consultation with other Parties and in light of such Party’s reasonable requirements for the timing, content and manner of such disclosure.

 

尽管有上述规定,如有需要, 双方 合资公司 可就( a )根据 一方 受约束或管治的 法律 、上市监管机构或证券交易所的规则要求披露的,( b )为税务目的合理需要披露或应有关税务监管机构的要求要求披露的,或( c )根据任何 法律 、任何法院,监管机构,或其他任何有管辖权的 政府机构 做出的具约束力的判决、判令或规定要求披露的保密信息,向相关监管机构或其它 政府机构 作必要批露,前提是应在可行的范围内与其它 双方 协商后并考虑到 该方 就发送披露的时间、内容和方式上的合理要求后再做出此等披露。

 

18.6         Neither of the Parties hereto shall issue a press release or make any public announcement or other public disclosure or otherwise communicate with any news media with respect to this Contract or any of the transactions contemplated herein without obtaining the prior written consent of the other Parties or use the name, or any part or abbreviation of any form thereof of the other Parties or any Affiliate thereof without obtaining in each instance the prior written consent of them, as the case may be.

 

未经 本合同 其他 双方 事先书面同意, 本合同 任何 一方 均不得发布与 本合同 本合同 拟议的交易有关的新闻稿或作出相关公告,亦不得以其他方式与任何新闻媒体进行交流。未经 本合同 任何 一方 事先书面同意, 本合同 任何其他 一方 也不得在任何情况下使用该方或其任何关联方的名称、姓名或其任何部分或任何形式的简称。

 

CHAPTER 9 BUSINESS TERM

 

9 经营期限

 

Article 1 9 Business Term

 

1 9 经营期限

 

19 .1         The business term of the JV Company shall be twenty (20) years commencing on the Establishment Date (“ Business Term ”).

 

合资公司 的经营期限为自 成立日期 起二十 (20) (“ 经营期限 ”)

 

19 .2         If the Parties agree to an extension of the Business Term , the Parties shall cause their appointed Directors to approve the extension and cause the JV Company to file a written application with the competent Record-filing Authority six (6) months

 

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prior to expiration of the Business Term . The extension shall become valid upon issuance of updated Business License by the Registration Authority.

 

如果合同 各方 同意延长 经营期限 各方 应促成其委派的 董事 批准该等延期,并促使 合资公司 经营期限 届满六 (6) 个月前,向 备案机关 提交一份书面申请。该等延期经登记机关出具更新的 营业执照 后生效。

 

CHAPTER 10 TERMINATION

 

10 合同终止

 

Article 20 Termination

 

20 合同终止

 

20.1         This Contract shall be terminated and the JV Company shall be dissolved in the following situations:

 

以下情形下 本合同 解除并解散 合资公司

 

(a)               the Business Term expires and not extended according to Article 19.2 above;

 

经营期限 届满;

 

(b)               the Parties decide to terminate the Contract with unanimous written consent

 

合同 各方 一致书面同意解除 本合同

 

(c)                one Party’s failure to contribute the registered capital it subscribes for according to Article 5, and such failure exceeds six (6) months;

 

合同 一方 未能按照第 5 条的规定缴纳出资,且超过六( 6 )个月;

 

(d)               one Party is involved in liquidation or bankruptcy proceeding or a receiver or administrator is appointed on its assets, or is controlled by third party, or a substantial portion of its assets is seized, forfeited or enforced by any Governmental Entity and not released within sixty (60) days unless the remaining Parties unanimously agree not to terminate this Contract ;

 

一方 进入清算或破产程序,或其资产被指定接管人或破产管理人 , 或被第三方控制,或 其资产的重大部分被 政府机构 查封、没收或强制执行且未能在六十 (60) 天内被解除,除非其它 各方 一致同意不解除 本合同

 

(e)                A Deadlock occurs  and  is  not  resolved  after  the  Parties’   efforts

 

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in accordance with Article 11.10;

 

董事会 出现 僵局 ,且经 各方 根据第 11.10 条进行的努力后仍未能解决;

 

(f)                 If the conditions and consequences of the Force Majeure Event prevail for a period in excess of six (6) months and the Parties have been unable to find an equitable solution;

 

不可抗力 的条件和影响持续超过六( 6 )个月,且 双方 已经无法找到一个公正的解决办法的;

 

(g)                In the event of occurrence of any breach contained in Article 8.1, the breach has not been remedied at the end of sixty (60) day period as set forth in the breach notice, the non-breaching Party shall have the option to terminate the Contract and dissolve the JV Company ; or

 

若第 8.1 条所载的违约行为出现,该违约没有在根据违约通知所载的六十( 60 )天期限到期前得到救济,非违约的 一方 应有权终止 本合同 并解散 合资公司 ;或

 

(h)               Either Aridis or the JV Company terminates the Technology License and Collaboration Agreement in accordance with the terms and conditions thereunder.

 

Aridis 合资公司 根据 技术许可和合作协议 条款和条件规定终止该协议的。

 

20.2         Any early termination (other than a termination for the reasons specified in the Article (c),(d),(e), (g) or (h) herein above) shall require an unanimous consent by the Board according to this Contract .

 

提前终止应获得 董事会 根据 本合同 的一致同意,但根据本条第 (c),(d),(e), (g)  (h) 款规定之原因而终止则除外。

 

20.3         The Parties agree that a non-breaching Party may terminate this Contract by notice in writing to the breaching Party apply directly to the competent Governmental Entity for dissolution of the JV Company without the necessity of obtaining such a Board resolution upon the occurrence of any of the events specified in (c),(d),(e), (g) or (h) herein above.

 

双方 同意若出现本条第 (c),(d),(e), (g)  (h) 款规定的事项,非违约方可直接通过书面通知违约方终止 本合同 ,并直接向有管辖权的 政府机构 申请解散 合资公司 ,无需获得 董事会 的一致决议。

 

20.4         If, upon the expiration of the term of Business License or upon early dissolution of the JV Company pursuant to Article 20.1 of this Contract , no Party purchases the Equity Interest of the other Party in the JV Company , the

 

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Parties shall cause the Directors to appointed by them to adopt a resolution to liquidate the JV Company , formulate liquidation procedures, establish a liquidation committee and submit its proposals to the department in charge of verification.

 

一旦 营业执照 所载期限到期或者 合资公司 根据 本合同 20.1 条规定提前解散,如果没有 一方 收购 另一方 合资公司 中的 股权 利益, 双方 应促使其任命的 董事 通过决议以清算 合资公司 ,规定清算程序,建议清算委员会并将其计划提交负责审核的部门。

 

20.5         The termination of the Contract for any reason, the dissolution of the JV Company or sale of a Party’s Equity Interest to third party shall not release a Party from its Liabilities to pay any sums of money accrued, due and payable to the other Party , or to discharge its then-accrued and unfulfilled obligations including any Liability to the JV Company or other Party in respect of any breach of this Contract .

 

本合同 因任何原因终止 ,或者 合资公司 解散或 一方 出售其 股权 利益给第三方,均免除 一方 应向 另一方 支付的任何到期应付的产生的金钱款项的责任,也不免除该方因其任何违反 本合同 的行为对 合资公司 另一方 负有的届时产生的和没有履行的义务(包括任何责任)。

 

Article  21 FORCE MAJEURE

 

2 1 不可抗力

 

21 .1         Force Majeure Event.

 

不可抗力事件

 

When the obligations of a Party under this Contract cannot be performed in full or in part according to the agreed terms as a direct result of an event that is unforeseeable and the occurrence and consequences of which cannot be prevented or avoided, such as earthquake, typhoon, flood, fire and other natural disasters, war, insurrection and similar military actions, civil unrest and strikes, slow-downs and other labor actions (a “ Force Majeure Event ”), the liability and obligations of the Party that encounters such Force Majeure Event (the “ Hindered Party ”) shall be determined pursuant to the provisions below.

 

如果 一方 不能按约定的条件履行 本合同 规定的全部或部分义务是某一无法预见且其发生及后果均无法防止或避免的事件所直接造成的,例如地震、台风、水灾、火灾及其它自然灾害;战争、暴乱及类似军事行动;民间骚乱;以及

 

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罢工、怠工及其它劳工运动(以下 简称 不可抗力事件 ),则应根据以下条款确定遇有上述 不可抗力事件 一方 (以下简称 受阻方 )的责任和义务。

 

21.2         Consequence of Force Majeure Events.

 

不可抗力事件的后果

 

(a)                  If the following conditions are met, then the Hindered Party shall be fully or partially released from its liability for its failure to perform its obligations hereunder; (i) the Force Majeure Event is the direct cause of the stoppage, impediment or delay encountered by the Hindered Party in performing its obligations under this Contract ; (ii) at the time of the occurrence of the Force Majeure Event , the Hindered Party immediately informed the other Party ; (iii) the Hindered Party has adopted measures to prevent the worsening of the damages and to remedy the situation; and (iv) the Hindered Party provides written information on such event within fifteen (15) days of its occurrence, including a statement of the reasons for the delay in performing or partially performing this Contract .

 

在满足下列条件的情况下, 受阻方 不履行 本合同 项下义务的责任应被全部或部分免除:( i 受阻方 在履行其在 本合同 项下的义务时所遇到的停工、障碍或迟延是 不可抗力事件 直接造成的;( ii 不可抗力事件 发生时, 受阻方 立即通知 另一方 ,( iii 受阻方 已尽其最大努力采取行动以防止损失的扩大并进行补救,( iv 受阻方 于发生 不可抗力事件 后十五( 15 天内提供该有关事件的书面资料,包括述明延迟履行或部分履行 本合同 的理由的说明书。

 

(b)                  If a Force Majeure Event occurs, the Parties shall decide whether this Contract should be amended in light of the impact of the event upon the performance hereof, and whether the Hindered Party should be partially or fully excused from its obligations hereunder.

 

如果发生 不可抗力事件 双方 应根据事件对履行 本合同 的影响,决定是否修改 本合同 ,以及是否部分或全部解除 受阻方 本合同 项下的义务。

 

(c)                   Subject to the fulfillment of the conditions set forth in Article 21.2(a) above and to the extent affected by Force Majeure Event , neither Party shall be liable for any damage, increased costs or loss which the other Party may sustain by reason of a failure or delay of performance due to such Force Majeure Event , and such failure or delay shall not be deemed a breach of

 

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this Contract .

 

若上述第 (a)21.2(a) 条项下的条件全部满足,则在受 不可抗力事件 影响范围内, 双方 均无需就源于 不可抗力事件 的不履行和延迟履行所导致的损害、成本或损失的增加而承担责任,该等不履行和延迟履行不应视为对 本合同 的违约。

 

CHAPTER 1 1 LIABILITIES FOR BREACH OF CONTRACT

 

1 1 违约责任

 

Article  22   Breach of Contract

22    违约

 

22.1         If a Party fails to perform any of its material obligations under the Contract , or if a representation or warranty made by a Party under the Contract and any agreements set forth below in the exhibits, the Party shall be deemed to have breached this Contract .

 

一方 未能履行其在 本合同 项下的主要义务或 该方 本合同 或其附件协议项下的陈述与保证, 该方 应被视为已经违反了 本合同。

 

Article 23  Defaults and Remedies

23 违约与救济

 

23 .1         In the event of occurrence of any breach contained in Article 8.1, any non-breaching Party shall notify the breaching Party in writing that the Contract has been breached and that the breach should be remedies within sixty (60) days from giving such notice by the non-breaching Party . If the breach has not been remedied at the end of sixty (60) day period as set forth in the breach notice, the non-breaching Party shall have the option either to receive  to receive damages,  or  terminate the Contract and dissolve the JV Company , and/or  to  buy-out all of the equity ownership of  the breaching Party favorable price or terms.

 

若出现第 8.1 条项下的任何违约行为,非违约方应以书面通知违约方其已经构成违约且该违约应在该通知发出后六十( 60 )天内部被纠正。若违约行为未能在违约通知中规定的六十( 60 )天截止时被纠正,则非违约方应有权获得赔偿金,或者终止 本合同 并解散 合资公司 ,和 / 或以优惠的价格或条款将违约方的所有股权收购。

 

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Article  24 Liabilities for Breach

 

24 违约责任

 

24.1         Without prejudice to any other provisions hereof, if a Party beaches any of its obligations, covenants or warranties under this Contract , it shall indemnify and hold harmless the JV Company and the other Parties against and from any claims or direct losses incurred therefrom. For clarification, direct losses shall not include, and a Party shall not be liable for, any incidental, contingent, special or consequential losses or damages.

 

在不损害 本合同 之任何其它规定的前提下,如果 一方 违反其在 本合同 项下 的任何义务、承诺或保证,其应就 合资公司 其他方 由此遭受的任何索赔或 直接损失作出赔偿,并使 合资公司 和其他方免受损害。为明确起见,直接损 失不包括任何偶然的、或有的、特殊的或间接导致的损失或损害,并且 一方 不承担任何该等损失或损害。

 

CHAPTER 1 2 GOVERNING LAW AND DISPUTE RESOLUTION

 

12 法律管辖和争议解决

 

Article  25 Governing Law

 

25 法律管辖

 

25 .1         The interpretation, execution, performance, dispute resolution and other legal issues arising from this Contract shall be governed by and construed in accordance with the Laws of the PRC , without regard to the conflict of laws provisions thereof..

 

本合同 的解释,签订、履行、争议解决和其它出自 本合同 的法律问题均应当 适用 中国法律 ,并据其解释,但 中国法律 关于冲突法的规定除外。

 

Article 2 6 Dispute Resolution

 

2 6 争议解决

 

26.1         In the event of any dispute of this Contract , the Article s of Association in Appendix A and the Technology License and Collaboration Agreement in Appendix B, each Party shall promptly designate one or more representatives to meet with each other to resolve the dispute.

 

本合同 和附属合同 A 章程 )和 B 技术许可和合作协议 )履行中发生争议,合同 各方 应立即指定代表人会面解决该争议。

 

26.2         If the dispute is not resolved as a result of the aforesaid meeting, the dispute shall be

 

54


 

resolved by a binding arbitration in the Hong Kong International Arbitration Centre (“ HKIAC ”) in accordance with its then effective arbitration rules. The arbitration shall be held and any award shall be rendered in Chinese. English translations shall be provided upon request by a Party and each Party bear one half of the cost.

 

如代表人会面不能解决争议的,则该争议由香港国际仲裁中心( 香港国际仲裁中心 )根据其届时有效之仲裁规则进行仲裁解决,仲裁地点为香港,仲裁语言为中文。争议 一方 有权要求英文翻译,费用有 双方 各自负担一半。

 

26.3         During the period when a dispute is being resolved, the Parties shall be in all other respects continue their implementation of the Contract .

 

在争议被解决的过程中, 双方 应继续全面地履行 本合同

 

CHAPTER 1 3 MISCELLANEOUS

 

1 3 其他规定

 

Article 2 7 Miscellaneous

 

2 7 其他规定

 

27.1         Each and every section, paragraph, sentence, term and provision of this Contract shall be considered several to the effect that, in the event a court or arbitrator finds any of the same to be invalid or unenforceable, the validity and enforceability, operation, or effect of the remaining sections, paragraphs, sentences, terms and provisions shall not be affected, and this Contract shall be construed in all respects as if the invalid or unenforceable matter had been omitted.

 

本合同 的每一条款、段落、句子、词语和规定应被视为可分割的,若法庭或 仲裁员认定任何条款、段落、句子、词语或规定为无效或不可执行,则本合 同的其它条款、段落、句子、词语和规定的有效性和可执行性、操作性或效 力不受其影响,且在对 本合同 各方面进行解读时,上述无效或不可执行的部 分不应被视为 本合同 的一部分。

 

27.2         This Contract constitutes the entire agreement between the Parties pertaining to the JV Company and supersedes all prior agreements and understandings of the Parties with respect thereto. It may be amended, including this provision, only by an agreement in writing. All Appendices referred to in this Contract are intended to be and are hereby specifically incorporated into and made a part of this Contract . In the event of any inconsistency between any such Appendix and

 

55



 

this Contract , the terms of this Contract shall govern, unless specifically agreed otherwise in the Appendix.

 

本合同 构成 双方 合资公司 达成的完整的的协议,并取代 双方 以前就此所达成的所有的协议和谅解。若需修改 本合同 包括本条款,仅可通过书面协议修改。所有 本合同 所指向的附件旨在且已经融入 本合同 并作为其一部分。若这些附件和 本合同 之间存在任何不一致, 本合同 的条款应优先,除非在附件中有特别约定

 

All Appendices are listed as follows:

这些附件包括:

 

Appendix A:                            Articles of Association of the JV Company

附件 A                                              合资公司的章程

Appendix B:                            Form of Technology License and Collaboration Agreement

附件 B                                              技术许可和合作协议格式

Appendix C:                            Form of Lease Agreement of the JV Company

附件 C                                              合资公司的租赁协议格式

 

27.3         Notices or other communications required to be given by a Party pursuant to this Contract shall be written in Chinese and English and sent by facsimile, electronic mail or personal delivery to the address of the other Party set forth in this Section or to an address updated by such other Party by notice as described in this Section. A notice sent by facsimile transmission or electronic mail shall, if there is a certificate of service, be deemed to be served on the date on which the receipt of the certificate of service is acknowledged by signing, or if there is no certificate of service, be deemed to be served on the date indicated on the fax transmission receipt or the date indicated on the sent email if sent during normal business hours of the recipient, and if not sent during normal business hours, then on the recipient’s next business day; A notice sent by personal delivery shall be deemed to have been served when the other Party signs to acknowledge its receipt.

 

本合同 要求任何 一方 发出的通知或其他通讯应用中文和英文书写,且采用传真、电子邮件或亲自送达的方式,送达 另一方 在本条中所述的地址或 另一方 以本条所述方式通知更改后的地址。如以传真或电子邮件方式送达,有回传送达回证的,以送达回证签收的日期为送达日期,没有送达回证的,如果在接收方的正常营业时间内发送的,以传真或发送的电子邮件回单上注明的日期为送达日期,如果不在接收方的正常营业时间内发送的,则以接收方收悉后的下一营业日作为送达日期;如以直接送达的方式送达,则

 

56



 

另一方 签收时视作已送达。

 

For the purpose of notices, the addresses of the Parties are as follows:

 

为通知目的, 各方 的通讯地址如下:

 

If to Hepalink , to: No. 21, Langshan Road, Songpingshan, Nanshan District, Shenzhen, the PRC

 

海普瑞 : 中国深圳市南山区松坪山郎山路 2

 

If to Aridis , to: 5941 Optical Court, San Jose, California 95138, the USA

 

Aridis : 5941 Optical Court, San Jose, California 95138, the USA

 

抄送(但不构成通知):

 

Sheppard Mullin Richter & Hampton LLP
30 Rockefeller Plaza, New York, NY 10112
Facsimile:  917.438.6133
Email:  JFessler@sheppardmullin.com

 

Addressee:  Jeffery Fessler

 

27.4         Unless otherwise provided for, failure or delay on the part of any Party to exercise any right, power or privilege under this Contract shall not operate as a waiver thereof, nor shall any single or partial exercise of any right, power or privilege preclude exercise of any other right, power or privilege.

 

除非另有约定,任何 一方 未能或延迟行使行使 本合同 下任何权利、权力或特权,不构成其弃权;任何单一或者部分行使该权利、权力或特权,不妨碍其行使其他的权利、权力或特权。

 

27.5         This Contract shall be written in Chinese and English, and both versions have equal legal effect.  In case of discrepancy between the two languages versions, the arbitrators shall decide based on the true intention of the Parties .

 

本合同 应以中、英文书写,且两种版本具有同等法律效力 。若两种语言版本之间存在任何不一致,应又仲裁员根据 双方 的真实意思来判定。

 

27.6         Amendments to this Contract must be made by a written agreement signed by each of the Parties in both Chinese and English texts, each of which shall have equal validity and legal effect, and, if necessary, shall be submitted to the original Record-filing Authority (or its successor) for filing.

 

本合同 的修改须由 每一方 签署中、英两种文本的书面合同方可进行,两种文本具有同等法律效力,在提交原 备案机构 (或其继任机构)备案。

 

[Signature Page Follows]

 

[ 签字页在下页 ]

 

57



 

IN WITNESS WHEREOF, the Parties have executed and delivered this Contract as of the date first above written.

 

兹此为鉴, 各方 已于文首所载之日期签署并交付 本合同

 

 

HEPALINK PHARMACEUTICAL CO., LTD.

 

 

 

深圳市海普瑞药业股份有限公司

 

 

 

 

 

 

By 签署人:

/s/_ 姓名 : 李锂

 

Name 姓名 :

李锂

 

Title 职务:

法定代表人 / Legal Representative

 

 

 

 

 

ARIDIS PHARMACEUTICALS INC.

 

 

 

 

 

 

By 签署人

/s/ Vu Truong 姓名

 

Name 姓名 :

Vu Truong

 

Title 职务:

创始人兼 CEO / Founder & CEO

 

 

58



 

Appendix A

 

Articles of Association of the JV Company

 

Appendix B

 

Form of Technology License and Collaboration Agreement

 

Appendix C

 

Form of Lease Agreement of the JV Company

 

59




Exhibit 10.15

 

EXECUTION COPY

 

TECHNOLOGY LICENSE AND COLLABORATION AGREEMENT

 

BY AND BETWEEN

 

SHENZHEN ARIMAB BIOPHARMACEUTICALS CO., LTD.

 

AND

 

ARIDIS PHARMACEUTICALS,INC.

 

Date: July 2, 2018

 



 

TABLE OF CONTENTS

 

Article 1 DEFINITIONS

1

 

 

 

Article 2 LICENSES AND OTHER RIGHTS

9

 

 

 

2.1

Grant of License to Company

9

2.2

Grant of License to Licensor

9

2.3

Right to Sublicense

9

2.4

Manufacturing Technology Transfer

10

2.5

Procedures for Manufacturing Technology Transfer

10

2.6

Exclusivity

10

 

 

 

Article 3 GOVERNANCE

10

 

 

 

3.1

Formation and Composition of Joint Advisory Committee

10

3.2

Function

11

3.3

Meetings

11

3.4

JAC Responsibilities

11

3.5

Minutes of Committee Meetings

11

3.6

Urgent Matters

11

 

 

 

Article 4 DEVELOPMENT, MANUFACTURE AND COMMERCIALIZATION OF PRODUCT

11

 

 

 

4.1

Development of Product

11

4.2

Development Support

12

4.3

Preparation of Development Plans

12

4.4

Commercialization

12

4.5

Clinical and Commercial Manufacturing

13

4.6

Diligence by Company

14

4.7

Compliance

14

4.8

Cooperation and Coordination

14

4.9

Right to Subcontract of Company

14

4.10

Trademarks

14

4.11

Reporting

15

 

 

 

Article 5 REGULATORY MATTERS

15

 

 

 

5.1

Regulatory Filings

15

5.2

Communications with Authorities

15

5.3

Support in Regulatory Matters

15

5.4

Adverse Event Reporting

15

 

i



 

5.5

Recalls

15

5.6

Pharmacovigilance Agreement

16

 

 

Article 6 FINANCIAL PROVISIONS

16

 

 

No Further Payment

16

 

 

Article 7 INVENTIONS AND PATENTS

16

 

 

 

7.1

Patent Ownership, Prosecution and Maintenance

16

7.2

Enforcement of Patents and Know-How

18

7.3

Third Party Actions Claiming Infringement

18

 

 

 

Article 8 CONFIDENTIALITY

19

 

 

 

8.1

Confidentiality Obligations

19

8.2

Use

20

8.3

Notice

20

8.4

Required Disclosure

20

 

 

 

Article 9 REPRESENTATIONS, WARRANTIES AND COVENANTS

20

 

 

 

9.1

Representations and Warranties

20

9.2

Additional Representations and Warranties of Licensor

21

9.3

Licensor Covenants

22

 

 

 

Article 10 INDEMNIFICATION AND INSURANCE

22

 

 

 

10.1

Indemnification by Company

22

10.2

Indemnification by Licensor

23

10.3

Certain Liabilities

23

10.4

No Consequential Damages

23

10.5

Notification of Claims; Conditions to Indemnification Obligations

23

10.6

Insurance

23

 

 

Article 11 TERM AND TERMINATION

24

 

 

 

11.1

Term and Expiration

24

11.2

Termination of the Agreement

24

11.3

Effects of Termination

24

11.4

Continuing Rights in Case of Licensor Bankruptcy or Insolvency; Right of First Refusal

25

11.5

Continuing Rights in Case of Company Bankruptcy or Insolvency; Right of First Refusal

25

11.6

Other Remedies

25

 

 

Article 12 DISPUTE RESOLUTION

25

 

 

12.1

Disputes

25

12.2

Escalation to Executive Officers

26

12.3

Full Arbitration

26

 

ii



 

Article 13 MISCELLANEOUS PROVISIONS

27

 

 

 

13.1

Relationship of the Parties

27

13.2

Assignment

27

13.3

Performance and Exercise by Affiliates

27

13.4

Change of Control

27

13.5

Further Actions

27

13.6

Accounting Procedures

28

13.7

Force Majeure

28

13.8

Entire Agreement of the Parties; Amendments

28

13.9

Captions

28

13.10

Governing Law

28

13.11

Notices and Deliveries

28

13.12

Waiver

28

13.13

Severability

28

13.14

Interpretation

28

13.15

Counterparts

29

13.16

No Reliance

29

 

 

 

Schedule 1.42

 

31

Schedule 1.43

 

32

Schedule 1.44

 

33

Schedule 1.62

 

34

Schedule 7.1.4

 

35

Schedule 9.2.13

 

36

 

iii



 

EXECUTION COPY

 

TECHNOLOGY LICENSE AND COLLABORATION AGREEMENT

 

This Technology License and Collaboration Agreement (this “ Agreement ”) is entered into as of July 2, 2018 (the “ Effective Date ”) by and between Shenzhen Arimab Biopharmaceuticals Co., Ltd., a corporation organized under the laws of the PRC having a place of business at Room 5044, No. 21, Langshan Lu, Song Ping Shan, Nanshan District, Shenzhen, China (“ Company ”), and Aridis Pharmaceuticals, Inc., a corporation organized under the laws of Delaware, USA, having a place of business at 5941 Optical Court, San Jose, California 95138, the USA (“ Licensor ”). Company and Licensor may be referred to herein respectively as a “ Party ” or collectively as “ Parties .”

 

RECITALS:

 

WHEREAS , Company is a Sino-foreign equity joint venture company formed pursuant to the Joint Venture Contract and the Articles of Association, both dated as of the date thereof by and between Shenzhen Hepalink Pharmaceutical Co. Ltd. (“ Hepalink ”) and Licensor;

 

WHEREAS , Licensor has developed or acquired and controls certain technology and proprietary materials related to certain pharmaceutical products including the Product for infections treatment, and is and will continue to be engaged in the research, discovery, development, manufacture and commercialization of the Product for pulmonary infection, breathing machine infection, pneumonia and blood poisoning treatment;

 

WHEREAS , Company is interested in the research, development, manufacturing and commercialization of the Product in the Territory; and

 

WHEREAS , pursuant to Section 5.1(b) of the Joint Venture Contract, subject to the terms and conditions of this Agreement, Licensor hereby contributes to and grants Company exclusive rights to Develop and Commercialize the Products in the Field in the Territory (“ Technology License ”) and agrees to collaborate with Company for the purpose of developing, manufacturing and commercializing the Products (“ Collaboration ”);

 

NOW, THEREFORE , in consideration of the various promises and undertakings set forth herein, the Parties agree as follows:

 

ARTICLE 1                            DEFINITIONS

 

Unless otherwise specifically provided herein, the following terms shall have the following meanings:

 

1.1                                Adverse Event ” means any serious untoward medical occurrence in a patient or subject who is administered Product.

 

1.2                                Affiliate ” or “ Associated Company ” means a Person that controls, is controlled by or is under common control with a Party, but only for so long as such control exists.  For the purposes of this Section 1.2, the word “control” (including, with correlative meaning, the terms “controlled by” or “under the common control with”) means the actual power, either directly or indirectly through one or more intermediaries, to direct the management and policies of such Person or entity, whether by the ownership of more than fifty percent (50%) of the voting stock of such entity, or by contract or otherwise.

 

1.3                                Articles of Association ” means the articles of association for the Company dated July 2, 2018 by and between Hepalink and Licensor.

 

1.4                                Bankruptcy Event ” means: (a) voluntary or involuntary proceedings by or against a Person are instituted in bankruptcy under any insolvency Law, which proceedings, if involuntary, shall not have been dismissed within sixty (60) days after the date of filing; (b) a receiver or custodian is appointed for a Person; (c) proceedings are instituted by or against a Person for reorganization, dissolution, liquidation or winding-up of the Person, which proceedings, if involuntary, shall not have been dismissed within sixty (60) days after the date of filing; or (d) substantially all of the assets of a Person are seized or attached and not released within sixty (60) days thereafter.

 

1



 

1.5                                Business Day ” means a day other than Saturday or Sunday on which banking institutions in Shenzhen, China are open for business.

 

1.6                                Calendar Quarter ” means each three (3) month period commencing on January 1, April 1, July 1 or October 1 of any year; provided, however, that (a) the first Calendar Quarter of the Term shall extend from the Effective Date to the end of the first full Calendar Quarter thereafter, and (b) the last Calendar Quarter of the Term shall end upon the expiration or termination of this Agreement.

 

1.7                                Calendar Year ” means the period beginning on the 1st of January and ending on the 31st of December of the same year; provided, however, that (a) the first Calendar Year of the Term shall commence on the Effective Date and end on December 31 of the same year and (b) the last Calendar Year of the Term shall commence on January 1 of the Calendar Year in which this Agreement terminates or expires and end on the date of termination or expiration of this Agreement.

 

1.8                                C FDA ” means the Chinese Food and Drug Administration or a successor agency thereto.

 

1.9                                Challenge ” means any challenge to the validity or enforceability of any of the Licensor Patents, including without limitation by (a) filing a declaratory judgment action in which any of the Licensor Patents is alleged to be invalid or unenforceable; or (b) filing or commencing any re-examination, interference, derivation proceeding, post-issuance proceeding, opposition, cancellation, nullity or similar proceedings against any of the Licensor Patents in the courts or patent offices in any country.

 

1.10                         Change of Control ” means, with respect to the Company, Licensor or its parent entity (the “ Target ”): (a) a transaction or series of related transactions that results in the sale or other disposition of all or substantially all of the Target’s  assets; or (b) a merger or consolidation in which, whether or not the Target is the surviving corporation, the shareholders of the Target immediately prior to the consummation of such merger or consolidation do not, immediately after consummation of such merger or consolidation, possess, directly or indirectly through one or more intermediaries, a majority of the voting power of all of the surviving entity’s outstanding stock and other securities and the power to elect a majority of the members of the surviving entity’s board of directors; or (c) a transaction or series of related transactions (which may include a tender offer for the Target’s stock or the issuance, sale or exchange of stock of the Target) if a single Person or group of Persons who are Affiliates (including, without limitation,  Affiliates that are venture capital or investment divisions of such Person) and who are engaged in the research, development, manufacturing and commercialization of pharmaceutical products acquire the Target’s stock in such transaction or series of related transactions that possesses a majority of the voting power of all of the Target’s outstanding stock and other securities and the power to elect a majority of the members of the Target’s board of directors.

 

1.11                         Clinical Trial ” means a clinical trial in human subjects that has been approved by a Regulatory Authority and Institutional Review Board or Ethics Committee, and is designed to measure the safety and/or efficacy of Product.  Clinical Trials shall include Phase I Clinical Trials, Phase II Clinical Trials, Phase III Clinical Trials and Phase IV Clinical Trials.

 

1.12                         Commercialization ” or “ Commercialize ” means activities relating specifically to the pre-launch, launch, promotion, marketing, sales force recruitment, pricing determination, sale and distribution of a pharmaceutical product and post-launch medical activities, including: (a) manufacturing and distribution for commercial sale, (b) strategic marketing, sales force detailing, advertising, and market and product support; (c) importing or exporting for sale, offering for sale; (d) medical education and liaison and any phase IV clinical trials; (e) all customer support and product distribution, invoicing and sales activities; (f) all post-approval regulatory activities, including those necessary to maintain Regulatory Approvals; and (g) target product profile, pricing, formulary and reimbursement related activities including pricing and reimbursement approvals.

 

2


 

1.13                         Commercialization Regulatory Approval ” means, with respect to any Product, the Regulatory Approval required by Laws to sell such Product for use for an Indication, as well as, to the extent required by Laws for the sale of the Product, Price Approvals and government reimbursement approvals.  For purposes of clarity, (a) “Commercialization Regulatory Approval” in the PRC means final approval of an NDA or sNDA by CFDA permitting marketing of the applicable Product in PRC; (b) “Commercialization Regulatory Approval” in the United States means final approval of an NDA or sNDA by FDA permitting marketing of the applicable Product in interstate commerce in the United States; (c) “Commercialization Regulatory Approval” in the European Union means marketing authorization for the applicable Product granted either by a Regulatory Authority in any European country or by the EMA, together, if required by Laws, with the first Price Approval for the applicable Product granted by a Regulatory Authority in any major European country including Italy.

 

1.14                         Commercially Reasonable Efforts ” means: (a) with respect to the efforts to be expended by a Party with respect to any objective, such reasonable, diligent, and good faith efforts as such Party would normally use to accomplish a similar objective under similar circumstances; and (b) with respect to any objective relating to Development or Commercialization of Product by a Party, the application by such Party, consistent with the exercise of its prudent scientific and business judgment, of diligent efforts and resources to fulfill the obligation in issue, consistent with the level of efforts such Party would devote to a product at a similar stage in its product life as  Product and having profit potential and strategic value comparable to that of Product, taking into account, without limitation, commercial, legal and regulatory factors, target product profiles, product labeling, past performance, the regulatory environment and competitive market conditions in the therapeutic area, safety and efficacy of Product, and the strength of its proprietary position all based on conditions then prevailing.  For clarity, Commercially Reasonable Efforts will not mean that a Party guarantees that it will actually accomplish the applicable objective. Notwithstanding anything to the contrary, Commercially Reasonable Efforts shall be deemed in all cases to at least include a contribution of significant efforts and resources in every year of the Term toward execution of the Development Plan, and continued demonstration by the Company in each year that it has sufficient assets to continue those significant efforts.

 

1.15                         Company Competitor ” means any company that (itself or through an Affiliate) is developing or commercializing a product, including any Competing Product, that is, or could reasonably be expected to be, in competition with any product that Company (itself or through an Affiliate) is developing or commercializes.

 

1.16                         Company Know-How” means all Know-How that is Controlled by Company or any of its Affiliates, as of the Effective Date or at any time thereafter during the Term, and that is necessary or useful in the research, Development, Manufacture, use, or Commercialization of the Product and is not invented or developed through the use or practice of Licensor Technology.

 

1.17                         Company Materials ” means all chemical, biological or physical materials that are Controlled by Company or any of its Affiliates, as of the Effective Date or at any time thereafter during the Term, and that are necessary or useful in the research, Development, Manufacture, use or Commercialization of the Product and are not invented or developed through the use or practice of Licensor Technology.

 

1.18                         Company Patents ” means all Patent Rights that are Controlled by Company or any of its Affiliates, as of the Effective Date or at any time thereafter during the Term, and that Cover the research, Development, Manufacture, use, or Commercialization of the Product and are not invented or developed through the use or practice of Licensor Technology.

 

1.19                         Company Technology ” means the Company Patents, the Company Know-How, and Company Materials.

 

1.20                         Competing Product ” means any pharmaceutical product in any dosage form, formulation, presentation or package configuration which contains AR-101 or AR-301.

 

1.21                         “Confidential Information” means non-public information relating to the business, operations or products, including any Know-How, of a party (“ Disclosing Party ”) or its Affiliates, regardless of its form or medium as provided to the other party (“ Receiving Party ”) or its Affiliates in connection with this Agreement or otherwise becomes known to the Receiving Party by virtue of this Agreement, provided that, Confidential

 

3



 

Information shall not include any information that the Receiving Party can show by competent evidence: (a) is already known to the Receiving Party at the time it is disclosed to the Receiving Party by the Disclosing Party; (b) is or becomes generally known to the public through no act or omission of the Receiving Party in violation of the terms of this Agreement; (c) has been lawfully received by the Receiving Party from a Third Party without restriction on its disclosure and without, to the knowledge of the Receiving Party, a breach by such Third Party of an obligation of confidentiality to the Disclosing Party; or (d) has been independently developed by the Receiving Party without use of or reference to the Confidential Information of the Disclosing Party.

 

1.22                         Controlled ” means, with respect to (a) Patent Rights, (b) Know-How or (c) biological, chemical or physical material, that a Party or one of its Affiliates owns or has a license or sublicense to such Patent Rights, Know-How or material (or, in the case of material, has the right to physical possession of such material) and has the ability to grant a license or sublicense to, or assign its right, title and interest in and to, such Patent Rights, Know-How or material as provided for in this Agreement without violating the terms of any agreement or other arrangement with any Third Party.

 

1.23                         Cover ”, “ Covering ” or “ Covered ” means, with respect to Product, that the making, using, selling, or offering for sale of Product would, but for a license granted in this Agreement under the Licensor Patent Rights, infringe a Valid Claim of the Licensor Patent Rights in the country in which the activity occurs.

 

1.24                         Development ” or “ Develop ” means, with respect to Product, the performance of all pre-clinical and clinical development (including toxicology, pharmacology, test method development and stability testing, process development, formulation development, quality control development, statistical analysis), Clinical Trials, manufacturing and regulatory activities that are required to obtain Regulatory Approval of Product in the Territory.

 

1.25                         Development Plan ” means with respect to each Product, the written plan for the Development activities to be conducted for such Product, as such written plan may be prepared, amended, modified or updated in accordance with Section 4.3.

 

1.26                         Development Program ” means the Development activities to be conducted during the Term by each Party with respect to each Product pursuant to the Development Plans.

 

1.27                         EMA ” means the European Medicines Agency or a successor agency thereto.

 

1.28                         European Commission ” means the authority within the European Union that has the legal authority to grant Regulatory Approvals in the European Union based on input received from the EMA or other competent Regulatory Authorities.

 

1.29                         Executive Officers ” means, together, a member of the senior management of the Company and the Licensor.

 

1.30                         Existing Third Party Agreement(s) ” means a license agreement under which rights with respect to Product are granted to Licensor directly or indirectly as an assignee or sublicensee by a Third Party.

 

1.31                         FDA ” means the United States Food and Drug Administration or a successor federal agency thereto.

 

1.32                         Field ” means the diagnosis, treatment, palliation or prevention of all diseases or conditions in all Indications related to infections in humans.

 

1.33                         First Commercial Sale ” means, on a country-by-country basis, the first transfer or disposition for value of Product in such country to a Third Party by Company or the Licensor, or any of its Affiliates or Sublicensees, in each case, after Commercialization Regulatory Approval has been obtained in such country.

 

1.34                         Governmental Body ” means any: (a) nation, principality, state, commonwealth, province, territory, county, municipality, district or other jurisdiction of any nature; (b) federal, state, local, municipal, foreign or other government; (c) governmental or quasi-governmental authority of any nature (including any governmental

 

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division, subdivision, department, agency, bureau, branch, office, commission, council, board, instrumentality, officer, official, representative, organization, unit, body or entity and any court or other tribunal); (d) multi-national or supranational organization or body; or (e) individual, entity, or body exercising, or entitled to exercise, any executive, legislative, judicial, administrative, regulatory, police, military or taxing authority or power of any nature.

 

1.35                         IFRS ” means the International Financial Reporting Standards, the set of accounting standards and interpretations and the framework in force on the Effective Date and adopted by the European Union as issued by the International Accounting Standards Board (IASB) and the International Financial Reporting Interpretations Committee (IFRIC), as such accounting standards may be amended from time to time.

 

1.36                         Indication ” means the prevention or treatment by AR-301 or AR-101 of a generally acknowledged disease or condition caused by a specific pathogen, a significant manifestation of a disease or condition caused by a specific pathogen, or symptoms associated with a disease or condition caused by a specific pathogen or a risk for a disease or condition caused by a specific pathogen for which a MAA may be obtained.

 

1.37                         IND ” means an investigational new drug application submitted to applicable Regulatory Authorities for approval to commence Clinical Trials in a given jurisdiction.

 

1.38                         Joint Venture Contract ” means the joint venture contract of the Company dated         , 2018 by and among Hepalink and Licensor.

 

1.39                         Know-How ” means any: (a) scientific or technical information, results and data of any type whatsoever, in any tangible or intangible form whatsoever, that is not in the public domain or otherwise publicly known, including discoveries, inventions, trade secrets, devices, databases, practices, protocols, regulatory filings, methods, processes (including manufacturing processes, specifications and techniques), techniques, concepts, ideas, specifications, formulations, formulae, data (including pharmacological, biological, chemical, toxicological, clinical and analytical information, quality control, trial and stability data), case reports forms, medical records, data analyses, reports, studies and procedures, designs for experiments and tests and results of experimentation and testing (including results of research or development), summaries and information contained in submissions to and information from ethical committees, or Regulatory Authorities, and manufacturing process and development information, results and data, whether or not patentable, all to the extent not claimed or disclosed in a patent or patent application; and (b) compositions of matter, cells, cell lines, assays, animal models and physical, biological or chemical material, including drug substance samples, intermediates of drug substance samples, drug product samples and intermediates of drug product samples and proprietary equipment, procedures or methodologies relating to the manufacturing of the Product.  The fact that an item is known to the public shall not be taken to exclude the possibility that a compilation including the item, and/or a development relating to the item, is (and remains) not known to the public.  “Know-How” includes any rights including copyright, database or design rights protecting such Know-How.  “Know-How” excludes Patent Rights.

 

1.40                         Knowledge ” means, with respect to a matter that is the subject of a given warranty of Licensor, the actual knowledge, information or belief of any officer of Licensor after making reasonable inquiry into the relevant subject matter of senior employees of Licensor.  “Knowingly” means with Knowledge.

 

1.41                         Law ” or “ Laws ” means all applicable laws, statutes, rules, regulations, ordinances and other pronouncements having the binding effect of law of any Governmental Body.

 

1.42                         Licensor Know-How ” means all Know-How that is Controlled by Licensor or any of its Affiliates, as of the Effective Date or at any time thereafter during the Term, and that is necessary or useful in the research, Development, Manufacture, use, or Commercialization of the Product but does not constitute Significant Improvements.  The Licensor Know-How as of the Effective Date shall include all Know-How set forth on Schedule 1.42 .

 

1.43                         Licensor Materials ” means all chemical, biological or physical materials other than AR-101 and AR-301 that are Controlled by Licensor or any of its Affiliates, as of the Effective Date or at any time thereafter

 

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during the Term, and that are necessary or useful in the research, Development, manufacture, use or Commercialization of the Product but do not constitute Significant Improvements.  The Licensor Materials as of the Effective Date shall include all Licensor Materials set forth on Schedule 1.43 .

 

1.44                         Licensor Patents ” means all Patent Rights that are Controlled by Licensor or any of its Affiliates, as of the Effective Date and at any time thereafter during the Term, and that Cover the research, Development, Manufacture, use, or Commercialization of the Product in the Territory but do not constitute Significant Improvements.  The Licensor Patents existing as of the Effective Date shall include all Licensor Patents set forth on Schedule 1.44 ; provided, that Licensor shall update Schedule 1.44 from time-to-time to include any new Patent Rights that come to be Controlled by Licensor or any of its Affiliates at any time during the Term on or following the Effective Date that Cover the research, Development, Manufacture, use, or Commercialization of the Product.

 

1.45                         Licensor Technology ” means the Licensor Patents, the Licensor Know-How, Licensor Materials, and Program IP (including Program Patents and Program Know-How).  For clarity and by way of example, Licensor Technology at least includes AR-101 and AR-301, cell line producing AR-301, AR-101 monoclonal antibody,culture medium producing monoclonal antibody, monoclonal purification process

 

1.46                         MAA ” means an NDA and any equivalent application for marketing approval submitted in any country in the Territory or outside of the Territory, including all additions, deletions or supplements thereto, and as any and all such requirements may be amended, or supplanted, at any time.

 

1.47                         “Manufacture ” or “ Manufacturing ” or “ Manufactured ” means all operations involved in the manufacture, receipt, incoming inspection, storage and handling of raw materials, and the manufacture, processing, purification, packaging, labeling, warehousing, quality control testing (including in-process release and stability testing), shipping and release of Product.

 

1.48                         Manufacturing Costs ” means with respect to any Product Manufactured by or on behalf of a Party, such Party’s costs of Manufacturing such Product, which shall be the sum of the following components: (a) direct costs, including manufacturing labor and materials directly used in Manufacturing such Product by such Party or its Affiliates and allocated supervisory costs of the manufacturing department; (b) direct labor and allocated supervisory costs of non-manufacturing departments (such as quality and regulatory) attributable to such Product; (c) an allocation of depreciation of facilities, machinery and equipment used in Manufacture of such Product; (d) toll process and other charges incurred by such Party or its Affiliates for outsourcing the Manufacture of such Product and the cost of supervising and managing the Third Party Manufacturers, and of receipt, incoming inspections, storage, packaging, handling quality control testing and release of the outsourced items; (e) allocated general and administrative costs, including, without limitation, purchasing, human resources, payroll, legal, maintenance, information system and accounting, attributable to such Product; and (f) any other reasonable and customary Out-of-Pocket costs borne by such Party or its Affiliates for the testing, transport, customs clearance, duty, insurance and/or storage of such Product.  For purposes of clarity, all allocations under this Section shall be based on space occupied or head-count or other activity-based method.

 

1.49                         “Manufacturing Development” means, with respect to a Product, all activities related to the optimization of a commercial-grade Manufacturing process for the Manufacture of such Product including, without limitation, test method development and stability testing, formulation, validation, productivity, trouble shooting and next generation formulation, process development, Manufacturing scale-up, development-stage Manufacturing, and quality assurance/quality control development.

 

1.50                         NDA ” means a New Drug Application submitted pursuant to the requirements of the FDA, as more fully defined in 21 U.S. CFR§ 314.3 et seq, or a Biologics License Application submitted pursuant to the requirements of the FDA, as more fully defined in 21 U.S. CFR § 601, or counterpart rules in other countries or regions.

 

1.51                         Out-of-Pocket Expenses ” means expenses actually paid by a Party or its Affiliate to any Third Party; provided, that “Out-of-Pocket Expenses” shall not include expenses paid to any consultants (or service providers of like kind), except for travel expenses associated with a consultant (or service provider of like kind).

 

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1.52                         Patent Rights ” means: (a) an issued or granted patent, including any extension, supplemental protection certificate, registration, confirmation, reissue, reexamination or renewal thereof; (b) a pending patent application, including any continuation, divisional, continuation-in-part, substitute or provisional application thereof; and (c) all counterparts or foreign equivalents of any of the foregoing issued by or filed in any country or other jurisdiction.

 

1.53                         “Patent Prosecution ” means the responsibility and authority for (a) preparing, filing and prosecuting applications (of all types) for any Patent, (b) paying, filing and maintenance fees relating to any Patent, (c) managing any interference, opposition, re-issue, reexamination, revocation, nullification, or cancellation proceeding relating to the foregoing, (d) deciding to abandon Patent(s) and (e) settling any interference, opposition, revocation, nullification or cancellation proceeding.

 

1.54                         Person ” means any natural person, corporation, firm, business trust, joint venture, association, organization, company, partnership or other business entity, or any government or agency or political subdivision thereof.

 

1.55                         Phase I Clinical Trial ” means a Clinical Trial in any country that would satisfy the US requirements of 21 CFR 312.21(a) or counterpart rules in other jurisdictions.

 

1.56                         Phase II Clinical Trial ” means, as to a particular Product for any Indication, a Clinical Trial conducted in any country that would satisfy the US requirements of 21 CFR 312.21(b) or counterpart rules in other jurisdictions.

 

1.57                         Phase III Clinical Trial ” means, as to a particular Product for any Indication, a Clinical Trial in any country that would satisfy the US requirements of 21 CFR 312.21(c) or counterpart rules in other jurisdictions.

 

1.58                         Phase IV Clinical Trial ” means a post-registrational Clinical Trial conducted in any country or countries and required as a condition to, or for the maintenance of, any Regulatory Approval for a Product in the Territory or outside the Territory.

 

1.59                         PRC ” means The People’s Republic of China.

 

1.60                         PRC Laws ” means all current effective laws, regulations, administrative rules, regulatory document, judicial interpretations and other legally-binding decisions formulated and published by the legislative bodies, governments at all levels and their functional departments, the Supreme People’s Court and the Supreme People’s Procuratorate.

 

1.61                         Price Approvals ” means, in those countries in the Territory or outside the Territory where Regulatory Authorities may approve or determine pricing and/or pricing reimbursement for pharmaceutical products, such pricing and/or pricing reimbursement approval or determination.

 

1.62                         Product ” means any pharmaceutical product, in any dosage form, formulation, presentation or package configuration that is commercialized or undergoing research or pre-clinical or clinical development that contains or comprises, in part or in whole, the AR-101 and AR-301, which are described in the attached Schedule 1.62 .  For clarity, different formulations or dosage strengths of a given Product shall be considered the same Product for purposes of this Agreement.

 

1.63                         Regulatory Authority ” means: (a) in China, the CFDA; (b) in the US, the FDA; (c) in the EU, the EMA or the European Commission; or (d) in any other jurisdiction anywhere in the world, any regulatory body with similar regulatory authority over pharmaceutical or biotechnology products.

 

1.64                         Regulatory Approval ” means any and all approvals, licenses, registrations, or authorizations of the relevant Regulatory Authority, including Price Approvals, necessary for the Development, manufacture, use, storage, import, transport or Commercialization of Product in a particular country or jurisdiction.

 

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1.65                         Regulatory Filings ” means, collectively: (a) all INDs, NDAs, establishment license applications, DMFs, applications for designation as an “Orphan Product(s)” under the Orphan Drug Act, for “Fast Track” status under Section 506 of the FDCA (21 U.S.C. § 356) or for a Special Protocol Assessment under Section 505(b)(4)(B) and (C) of the FDCA (21 U.S.C. § 355(b)(4)(B)) and all other similar filings (including, without limitation, counterparts of any of the foregoing in any country or region in the Territory or outside the Territory); (b) all supplements and amendments to any of the foregoing; and (c) all data and other information contained in, and correspondence relating to, any of the foregoing.

 

1.66                         Representatives ” means employees, consultants, contractors, advisors and agents of a Party or its Affiliates.

 

1.67                         Senior Executive ” means a member of senior management of a Party who is designated by such Party to resolve disputes under this Agreement.

 

1.68                         Significant Improvements ” means any improvements which either (a) comprise such significantly new scope that new clinical trial(s) ( i.e ., more than a single equivalency trial) would be required, or (b) whose incorporation in the license rights granted herein would require the payment of new fees or royalties to third parties.  Significant Improvements does not include minor improvements, such as formulation, affinity, vector function, or shelf half-life, for which no new clinical trial (other than a single Product equivalency trial) is required.

 

1.69                         Sublicensee ” means a Person other than an Affiliate of a Party to which either Party (or its Affiliate) has, pursuant to Section 2.3, granted sublicense rights under any of the license rights granted under Section 2.1 and Section 2.2; provided, that “Sublicensee” shall exclude distributors and contract manufacturers.

 

1.70                         Territory ” means PRC, Hong Kong, Macau and Taiwan.

 

1.71                         Third Party ” means any Person other than Licensor and Company or any of their respective Affiliates.

 

1.72                         Third Party Action ” means any Action made by a Third Party against either Party that claims that the Product, or its use or Development, manufacture, importation, or sale, infringes or misappropriates such Third Party’s intellectual property rights.

 

1.73                         Third Party Agreement ” means any agreement entered into by a Party or its Affiliate with a Third Party, or any amendment or supplement thereto, in each case following the Effective Date, whereby royalties, fees or other payments are to be made by a Party or its Affiliate to such Third Party in connection with the grant of rights under intellectual property rights Controlled by such Third Party, which rights are necessary or useful for the Development, manufacture, use or Commercialization of the Product.

 

1.74                         United States ” or “ US ” means the United States of America, its territories and possessions.

 

1.75                         USD ” or “ $ ” means the lawful currency of the United States.

 

1.76                         Valid Claim ” means a claim of (a) an issued and unexpired patent which has not lapsed or been revoked, abandoned or held unenforceable or invalid by a final decision of a court or governmental or supra-governmental agency of competent jurisdiction, unappealable or unappealed within the time allowed for appeal, and which has not been disclaimed, denied or admitted to be invalid or unenforceable through reissue, reexamination or disclaimer or otherwise or (b) any patent application which was filed in good faith and which has not  been cancelled, withdrawn, abandoned, or disallowed without the possibility of appeal or re-filing of the application and that has not been pending for more than five (5) years from the first substantive office action on such patent application.  If the patent application has been refiled or is a divisional application, the five (5) year period mentioned above shall be calculated from the first application filed in the series of applications.

 

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ARTICLE 2                            LICENSES AND OTHER RIGHTS

 

2.1                                Grant of License to Company .

 

2.1.1                      Development License . Subject to the terms and conditions of this Agreement, Licensor hereby grants to Company an exclusive (even as to Licensor), revocable, and royalty-free right and license to the Licensor Technology during the Term (with the right to sublicense as provided in Section 2.3) in the Field in the Territory, including related clinical trial data for the purpose of Development of AR-101 and AR-301 and Products in the Field in the Territory, including without limitation, the Manufacture of AR-101 and AR-301 and Product for use in Development in the Field in the Territory. This license cannot be revoked unless it is revoked by the Licensor according to Section 11.2.

 

2.1.2                      Commercialization License. Subject to the terms and conditions of this Agreement, Licensor hereby grants to Company an exclusive (even as to Licensor), revocable, and royalty-free right and license to the Licensor Technology during the Term (with the right to sublicense as provided in Section 2.3) in the Field in the Territory, including related clinical trial data for the purpose of (i) Commercializing Products in the Field in the Territory and (ii) Manufacture of AR-101 and AR-301 and Product for use in Commercialization in the Field in the Territory.  This license cannot be revoked unless it is revoked by the Licensor according to Section 11.2.

 

2.2                                Grant of License to Licensor .

 

2.2.1                      Development License . Subject to the terms and conditions of this Agreement, Company hereby grants to Licensor an exclusive (even as to Company), and revocable right and license to the Company Technology (with the right to sublicense solely as provided in Section 2.3) including related clinical trial data for the sole purpose of Development of AR-101 and AR-301 and Products in the Field outside the Territory, including without limitation, the Manufacture of AR-101 and AR-301 and Product for use in Development outside the Territory.  This license cannot be revoked unless it is revoked by the Company according to Section 11.2.

 

2.2.2                      Commercialization License. Subject to the terms and conditions of this Agreement, Company hereby grants to Licensor an exclusive (even as to Company), and revocable right and license to the Company Technology (with the right to sublicense solely as provided in Section 2.3) including related clinical trial data for the sole purposes of (i) Commercializing the Product in the Field outside the Territory and (ii) Manufacture of AR-101 and AR-301 and Product for use in Commercialization in the Field outside the Territory.  This license cannot be revoked unless it is revoked by the Company according to Section 11.2.

 

2.2.3                      In the event that Company files a patent application based on Company Technology, the Licensor shall pay Company a royalty of RMB10,000 for the licenses granted under Section 2.2,  Other than the royalty provided herein, Company has no current or future obligation to make any form of payment, including upfront payment, royalties, milestone payments, commercial event payments to Company, or reward and remuneration to inventors for Company’s grant of the rights and licenses to Licensor pursuant to Section 2.2.

 

2.3                                Right to Sublicense .

 

2.3.1                      Sublicenses . Either Party shall have the right to grant sublicenses to Sublicensees under the Development and Commercialization licenses granted to it under Section 2.1 and 2.2 respectively, with respect to Product for sale in the Field in the Territory for Company, and, in the Field outside the Territory for Licensor; provided, that, (i) it shall be a condition of any such sublicense that each Sublicensee agrees to be bound by the terms of this Agreement applicable to the Commercialization of Products in the Field in the applicable territory; (ii) the Party that is the

 

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sublicensor shall provide written notice to the other Party of any such proposed sublicense at least 30 days prior to such extension and provide copies to such Party of each such sublicense within 30 days of its execution; (iii) if a Party grants a sublicense to a Sublicensee, the Party that is the sublicensor shall be deemed to have guaranteed that such Sublicensee will fulfill all of such Party’s obligations under this Agreement applicable to the subject matter of such sublicense; (iv) the Party that is the sublicensor shall not be relieved of its obligations pursuant to this Agreement as a result of such sublicense; and (v) the sublicenses to such Sublicensee are permissible under any preexisting agreements with a Third Party.

 

2.3.2                      No Other Rights. Company shall have no rights to use or otherwise exploit Licensor Technology, and, Licensor shall have no rights to use or otherwise exploit Company Technology, in each case, except as expressly set forth herein.

 

2.4                                Manufacturing Technology Transfer .   Within 30 days following Company’s written request, Licensor will transfer to Company, at Licensor’s cost and expense, written or electronic copies of all Licensor Know-How and reasonable quantities of Licensor Materials, including such Know-How that relates to the Development and Manufacture of the Product. Reasonable quantities of Licensor Materials when they relate to AR-101 and AR-301 do not refer to the amount of AR-101 and AR-301 that Company needs to use in its clinical trials or commercialization but refer to the amount of AR-101 and AR-301 that Company needs to use as reference antibodies.

 

2.5                                Procedures for Manufacturing Technology Transfer .  The technology transfer set forth in Section 2.4 shall occur in an orderly fashion and in a manner such that the usefulness and confidentiality of the transferred Licensor Know-How, Licensor Materials and regulatory documentation are preserved in all material respects. During the Term, Licensor shall provide to Company full and prompt disclosure, within 30 days from the date when any Licensor Technology become Controlled by Licensor or any of its Affiliates of any Licensor Technology that becomes Controlled by Licensor or any of its Affiliates after the Effective Date and that is necessary or useful to Company to conduct its activities or exercise its rights as contemplated hereunder and shall, in the case of Licensor Know-How or Licensor Materials, promptly following such disclosure, transfer to Company written or electronic copies of such Licensor Know-How and reasonable quantities of such Licensor Materials.

 

2.6                                Exclusivity .  Licensor and its Affiliates shall not, during the Term, develop, manufacture, have manufactured, use, sell, offer for sale, promote, import, export or distribute a Competing Product in the Field in the Territory nor enter into any relationship with any Third Party with respect thereto.  The aforementioned restriction shall remain in effect in the event of Change of Control of Licensor and shall apply to the successor or assignee of Licensor.

 

ARTICLE 3                            GOVERNANCE

 

3.1                                Formation and Composition of Joint Advisory Committee .  As soon as reasonably practicable after the Effective Date, but in no event later than sixty (60) days following the Effective Date, a joint advisory committee (“ JAC ”) shall be established, composed of two (2) representatives from Company (consisting of one (1) representative from each of the shareholder of Company), two (2) representatives from Licensor, and one (1) representative from Hepalink, all of whom shall be senior level personnel who will have the appropriate technical credentials, experience and knowledge in business, pharmaceutical drug discovery, development and/or commercialization, and will have ongoing familiarity with the Development Program. The Parties shall notify one another in writing of any change in their respective members of the JAC. An alternate member designated by a Party may serve temporarily in the absence of a permanent member of the JAC for such Party.  Company will designate one member of the JAC as the “ Chairperson ” and Licensor will designate one member of the JAC as the “ Co-Chairperson ”.  The Chairperson shall be responsible for (a) calling meetings, (b) preparing and issuing minutes of each such meeting within a reasonable time thereafter (but in any event not to exceed thirty (30) days following such meeting), and (c) preparing and circulating an agenda for any upcoming meeting. Each member of the JAC, and each substitute, shall be subject to the confidentiality obligations contained in Article 8.

 

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3.2                                Function.   The JAC shall be responsible for advising on a research and development strategy and Manufacturing for Product with respect to the Company in the Territory and Licensor outside the Territory. The Parties shall act reasonably and in good faith with respect of the timing of such development to avoid adverse impact on development, Manufacture and Commercialization of Product by Company in the Territory and Licensor outside the Territory. The JAC shall have no power to amend this Agreement and shall have only such powers as are specifically delegated to it hereunder.

 

3.3                                Meetings.   Subject to the provisions of Section 3.6, the JAC shall hold meetings at least once each Calendar Quarter (unless otherwise unanimously agreed by the JAC) at such times and places as shall be determined by the JAC (including by videoconference, telephone, or web conference) to the extent necessary to fulfill the functions described in Section 3.2 and below; provided, that, in no event, shall such meetings be held in person less frequently than once every year (unless otherwise unanimously agreed by the JAC). At least four (4) members of the JAC will constitute a quorum for any meeting. The Chairperson will be responsible for organizing the meetings of the JAC, but will have no additional powers or rights beyond those held by the other representatives to the JAC. The Chairperson will include on the agenda any item within the scope of the responsibility of the JAC that is requested to be included by a JAC member, and will distribute the agenda to the all JAC members no less than five (5) days before any meeting of the JAC. A Party may invite other senior personnel of their organization to attend meetings of the JAC, as appropriate; provided, however, that such other senior personnel shall not have any duties of a JAC member or be taken into account for purposes of achieving a quorum. The JAC may act without a meeting if, prior to such action, a unanimous written consent thereto is given by all JAC members.  Each JAC member shall be responsible for its travel costs incurred for attending JAC meetings.

 

3.4                                JAC Responsibilities .  Company shall have the ultimate right to determine the strategy with respect to Development and Commercialization of Product in the Territory (including Manufacturing for the foregoing purposes) and Licensor shall have the ultimate right to determine the strategy with respect to the Development and Commercialization of Product outside the Territory. The JAC shall be responsible for general oversight of the conduct and progress of the Collaboration. Without limiting the generality of the foregoing, the JAC shall have the following responsibilities: (i) reviewing Development Plans and Product Commercialization Plans; (ii) reviewing data, reports or other information submitted to it by the Parties from time to time; and (iii) appointing committees with specific responsibilities in connection with the foregoing activities; provided, however, that in no event shall the JAC have any authority to (x) resolve any disputes involving the breach or alleged breach of this Agreement, or (y) otherwise amend or modify this Agreement, or the Parties’ respective rights and obligations hereunder.

 

3.5                                Minutes of Committee Meetings .  Minutes will be kept of all JAC meetings by the Chairperson and sent to all members of the JAC for review and approval within fourteen (14) days after each meeting. Minutes will be deemed approved unless any member of the JAC objects to the accuracy of such minutes by providing written notice to the other members of the JAC within seven (7) days of receipt of the minutes. In the event of any such objection that is not resolved by mutual agreement of the Parties, such minutes will be amended to reflect such unresolved dispute.

 

3.6                                Urgent Matters .  Notwithstanding anything in Section 3.3 expressed or implied to the contrary, in the event that an urgent issue or matter arises that requires prompt action by the JAC, the JAC shall arrange for a teleconference (or otherwise meet) for the purpose of resolving such issue or matter. Such JAC teleconference or meeting shall take place as promptly as possible, with the immediacy of such issue or matter requiring JAC action determining the time, place and manner of such teleconference or meeting.

 

ARTICLE 4                            DEVELOPMENT, MANUFACTURE AND COMMERCIALIZATION OF PRODUCT

 

4.1                                Development of Product .

 

4.1.1                      Starting on the Effective Date, except as set forth in Article 3 above, Company shall have the exclusive right, and sole responsibility and decision-making authority, at Company’s own cost and expense, to research, Develop the Product in the Territory and to conduct (either itself or through its Affiliates, agents, subcontractors and/or Sublicensees) all Clinical Trials and non-

 

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clinical studies necessary to obtain Regulatory Approval for Product in the Field in the Territory in accordance with the Development Plan, and to Manufacture Product for Development and Commercialization in the Territory.

 

4.1.2                      Starting on the Effective Date, except as set forth in Article 3 above, Licensor shall retain all other rights not described in Section 2.1 above to research, Develop and Commercialize Product outside the Territory, at its own cost and expense, and to Manufacture Product for Development and Commercialization outside the Territory.

 

4.1.3                      Notwithstanding the foregoing, each Party shall disclose to the other Party all non-clinical and clinical data relating to Product generated by either Party in the Territory and Licensor outside the Territory.  Each Party hereby grants the other Party the right to use such data for Development and Commercialization of the Product and to obtain Regulatory Approval by Company in the Territory and Licensor outside the Territory, and to Manufacture Product for Development and Commercialization by Company in the Territory and by Licensor outside the Territory.

 

4.2                                Development Support .

 

4.2.1                      Each Party shall make its Representatives who are knowledgeable regarding the Licensor Technology, the Product (including the properties and functions thereof), available to the other Party for scientific and technical explanations, advice and support that may reasonably be required by the other Party relating to the Development of the Product (the “ Development Support ”).  The Development Support shall be provided by each Party to the other Party free-of-charge after the Effective Date of this Agreement, provided that the amount of free-of charge Development Support provided by the Licensor to the Company shall be reasonable under the circumstances, and if any additional Development Support is needed, the Licensor is entitled to charge a service fee at the prevailing market rate.

 

4.2.2                      In the event Company wishes Licensor to recruit patients and participate in a Clinical Trial outside the Territory as part of a Company sponsored Clinical Trial, Company may so notify Licensor in writing and the Parties will negotiate in good faith with respect to Licensor’s recruitment of patients and participation in such Clinical trial and the compensation to Licensor for such activities.

 

4.2.3                      In the event Licensor wishes Company to recruit patients and participate in a Clinical Trial in the Territory as part of a Licensor sponsored Clinical Trial, Licensor may so notify Company in writing and the Parties will negotiate in good faith with respect to Company’s recruitment of patients and participation in such Clinical trial and the compensation to Company for such activities.

 

4.3                                Preparation of Development Plans The initial Development Plan for each Party in its respective Territory shall be prepared within 60 days after the Effective Date.  During the Term, each Party may prepare a revised Development Plan, which shall be prepared by each Party for its respective territory and submitted to the JAC for review at least twenty (20) days before the meeting of the JAC at which it will be considered.  Each Development Plan shall: (a) set forth the Development objectives, including Clinical Trials to be conducted within the respective territory and the other Development activities to be conducted, and the timelines applicable to such activities for the period covered by such Development Plan, and (b) be consistent with the other terms of this Agreement.  Each amendment, modification and/or update to a Party’s Development Plan shall be set forth in a written document prepared by such Party, and submitted for review to the JAC.

 

4.4                                Commercialization .

 

4.4.1                      Company Product Commercialization Plans .  Company will make a reasonable effort to prepare and provide to the JAC for its review a Product Commercialization Plan for each Product thirty (30) days prior to the date Company anticipates filing a MAA in the Territory.  Failure to provide such Product Commercialization Plan prior to filing a MAA shall not be a breach of this

 

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Agreement, but in any event within thirty (30) days of filing a MAA in the Territory with respect to each Product, Company shall provide such Product Commercialization Plan to the JAC.  The Company Product Commercialization Plan(s) shall be updated and reviewed at least annually.

 

4.4.2                      Licensor Product Commercialization Plans .  Licensor shall prepare and provide to the JAC for its review a Product Commercialization Plan for each such Product within thirty (30) days of filing a MAA outside the Territory with respect to each Product.  Failure to provide such Product Commercialization Plan prior to filing a MAA shall not be a breach of this Agreement, but in any event within thirty (30) days of filing a MAA outside the Territory with respect to each Product, Licensor shall provide such Product Commercialization Plan to the JAC. The Licensor Product Commercialization Plan shall be updated and reviewed at least annually.

 

4.4.3                      Company Responsibility for Commercialization of Products . Company shall have the sole right and responsibility, at its sole expense, for all aspects of the Commercialization of Products in accordance with the applicable Product Commercialization Plan, in the Field and in the Territory and shall have the sole right and responsibility, at its sole expense, for order fulfillment and distribution of Product and for booking all sales of Product in the Territory, including, without limitation, the conduct of: (a) all activities relating to the Manufacture and supply of Products for Commercialization in the Territory; and (b) all marketing, promotion, sales, distribution, import and export activities (including securing reimbursement, conducting sales and marketing activities and any post-marketing trials or post-marketing safety surveillance and maintaining databases) in the Territory.  Company and its Affiliates shall have the right, in their sole discretion, to appoint Distributors to distribute Products in the Territory. For purposes of this Section 4.4.3, the term Distributor shall mean a Third Party which warehouses and distributes a Product for which Company or an Affiliate or Sublicensee (i) holds the Commercialization Regulatory Approval and (ii) is responsible for marketing the Product, and shall not include any entity which holds Commercialization Regulatory Approval for the Product or is responsible for marketing the Product, unless such entity was granted a sublicense pursuant to Section 2.3 above.

 

4.4.4                      Licensor Responsibility for Commercialization of Products .  Licensor shall have the sole right and responsibility, at its sole expense, for all aspects of the Commercialization of Products in accordance with the applicable Product Commercialization Plan, in the Field and outside the Territory and shall have the sole right and responsibility, at its sole expense, for order fulfillment and distribution of Product and for booking all sales of Product outside the Territory, including, without limitation, the conduct of: (a) all activities relating to the Manufacture and supply of Products for Commercialization outside the Territory; and (b) all marketing, promotion, sales, distribution, import and export activities (including securing reimbursement, conducting sales and marketing activities and any post-marketing trials or post-marketing safety surveillance and maintaining databases) outside the Territory.

 

4.5                                Clinical and Commercial Manufacturing .

 

4.5.1                      Development Supply for the Development Program . Company shall have the right to Manufacture AR-101 and AR-301 and/or finished Products in or outside the Territory necessary for the conduct of the Development Program in the Territory.  In an effort to establish efficient Manufacturing for AR-101 and AR-301 and/or finished Products, the Parties agree to use Commercially Reasonable Efforts to coordinate the Manufacturing activities through the JAC in their respective territories, provided that each Party shall retain the right to Manufacture AR-101 and AR-301 and/or finished Products in quantities necessary for the Development Program in their respective territories. In the event that one Party agrees to supply the other Party with its requirements of AR-101 and AR-301 and/or finished Products in quantities necessary for the Development Program in their respective territories, then the transfer price for such AR-101 and AR-301 and/or Products for the conduct of the Development Program shall be negotiated in good faith by the Parties on an arm’s-length basis.

 

4.5.2                      Commercial Supply for Commercialization Plans . The same coordination efforts referred to in the second sentence of paragraph 4.5.1 above shall be undertaken by the Parties with respect to

 

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Manufacture of AR-101 and AR-301 and/or Products for Commercialization of Product in the Territory and outside the Territory, and the Parties shall discuss in good faith through the JAC the location of such Manufacture. In the event that one Party agrees to supply the other Party with its requirements of AR-101 and AR-301 and/or finished Products in quantities necessary to Commercialize the Product according to the Commercialization Plan applicable in their respective territories, then the transfer price shall be determined in the manner set forth in paragraph 4.5.1 above.

 

4.5.3                      Sole Right and Decision . Notwithstanding the foregoing, each Party shall have the sole right and decision making authority with respect to the Manufacture of Product in the Territory by Company and outside the Territory by Licensor.

 

4.6                                Diligence by Company .  Company shall use Commercially Reasonable Efforts to (a) Develop at least one Product, (b) Commercialize at least one Product in the Territory after receiving Commercialization Regulatory Approval, and (c) correct, prevent or eliminate any adverse condition or event relating to the safety or efficacy of the Product.  Company shall have the exclusive right to determine, in its sole discretion, the launch strategy for Product in the Field in the Territory, subject to its exercise of Commercially Reasonable Efforts and the availability of any necessary Third Party licenses or other rights.  Company shall be expected to contribute at least fifty patients to Licensor’s global clinical trial package for each of AR-101 and AR-301.  Activities by Company’s Affiliates and Sublicensees will be considered as Company’s activities under this Agreement for purposes of determining whether Company has complied with its obligation to use Commercially Reasonably Efforts.  Company shall be relieved of its diligence obligations under this Section starting from the date Company provides Licensor with a termination notice.

 

4.7                                Compliance .  Each Party shall perform its obligations under each Development Plan and Product Commercialization Plan in good scientific manner and in compliance in all material respects with all Laws.  For purposes of clarity, with respect to each activity performed under a Development Plan and/or Product Commercialization Plan that will or would reasonably be expected to be submitted to a Regulatory Authority in support of a Regulatory Filing or MAA, the Party performing such activity shall comply in all material respects with GMPs or Good Manufacture Practices, GLPs or Good Clinical Practices (or, if and as appropriate under the circumstances, International Conference on Harmonization (ICH) guidance or other comparable regulation and guidance of any Regulatory Authority in any country or region in the Territory).

 

4.8                                Cooperation and Coordination Company and Licensor shall cooperate in the performance of the Development Program and, subject to the terms of this Agreement and any confidentiality obligations to Third Parties, shall exchange such data, information and materials as is reasonably necessary for the other Party to perform its obligations under any Development Plan and Product Commercialization Plan. Both Parties will review all significant Regulatory Filings applicable to the Commercialization of a Product prior to submission by either Party to the applicable Regulatory Authorities with respect to the Commercialization of a Product, and will receive copies of all correspondence from Regulatory Authorities with respect to the Commercialization of a Product in a timely manner.  For clarity, nothing in this Section 4.8 shall reduce a Party’s sole right and responsibility to Commercialize Products in its respective territory.

 

4.9                                Right to Subcontract of Company .  Company may exercise any of its rights, or perform any of its obligations, under this Agreement (including any of the rights granted in Section 2.1) by subcontracting the exercise or performance of all or any portion of such rights and obligations on Company’s behalf to an Affiliate or a Third Party, including, but not limited to, distributors and contract manufacturers.  For avoidance of doubt, any Company-designated distributors and contract manufacturers under Section 4.11 shall not be considered as Sublicensees.  Any subcontract granted or entered into by Company as contemplated by this Section 4.9 of the exercise or performance of all or any portion of the rights or obligations that Company may have under this Agreement shall not relieve Company from any of its obligations under this Agreement.

 

4.10                         Trademarks .  As between Licensor and Company, Company shall have the sole authority to select trademarks for Product in the Field in the Territory and shall own all such trademarks. Notwithstanding the foregoing, Company and Licensor shall coordinate the selection of trademarks for similar Products in and outside the Territory for the benefit of successful commercialization.

 

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4.11                         Reporting .  Each Party shall, within plus or minus two (2) months of each anniversary of the Effective Date, provide the other Party with a written report summarizing in reasonable detail its Commercialization activities conducted during the prior Calendar Year with respect to the Commercialization of Product in the Territory by Company and with respect to the Commercialization of Product outside the Territory by Licensor. All information and reports provided to a Party pursuant to this Section 4.11 shall be without any commitment from a Party and shall be treated as Confidential Information of such Party. Notwithstanding the foregoing, each Party’s obligation to provide reports under this Section 4.11 shall expire upon the tenth anniversary of the First Commercial Sale of Product in the Territory for Company and outside the Territory for Licensor.

 

ARTICLE 5                            REGULATORY MATTERS

 

5.1                                Regulatory Filings .  Company and Licensor shall own and maintain all regulatory filings and Regulatory Approvals for Product, including all INDs and MAAs, in the Territory and outside the Territory, respectively.  Company shall be responsible for conducting Clinical Trials in the Territory, and shall design the Clinical Trials in the Territory to be consistent with Clinical Trials conducted by Licensor outside the Territory.  Company shall be expected to contribute at least fifty patients to Licensor’s global clinical trial package for each of AR-101 and AR-301.

 

5.2                                Communications with Authorities .  Company (or one of its Affiliates or Sublicensees) shall be primarily responsible, and , for communications with Regulatory Authorities in connection with the Development, Commercialization, and Manufacturing of Product in the Territory.  Company shall provide Licensor with reasonable opportunities to communicate with Regulatory Authorities in the Territory.  Following the Effective Date, Licensor shall not initiate, with respect to Product, any meetings or contact with Regulatory Authorities in the Territory without reasonable consultation with Company or Company’s prior consent .  To the extent Licensor receives any written or oral communication from any Regulatory Authority in the Territory relating to Product, Licensor shall (a) refer such Regulatory Authority to Company, and (b) as soon as reasonably practicable (but in any event within 14 days, notify Company and provide Company with a copy of any written communication received by Licensor or, if applicable, complete and accurate minutes of such oral communication.  At the request of Company, Licensor shall make available to Company, free of charge, a qualified representative who shall, together with the representatives of Company, participate in and contribute to meetings with the Regulatory Authorities in the Territory with respect to regulatory matters relating to the Licensor Technology. Company shall reimburse Licensor for all Out-of-Pocket Expenses incurred in such participation.

 

5.3                                Support in Regulatory Matters .  Each Party shall make its Representatives that are knowledgeable regarding the Licensor Technology, the Product available to the other Party for regulatory explanations, advice and on-site support, that may reasonably be required by the other Party relating to regulatory matters (including preparation and filing for any INDs and MAAs and obtaining and maintaining Marketing Authorizations) (the “ Regulatory Support ”).  The Regulatory Support shall be provided by each Party to the other Party free-of-charge during the Term. The Party receiving Regulatory Support shall reimburse the Party providing Regulatory Support for all Out-of-Pocket Expenses incurred in such activities.

 

5.4                                Adverse Event Reporting .  The Parties agree to comply with any and all Laws that are applicable as of the Effective Date and thereafter during the Term in connection with Product safety data collection and reporting.  If either Party has or receives any information regarding any Adverse Event, then such Party shall provide the other Party with all such information in English within such timelines which is reasonably expected to enable the other Party to comply with all Laws and relevant regulations and requirements.  Each Party shall report to the other Party any Adverse Event culminating in death or permanent disability of a patient or subject who is administered Product within one day after becoming aware of the Adverse Event.

 

5.5                                Recalls .  Company shall have the sole right to determine whether and how to implement a recall or other market withdrawal of Product in the Territory and shall notify Licensor promptly of any recall or other market withdrawal of Product in the Territory.  Licensor shall notify Company promptly of any recall or other market withdrawal of Product outside the Territory.

 

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5.6                                Pharmacovigilance Agreement .  Without limitation of Section 5.4, the Parties shall meet to commence good faith negotiations to establish a detailed pharmacovigilance agreement relating to the Product, which shall set forth standard operating procedures governing the collection, investigation, reporting, and exchange of information concerning adverse drug reactions/adverse events sufficient to permit each Party to comply with its regulatory and other legal obligations within applicable timeframes.

 

ARTICLE 6                            FINANCIAL PROVISIONS

 

No Further Payment . Licensor’s grant of the rights and licenses to Company pursuant to Section 2.1 and $1 million USD cash constitute Licensor’s total contribution to Company under the Joint Venture Contract.  Company has no current or future obligation to make any form of payment, including upfront payment, royalties, milestone payments, commercial event payments to Licensor for Licensor’s grant of the rights and licenses to Company pursuant to Section 2.1, except milestone and/or royalty obligations due to Development and Commercialization of Licensed Technology in the Territory to Third Parties that may arise from the preexisting agreements as set forth in Schedule 9.2.13 .

 

ARTICLE 7                            INVENTIONS AND PATENTS

 

7.1                                Patent Ownership, Prosecution and Maintenance .

 

7.1.1                      Program IP.   Any Patent Rights and Know-How invented or developed through the use or practice of Licensor Technology pursuant to this Agreement, whether invented jointly between the Parties, or solely by Company (“Program Patents” and “Program Know-How”, respectively), shall be owned by the Licensor (“ Program IP ”).  Any Patent Rights and Know-How invented solely by a Party not through the use or practice of Licensor Technology during the Term shall be solely owned by such Party.

 

(a)                                  Company agrees to assign and hereby assigns all of Company’s rights, title and interest in and to any Program IP that is invented or developed by Company or its Affiliates or Sublicensees or its or their contractors to Licensor.  Company shall obtain from such Affiliates, Sublicensees and contractors equivalent present assignments of such Affiliates’, Sublicensees’ and contractors’ rights, title and interest in any Program IP and promptly assign the same to Licensor.

 

(b)                                  Licensor agrees to grant a license of Licensor’s rights, title and interest in and to any Program IP to Company in the same manner as in Section 2.1.

 

7.1.2                      Patent Coordinators .  Licensor and Company shall, by written notice to the other Party, each appoint a patent coordinator reasonably acceptable to the other Party (each, a “Patent Coordinator” ) to serve as such Party’s primary liaison with the other Party on matters relating to patent filing, prosecution, maintenance and enforcement.  Each Party may replace its Patent Coordinator at any time by notice in writing to the other Party.

 

7.1.3                      Inventorship .  Inventorship shall be determined under PRC patent law.  The Patent Coordinators shall initially determine inventorship of all inventions made in the Development and Commercialization of AR-101 and AR-301 and Products.  In case of a dispute between the Patent Coordinators over inventorship, such dispute shall be resolved according to PRC patent law.

 

7.1.4                      Licensor Patents and Program Patents. Licensor shall have the first right, and the obligation, to file, prosecute and maintain Licensor Patents (in Licensor’s name) and Program Patents (in both Parties’ names) in and outside the Territory, including the country/regions in Schedule 7.1.4 .  Licensor shall bear all costs and expenses of filing, prosecuting and maintaining Licensor Patents and Program Patents in and outside the Territory except that Company shall reimburse

 

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Licensor the costs and expenses of filing, prosecuting and maintaining joint Patents in the Territory.  Licensor shall keep Company informed of the status of the filing and prosecution of Licensor Patents and Program Patents or related proceedings (e.g. interferences, oppositions, reexaminations, reissues, revocations or nullifications) in and outside the Territory.  At Licensor’s request, Company will provide Licensor with reasonable free-of-charge assistance in prosecuting Licensor Patents and Program Patents to the extent possible, including providing such data in Company’s Control that is, in Licensor’s reasonable judgment, needed to support the prosecution of a Licensor Patent and Program Patents in and outside the Territory.  If Licensor elects not to file or to continue to prosecute or maintain a Licensor Patent or Program Patent in the Territory, it shall provide Company with written notification. In such case Company shall have the right, at its own cost and expense, to pursue the filing or support the continued prosecution or maintenance of such Licensor Patent or Joint Patent solely in the Territory.

 

7.1.5                      Company Patents. Company shall have the first right, and the obligation, to file, prosecute and maintain Company Patents (in Company’s name) in and outside the Territory. Company shall bear all costs and expenses of filing, prosecuting and maintaining Company Patents in and outside the Territory.  Company shall keep Licensor informed of the status of the filing and prosecution of Company Patents or related proceedings (e.g. interferences, oppositions, reexaminations, reissues, revocations or nullifications) in and outside the Territory.  At Company’s request, Licensor will provide Company with reasonable free-of-charge assistance in prosecuting Company Patents to the extent possible, including providing such data in Licensor’s Control that is, in Company’s reasonable judgment, needed to support the prosecution of a Company Patent in and outside the Territory.  If Company elects not to file or to continue to prosecute or maintain a Company Patent in and outside the Territory, then it shall notify Licensor in writing at least three (3) months before any final deadline applicable to the filing, prosecution or maintenance of such Company Patent, as the case may be, or any other date by which an action must be taken to establish or preserve such Company Patent in and outside the Territory.  In such case, Licensor shall have the right, at its own cost and expense, to pursue the filing or support the continued prosecution or maintenance of such Company Patent in and outside the Territory.

 

7.1.6                      Patent Term Extension and Supplemental Protection Certificates.  When it is commercially reasonable, Company shall be responsible for obtaining patent term extensions available for in the Territory and for obtaining Supplemental Protection Certificates effectively extending a patent.  Licensor shall provide Company free-of-charge with all relevant information, documentation and assistance in this respect as may reasonably be requested by Company.  Any such assistance, supply of information and consultation shall be provided promptly.  In the event that any election with respect to obtaining patent term extensions or Supplemental Protection Certificates is to be made in the Territory, Company shall have the right to make such elections after reasonable consultation with Licensor, and Licensor shall abide by all such elections.

 

7.1.7                      Information and Cooperation.   Each Party that has responsibility for filing and prosecuting any Patent Rights under this Section 7.1 (a “ Filing Party ”) shall (a) regularly provide the other Party (the “ Non-Filing Party ”) with copies of all patent applications filed hereunder and other material submissions and correspondence with the patent offices, in sufficient time to allow for review and comment by the Non-Filing Party; and (b) provide the Non-Filing Party and its patent counsel with an opportunity to consult with the Filing Party and its patent counsel regarding the filing and contents of any such application, amendment, submission or response.  The advice and suggestions of the Non-Filing Party and its patent counsel shall be taken into consideration in good faith by such Filing Party and its patent counsel in connection with such filing.  Each Filing Party shall pursue in good faith all reasonable claims and take such other reasonable actions, as may be requested by the Non-Filing Party in the prosecution of any Patent Rights covering any Program Technology under this Section 7.1; provided, however, if the Filing Party incurs any additional expense as a result of any such request, the Non-Filing Party shall be responsible for the cost and expenses of pursuing any such additional claim or taking such other actions.

 

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7.2                                Enforcement of Patents and Know-How .

 

7.2.1                      Notice .  If either Party believes that an infringement, unauthorized use, misappropriation or ownership claim or threatened infringement or other such activity by a Third Party has occurred with respect to any Licensor Technology or Program IP in the Territory, or if a Third Party claims that any Licensor Patent or Program Patent is invalid or unenforceable in the Territory, the Party possessing such knowledge or belief shall notify the other Party and provide it with details of such infringement or claim that are known by such Party.

 

7.2.2                      Right to Bring an Action .  Licensor shall have the exclusive right to attempt to resolve any infringement or claim in the Territory, including by filing an infringement suit, defending against such claim or taking other similar action, with respect to a Licensor Patent or Program Patent (each, an “ Action ”) and to compromise or settle any such infringement or claim.  At Licensor’s request, Company shall promptly provide Licensor with all relevant documentation (as may be requested by Licensor) evidencing that Licensor is validly empowered by Company to take such an Action.  Company is obligated to join Licensor in such Action, or bring such Action on Licensor’s behalf upon Licensor’s request, in each case at Licensor’s expense, if Licensor determines that it is necessary to demonstrate “standing to sue”.   Company shall cooperate with Licensor in any such Action.  If Licensor does not intend to prosecute or defend an Action, Licensor shall promptly inform Company.

 

7.2.3                      Costs of an Action .  The Party taking an Action under Section 7.2.2 shall pay all costs associated with such Action, other than the expenses of the other Party if the other Party elects to join such Action (as provided in the last sentence of this paragraph).  Each Party shall have the right to join an Action relating to a Licensor Patent or Program Patent, at its own expense.

 

7.2.4                      Settlement .  Neither Party shall settle or otherwise compromise any Action by admitting that any Licensor Patent or Program Patent is invalid or unenforceable in the Territory without the other Party’s prior written consent, and, in the case of Company, Company may not settle or otherwise compromise an Action in a way that adversely affects or would be reasonably expected to adversely affect Licensor’s rights or benefits hereunder, without Licensor’s prior written consent.

 

7.2.5                      Reasonable Assistance .  The Party not enforcing or defending Licensor Patents or Program Patent shall provide reasonable assistance to the other Party, including providing access to relevant documents and other evidence and making its employees available, subject to the other Party’s reimbursement of any reasonable Out-of-Pocket Expenses incurred on an on-going basis by the non-enforcing or non-defending Party in providing such assistance.

 

7.2.6                      Distribution of Amounts Recovered .  Any amounts recovered by the Party taking an Action pursuant to this Section 7.2, whether by settlement or judgment, shall be allocated in the following order: (i) to reimburse the Party taking such Action for any costs incurred,  (ii) to reimburse the Party not taking such Action for its costs incurred in such Action, if it joins such Action as provided in the last sentence of Section 7.2.3; and (iii) the remaining amount of such recovery shall be allocated to Licensor.

 

7.3                                Third Party Actions Claiming Infringement .

 

7.3.1                      Notice .  If a Party becomes aware of any Third Party Action, such Party shall promptly notify the other Party of all details regarding such claim or action that is reasonably available to such Party.

 

7.3.2                      Right to Defend .  Licensor shall have the right and obligation, at its sole expense, to defend a Third Party Action in the Territory described in Section 7.3.1 and to compromise or settle such Third Party Action.  If Licensor declines or fails to assert its intention to defend such Third Party Action within 30 days of after sending (in the event that Company is the notifying Party) or receipt (in the event that Licensor is the notifying Party) of notice under Section 7.3.1, then Company shall have the right to defend such Third Party Action.  The Party defending such Third Party Action shall have the sole and exclusive right to select counsel for such Third Party Action.

 

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7.3.3                      Consultation .  The Party defending a Third Party Action pursuant to Section 7.3.2 shall be the “ Controlling Party .”  The Controlling Party shall consult with the non-Controlling Party on all material aspects of the defense.  The non-Controlling Party shall have a reasonable opportunity for meaningful participation in decision-making and formulation of defense strategy.  The Parties shall reasonably cooperate with each other in all such actions or proceedings.  The non-Controlling Party will be entitled to be represented by independent counsel of its own choice at its own expense.

 

7.3.4                      Appeal .  In the event that a judgment in a Third Party Action is entered against the Controlling Party and an appeal is available, the Controlling Party shall have the first right, but not the obligation, to file such appeal.  In the event the Controlling Party does not desire to file such an appeal, it will promptly, in a reasonable time period (i.e., with sufficient time for the non-Controlling Party to take whatever action may be necessary) prior to the date on which such right to appeal will lapse or otherwise diminish, permit the non-Controlling Party to pursue such appeal at such non-Controlling Party’s own cost and expense. If Law requires the other Party’s involvement in an appeal, the other Party shall be a nominal party of the appeal and shall provide reasonable cooperation to such Party at such Party’s expense.

 

7.3.5                      Costs of an Action .  The Controlling Party shall pay all costs associated with such Third Party Action other than the expenses of the other Party if the other Party elects to join such Third Party Action (as provided in the last sentence of this paragraph). Each Party shall have the right to join a Third Party Action defended by the other Party, at its own expense.

 

7.3.6                      No Settlement Without Consent .  Neither Party shall settle or otherwise compromise any Third Party Action by admitting that any Licensor Patent is invalid or unenforceable without the other Party’s prior written consent, and, in the case of Company, Company may not settle or otherwise compromise a Third Party Action in a way that adversely affects or would be reasonably expected to adversely affect Licensor’s rights and benefits hereunder, without Licensor’s prior written consent.

 

ARTICLE 8                            CONFIDENTIALITY

 

8.1                                Confidentiality Obligations .  Each Party agrees that, for the Term and thereafter, such Party shall, and shall ensure that its Representatives, hold in confidence all Confidential Information disclosed to it by the other Party pursuant to this Agreement, unless the recipient of the Confidential Information demonstrates by written evidence that such information: (i) is or has become generally available to the public other than as a result of disclosure by the recipient; (ii) is already known by or in the possession of the recipient at the time of disclosure by the disclosing Party; (iii) is independently developed by recipient without use of or reference to the disclosing Party’s Confidential Information; or (iv) is obtained by recipient from a Third Party that has not breached any obligations of confidentiality.

 

The recipient shall not disclose any of the Confidential Information, except to Representatives of the recipient who need to know the Confidential Information for the purpose of performing the recipient’s obligations, or exercise its rights, under this Agreement and who will, prior to their access to such Confidential Information, be bound by written obligations of non-use and non-disclosure substantially similar to those set forth herein.  Each Party agrees to use, and to cause its Affiliates to use, reasonable efforts to enforce such obligations and to prohibit Representatives from using such Confidential Information except as expressly permitted hereunder. Each Party shall be liable to the other for any disclosure or use of the Confidential Information by such Representatives.  The recipient shall (i) protect Confidential Information using not less than the same care with which it treats its own confidential information, but at all times shall use at least reasonable care and (ii) not use, and cause its Affiliates and Representatives not to use, any Confidential Information of the other Party except as expressly permitted hereunder.  Each Party shall: (a) implement and maintain appropriate security measures to prevent unauthorized access to, or disclosure of, the other Party’s Confidential Information; (b) promptly notify the other Party of any unauthorized access or disclosure of such other Party’s Confidential Information; and (c) cooperate with such other Party in the investigation and remediation of any such unauthorized access or disclosure.

 

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8.2                                Use .  Notwithstanding Section 8.1, a Party may use the Confidential Information of the other Party for the purpose of performing its obligations, or exercising its rights, under this Agreement, including for purposes of: (i) filing or prosecuting patent applications; (ii) prosecuting or defending litigation; (iii) conducting pre-clinical studies or Clinical Trials pursuant to this Agreement; (iv) seeking or maintaining Regulatory Approval for Product; (v) complying with Law, including securities Law and the rules of any securities exchange or market on which a Party’s securities are listed or traded; (vi) disclosure to such other Party’s legal and financial advisors; (vii) in connection with an actual or potential (a) permitted sublicense of such other Party’s rights hereunder, (b) debt, equity or other financing of such other Party or (c) merger, acquisition, consolidation, share exchange or other similar transaction involving such Party and any Third Party; or (viii) for any other purpose with the other Party’s written consent, not to be unreasonably withheld.

 

8.3                                Notice . In making any disclosures set forth in clauses (i) through (viii) in Section 8.2, the disclosing Party shall, where reasonably practicable, give such advance notice to the other Party of such disclosure requirement as is reasonable under the circumstances and will use its reasonable efforts to cooperate with the other Party in order to secure confidential treatment of such Confidential Information required to be disclosed.  In addition, in connection with any permitted filing by either Party of this Agreement with any Governmental Body, the filing Party shall endeavor to obtain confidential treatment of economic, trade secret information and such other information as may be requested by the other Party, and shall provide the other Party with the proposed confidential treatment request with reasonable time for such other Party to provide comments, and shall include in such confidential treatment request all reasonable comments of the other Party.

 

8.4                                Required Disclosure .  The recipient may disclose the Confidential Information to the extent required by Law or court order; provided, however, that the recipient promptly provides to the disclosing party prior written notice of such disclosure and provides reasonable assistance in obtaining an order or other remedy protecting the Confidential Information from public disclosure.

 

8.5                                Return of Property .  All Licensor Technology, including any cell line and physical media embodying Confidential Information of the Licensor, is and shall remain the property of the Licensor. Upon the termination of this Agreement, Company shall return all cell lines, physical media embodying any Confidential information of the Licensor, and other physical property embodying Licensor Technology to the Licensor, regardless of how stored or maintained and including all originals, copies, compilations, cell line clones and derivatives.

 

ARTICLE 9                            REPRESENTATIONS, WARRANTIES AND COVENANTS

 

9.1                                Representations and Warranties .  Each Party represents and warrants to the other Party that, as of the Effective Date:

 

9.1.1                      such Party is duly organized and validly existing under the Laws of the jurisdiction of its incorporation or organization;

 

9.1.2                      such Party has taken all corporate action necessary to authorize the execution and delivery of this Agreement and the performance of its obligations under this Agreement;

 

9.1.3                      this Agreement is a legal and valid obligation of such Party, binding upon such Party and enforceable against such Party in accordance with the terms of this Agreement, except as enforcement may be limited by applicable bankruptcy, fraudulent conveyance, insolvency, reorganization, moratorium and other laws relating to or affecting creditors’ rights generally and by general equitable principles.  The execution, delivery and performance of this Agreement by such Party does not conflict with, breach or create in any Third Party the right to accelerate, terminate or modify any agreement or instrument to which such Party is a party or by which such Party is bound, and does not violate any Law of any Governmental Body having authority over such Party; and

 

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9.1.4                      such Party has all right, power and authority to enter into this Agreement, to perform its obligations under this Agreement.

 

9.2                                Additional Representations and Warranties of Licensor .  Licensor warrants to Company that, as of the Effective Date:

 

9.2.1                      no consent by any Third Party or Governmental Body is required with respect to the execution and delivery of this Agreement by Licensor or the consummation by Licensor of the transactions contemplated hereby.

 

9.2.2                      to the knowledge of Licensor, no claims have been asserted in writing, to the effect that the manufacture, use or sale of AR-101 and AR-301 infringes any issued Patent Right of any Third Party;

 

9.2.3                      the Licensor Patents are subsisting and to the knowledge of Licensor, are not the subject of any litigation procedure, discovery process, interference, reissue, reexamination, opposition, appeal proceedings or any other legal dispute;

 

9.2.4                      the Licensor Patents constitute all material Patent Rights owned or Controlled by Licensor as of the Effective Date that Cover the research, Development, Manufacture, use or Commercialization of the Product, are necessary for, the research, Development, Manufacture, use or Commercialization of the Product;

 

9.2.5                      the Licensor Know-How constitutes all material Know-How owned or Controlled by Licensor as of the Effective Date that is directly related to, and are necessary for, the research, Development, Manufacture, use or Commercialization of the Product;

 

9.2.6                      the Licensor Materials constitute all key materials owned or Controlled by Licensor as of the Effective Date that is directly related to, and are necessary for, the research, Development, Manufacture, use or Commercialization of the Product;

 

9.2.7                      Licensor has not licensed to a Third Party the right to develop a Competing Product within the Territory;

 

9.2.8                      to the knowledge of Licensor, no Third Party has filed or threatened in writing to file any lawsuit or other action alleging that any Licensor Patent is invalid or unenforceable;

 

9.2.9                      it has the full right to provide the Licensor Technology to Company pursuant to this Agreement, and to the knowledge of Licensor, neither Company’s use of the Licensor Material as contemplated by this Agreement, nor such transfer, will violate any agreement with any Third Party;

 

9.2.10               to the knowledge of Licensor, all Representatives of Licensor who have performed any activities on its behalf in connection with research regarding the Product have assigned to Licensor the whole of their rights in any intellectual property made, discovered or developed by them as a result of such research;

 

9.2.11               the Licensor Technology is free and clear of any liens, charges, encumbrances or rights of others to possession or use, in each case that were created by an action of Licensor, other than those liens, charges, encumbrances or rights of others to possession or use that do not individually or in the aggregate materially detract from the value or use of the Licensor Technology;

 

9.2.12               except with respect to rights granted to Company in the Territory, Licensor has not previously licensed, assigned, transferred, or otherwise conveyed any right, title or interest in and to the Licensor Technology to any Third Party in the Territory, including any rights with respect to any Product;

 

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9.2.13               there are no Third Party Agreements related to AR-101 and AR-301 except those in Schedule 9.2.13 ;

 

9.2.14               Licensor (and its Affiliates) has not employed or otherwise used in any capacity, and will not employ or otherwise use in any capacity, the services of any Person debarred under United States law, including under Section 21 USC 335a or any foreign equivalent thereof, with respect to the Product; and

 

9.2.15               to the knowledge of Licensor, all research and development related to the Product prior to the Effective Date has been conducted in accordance with all Laws in all material aspects.

 

Except as expressly set forth in this Section 9, Licensor does not make any representations, warranties or guarantee, whether expressed or implied, with respect to the Licensor Technology or other services provided by Licensor under this Agreement.

 

9.3                                Licensor Covenants .  Licensor covenants to Company that:

 

9.3.1                      Licensor shall fulfill all of its obligations in all material aspects, including but not limited to its payment obligations, under any Third Party Agreement set forth in Schedule 9.2.13 except milestone and/or royalty obligations due to Development and Commercialization of Licensed Technology in the Territory to Third Parties that may arise from preexisting agreements set forth in Schedule 9.2.13 ;

 

9.3.2                      Licensor shall cause the sublicense of technology in the Territory to the Company within 3 months after the Effective Date of this Agreement as to the following preexisting license agreements;

 

9.3.3                      Licensor shall not amend or waive, or take any action or omit to taking any action that would alter, any of Licensor’s rights under any Third Party License Agreement in any manner that adversely affects, or would reasonably be expected to adversely affect, Company’s rights and benefits under this Agreement.  Licensor shall promptly notify Company of any default under, termination or amendment of, Third Party License Agreement.

 

9.4                                Company Covenants . Company covenants to Licensor that it will not during the Term of this Agreement or thereafter, either contest or challenge the ownership by Licensor of the Licensor Technology, nor will it actively or passively aid any other person or third party in infringing or in challenging or contesting the ownership by Licensor of the Licensor Technology.

 

ARTICLE 10                     INDEMNIFICATION AND INSURANCE

 

10.1                         Indemnification by Company .  Company shall indemnify, defend and hold Licensor and its Affiliates and each of their respective employees, officers, directors and agents and their respective heirs, successors and assigns (the “ Licensor Indemnitees ”) harmless from and against any and all liability, damage, loss, cost or expense (including reasonable attorneys’ fees and expenses of litigation) to the extent arising out of Third Party claims, actions, demands, suits or judgments related to: (a) Company’s gross negligence or willful misconduct; (b) Company’s failure to perform its obligations under this Agreement; (c) breach by Company of its representations, warranties or covenants set forth in Article 9, or (d) the Development of any Product or the Commercialization (including, without limitation, the use by any Person) of any Product by Company or any of its Affiliates, Sublicensees, distributors or agents outside the Territory; provided, however, that Company’s obligations pursuant to this Section 10.1 shall not apply (i) to the extent such claims or suits result from the negligence or willful misconduct of any of the Licensor Indemnitees, (ii) with respect to claims or suits arising out of breach by Licensor of its representations, warranties or covenants set forth in Article 9.

 

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10.2                         Indemnification by Licensor .  Licensor shall indemnify, defend and hold Company and its Affiliates and each of their respective agents, employees, officers and directors and their respective heirs, successors and assigns (“ Company Indemnitees ”) harmless from and against any and all liability, damage, loss, cost or expense (including reasonable attorney’s fees and expenses of litigation) to the extent arising out of Third Party claims, actions, demands, suits or judgments related to: (a) Licensor’s gross negligence or willful misconduct; (b) Licensor’s failure to perform its obligations under this Agreement; (c)  breach by Licensor of its representations, warranties or covenants set forth in Article 9; or (d) the Development of any Product or the Commercialization (including, without limitation, the use by any Person) of any Product by Licensor or any of its Affiliates, Sublicensees, distributors or agents in the Territory; provided, however, that Licensor’s obligations pursuant to this Section 10.2 shall not apply (i) to the extent that such claims or suits result from the negligence or willful misconduct of any of Company Indemnitees, (ii) with respect to claims or suits arising out of breach by Company of its warranties set forth in Article 9, and (iii) with respect to claims or suits arising out of the use of the Products in the Territory.

 

10.3                         Certain Liabilities .  NOTWITHSTANDING ANY OTHER PROVISION OF THIS AGREEMENT, NEITHER PARTY’S LIABILITY IS LIMITED WITH RESPECT TO STATUTORY LIABILITY AS PRESCRIBED FOR BY THE MANDATORY PROVISIONS OF THE PRC LAWS.

 

10.4                         No Consequential Damages .  EXCEPT WITH RESPECT TO EACH PARTY’S INDEMNIFICATION OBLIGATIONS UNDER SECTION 10.1 OR SECTION 10.2 FOR PAYMENTS TO THIRD PARTIES, AS APPLICABLE, AND SUBJECT ALWAYS TO SECTION 10.3 (CERTAIN LIABILITIES), TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW, IN NO EVENT SHALL EITHER PARTY OR ANY OF ITS AFFILIATES BE LIABLE TO THE OTHER PARTY OR ANY OF ITS AFFILIATES FOR SPECIAL, INDIRECT, INCIDENTAL, CONSEQUENTIAL OR PUNITIVE DAMAGES, INCLUDING LOSS OF PROFITS, WHETHER IN CONTRACT, WARRANTY, TORT, NEGLIGENCE, STRICT LIABILITY OR OTHERWISE ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREIN OR ANY BREACH HEREOF.  NOTWITHSTANDING THE FOREGOING, NOTHING IN THIS AGREEMENT SHALL LIMIT EITHER PARTY FROM SEEKING OR OBTAINING ANY REMEDY AVAILABLE UNDER LAW FOR ANY BREACH BY THE OTHER PARTY OF ITS CONFIDENTIALITY AND NON-USE OBLIGATIONS UNDER ARTICLE 8.

 

10.5                         Notification of Claims; Conditions to Indemnification Obligations .  As a condition to a Party’s right to receive indemnification under this Article 10, it shall: (a) promptly notify the other Party as soon as it becomes aware of a claim or suit for which indemnification may be sought pursuant hereto; (b) cooperate, and cause the individual indemnitees to cooperate, with the indemnifying Party in the defense, settlement or compromise of such claim or suit; and (c) permit the indemnifying Party to control the defense, settlement or compromise of such claim or suit, including the right to select defense counsel.  In no event, however, may the indemnifying Party compromise or settle any claim or suit in a manner which admits fault or negligence on the part of the indemnified Party or any indemnitee without the prior written consent of the indemnified Party.  Each Party shall reasonably cooperate with the other Party and its counsel in the course of the defense of any such suit, claim or demand, such cooperation to include without limitation using reasonable efforts to provide or make available documents, information and witnesses.  The indemnifying Party shall have no liability under this Article 10 with respect to claims or suits settled or compromised without its prior written consent.

 

10.6                         Insurance .  During the Term, each Party shall obtain and maintain, at its sole cost and expense, insurance (including any self-insured arrangements) in types and amounts that are reasonable and customary in the pharmaceutical and biotechnology industry for companies engaged in comparable activities.  It is understood and agreed that this insurance shall not be construed to limit either Party’s liability with respect to its indemnification obligations hereunder.  Each Party will, except to the extent self-insured, provide to the other Party upon request a certificate evidencing the insurance such Party is required to obtain and keep in force under this Section 10.6.

 

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ARTICLE 11                     TERM AND TERMINATION

 

11.1                         Term and Expiration .  The term of this Agreement (the “ Term ”) shall commence on the Effective Date and, unless earlier terminated as provided in this Article 11, shall continue in full force and effect until the Joint Venture Contract expires.

 

11.2                         Termination of the Agreement .  At any time during the Term, Company may, at its convenience, terminate this Agreement in its entirety with ninety (90) days’ prior written notice to Licensor. Licensor may terminate this Agreement in its entirety with ninety (90) days’ prior written notice to Company in the event that Company has not complied with its obligation to use Commercially Reasonably Efforts under Section 4.6 (“Breach of Commercially Reasonable Efforts Event”) and the breach has not been remedied at the end of sixty (60) day period as set forth in the breach notice. Licensor may also immediately terminate this Agreement in its entirety in the event that Hepalink does not make the additional equity investment in the Company of no less than USD $9,000,000 in accordance with Section 5.4 of the Joint Venture Contract (“Breach of Future Financing Obligation Event”), that the Company materially breached its confidentiality obligations under Section 8.1 (“Breach of Confidentiality Obligation Event”) and the breach has not been remedied at the end of sixty (60) day period as set forth in the breach notice, or a Change of Control of the Company (“ Company Change of Control Event ”).

 

11.3                         Effects of Termination .

 

11.3.1               Survival .

 

(a)                                  Notwithstanding the expiration or termination of this Agreement, the following provisions shall survive the expiration or termination of this Agreement:  Article 1 (Definitions), Article 8 (Confidentiality), Article 10 (Indemnification and Insurance), Article 11 (Term and Termination), Article 12 (Dispute Resolution), and Article 13 (Miscellaneous).

 

(b)                                  Expiration or termination of this Agreement shall not relieve the Parties of any liability that accrued hereunder prior to the effective date of such termination.

 

11.3.2               Licenses, Contracts, Regulatory Matters and Other Obligations .  Upon termination of this Agreement, each Party shall promptly return all Confidential Information and proprietary materials of the other Party that are not subject to a continuing license hereunder; provided, that, each Party may retain one copy of the Confidential Information of the other Party in its archives solely for the purpose of establishing the contents thereof and ensuring compliance with its obligations hereunder. Documents and copies of Confidential Information which cannot be returned physically shall be completely destroyed and erased from any computer system.

 

11.3.3               Right of First Refusal .  In addition to the foregoing, in the event of Breach of Commercially Reasonable Efforts Event, Breach of Future Financing Obligation Event, Breach of Confidentiality Obligation Event, or Company Change of Control Event, Licensor shall, to the extent allowed by Law, have a right of first refusal to purchase all of Company’s interest in the Product and the Company Technology in the Territory (the “ Right of First Refusal ”).  The Right of First Refusal shall operate as follows:

 

(i)                                      Licensor shall promptly send to Company a reasonably detailed written notification of any Breach of Commercially Reasonable Efforts Event, Breach of Future Financing Obligation Event, Breach of Confidentiality Obligation Event, or Company Change of Control Event.

 

(ii)                                   Company shall promptly send to Licensor a written notification of any Third Party offer made for the Product or Company Technology in the Territory.  Licensor shall have a Right of First Refusal for a period of up to sixty (60) days after Licensor receives such notice (such period, the “ Right of First Refusal Notice Period ”). In the event Licensor exercises its Right of First Refusal, the terms of the Third Party offer shall become binding upon Company and Licensor.  For the avoidance of doubt, Company shall not enter into any agreement with a Third Party relating to Company’s interest in Products or Company Technology in the Territory during the Right of First Refusal Notice Period.

 

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11.4                         Continuing Rights in Case of Licensor Bankruptcy or Insolvency; Right of First Refusal .

 

(a)                                  Continuing Rights.   The Parties agree that, in the event of a Licensor Bankruptcy Event, Company shall continue to be entitled to rights granted under Section 2.1 of this Agreement to Licensor Technology and all embodiments thereof, which, if not already in Company’s possession, shall be promptly delivered to it (a) following any such commencement of a bankruptcy proceeding upon Company’s written request therefor, unless Licensor elects to continue to perform all of its obligations under this Agreement or (b) if not delivered under clause (a), following the rejection of this Agreement by Licensor  upon written request therefor by Company.

 

11.5                         Continuing Rights in Case of Company Bankruptcy or Insolvency; Right of First Refusal .

 

(a)                                  Continuing Rights.   The Parties agree that, in the event of a Company Bankruptcy Event, Licensor shall continue to be entitled to rights granted under section 2.2 of this Agreement to Company Technology and all embodiments thereof, which, if not already in Licensor’s possession, shall be promptly delivered to it (a) following any such commencement of a bankruptcy proceeding upon Licensor’s written request therefor, unless Company elects to continue to perform all of its obligations under this Agreement or (b) if not delivered under clause (a), following the rejection of this Agreement by Company upon written request therefor by Licensor.

 

(b)                                  Right of First Refusal .  In addition to the foregoing, in the event of a Company Bankruptcy Event, Licensor shall, to the extent allowed by Law, have a right of first refusal to purchase all of Company’s interest in the Product and the Company Technology in the Territory (the “ Right of First Refusal ”).  The Right of First Refusal shall operate as follows:

 

(i)                                      Company (or other authorized representative of Company, including a bankruptcy trustee) shall promptly send to Licensor a reasonably detailed written notification of any Company Bankruptcy Event.

 

(ii)                                   Company (or other authorized representative of Company, including a bankruptcy trustee) shall promptly send to Licensor a written notification of any Third Party offer made for the Product or Company Technology in the Territory.  Licensor shall have a Right of First Refusal for a period of up to sixty (60) days after Licensor receives such notice (such period, the “ Right of First Refusal Notice Period ”). In the event Licensor exercises its Right of First Refusal, the terms of the Third Party offer shall become binding upon Company and Licensor.  For the avoidance of doubt, Company shall not enter into any agreement with a Third Party relating to Company’s interest in Products or Company Technology in the Territory during the Right of First Refusal Notice Period.

 

11.6                         Other Remedies .  Termination of this Agreement for any reason shall not release either Party from any liability or obligation that already has accrued prior to such termination.  Termination of this Agreement for any reason shall not constitute a waiver or release of, or otherwise be deemed to prejudice or adversely affect or limit, any rights or remedies that otherwise may be available at Law or in equity.

 

ARTICLE 12                     DISPUTE RESOLUTION

 

12.1                         Disputes .  The Parties recognize that disputes as to certain matters may from time to time arise during the Term which relate to either Party’s rights and/or obligations hereunder.  It is the objective of the Parties to establish under this Article 12 procedures to facilitate the resolution of disputes arising under this Agreement (other than any disputes relating to matters for which under this Agreement Company or Licensor has sole decision-making authority and/or discretion (each, a “ Non-Escalable Dispute ”), in which case, such matter shall be determined by Company or Licensor, as the case may be, and shall not be part of the dispute resolution procedure set forth in this Article 12) in an expedient manner by mutual cooperation and without

 

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resort to litigation.  In the event that the Parties are unable to resolve such dispute through diligent review and deliberation by the Senior Executives within thirty (30) days from the day that a Party had designated the issue as a dispute in written notice to the other Party, then either Party shall have the right to escalate such matter to the Executive Officers as set forth in Section 12.2.

 

12.2                         Escalation to Executive Officers .  Either Party may, by written notice to the other Party, request that a dispute (other than a Non-Escalable Dispute) that remains unresolved by the Senior Executives for a period of thirty (30) days as set forth in Section 12.1 arising between the Parties in connection with this Agreement, or a dispute relating to material breach, be resolved by the Executive Officers, within fifteen (15) days after referral of such dispute to them If the Executive Officers cannot resolve such dispute within fifteen (15) days after referral of such dispute to them, then, at any time after such fifteen (15) day period, either Party may proceed to enforce any and all of its rights with respect to such dispute.

 

12.3                         Full Arbitration .  If the Parties are unable to resolve the dispute following the procedure set forth in Section 12.2, then the dispute for arbitration shall be referred to and finally resolved by arbitration in the following manner:

 

(a)                                  dispute shall be settled by arbitration in Hong Kong by the Hong Kong International Arbitration Centre (the “ HKIAC ”) in accordance with the Hong Kong International Arbitration Centre Administered Arbitration Rules (the “ HKIAC Rules ”) in force when the Arbitration Notice is submitted.  There shall be three (3) arbitrators.

 

(b)                                  Each Party shall select one person to act as arbitrator and the two Party-selected arbitrators shall select a third arbitrator within ten (10) 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 HKIAC.

 

(c)                                   No arbitrator shall have any past or present family, business or other relationship with the Parties or any Affiliate, director or officer thereof, unless following full disclosure of all such relationships, the Parties agree in writing to waive such requirement with respect to an individual in connection with any dispute.

 

(d)                                  No discovery other than an exchange of relevant documents may occur in any arbitration commenced under the provisions of this Article 12.  The Parties agree to act in good faith to promptly exchange relevant documents.

 

(e)                                   The arbitral proceedings shall be conducted in Chinese. A Party may request English translation and each Party bears half of cost.

 

(f)                                    To the extent that the HKIAC Rules are in conflict with the provisions of this Section 12.3, including the provisions concerning the appointment of the arbitrator, the provisions of this Section 12.3 shall prevail.

 

(g)                                   The award of the arbitral tribunal shall be final and binding upon the Parties a party thereto, and the prevailing Party may apply to a court of competent jurisdiction for enforcement of such award.

 

(h)                                  Any Party that is a party to the dispute shall be entitled to seek preliminary injunctive relief, if possible, from any court of competent jurisdiction pending the constitution of the arbitral tribunal.

 

(i)                                      The Parties will each pay fifty percent (50%) of the initial compensation to be paid to the arbitrator in any such arbitration and fifty percent (50%) of the costs of transcripts and other normal and regular expenses of the arbitration proceedings; provided, however, that: (i) the prevailing Party in any arbitration will be entitled to an award of attorneys’ fees and costs; and (ii) all costs of arbitration, other than those provided for above, will be paid by the losing Party, and the arbitrator will be authorized to determine the identity of the prevailing Party and the losing Party.

 

(j)                                     The panel of the arbitrators chosen in accordance with these provisions will not have the power to alter, amend or otherwise affect the terms of these arbitration provisions or any other provisions contained in this Agreement.

 

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ARTICLE 13                     MISCELLANEOUS PROVISIONS

 

13.1                         Relationship of the Parties .  The Parties hereto understand and agree that the Collaboration is limited to the activities, rights and obligations as set forth in this Agreement.  Nothing in this Agreement shall be construed or shall be deemed, for financial, tax, legal or other purposes (a) to create or imply a general partnership between the Parties, (b) to make either Party the agent of the other for any purpose, (c) to alter, amend, supersede or vitiate any other arrangements between the Parties with respect to any subject matters not covered hereunder, (d) to give either Party the right to bind the other, (e) to create any duties or obligations between the Parties except as expressly set forth herein, or (f) to grant any direct or implied licenses or any other right other than as expressly set forth herein.

 

13.2                         Assignment .

 

13.2.1               Assignment and Successors. Neither this Agreement nor any obligation of a Party hereunder may be assigned by either Party, except that upon the consent of the other which shall not be unreasonably withheld, each Party may assign this Agreement and the rights, obligations and interests of such Party, in whole, but not in part, to any purchaser of all of its assets or all of its assets to which this Agreement relates or shares representing a majority of its common stock voting rights or to any successor corporation resulting from any merger, consolidation, share exchange or other similar transaction.

 

13.2.2               Continuing Obligations .  No assignment under this Section 13.2 shall relieve the assigning Party of any of its responsibilities or obligations hereunder accruing prior to such assignment and, as a condition of such assignment, the assignee shall agree in writing to be bound by all obligations of the assigning Party hereunder.  This Agreement shall be binding upon the successors and permitted assigns of the Parties.

 

13.2.3               Void Assignments .  Any assignment not in accordance with this Section 13.2 shall be void.

 

13.2.4               Assignment of Licensor Technology .  Licensor shall not assign or transfer any Licensor Technology to any of its Affiliates or any Third Party without the prior written consent of Company, unless the assignee agrees in writing that such Licensor Technology shall be subject to this Agreement.

 

13.2.5               Assignment of Company Technology .  Company shall not assign or transfer any Company Technology to any of its Affiliates or any Third Party without the prior written consent of Licensor, unless the assignee agrees in writing that such Company Technology shall be subject to this Agreement.

 

13.3                         Performance and Exercise by Affiliates .  Either Party shall have the right to have any of its obligations hereunder performed, or its rights hereunder exercised, by, any of its Affiliates and the performance of such obligations by any such Affiliate shall be deemed to be performance by such Party; provided, however, that each Party  shall be responsible for ensuring the performance of its obligations under this Agreement and that any failure of any Affiliate performing obligations of such Party hereunder shall be deemed to be a failure by such Party to perform such obligations.  For clarity, either Party may designate an Affiliate to perform any of its obligations hereunder or to exercise any of its rights hereunder.

 

13.4                         Change of Control .  In the event of a Change of Control of Licensor by a Company Competitor, then as from the date of such Change of Control: (i) upon Company’s written request, the JAC shall disband; and (ii) Company shall no longer be obligated to provide Product Development and Commercialization Plans as set forth in Article 4 or any reporting obligations to Licensor or its successor entity pursuant to this Agreement.  In the event of a Change of Control of the Company, then as from the date of such Change of Control, the Licensor shall have the right to terminate this Agreement.

 

13.5                         Further Actions .  Each Party agrees to execute, acknowledge and deliver such further instruments and to do all such other acts as may be necessary or appropriate in order to carry out the purposes and intent of this Agreement.

 

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13.6                         Accounting Procedures .  Each Party shall calculate all amounts, and perform other accounting procedures required, under this Agreement and applicable to it in accordance with the accounting principles and standards applicable to it (for example IFRS or GAAP).

 

13.7                         Force Majeure .  Neither Party shall be liable to the other Party or be deemed to have breached or defaulted under this Agreement for failure or delay in the performance of any of its obligations under this Agreement for the time and to the extent such failure or delay is caused by or results from acts of God, earthquake, riot, civil commotion, terrorism, war, strikes or other labor disputes, fire, flood, failure or delay of transportation, omissions or delays in acting by a governmental authority, acts of a government or an agency thereof or judicial orders or decrees or restrictions or any other reason which is beyond the reasonable control of the respective Party.  The Party affected by force majeure shall provide the other Party with full particulars thereof as soon as it becomes aware of the same (including its best estimate of the likely extent and duration of the interference with its activities), and will use Commercially Reasonable Efforts to overcome the difficulties created thereby and to resume performance of its obligations hereunder as soon as practicable.

 

13.8                         Entire Agreement of the Parties; Amendments .  This Agreement and the Schedules hereto constitute and contain the entire understanding and agreement of the Parties respecting the subject matter hereof and cancel and supersede any and all prior negotiations, correspondence, understandings and agreements between the Parties, whether oral or written, regarding such subject matter.  No waiver, modification or amendment of any provision of this Agreement shall be valid or effective unless made in a writing referencing this Agreement and signed by a duly authorized officer of each Party.

 

13.9                         Captions .  The captions to this Agreement are for convenience only, and are to be of no force or effect in construing or interpreting any of the provisions of this Agreement.

 

13.10                  Governing Law .  This Agreement shall be governed by and interpreted in accordance with the PRC Laws, excluding application of any conflict of laws principles that would require application of the Law of a jurisdiction outside of PRC.

 

13.11                  Notices and Deliveries .  Any notice, request, approval or consent required or permitted to be given under this Agreement shall be in writing and shall be deemed to have been sufficiently given if delivered in person, transmitted by facsimile (receipt verified) or by express courier service (signature required) to the Party to which it is directed at its address or facsimile number shown below or such other address or facsimile number as such Party shall have last given by notice to the other Party.

 

If to Company, addressed to: Room 5044, No. 21, Langshan Lu, Song Ping Shan, Nanshan District, Shenzhen, China

 

If to Licensor, addressed to: 5941 Optical Court, San Jose, California 95138, the USA

 

13.12                  Waiver .  A waiver by either Party of any of the terms and conditions of this Agreement in any instance shall apply only to the specific instance and shall not be deemed or construed to be an ongoing or future waiver of such term or condition or of any other term or condition hereof.  All rights, remedies, undertakings, obligations and agreements contained in this Agreement shall be cumulative and none of them shall be in limitation of any other remedy, right, undertaking, obligation or agreement of either Party.

 

13.13                  Severability .  When possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under Law, but if any provision of this Agreement is held to be prohibited by or invalid under Law, such provision will be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of this Agreement.  The Parties shall make a good faith effort to replace the invalid or unenforceable provision with a valid one which in its economic effect is most consistent with the invalid or unenforceable provision.

 

13.14                  Interpretation .  Except where the context expressly requires otherwise, (a) the use of any gender herein shall be deemed to encompass references to either or both genders, and the use of the singular shall be deemed to include the plural (and vice versa), (b) the words “include”, “includes” and “including” shall be deemed to

 

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be followed by the phrase “without limitation”, (c) the word “will” shall be construed to have the same meaning and effect as the word “shall”, (d) any definition of or reference to any agreement, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein), (e) any reference herein to any person shall be construed to include the person’s successors and assigns, (f) the words “herein”, “hereof” and “hereunder”, and words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particular provision hereof, (g) all references herein to Articles, Sections, or Schedules shall be construed to refer to Articles, Sections, or Schedules of this Agreement, and references to this Agreement include all Schedules hereto, (h) the word “notice” means notice in writing (whether or not specifically stated) and shall include notices, consents, approvals and other written communications contemplated under this Agreement, (i) provisions that require that a Party, the Parties or any committee hereunder “agree”, “consent” or “approve” or the like shall require that such agreement, consent or approval be specific and in writing, whether by written agreement, letter, approved minutes or otherwise (but excluding e-mail and instant messaging), (j) references to any specific law, rule or regulation, or article, section or other division thereof, shall be deemed to include the then-current amendments thereto or any replacement or successor law, rule or regulation thereof, and (k) the term “or” shall be interpreted in the inclusive sense commonly associated with the term “and/or.”

 

13.15                  Counterparts .  This Agreement may be executed in counterparts, each of which will be deemed an original, and all of which together will be deemed to be one and the same instrument.  A facsimile or a portable document format (PDF) copy of this Agreement, including the signature pages, will be deemed an original.

 

13.16                  No Reliance .   Each Party acknowledges that, in entering into this Agreement (and any document referred to in it), it has not relied on, and shall have no right or remedy in respect of, any statement, representation, assurance or warranty (whether made negligently or innocently) other than as expressly set out in this agreement.  Nothing herein shall limit a party’s liability for fraud or fraudulent misrepresentation.

 

13.17                  Incorporation.   All Schedules referred to in this Agreement are intended to be and are hereby specifically incorporated into and made a part of this Agreement. All Schedules shall have the same force and effect as other provisions of this Agreement.

 

[SIGNATURE PAGE FOLLOWS]

 

29


 

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

 

Shenzhen Arimab Biopharmaceuticals Co., Ltd.

 

ARIDIS PHARMACEUTICALS INC.

 

 

 

Signature:

/s/ Yuenian Shi

 

Signature:

/s/ Vu Truong

 

 

 

 

 

Printed Name: Yuenian Shi

 

Printed Name: Vu Truong

 

 

 

Title: Manager

 

Title: Founder & CEO

 

30



 

Schedule 1.42

 

Licensor Know-How

 

Method of manufacturing the Antibodies under GMP, including the manufacturing facility setup, manufacturing protocols, and optimization protocols.

 

Clinical study designs for the Antibodies including the use of certain adjuvant in enhancing effectiveness of AR-101 and AR-301 in treating infections in humans, the design of combination products, the selection of patients, statistics designs, and insights in disease indications suitable for the AR-101 and AR-301.

 

Existing clinical and preclinical data and knowledge for AR-101 and AR-301 including proof of concept, safety, and efficacy data.

 

Information about the Chemistry, Manufacturing and Controls of the Product.

 

Information about the formulation of the Product.

 

Information about all biochemical and biophysical analytical assays, both in vitro and in vivo, that relate to pharmacokinetic analytics, pharmacodynamics markers, bioanalytical methods for assaying the safety and efficacy of the AR-101 and AR-301 in clinical trials.

 

31



 

Schedule 1.43

 

Licensor Materials

 

1.                                       All cells lines, culture media and purification processes used for producing AR-101 and AR-301. (This includes commercially viable CHO cell line, scalable, high yield processes for cGMP manufacturing, and improved stable formulation).

 

2.                                       All regulatory filings and approvals related to the Clinical Programs.

 

3.                                       All inventory of the AR-101 and AR-301 used in clinical and preclinical studies to the extent sufficient for use as reference antibodies.

 

4.                                       All books, records, files, manuals, manufacturing protocols and other documents including clinical study reports, investigator brochures and laboratory books or portion thereof that relate to the AR-101 and AR-301.

 

32



 

Schedule 1.44

 

Licensor Patents

 

1. Patent Family

 

Country

 

Status

 

Appl. No.

 

Filing Date

 

Pat. No.

 

Issue Date

WO2006/084758
[AR101]

 

Canada

 

granted

 

2,597,701

 

Feb 13, 2006

 

2,597,701

 

Jan 10, 2012

 

 

China

 

granted

 

200680004847

 

Feb 13, 2006

 

200680004847

 

July 25, 2010

 

 

Europe

 

granted

 

06 706 900

 

Feb 13, 2006

 

1848741

 

Sept 8,2010

 

 

Israel

 

granted

 

184774

 

Feb 13, 2006

 

184774

 

May 01, 2012

 

 

India

 

granted

 

5974/DELNP/2007

 

Feb 13, 2006

 

241746

 

July 22, 2010

 

 

Japan

 

granted

 

2007-554515

 

Feb 13, 2006

 

4944799

 

Mar 09, 2012

 

 

USA

 

granted

 

11/884,163

 

Feb 13, 2006

 

8,197,816

 

Jun 12, 2012

 

2. Patent Family

 

Country

 

Status

 

Appl. No.

 

Filing Date

 

Pat. No.

 

Issue Date

WO2011/018208
[AR301]

 

Canada

 

pending

 

2,769,394

 

Aug 10, 2010

 

 

 

 

 

 

China

 

granted

 

201080044958

 

Aug 10, 2010

 

102549013

 

May 06, 2015

 

 

Europe

 

granted

 

10743037.3

 

Aug 10, 2010

 

2464665

 

Dec 03, 2014

 

 

Europe

 

granted

 

14195810.8

 

Aug 10, 2010

 

2860191

 

Oct 11, 2017

 

 

Israel

 

granted

 

217746

 

Aug 10, 2010

 

217746

 

Sept 01, 2016

 

 

India

 

pending

 

797/DELNP/2012

 

Aug 10, 2010

 

 

 

 

 

 

Japan

 

granted

 

2012-524142

 

Aug 10, 2010

 

6064241

 

Jan 06, 2017

 

 

Korea

 

pending

 

10-2012-7004737

 

Aug 10, 2010

 

 

 

 

 

 

Russia

 

granted

 

2012105045

 

Aug 10, 2010

 

2429946

 

April 11, 2014

 

 

USA

 

granted

 

13/388,254

 

Aug 10, 2010

 

9.249.215

 

Feb 02, 2016

 

33



 

Schedule 1.62

 

Products

 

AR-101:

 

A human monoclonal antibody specific to P.aeruginosa lipopolysaccharide serotype O11 (IATS O11) wherein the antibody exhibits high protective capacity effective against multidrug resistant  P. aeruginosa clinical isolates. AR-101 is further characterized by SEQ ID NO 1-8 as disclosed in Licensor Patents;

 

AR-301:

 

A human monoclonal antibody specific to alpha-toxin derived from S. aureus , wherein the antibody has protective and therapeutic capacity in vivo against clinically complex S. aureus infections. AR-301 is further characterized by SEQ ID NO 1-8 as disclosed in Licensor Patents;

 

34



 

Schedule 7.1.4

 

Licensor Patents and Program Patents Country List

 

China, Hong Kong, Taiwan, and Macao

 

35



 

Schedule 9.2.13

Third Party Agreements related to AR-101 and AR-301

 

Index

 

Date

 

Parties

 

Title/Description

1

 

May 10, 2013

 

between Kenta Biotech, Ltd. and Aridis Pharmaceuticals, LLC

 

Asset Purchase Agreement - covering assignment of rights to Licensor of intellectual property relating to AR-101 and AR-301

2

 

 

 

 

 

 

3

 

 

 

 

 

 

4

 

 

 

 

 

 

5

 

 

 

 

 

 

6

 

 

 

 

 

 

7

 

 

 

 

 

 

 

36




Exhibit 10.16

 

LICENSE and OPTION AGREEMENT

 

BRIGHAM YOUNG UNIVERSITY and ARIDIS, LLC

 

This Agreement, effective July 29, 2005 is entered into between Brigham Young University, a Utah non-profit corporation and institution of higher education, with its principal campus and place of business located at Provo, Utah 84602 (referred to in this Agreement as “BYU”) and Aridis, LLC, a California corporation with its principal place of business located at 350 Cervantes Road, Portola Valley, CA 94028, (referred to in this Agreement as “LICENSEE”).

 

RECITALS

 

I                                            BYU is the sole owner of certain intellectual property rights known as “Stabilization of Biological Agents” and has the right to grant licenses with respect to these rights.

 

A.                                     BYU is an institution of higher education and is not in the business of commercially developing ideas, inventions, or other types of intellectual property, but it does desire to have Stabilization of Biological Agents available to the public and is willing to grant a license for this purpose.

 

B.                                     LICENSEE has represented to BYU that LICENSEE has the technical and commercial ability, and the technical, financial and other resources necessary to successfully develop and sell products or services based upon Stabilization of Biological Agents.

 

C.                                     LICENSEE desires to obtain a license to Stabilization of Biological Agents upon the terms and conditions of this Agreement.

 

In consideration of the promises and mutual covenants contained in this Agreement the parties agree as follows:

 

TERMS OF AGREEMENT

 

1.                                       Definitions

 

For the purposes of this Agreement, the following terms, words and phrases shall have the meaning ascribed to them in this Section.

 

1.1                                ADJUSTED GROSS SALES ” shall mean actual gross receipts or the fair market monetary equivalent value of consideration received by LICENSEE, AN AFFILIATE OR A SUBLICENSEE for the sale, lease, license, transfer or use of LICENSED PRODUCTS, less qualifying costs directly attributable to such sale, lease, license or transfer actually allowed and ‘borne by LICENSEE, an AFFILIATE, or a SUBLICENSEE.  Such qualifying costs shall be limited to the costs of the following:

 

A.                                     Trade or quantity discounts and credits for free goods actually allowed and taken in such amounts as are customary in the trade;

 

1



 

B.                                     Sales, import and export duties (or other transportation taxes) and/or production, use, delivery and excise taxes directly imposed with reference to particular sales;

 

C.                                     Outbound transportation and insurance expenses prepaid or allowed; and

 

D.                                     Amounts allowed or credited by reason of timely rejections, recalls, destruction or returns, or for rebates or chargebacks.

 

No deductions shall be made for commissions paid to individuals, whether they be regularly employed by LICENSEE or by independent sales agents, or for the cost of collections.

 

1.2                                AFFILIATE ” shall mean any person or entity owned or controlled directly or indirectly by LICENSEE or a SUBLICENSEE or any person or other entity controlled by, controlling or under common control with LICENSEE or a SUBLICENSEE.  The term “control” means possession, direct or indirect, of the powers to direct or cause the direction of the management and policies of a person or entity; whether through ownership, voting securities, beneficial interests, by contract, by agreement, or otherwise.

 

1.3                                “FIELD OF APPLICATION-ANTIBODIES” means therapeutic antibodies for treatment of infectious diseases.

 

1.4                                FIELD OF APPLICATION -VACCINES” means vaccines and prophylactic biologics.

 

1.5                                IMPROVEMENT(S) ” means any invention (not currently comprised by the LICENSED TECHNOLOGY described in Exhibit A) which is both (i) specific in its operation or use as dependent upon the use of the LICENSED TECHNOLOGY as described (i.e., not general to the field of stabilization of biological agents), and (ii) an enhancement or improvement of some portion of the LICENSED TECHNOLOGY.

 

1.6                                INTELLECTUAL PROPERTY ” means and includes all patent applications listed in Exhibit A and all patent applications claiming the inventions described in Exhibit A, including any divisional, continuation, or continuation-in-part to such applications to the extent comprising the inventions described therein, as well as any patent issued thereon, any reissue or extension of such patent, and any foreign counterparts to such patents and application.

 

1.7                                LICENSED PRODUCT(S) ” means and includes any drug or other product whose manufacture, use or sale in a country would but for this agreement comprise an infringement of a valid patent claim included in the INTELLECTUAL PROPERTY, the phrase “valid patent claim” meaning either (i) a claim issued and not expired, revoked, abandoned or held unenforceable, or (ii) a claim that is pending, made in good faith, and reasonably designed to cover inventions described in the INTELLECTUAL PROPERTY.  Solely for purposes of calculating ADJUSTED GROSS SALES above, LICENSED PRODUCT shall also include any drug or other product whose manufacture, use or sale in a country would, but for Aridis’s own ownership rights in a valid patent claim covering an IMPROVEMENT, comprise an infringement of that patent claim.

 

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1.8                                LICENSED TECHNOLOGY ” means and includes all of BYU’s rights in the INTELLECTUAL PROPERTY known as “Stabilization of Biological Agents” as more particularly described in Exhibit A, which is attached to this Agreement and by reference is incorporated and made part of this Agreement.

 

1.9                                LICENSEE ” is Aridis, LLC and its AFFILIATES and any other person or entity that becomes a successor in interest to, purchases, merges with, assumes control of, or becomes an assignee of LICENSEE.

 

1.10                         SUBLICENSEE ” is any person or entity sublicensed by LICENSEE under any of its license rights under this Agreement.

 

1.11                         TERRITORY ” means the world.

 

2.                                       BYU Grant

 

2.1                                Subject to the provisions of Section 2.6, BYU hereby grants LICENSEE an exclusive right and license to utilize the LICENSED TECHNOLOGY to develop LICENSED PRODUCTS, and IMPROVEMENTS, and to make, have made, use, have used, import, have imported, and sell, lease and otherwise transfer LICENSED PRODUCTS within the TERRITORY and the FIELD OF APPLICATION-VACCINES as authorized in this Agreement until such time as this Agreement expires or is terminated.  This grant will extend to the manufacture, sale, lease, transfer or other disposition of LICENSED PRODUCTS within the TERRITORY and the FIELD OF APPLICATION-VACCINES through an AFFILIATE or through LICENSEE’s use of any retail outlet or distributor.

 

2.2                                Subject to the provisions of Section 2.4, BYU hereby grants LICENSEE a non-exclusive right and license to utilize the LICENSED TECHNOLOGY to develop LICENSED PRODUCTS, and IMPROVEMENTS, and to make, have made, use, have used, import, have imported, and sell, lease and otherwise transfer LICENSED PRODUCTS within the TERRITORY and the FIELD OF APPLICATION-ANTIBODIES as authorized in this Agreement until such time as this Agreement expires or is terminated.  This grant will extend to the manufacture, sale, lease, transfer or other disposition of LICENSED PRODUCTS within the TERRITORY and the FIELD OF APPLICATION-ANTIBODIES through an AFFILIATE or through LICENSEE’s use of any retail outlet or distributor.

 

2.3                                BYU hereby grants LICENSEE an option to convert the non-exclusive grant of Section 2.2 for the FIELD OF APPLICATION-ANTIBODIES into an exclusive grant upon acceptance by BYU of a reasonable development plan for the exploitation of the FIELD OF APPLICATION-ANTIBODIES including financing and a development plan and schedule.  If the exclusive license is granted, LICENSEE shall agree to pay milestone payments for the FIELD OF  APPLICATION-ANTIBODIES equal to the payments specified in Section 6.1 for the HELD OF APPLICATION-VACCINES.  This option shall terminate on the fifth anniversary of the effective date of this Agreement, or if BYU receives a bona fide offer for license rights for the FIELD OF APPLICATION-ANTIBODIES from a third party and LICENSEE fails to exercise its option within ninety days of notice thereof, whichever event occurs earlier in time.

 

3



 

2.4                                The grants provided under this Agreement shall specifically include the right for LICENSEE to sublicense to SUBLICENSEES its rights under this Agreement to the LICENSED TECHNOLOGY with respect to the TERRITORY, in the following fields:

 

(i)                                      the FIELD OF APPLICATION-VACCINES;

 

(ii)                                   the FIELD OF APPLICATION-ANTIBODIES, where the sublicense is made to cover LICENSED PRODUCTS developed or jointly developed by LICENSEE; and

 

(iii)                                the FIELD OF APPLICATION-ANTIBODIES, if the option described in section 2.3 above is exercised.

 

All sublicenses granted by LICENSEE shall be subject to the terms and conditions of this Agreement and any sublicense agreement shall have an express provision to this effect.  No sublicense shall relieve LICENSEE of any of its obligations under this Agreement.  Sublicenses under this Agreement shall be structured to guarantee the payment of royalties to BYU in an amount at least equal to the amount of royalties which BYU would have received from LICENSEE had LICENSEE made, sold, leased, or otherwise transferred the LICENSED PRODUCTS authorized in the sublicense.  LICENSEE agrees to forward to BYU a fully executed copy of each sublicense agreement within thirty (30) days of its execution, and to act as a fiduciary to protect BYU’s interests in the sublicense and to collect and transmit to BYU all royalties due.

 

2.5                                Nothing in this Agreement shall be considered as granting any rights, express or implied, in BYU’s patents, patent applications, inventions, methods, technical, confidential or proprietary information, expertise, know-how, trade secrets or knowledge not specifically licensed in this Agreement, and all rights not expressly granted by this Agreement to LICENSEE are expressly reserved by BYU.  The license granted by this Agreement shall not be construed to confer any rights upon LICENSEE by implication, estoppel or otherwise as to any existing, new or derivative technology not specifically licensed by this Agreement.  The reservation of rights described in this Section is intended to be broadly construed and not to be limited by the definitions set forth in this Agreement.

 

2.6                                Notwithstanding the exclusive license granted pursuant to this Agreement with respect to the TERRITORY and FIELD OF APPLICATION, BYU, the Church of Jesus Christ of Latter-day Saints and the Church Education System reserve the right to make, have made or use the LICENSED TECHNOLOGY, LICENSED PRODUCTS, and IMPROVEMENTS anywhere in the world for continuing research and non-commercial academic and ecclesiastical uses without cost.  Moreover, should BYU, The Church of Jesus Christ of Latter-day Saints or any educational institution within the Church Education System (collectively, the “Church”) wish to purchase any LICENSED PRODUCTS from LICENSEE or its AFFILIATES, LICENSEE agrees to sell such LICENSED PRODUCTS at the manufacturing cost plus 20% or the price given by LICENSEE to its most favored customers, whichever is less.  (The parties to this Agreement do not expect that these sales would comprise more than 1-2% of the overall LICENSED PRODUCT sales in any country.  If BYU or the Church were to require LICENSED

 

4



 

PRODUCT in excess of this amount the parties agree to meet in order to agree upon fair consideration for the LICENSED PRODUCTS provided.)

 

3.                                       Rights in Improvements

 

3.1                                Upon any termination of this Agreement other than its termination due to expiration of the patent rights as described in section 16.1, and to the extent LICENSEE at that time has the legal right to grant such license, LICENSEE shall grant to BYU a non-exclusive, irrevocable, perpetual, worldwide license, to any of LICENSEE’s rights in IMPROVEMENTS.  LICENSEE agrees to disclose to BYU all information reasonably requested by BYU with respect to any such licensed IMPROVEMENTS and to provide to BYU all documents and data, in whatever form, reasonably necessary for BYU to exercise such license rights.  BYU’s license under this Section shall include the right to practice, license or sublicense IMPROVEMENTS for commercial use when done in conjunction with the practice, license or sublicense of INTELLECTUAL PROPERTY and LICENSED TECHNOLOGY, provided that BYU and LICENSEE shall agree in advance upon an appropriate sharing between them for royalties or other consideration received by BYU, in recognition of and to the extent of the value contributed to the INTELLECTUAL PROPERTY and LICENSED TECHNOLOGY by addition of the licensed IMPROVEMENTS.

 

3.2                                During the term of this Agreement, LICENSEE shall disclose to BYU (under appropriate confidentiality, where appropriate) information with respect to any IMPROVEMENTS developed by LICENSEE for which patent protection is being sought, in order that BYU may assess whether it has any legitimate ownership interest in the invention comprised by the IMPROVEMENT.

 

3.3                                During the term of this Agreement, any IMPROVEMENTS and associated patent rights which are developed by licensees of BYU other than LICENSEE, and for which BYU hereafter acquires ownership or license rights, shall be deemed to be included under the definition of INTELLECTUAL PROPERTY and LICENSED TECHNOLOGY above and included in the license herein.

 

4.                                       Activities of LICENSEE

 

4.1                                The parties acknowledge that LICENSEE may investigate or develop alternative approaches towards the stabilization of biological agents other than the LICENSED TECHNOLOGY.  LICENSEE represents that it enters into this Agreement, including its performance obligations under Section 5 hereunder, and its obligations to support and cooperate in BYU’s efforts to obtain properly patentable valid patent claims as set out in Section 12 hereunder, all in good faith.

 

5.                                       Performance Requirements

 

5.1                                LICENSEE shall, during the term of this Agreement, use its reasonable best efforts to bring one or more LICENSED PRODUCTS to market in order to maximize the ADJUSTED GROSS SALES through a thorough, vigorous and diligent commercial program.

 

5



 

5.2                                LICENSEE has delivered to BYU a development plan and schedule which is attached hereto as Exhibit B.  LICENSEE shall use its reasonable best efforts to accomplish said development plan and schedule.

 

5.3                                LICENSEE shall provide biannual progress reports to BYU by the last day of January and the last day of July until LICENSEE’S first commercial sale.

 

5.4                                LICENSEE’s failure to perform in accordance with this Section of the Agreement to the reasonable satisfaction of BYU may be considered by BYU to be a material breach of this Agreement and as such may entitle BYU to exercise its termination rights in accordance with Section 16.4 below.

 

6.                                       Milestone Payments and Royalties

 

In consideration of the license granted under this Agreement, LICENSEE shall pay to BYU, in the manner designated below until the Agreement shall be terminated, as follows:

 

6.1                                Milestone Payments: LICENSEE shall make the following milestone payments for the first LICENSED PRODUCT to BYU according to the following schedule:

 

Upon the completion of Phase 2 clinical trials

 

$

50,000

 

 

 

 

 

 

Upon the completion of Phase 3 clinical trials

 

$

100,000

 

 

 

 

 

 

Upon the first commercial sale of a LICENSED PRODUCT

 

$

250,000

 

 

6.2                                Earned Royalties: Earned royalties shall be paid quarterly in the amount equal to Two Percent (2.0%) of the ADJUSTED GROSS SALES for LICENSED PRODUCT anywhere in the TERRITORY and FIELD OF APPLICATION-VACCINES or FIELD OF APPLICATION-ANTIBODIES.

 

6.3                                If LICENSEE judges it to be necessary to license and utilize additional rights from a third party which are reasonably considered to fall within the scope of the LICENSED TECHNOLOGY, LICENSEE may reduce the Earned Royalties due BYU on any such LICENSED PRODUCT sold which utilizes the third party’s licensed rights by one-half of the royalty paid to the third party for said rights provided prior notice is given to BYU by LICENSEE and BYU provides written consent thereto, which consent shall not be unreasonably withheld.  However, under no circumstances shall the Earned Royalties payable to BYU be less than One Percent (1.0%).

 

6.4                                Any royalty amount due to BYU arising out of this Agreement shall accrue at the time of receipt by LICENSEE of consideration for LICENSED PRODUCT or LICENSED PROCESS and shall be deemed to be held in trust for the benefit of BYU until actual payment of such amounts is made pursuant to this Agreement.

 

6



 

7.                                       Reports, Records, Penalties and Interest

 

7.1                                LICENSEE shall keep, and shall require all SUBLICENSEES, AFFILIATES, and any other party responsible by the terms of this Agreement to make payments to BYU to keep, at their own expense, accurate books of account, using generally accepted accounting principles and practices, detailing all data necessary to calculate and easily audit any payments due to BYU under this Agreement.  These books of account shall be kept at LICENSEE’s, AFFILIATE’s or SUBLICENSEE’s principal place of business.  These books and supporting data shall be open at all reasonable times, upon ten (10) calendar days written notice, throughout the term of this Agreement and for a period of five (5) years following the end of the calendar year to which they pertain, to inspection by BYU or its agents for the purpose of verifying LICENSEE’s reports, royalty statements or other compliance with this Agreement.  In the event that any such inspection reveals any underpayment of royalties by LICENSEE, LICENSEE shall promptly rectify any such underpayment, reimburse BYU for the cost of such inspection if such inspection reveals a deficiency in any quarterly payment due to BYU hereunder in the amount of five percent (5%) or more of the amount payable to BYU, and shall pay the penalty and interest amounts specified in Section 7.4 below.

 

7.2                                LICENSEE, within sixty (60) days after the last day of each full calendar quarter subsequent to the effective date of this Agreement, shall deliver to BYU an accurate written report summarizing in sufficient detail to allow BYU to verify all payment amounts, the data used during the preceding three-month period under this Agreement to calculate the payments due to BYU during the applicable accounting period.  These records and reports shall include at least the following information for the accounting period:

 

A.                                     Calculation of ADJUSTED GROSS SALES, itemized as to the number and the identity of the LICENSED PRODUCTS sold.

 

B.                                     All qualifying deductible costs claimed as offsets as applicable.

 

C.                                     Calculation of earned royalties and total royalties due broken down by applicable category.

 

D.                                     Names and address of all AFFILIATES and SUBLICENSEES and full reports from them complying with the reporting requirements of Section A-C.

 

7.3                                With each such report submitted, LICENSEE shall pay to BYU all fees, royalties and all other amounts due, payable and arising pursuant to this Agreement.  If no amounts shall be due, LICENSEE shall so report.  All amounts paid to BYU pursuant to this Agreement shall be in United States Dollars unless otherwise agreed in writing between the parties, and the amount of all royalties to be paid to BYU shall be determined on the basis of the relevant currency exchange rate published by the Wall Street Journal on the last business day of the calendar quarter to which such royalties relate.

 

7.4                                A penalty will be assessed in an amount equal to three percent (3%) of any payment due to BYU arising out of this Agreement if the payment is made more than sixty (60) days late.  Interest will accrue from the thirtieth day after the payment was due at a rate of twelve percent (12%) per annum or the highest rate permitted by law, whichever is lower.  Any unpaid

 

7



 

interest or penalty shall be compounded monthly at the applicable interest rate.  The penalty and interest provisions of this Section 7.4 shall not apply to any payment reasonably in dispute or any circumstance of force majeure as described in Section 22.6.

 

7.5                                In the event LICENSEE engages an independent auditor or employs an internal auditor for the purpose of verifying the accuracy of its books of account, LICENSEE shall cause said auditor to verify the accuracy of the quarterly reports required in Section 7.2 of this Agreement, and LICENSEE shall provide to BYU a copy of the report and any documentation generated in the verification process on or before ninety (90) days after the verification process is completed.

 

8.                                       Confidentiality

 

8.1                                If either party receives material provided by the other party which is marked as confidential, or is verbally so designated and confirmed in writing by the disclosing party within thirty (30) days of the receipt of the materials by the receiving party, the receiving party shall take reasonable precautions to protect such material and to preserve its confidential, proprietary or trade secret status during the term of this Agreement and for a period of five (5) years after termination of this Agreement.

 

8.2                                In determining whether or not information is confidential, the burden of proof shall be upon the receiving party to establish by competent proof and by preponderance of the evidence that such information to be non-confidential was:

 

A.                                     Already known to the receiving party at the time of disclosure by the disclosing party or independently developed by the receiving party, or

 

B.                                     Generally available to the public or otherwise part of the public domain at the time of its disclosure to the receiving party, or

 

C.                                     Became generally available to the public or otherwise part of the public domain after its disclosure and other than through any act or omission of the receiving party in breach of this Agreement, or

 

D.                                     Subsequently, lawfully disclosed to the receiving party by a third party, or

 

E.                                      Required by law to be disclosed.

 

8.3                                LICENSEE may disclose BYU’s confidential information to its agents, employees, independent contractors, officers, AFFILIATES and SUBLICENSEES where reasonably necessary to further the objectives of this Agreement, and otherwise only to the extent it is authorized in writing to do so by BYU.

 

8.4                                All of the receiving party’s SUBLICENSEE’s, employees and independent contractors with access to the disclosing party’s confidential information shall be bound in writing, copies of which shall be retained by the receiving party and submitted to the disclosing party upon request of the disclosing party, to make no unauthorized use or disclosure of the confidential information.

 

8



 

8.5                                Both parties agree that a breach of its obligation to protect the other party’s confidential information shall cause immediate and irreparable harm which cannot be adequately compensated by monetary damages.  Accordingly, any breach or threatened breach of confidentiality shall entitle the disclosing party to preliminary and permanent injunctive relief in addition to such remedies as may be otherwise available.

 

9.                                       Separate Service Agreement

 

If BYU and LICENSEE mutually agree that BYU shall supply technical and engineering services required to effectively transfer to LICENSEE the LICENSED TECHNOLOGY licensed herein, then LICENSEE shall reimburse BYU for its expenses incurred in furnishing such technical and engineering services pursuant to the terms and conditions of a separate written agreement.

 

10.                                Export Controls and Applicable Laws

 

10.1                         It is understood that the LICENSED TECHNOLOGY may be subject to United States laws and regulations controlling the export of technical data, computer software, laboratory prototypes and other commodities (including the Arms Export Control Act, as amended, and the Export Administration Act of 1979), and LICENSEE’s obligations under this Agreement may be contingent upon compliance with applicable United States export laws and regulations.  The transfer of certain technical data and commodities may require a license from the cognizant agent of the United States Government and/or written assurances by LICENSEE that LICENSEE shall not export data or commodities to certain foreign countries without prior approval of such agency.  BYU neither represents that a license shall not be required nor that, if required, it shall be issued.  LICENSEE shall observe and obey all export laws in countries in which it shall do business.

 

10.2                         In the exercise of its rights, and the performance of its obligations under this Agreement, LICENSEE shall comply with all applicable laws, regulations and governmental orders.  LICENSEE shall obtain, and shall maintain in full force and effect throughout the continuance of this Agreement, all licenses, permits, authorizations and approvals required under all applicable laws, regulations and governmental orders of the TERRITORY, and shall make all filings, notifications and reports to all relevant governmental agencies, which are necessary or appropriate in order for the performance by LICENSEE of all of its obligations under this Agreement.  In the event that the issuance of any such license, permit, authorization or approval is conditioned upon any material modification or amendment of BYU’s rights under this Agreement, and is sought without BYU’S agreement to that modification or amendment, then BYU shall have the right to terminate this Agreement with respect to the affected territory, and such TERRITORY shall be excluded from the definition of the TERRITORY herein

 

11.                                Patent Marking and Copyright Notice

 

If applicable, LICENSEE agrees to mark the LICENSED PRODUCTS sold in the United States with all applicable United States patent numbers and copyright notices.  All LICENSED PRODUCTS shipped to or sold in other countries shall be marked in such a manner as to conform with the patent and/or copyright laws and practice of the country of manufacture or sale.

 

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12.           Patent Prosecution and Maintenance

 

12.1        BYU shall use its reasonable best efforts to apply for, seek prompt issuance of, and maintain during the term of this Agreement any patent rights to properly patentable INTELLECTUAL PROPERTY set forth in Exhibit A or to any enhancements and modifications thereto.  BYU shall diligently prosecute, file, perfect and maintain all such patent rights, patents or applications utilizing legal counsel of its choice.  LICENSEE shall cooperate with BYU in such prosecution, filing and maintenance.

 

12.2        Payment of one-third of all fees and costs relating to the filing, prosecution, perfection and maintenance of the patent rights, both domestic and foreign, shall be reimbursed by LICENSEE to BYU, whether such fees and costs were incurred before or after the date of this Agreement.  If the option for an exclusive license to the HELD OF APPLICATION-ANTIBODIES of Section 2.3 is granted, and if BYU has no other non-exclusive licensee in the FIELD OF APPLICATION-ANTIBODIES, LICENSEE shall pay an additional one-third of said patent-related costs.  For filings outside the United States not made in joint agreement between the parties, LICENSEE may elect not to reimburse BYU for such expenses by providing advance written notice to BYU, but any such filing in such country shall thereafter be excluded from INTELLECTUAL PROPERTY and LICENSED TECHNOLOGY as defined herein.

 

12.3        LICENSEE shall have the right to comment upon all patent prosecution or interference matters.  Strategic matters affecting potential breadth and term of any patent coverage, and all other material matters related to patent prosecution, shall be managed by joint agreement negotiated in good faith among BYU, LICENSEE and (where necessary) any third party BYU licensees.  Copies of all documentation and correspondence with governmental patent offices and patent counsel shall be provided to LICENSEE.

 

12.4        LICENSEE SHALL HAVE NO CLAIM OR DAMAGES AGAINST BYU, ITS  PERSONNEL, TRUSTEES OR STUDENTS FOR FAILURE TO PERFORM ITS  OBLIGATIONS PURSUANT TO SECTION 12 OF THIS AGREEMENT, AND SHALL NOT CONSIDER BYU’S FAILURE TO SO PERFORM A BREACH OF THIS AGREEMENT, PROVIDED THAT BYU COMPLIES WITH THE FOLLOWING TERMS: IF BYU SHALL ELECT NOT TO PERFORM ITS OBLIGATIONS HEREUNDER WITH RESPECT TO ANY  OR ALL PATENT APPLICATIONS AND PATENTS, THEN IT SHALL PROVIDE  LICENSEE WITH REASONABLE ADVANCE WRITTEN NOTICE OF ITS INTENT, AND  PROVIDE LICENSEE THE OPPORTUNITY THEREAFTER TO CONTINUE THE  PROSECUTION, FILING, PERFECTION AND MAINTENANCE OF SUCH PATENT  APPLICATIONS AND PATENTS INDEPENDENTLY OF BYU AND AT ITS OWN  EXPENSE .

 

13.           Infringement

 

LICENSEE will have the first right to pursue, prosecute and settle infringement matters in its exclusive field of use.  BYU shall have the first right to pursue all other infringement matters.  In either case the other party may pursue matters not elected by the party with the first right (provided the matter is within LICENSEES’ field of use).  Where LICENSEE takes first

 

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action, proceeds shall be divided, net of expenses, 75% to LICENSEE and 25% to BYU.  Where BYU takes first action, proceeds shall be divided 75% to BYU and 25% to LICENSEE.

 

14.           Warranty and Limitation of Remedy

 

14.1        BYU represents and warrants that to the best of its knowledge it is the owner of the entire right, title, and interest in and to and has the sole right to grant licenses under this Agreement to the LICENSED TECHNOLOGY as described on Exhibit A.  BYU makes no warranty or representation with respect to the application of the LICENSED TECHNOLOGY to any particular purpose.

 

14.2        BYU makes no representation that the manufacture, use, lease, or sale of the LICENSED TECHNOLOGY will not infringe a copyright or patent granted to others, other than to state that it knows of no such copyright, patent or other proprietary interests which would be so infringed.

 

14.3        Each party represents and warrants to the other that it has all of the requisite power and authority to enter into this Agreement and to perform each and every term, provision and obligation of this Agreement, and that neither the execution nor delivery of this Agreement will conflict with or result in a breach of the terms, provisions or obligations of, or constitute a default pursuant to, any other agreement or instrument under which such party is obligated.

 

14.4        ALL WARRANTIES MADE IN THIS AGREEMENT ARE EXCLUSIVE AND, TO THE EXTENT PERMITTED BY LAW, ARE IN LIEU OF ALL OTHER WARRANTIES EXPRESS  AND IMPLIED, INCLUDING BUT NOT LIMITED TO, THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE, OR ANY OTHER WARRANTY WHETHER EXPRESS OR IMPLIED .

 

14.5        BYU will not be liable for any loss of profits or for any claim or demand against LICENSEE by any other party.  BYU’s liability, if any, for any damages to LICENSEE shall not exceed in any event the total earned royalties which have been paid by LICENSEE to BYU during the term of this Agreement.  IN NO EVENT WILL BYU BE LIABLE FOR INCIDENTAL OR  CONSEQUENTIAL DAMAGES EVEN IF BYU HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES .  No action, regardless of form, arising out of the transaction subject of this Agreement may be brought against BYU more than one year after the cause of action is discovered.

 

15.           Product Liability and General Indemnification

 

15.1        BYU does not warrant the effectiveness or operation of any of the LICENSED PRODUCTS, and the parties to this Agreement agree and understand that BYU shall have no liability to any user of LICENSED PRODUCTS.  LICENSEE, therefore, agrees to hold BYU harmless and indemnify BYU, its trustees, officers, employees and agents from and against any and all litigation, claims, damages or actions (including reasonable attorneys’ fees) that may be instituted against BYU arising out of LICENSEE’s marketing, distribution, sale, production, manufacture, lease, consumption or advertisement of the LICENSED TECHNOLOGY or LICENSED PRODUCTS or arising from any obligation of LICENSEE under this Agreement, including, but not limited to, claims resulting from any alleged type of defect in the LICENSED

 

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TECHNOLOGY or LICENSED PRODUCTS or damages allegedly caused by any breach of contract by LICENSEE, its AFFILIATES or SUBLICENSEES, or the use or misuse of the LICENSED TECHNOLOGY or LICENSED PRODUCTS, notwithstanding any third-party allegation that their claims, injuries or damages were proximately caused in part or wholly by BYU’s negligence.  In the event BYU is sued as a party defendant or otherwise pursuant to claims identified in this Section as being subject to indemnification, LICENSEE agrees to defend BYU at LICENSEE’s sole expense in such action.  Should any award or decree be made against BYU, it shall be the obligation of LICENSEE to (a) appeal the decision and pay if the appeal is lost or (b) pay such award or make any settlement as may be warranted before or after the decision on appeal.  BYU shall have the right to elect to participate in any such action with counsel of its choosing; the costs of BYU’s participation shall be at its own expense.

 

15.2        LICENSEE shall immediately notify BYU of any litigation in which it, its officers or its directors, agents or employees may be involved if there is a reasonable possibility that this Agreement or BYU will be affected and afford BYU reasonable cooperation should BYU elect to make its own defense.

 

16.           Term and Termination

 

16.1        Subject to earlier termination in accordance with this Section, this Agreement shall commence on the effective date of this Agreement and remain in force until the expiration of the last valid patent claim contained in the LICENSED TECHNOLOGY.

 

16.2        The Agreement may be terminated immediately by written notice to LICENSEE by BYU at its election in the event of the occurrence of any one of the following circumstances:

 

A.            In the event LICENSEE is placed in the hands of a receiver or makes a general assignment for the benefit of creditors, such that LICENSEE is unable to perform its continuing obligations hereunder; or

 

B.            In the event that all or substantially all of the assets of LICENSEE or its successor-in-interest are seized or attached in a final, unappealed or unappealable order in conjunction with any action brought against it by a third party creditor, such that LICENSEE is unable to perform its continuing obligations hereunder.

 

16.3        This Agreement may be terminated effective upon thirty (30) days written notice from BYU and the failure of LICENSEE to cure any breach or default prior to the expiration of the thirty-day notice period in any of the following circumstances:

 

A.            In the event LICENSEE becomes insolvent or shall cease to carry on its business in the normal course; or

 

B.            In the event there is a transfer or sale of LICENSEE’s business purporting to transfer or assign this Agreement and/or the LICENSED TECHNOLOGY without the prior express written consent of BYU.

 

16.4        In the case of breach or default arising from LICENSEE’s failure to pay BYU royalties or other costs or expenses pursuant to the Agreement when due and payable, failure to

 

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complete the performance requirements of Section 5 of this Agreement, or from any other material breach or default of this Agreement, BYU shall have the right to terminate this Agreement upon thirty (30) days written notice to LICENSEE.  Termination shall become effective upon the failure of LICENSEE to cure such breach or default within such notice period.

 

16.5        LICENSEE may terminate this Agreement at any time by providing sixty (60) days written notice to BYU.

 

16.6        Upon termination of this Agreement for any reason, the parties shall not be released from any obligation that has matured prior to the effective date of the termination.  LICENSEE may, however, after the effective date of such termination, sell all LICENSED PRODUCTS in its inventory or in process as of the time of such termination, provided that LICENSEE shall pay to BYU the royalties and other consideration due on such products as required by this Agreement and shall submit the reports as required.

 

16.7        Upon the termination of this Agreement, any SUBLICENSEE which has not breached in any material way its sublicense agreement shall be offered by BYU the option of receiving a license directly from BYU on substantially the same terms and conditions as those provided herein.

 

16.8        Upon the termination of this Agreement, LICENSEE shall immediately cease using the INTELLECTUAL PROPERTY and return to BYU all documents and information as may have been provided by BYU pursuant to this Agreement, which contain information which is confidential or proprietary to BYU.

 

16.9        Nothing herein shall be construed to limit BYU’s legal or equitable remedies in the event of a default by LICENSEE and/or subsequent termination of this Agreement by BYU.

 

17.           Dispute Resolution and Mediation

 

17.1        With respect to any and all claims, disputes or controversies arising out of the performance of or in connection with this Agreement, the parties agree to attempt in good faith to resolve those claims, disputes or controversies by negotiations between the parties.  In the event either party believes the negotiation discussions are likely not to result in settlement, the parties must, in good faith, participate in mediation sessions with a professional mediator to be mutually selected by the parties and the expense of which is to be paid fifty percent (50%) by each party.  In the event, after one or more mediation sessions, either party believes the mediation process is not likely to resolve the dispute by mutual agreement, such party may seek any legal or equitable remedy available through a court of competent jurisdiction.

 

17.2        Nothing in this Section shall be construed to waive any rights of timely performance of any obligation existing under this Agreement.

 

18.           Licensee Assignment

 

Neither this Agreement nor the LICENSED TECHNOLOGY is assignable by LICENSEE without the express written consent of BYU, which shall not be unreasonably withheld.  Any attempt to make such an assignment without BYU’s written consent may be

 

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voided at the election of BYU.  LICENSEE agrees that in the event BYU elects to void an unauthorized assignment that BYU will have suffered immediate and irreparable damage and shall be entitled to immediate injunctive relief.  In the event BYU does not elect to void an unauthorized assignment, LICENSEE agrees that the assignee will be treated in all respects as a LICENSEE for purposes of this Agreement.  Nothing in this section may be construed to preclude BYU from initiating an independent action against the assignee of the unauthorized assignment or to otherwise pursue other legal or equitable remedies against LICENSEE, the assignee or both.

 

19.           Non Use of BYU Name

 

LICENSEE shall not use the name of Brigham Young University nor of any of its employees, nor any adaptation thereof, in any advertisement, promotion or sales literature without the express prior written consent from BYU in each case, except that LICENSEE may state that it is licensed by BYU.

 

20.           Publication

 

BYU shall have the right to publish any academic paper, article or learned treatise and make public disclosure at professional meetings or seminars regarding any portion of the LICENSED TECHNOLOGY which has been or may be invented, conceived or developed by BYU.

 

21.           Payment, Notices and Other Communications

 

Any payment, notice or other communication pursuant to this Agreement shall be sufficiently made or given on the date of mailing if sent by certified first-class mail, postage prepaid, addressed to the receiving party at its address designated below or such address as shall be designated by written notice given to the other party.

 

BYU:

Technology Transfer Office

 

A-285 ASB

 

Brigham Young University

 

P.O. Box 21231

 

Provo, Utah 84602-1231

 

(801) 378-6266

 

 

LICENSEE:

Aridis, LLC

 

350 Cervantes Road

 

Portola Valley, CA 94028

 

22.           Miscellaneous Provisions

 

22.1        Independence of Parties .   BYU and LICENSEE are independent parties engaged in independent business and neither party nor any respective agent or employee of either party shall be regarded as an agent or an employee of the other.  Nothing in this Agreement shall be construed as reserving to either party the right to control the other in the conduct of its business,

 

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nor shall either party have the authority to make any promise, guarantee, warranty or reservation which will create any obligation or liability whether express or implied on behalf of the other.

 

22.2        Attorneys’ Fees .  In the event a legal proceeding is commenced in a court of competent jurisdiction to construe or enforce any provision of this Agreement, the prevailing party, in addition to all other amounts to which such party may be entitled, shall be entitled to recover from the non-prevailing party its reasonable attorneys’ fees, expert witness fees and costs incurred in connection with the proceeding.

 

22.3        Waiver .  No waiver by either party, whether express or implied, of any provisions of this Agreement or of any breach or default of either party, shall constitute a continuing waiver of such provision or a waiver of any other provisions of this Agreement.

 

22.4        Governing Law .  This Agreement shall be interpreted and construed in accordance with the laws of the State of Utah.  Venue for any legal disputes shall be in Utah County, Utah.

 

22.5        Partial Invalidity .  Should any Section or any part of a Section of this Agreement be held unenforceable or in conflict with the law of any jurisdiction, the validity of the remaining Sections and Subsections shall not be affected by the invalidity of any other part of the Agreement.

 

22.6        Force Majeure .  Neither party to this Agreement shall be in default because of a delay or failure to perform which is not the result of the defaulting party’s intentional or negligent acts or omissions, but results from causes beyond the reasonable control of such party such as acts of God, terrorism, civil disobedience and war.

 

22.7        Entire Agreement .  This Agreement constitutes the entire Agreement and understanding between the parties and supersedes all prior agreements and understandings with respect to the LICENSED TECHNOLOGY, whether written or oral.  No modification or claimed waiver of any of the provisions of this Agreement shall be valid unless in writing and signed by authorized representatives of the party against whom such modification or waiver was sought to be enforced.

 

22.8        Full and Fair Meaning .  This Agreement shall be interpreted in accordance with its fair meaning and shall not be interpreted for or against any party on the ground that such party drafted or caused to be drafted this Agreement or any part thereof.

 

22.9        Binding Effect .  This License Agreement shall be binding upon and shall inure to the benefit of the successors, assigns and legal representatives of the parties.

 

22.10      Headings .  The paragraph and subparagraph headings contained in this Agreement are for convenience and reference only.  They are not intended to define, limit, or expand the scope of the provisions of this Agreement.

 

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IN WITNESS WHEREOF, the parties have entered into this Agreement and it is effective this 29th day of July, 2005.

 

Date: 7/29/2005

BRIGHAM YOUNG UNIVERSITY

 

 

 

 

 

 

By:

Gary R. Hooper

 

 

Gary R. Hooper

 

 

Associate Academic Vice President

 

 

 

 

Date: 7/29/2005

LICENSEE

 

 

 

 

 

 

By:

/s/ Eric J. Patzer

 

 

Eric J. Patzer

 

 

President

 

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EXHIBIT A

 

LICENSED TECHNOLOGY

 

STABILIZATION OF BIOLOGICAL AGENTS

 

The LICENSED TECHNOLOGY includes U.S. patent application number 10/199,061, “Plasticized Hydrophilic Glasses for Improved Stabilization of Biological Agents”, the corresponding Patent Cooperation Treaty application number PCT/US02/28320, Canadian application number 2,458,794, European Patent Office application number 02795489.0 and any additional foreign counterparts thereof, as well as all continuations, continuations-in-part, divisions and renewals thereof, all patents which may be granted thereon, and all reissues, reexaminations and extensions; and any trade secrets and know-how which are in existence upon the effective date of this Agreement.

 




Exhibit 21.1

 

List of Subsidiaries of Aridis Pharmaceuticals, Inc.:

 

Name

 

Jurisdiction of Incorporation/Formation

Aridis Biopharmaceuticals LLC

 

Delaware

Aridis Pharmaceuticals C.V.

 

Netherlands

 




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Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

        As independent registered public accountants, we hereby consent to the use in this Form S-1 Registration Statement and related Prospectus, of our report dated April 19, 2018, relating to the consolidated financial statements of Aridis Pharmaceuticals, Inc., as of and for the years ended December 31, 2017 and 2016. We also consent to the reference to our Firm under the caption "Experts" in the Prospectus, which is part of said Registration Statement.

/s/ Mayer Hoffman McCann P.C.

San Diego, California
July 18, 2018




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CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM