SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 20-F
|_| REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES
EXCHANGE ACT OF 1934
OR
|X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended June 30, 2004
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission file number 000-49843
PRANA BIOTECHNOLOGY LIMITED
(Exact name of Registrant as specified in its charter
and translation of Registrant's name into English)
Australia
(Jurisdiction of incorporation or organization)
Level 2, 369 Royal Parade, Parkville, Victoria 3052 Australia
(Address of principal executive offices)
Securities registered or to be registered pursuant to Section 12(b)
of the Act: None
Securities registered or to be registered pursuant to Section 12(g)
of the Act:
American Depositary Shares, each representing ten Ordinary Shares
(Title of Class)
Securities for which there is a reporting obligation pursuant to Section 15(d)
of the Act: None
Indicate the number of outstanding shares of each of the issuer's classes of capital or common stock as of the close of the period covered by the annual report:
Ordinary Shares, as of June 30, 2004..........................115,984,380
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes |X| No |_|
Indicate by check mark which financial statement item the registrant has elected to follow:
Item 17 |X| Item 18 |_|
INTRODUCTION
Prana Biotechnology Limited was incorporated under the laws of the Commonwealth of Australia on November 11, 1997. Our mission is to develop therapeutic drugs designed to treat the underlying causes of degeneration of the brain and the eye as the aging process progresses, initially focusing on Alzheimer's disease. Other potential applications for our therapies include age-related cataracts, Creutzfeldt-Jakob disease (the human variant of Mad Cow disease), Motor Neuron disease and Parkinson's disease. The principal listing of our ordinary shares and listed options to purchase our ordinary shares is on the Australian Stock Exchange. Since September 5, 2002 our American Depository Receipts, or ADRs, have traded on the NASDAQ SmallCap Market under the symbol "PRAN." The Bank of New York, acting as depositary, issues our ADRs, each of which evidences an American Depositary Share, which in turn represents ten of our ordinary shares. As used in this annual report, the terms "we," "us," "our" and "Prana" mean Prana Biotechnology Limited, an Australian company, and its subsidiaries, unless otherwise indicated.
Except for the historical information contained in this annual report, the
statements contained in this annual report are "forward-looking statements"
within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended, and the Private
Securities Litigation Reform Act of 1995, as amended, with respect to our
business, financial condition and results of operations. Such forward-looking
statements reflect our current view with respect to future events and financial
results. We urge you to consider that statements which use the terms
"anticipate," "believe," "do not believe," "expect," "plan," "intend,"
"estimate," "anticipate" and similar expressions are intended to identify
forward-looking statements. Neither our registered independent accounting firm,
nor any other independent accountants, have compiled, examined, or performed any
procedures, with respect to the prospective financial information contained
herein nor have they expressed any opinion or any other form of assurance on
such information or its achievability, and assume no responsibility for, and
disclaim any association with, the prospective financial information. We remind
readers that forward-looking statements are merely predictions and therefore
inherently subject to uncertainties and other factors and involve known and
unknown risks that could cause the actual results, performance, levels of
activity, or our achievements, or industry results, to be materially different
from any future results, performance, levels of activity, or our achievements
expressed or implied by such forward-looking statements. Readers are cautioned
not to place undue reliance on these forward-looking statements, which speak
only as of the date hereof. Except as required by applicable law, including the
securities laws of the United States, we undertake no obligation to publicly
release any update or revision to any forward-looking statements to reflect new
information, future events or circumstances, or otherwise after the date hereof.
We have attempted to identify significant uncertainties and other factors
affecting forward-looking statements in the Risk Factors section that appears in
Item 3.D. "Key Information-Risk Factors"
We have not obtained or applied for trademarks registrations. Any trademarks and trade names appearing in this annual report are owned by their respective holders.
Our financial statements appearing in this annual report are prepared in Australian dollars and in accordance with accounting principles generally accepted in Australia. In this prospectus, all references to "U.S. dollars" or "US$" are to the currency of the United States of America, and all references to "Australian dollars" or "A$" are to the currency of Australia.
Statements made in this annual report concerning the contents of any contract, agreement or other document are summaries of such contracts, agreements or documents and are not complete descriptions of all of their terms. If we filed any of these documents as an exhibit to this annual report or to any registration statement or annual report that we previously filed, you may read the document itself for a complete description of its terms.
TABLE OF CONTENTS
Page
----
PART I.........................................................................................................1
ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS.........................................1
ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE.......................................................1
ITEM 3. KEY INFORMATION...............................................................................1
A. Selected Financial Data.......................................................................1
B. Capitalization and Indebtedness...............................................................3
C. Reasons for the Offer and Use of Proceeds.....................................................3
D. Risk Factors..................................................................................3
ITEM 4. INFORMATION ON THE COMPANY...................................................................13
A. History and Development of the Company.......................................................13
B. Business Overview............................................................................15
C. Organizational Structure.....................................................................29
D. Property, Plants and Equipment...............................................................30
ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS.................................................30
A. Operating Results............................................................................30
B. Liquidity and Capital Resources..............................................................37
C. Research and Development, Patents and Licenses...............................................40
D. Trend Information............................................................................42
E. Off-Balance Sheet Arrangements...............................................................42
F. Tabular Disclosure of Contractual Obligations................................................42
ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES...................................................42
A. Directors and Senior Management..............................................................42
B. Compensation.................................................................................45
C. Board Practices..............................................................................46
D. Employees....................................................................................50
E. Share Ownership..............................................................................50
ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS............................................52
A. Major Shareholders...........................................................................52
B. Related Party Transactions...................................................................54
C. INTERESTS OF EXPERTS AND COUNSEL.............................................................54
ITEM 8. FINANCIAL INFORMATION........................................................................54
A. Financial Statements and Other Financial Information.........................................54
B. Significant Changes..........................................................................55
ITEM 9. THE OFFER AND LISTING........................................................................55
A. Offer and Listing Details....................................................................55
B. Plan of Distribution.........................................................................57
C. Markets......................................................................................57
D. Selling Shareholders.........................................................................57
E. Dilution.....................................................................................58
F. Expenses of the Issue........................................................................58
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ITEM 10. ADDITIONAL INFORMATION.......................................................................58
A. Share Capital................................................................................58
B. Memorandum and Articles of Association.......................................................58
C. Material Contracts...........................................................................58
D. Exchange Controls............................................................................60
E. Taxation.....................................................................................61
F. Dividend and Paying Agents...................................................................67
G. Statement by Experts.........................................................................68
H. Documents on Display.........................................................................68
I. Subsidiary Information.......................................................................68
ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISKS...................................69
ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES.......................................69
PART II.......................................................................................................69
ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES..............................................69
ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS.................69
ITEM 15. CONTROLS AND PROCEDURES......................................................................69
ITEM 16. RESERVED.....................................................................................70
ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT.............................................................70
ITEM 16B. CODE OF ETHICS...............................................................................70
ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES.......................................................70
ITEM 16D. EXEMPTIONS FROM THE LISTING REQUIREMENTS AND STANDARDS FOR AUDIT COMMITTEE...................71
ITEM 16E. PURCHASE OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATES AND PURCHASERS....................71
ITEM 17. FINANCIAL STATEMENTS.........................................................................71
ITEM 18. FINANCIAL STATEMENTS.........................................................................72
ITEM 19. EXHIBITS.....................................................................................72
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PART I
ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS
Not applicable.
ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE
Not applicable.
ITEM 3. KEY INFORMATION
A. SELECTED FINANCIAL DATA
The following table presents our selected financial data as of the dates and for each of the periods indicated. You should read the selected financial data set forth below together with Item 5. "Operating and Financial Review and Prospects" as well as our financial statements and notes thereto appearing elsewhere in this annual report.
The selected financial data as of June 30, 2004 and 2003 and for each of the three years in the period ended June 30, 2004 have been derived from our audited financial statements and notes thereto included elsewhere in this annual report. The selected financial data as of June 30, 2002, 2001 and 2000 and for the years ended June 30, 2001 and 2000 have been derived from our audited financial statements and notes thereto which are not included in this annual report.
We prepare our financial statements in accordance with accounting principles generally accepted in Australia, or A-GAAP, which differ in certain significant respects from accounting principles generally accepted in the United States, or U.S. GAAP. Please refer to Note 25 to the financial statements for a description of the differences between A-GAAP and U.S. GAAP as they relate to us, and a reconciliation of net loss and total equity for the periods and as of the dates therein indicated.
Statements of Financial Performance Data:
Year Ended June 30,
------------------------------------------------------------------------------
2004 2003 2002 2001 2000
---------- ---------- ---------- ---------- ----------
(in A$, except per share and share data)
A-GAAP:
Revenue from ordinary activities ............ 2,321,227 1,816,478 793,970 516,182 78,758
Depreciation and amortization
expense ................................... (1,195,006) (1,185,973) (1,160,595) (1,140,658) (654,977)
Patents, research and development
expense ................................... (5,232,581) (1,861,295) (2,498,486) (2,376,404) (421,933)
Legal expense ............................... (1,650,467) (848,660) (923,816) (252,675) (13,082)
Employee benefits expense ................... (1,060,730) (760,980) (378,853) (122,199) --
Consulting fee expense ...................... (1,706,809) (567,730) (604,873) (306,530) (179,998)
Corporate compliance expense ................ (419,708) (395,604) (339,383) (196,629) (75,999)
Other expenses from ordinary
activities ................................ (941,540) (781,074) (336,431) (260,066) (59,057)
Net loss .................................... (9,885,614) (4,584,838) (5,448,467) (4,138,979) (1,326,288)
Loss per share - basic and diluted (1) ...... (0.13) (0.08) (0.10) (0.08) (0.04)
Weighted average number of
ordinary shares outstanding -
basic and diluted ......................... 75,701,818 61,131,313 57,623,389 53,090,491 37,342,158
U.S. GAAP(2):
Net loss .................................... (9,208,199) (3,244,397) (4,728,019) (3,048,784) (3,798,792)
Loss per share - basic and diluted .......... (0.12) (0.05) (0.08) (0.06) (0.11)
Weighted average number of
ordinary shares outstanding -
basic and diluted ......................... 75,701,818 61,131,313 57,623,389 53,090,491 37,342,158
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Statements of Financial Position Data:
June 30,
------------------------------------------------------------------------------
2004 2003 2002 2001 2000
---------- ---------- ---------- ---------- ----------
(in A$ )
A-GAAP:
Cash assets 29,580,398 3,463,783 3,585,014 6,854,873 4,469,589
Working capital 27,033,245 3,093,745 2,840,984 6,454,969 4,684,284
Total assets 41,415,397 16,389,926 17,581,319 22,287,460 20,876,444
Contributed equity 49,505,493 16,741,023 13,001,486 12,276,892 7,474,343
Accumulated deficit during
development stage (25,464,876) (15,579,262) (10,994,424) (5,545,957) (1,406,978)
Total equity 38,702,559 15,823,703 16,668,986 21,392,877 20,729,307
U.S. GAAP:
Total assets 34,197,794 7,944,306 7,231,703 10,298,744 7,294,213
Accumulated deficit during
development stage (24,108,881) (14,900,682) (11,656,285) (6,928,266) (3,879,482)
Total equity 31,484,956 7,378,083 6,715,803 9,404,161 7,347,076
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Exchange Rate Information
The following tables set forth, for the periods and dates indicated, certain information regarding the rates of exchange of A$1.00 into the US$ based on the noon market buying rate in New York City for cable transfers in Australian dollars as certified for customs purposes by the Federal Reserve Bank of New York, or the noon buying rate.
Month High Low ----- ---- --- March 2004..................... 0.7732 0.7323 April 2004..................... 0.7691 0.7223 May 2004....................... 0.7332 0.6851 June 2004...................... 0.7153 0.6831 July 2004...................... 0.7347 0.6875 August 2004.................... 0.7262 0.6954 |
The noon buying rate on September 21, 2004 was US$0.70458 = A$1.00
Year
Ended June 30, At Period End Average Rate High Low
-------------- ------------- ------------ ---- ---
2000.................... 0.5971 0.6237 0.6560 0.5708
2001.................... 0.5100 0.5320 0.5996 0.4828
2002.................... 0.5614 0.5682 0.5747 0.4858
2003.................... 0.6713 0.5623 0.6729 0.5280
2004.................... 0.6903 0.7139 0.8005 0.6345
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B. CAPITALIZATION AND INDEBTEDNESS
Not applicable.
C. REASONS FOR THE OFFER AND USE OF PROCEEDS
Not applicable.
D. RISK FACTORS
Investing in our American Depositary Shares involves a high degree of risk and uncertainty. You should carefully consider the risks and uncertainties described below before investing in our American Depositary Shares. Additional risks and uncertainties not presently known to us or that we believe to be immaterial may also adversely affect our business. If any of the following risks actually occurs, our business, prospects, financial condition and results of operations could be harmed. In that case, the daily price of our depositary shares could decline, and you could lose all or part of your investment.
Risks Related To Our Business
We are a development stage company at an early stage in the development of pharmaceutical products and our success is uncertain.
We are a development stage company at an early stage in the development of our pharmaceutical products that are designed to treat the underlying causes of degeneration of the brain and the eye as the aging process progresses. We have not sufficiently advanced the development of any of our product candidates, including our new lead product candidate, PBT-2, to market or generate revenues from its commercial application. We cannot make any assurances that any of our product candidates, if successfully developed, will generate sufficient or sustainable revenues to enable us to be profitable.
There is a high risk that we may not be able to complete the development of PBT-1, PBT-2 or develop other pharmaceutical products.
Although we entered into a licensing and research collaboration with Schering A.G., a major international pharmaceutical company, and Neurosciences Victoria Ltd., a consortium of Australian universities, research institutes and teaching hospitals, under which Schering A.G. will provide to us funding of up to A$2.7 million for specified research and development projects that we will conduct, including the development of a new Alzheimer's diagnostic, we cannot make any assurances that we will be able to develop our current or any future pharmaceutical product candidates adequately to attract a suitable collaborative partner. Nor can we assure you that the projects initially specified in connection with such collaboration or the associated funding by Schering A.G. will not change with the changing interests of either Schering A.G. or Prana, or that any such change may change the budget for the projects under the collaboration. We are also unable to assure you that our research will lead to the discovery of additional product candidates, or that any of our current and future product candidates will be successfully developed, prove to be safe and efficacious in clinical trials, meet applicable regulatory standards and receive regulatory approval, be capable of being produced in commercial quantities at reasonable costs, or be successfully or profitably marketed, either by us or a collaborative partner. We also cannot make any assurances that the products we develop will be able to penetrate the potential market for a particular therapy or indication or gain market acceptance among health care providers, patients and third-party payors. We cannot predict if or when PBT-1, PBT-2, or any of our other pharmaceutical products under development will be commercialized.
We will not be able to commercialize any of our product candidates if we fail to adequately demonstrate their safety, efficacy and superiority over existing therapies.
Before obtaining regulatory approvals for the commercial sale of any of our pharmaceutical products, we must demonstrate through pre-clinical testing and clinical studies that our product candidates are safe and effective for use in humans for each target indication. Conducting pre-clinical testing and clinical studies is an expensive, protracted and time-consuming process. Likewise, results from early clinical trials may not be predictive of results obtained in large-scale, later-stage clinical testing. In addition, even though a potential drug product shows promising results in clinical trials, regulatory authorities may not grant the necessary approvals without sufficient safety and efficacy data.
We cannot make any assurances that we will be able to undertake further clinical trials of PBT-1 or commence clinical trials of PBT-2 or our proposed vaccine as planned, or to demonstrate the safety and efficacy or superiority of PBT-1 or PBT-2 over existing therapies, or other therapies under development, or enter into any collaborative arrangement to commercialize PBT-1 or PBT-2 on terms acceptable to us, or at all. Clinical trial results that show insufficient safety and efficacy could have a material adverse effect on our business, financial condition and results of operations.
We may experience delays in our clinical trials that could adversely affect our business and operations.
We do not know whether planned clinical trials will begin on time or whether we will complete any of our clinical trials on schedule or at all. Our ability to commence and complete clinical trials may be delayed by many factors, including:
o government or regulatory delays, including delays in obtaining approvals from applicable hospital ethics committees and internal review boards;
o slower than expected patient recruitment;
o our inability to manufacture sufficient quantities of our new proprietary compound or our other product candidates or matching controls;
o unforeseen safety issues; and
o lack of efficacy or unacceptable toxicity during the clinical trials.
Patient enrollment is a function of, among other things, the nature of the clinical trial protocol, the existence of competing protocols, the size and longevity of the target patient population, and the availability of patients who comply with the eligibility criteria for the clinical trial. Delays in planned patient enrollment may result in increased costs, delays or termination of clinical trials. Moreover, we rely on third parties to assist us in managing and monitoring clinical trials. Any failure by these third parties to perform under their agreements with us may cause the trials to be delayed or result in a failure to complete the trials.
Product development costs to our collaborators and us will increase if we have delays in testing or approvals or if we need to perform more or larger clinical trials than planned. Significant delays could have a material adverse effect on the commercial prospects of our product candidates and our business, financial condition and results of operations.
We have limited manufacturing experience, and delays in manufacturing sufficient quantities of PBT-1 or PBT-2 for pre-clinical and clinical trials may negatively impact our business and operations.
We cannot make any assurances that we will be able to manufacture sufficient quantities of PBT-1, PBT-2 or any of our other product candidates in a cost-effective or timely manner. Any delays in production would delay our pre-clinical and human clinical trials which could have a material adverse effect on our business, financial condition and results of operations.
We may be required to enter into contracting arrangements with third parties to manufacture PBT-1, PBT-2 and our other product candidates for large-scale, later-stage clinical trials. We cannot make any assurances that we will be able to make the transition to commercial production. We may need to develop additional manufacturing resources, enter into collaborative arrangements with other parties who have established manufacturing capabilities, or have third parties manufacture our products on a contract basis. We cannot make any assurances that we will have access on acceptable terms to the necessary and substantial financing that would be required to scale-up production and develop effective commercial manufacturing processes and technologies. We also cannot make any assurances that we will be able to enter into collaborative or contracting arrangements on acceptable terms with parties that will meet our requirements for quality, quantity and timeliness.
We may require substantial additional financing in the future to sufficiently fund our operations and research.
We have been unprofitable to date and expect to incur losses over the next several years as we expand our drug discovery and development programs and pre-clinical testing and as we conduct clinical trials of our product candidates. Although we believe that our existing cash and cash equivalents and revenue resources will be adequate to satisfy the requirements of our current and planned operations for the foreseeable future, we cannot make any assurances that such funds will be available or sufficient to meet our actual operating expenses and capital requirements on a long-term basis. Our actual cash requirements may vary materially from those now planned and will depend upon numerous factors, including:
o the continued progress of our research and development programs;
o the timing, scope, results and costs of pre-clinical studies and clinical trials;
o the cost, timing and outcome of regulatory submissions and approvals;
o determinations as to the commercial potential of our product candidates;
o our ability to successfully expand our contract manufacturing services;
o our ability to establish and maintain collaborative arrangements;
o the status and timing of competitive developments; and
o other factors.
We anticipate that we will require substantial additional funds in order to achieve our long-term goals and complete the research and development of our pharmaceutical product candidates. In addition, we will require additional funds to pursue regulatory clearances, and defend our intellectual property rights, establish commercial scale manufacturing facilities, develop marketing and sales capabilities and fund operating expenses. We intend to seek such additional funding through public or private financings and/or through strategic alliances or other arrangements with corporate partners. We cannot, however, be certain that such additional financing will be available from any sources on acceptable terms, or at all, or that we will be able
to establish new strategic alliances or other arrangements with corporate partners on acceptable terms, or at all. Any shortfall in funding could result in our having to curtail our operations, including our research and development activities, which could have a material adverse effect on our business, financial condition and results of operations.
We have a history of operating losses and may not achieve or maintain profitability in the future.
We have incurred losses in every period since we began operations in 1997. We expect to continue to incur additional operating losses over at least the next several years and to increase our cumulative losses substantially as we expand our research and development and pre-clinical activities and commence additional clinical trials of PBT-1 and PBT-2. We reported a net loss of A$9,885,614, A$4,585,838 and A$5,448,467 during the fiscal years ended June 30, 2004, 2003 and 2002, respectively. As of June 30, 2004, our accumulated deficit was A$25,464,876. We cannot assure you that we will achieve or maintain profitability.
Our success depends upon our ability to protect our intellectual property and our proprietary technology.
Our success will depend in large part on whether we can:
o obtain and maintain patents to protect our own products;
o obtain licenses to the patented technologies of third parties;
o operate without infringing on the proprietary rights of third parties; and
o protect our trade secrets and know-how.
Patent matters in biotechnology are highly uncertain and involve complex legal and factual questions. Accordingly, the availability and breadth of claims allowed in biotechnology and pharmaceutical patents cannot be predicted. While we intend to seek patent protection for our therapeutic products and technologies, we cannot be certain that any of the pending or future patent applications filed by us or on our behalf will be approved, or that we will develop additional proprietary products or processes that are patentable or that we will be able to license any other patentable products or processes.
Our commercial success will also depend, in part, on our ability to avoid infringement of patents issued to others. If a court determines that we were infringing any third party patents, we could be required to pay damages, alter our products or processes, obtain licenses or cease certain activities. We cannot be certain that the licenses required under patents held by third parties would be made available on terms acceptable to us or at all. To the extent that we are unable to obtain such licenses, we could be foreclosed from the development, manufacture or commercialization of the product requiring such license or encounter delays in product introductions while we attempt to design around such patents, and any of these circumstances could have a material adverse effect on our business, financial condition and results of operations.
We may have to resort to litigation to enforce any patents issued or licensed to us or to determine the scope and validity of third party proprietary rights. Any such litigation, regardless of outcome, could be expensive and time consuming, and adverse determinations in any such proceedings could prevent us from developing, manufacturing or commercializing our products and could have a material adverse effect on our business, financial condition and results of operations.
Our products may infringe on the intellectual property rights of others, which could increase our costs and negatively affect our profitability.
Third parties have in the past and may in the future assert against us infringement claims or claims that we have infringed a patent, copyright, trademark or other proprietary right belonging to them. Any infringement claim, even if not meritorious, could result in the expenditure of significant financial and managerial resources and could negatively affect our profitability.
If we do not obtain the necessary governmental approvals we will be unable to commercialize our pharmaceutical products.
Our ongoing research and development activities are, and the production and marketing of our pharmaceutical product candidates derived therefrom will be, subject to regulation by numerous governmental authorities in Australia, principally the Therapeutics Goods Administration, or TGA, and the Food and Drug Administration, or FDA, in the United States, the Medicines Control Agency in the United Kingdom and the European Medicines Evaluation Authority. Prior to marketing, any therapeutic product developed must undergo rigorous pre-clinical testing and clinical trials, as well as an extensive regulatory approval process mandated by the TGA and, to the extent that any of our pharmaceutical products under development are marketed abroad, by foreign regulatory agencies, including the FDA in the United States and the Medicines Control Agency in the United Kingdom. These processes can take many years and require the expenditure of substantial resources. Delays in obtaining regulatory approvals would adversely affect the development and commercialization of our pharmaceutical product candidates. We cannot be certain that we will be able to obtain the clearances and approvals necessary for clinical testing or for manufacturing and marketing our pharmaceutical products candidates.
Our research and development efforts will be seriously jeopardized if we are unable to retain key personnel and cultivate key academic and scientific collaborations.
Our future success depends to a large extent on the continued services of our senior management and key scientific personnel. We have entered into employment agreements with these individuals. The loss of their services could negatively affect our business. Our success is highly dependent on the continued contributions of our scientific personnel and on our ability to develop and maintain important relationships with leading academic institutions and scientists. Competition among biotechnology and pharmaceutical companies for qualified employees is intense, and we cannot be certain that we will be able to continue to attract and retain qualified scientific and management personnel critical to our success. We also have relationships with leading academic and scientific collaborators who conduct research at our request or assist us in formulating our research and development strategies. These academic and scientific collaborators are not our employees and may have commitments to, or consulting or advisory
contracts with, other entities that may limit their availability to us. In addition, these collaborators may have arrangements with other companies to assist such companies in developing technologies that may prove competitive to ours.
If we are unable to successfully keep pace with technological change or with the advances of our competitors, our technology and products may become obsolete or non-competitive.
The biotechnology and pharmaceutical industries are subject to rapid and significant technological change. Our competitors in Australia and elsewhere are numerous and include major pharmaceutical companies, biotechnology firms, universities and other research institutions. These competitors may develop technologies and products that are more effective than any that we are developing, or which would render our technology and products obsolete or non-competitive. Many of these competitors have greater financial and technical resources and manufacturing and marketing capabilities than we do. In addition, many of our competitors have much more experience than we do in pre-clinical testing and human clinical trials of new or improved drugs, as well as in obtaining FDA, TGA and other regulatory approvals.
We know that competitors are developing or manufacturing various technologies or products for the treatment of diseases that we have targeted for product development. Some of these competitive products use therapeutic approaches that compete directly with certain of our product candidates. Our ability to further develop our products may be adversely affected if any of our competitors were to succeed in obtaining regulatory approval for their competitive products sooner than us.
Acceptance of our products in the marketplace is uncertain, and failure to achieve market acceptance will negatively impact our business and operations.
We cannot make any assurances that our products will achieve market acceptance even if they are approved by the TGA and the FDA. The degree of market acceptance of our products will depend on a number of factors, including:
o the receipt and timing of regulatory approvals for the uses that we are studying;
o the establishment and demonstration to the medical community of the safety, clinical efficacy and cost-effectiveness of our product candidates and their potential advantages over existing therapeutics and technologies; and
o the pricing and reimbursement policies of governments and third-party payors.
Physicians, patients, payors or the medical community in general may be unwilling to accept, use or recommend any of our products.
The failure to establish a sales, marketing and distribution capability would materially impair our ability to successfully market and sell our pharmaceutical products.
We currently have no experience in marketing, sales or distribution of pharmaceutical products. If we develop any commercially marketable pharmaceutical products and decide to perform our own sales and marketing activities, we will require additional management, will need to hire sales and marketing personnel, and will require additional capital. We cannot make
any assurances that qualified personnel will be available in adequate numbers or at a reasonable cost, that additional financing will be available on acceptable terms, or at all, or that our sales staff will achieve success in their marketing efforts. Alternatively, we may be required to enter into marketing arrangements with other parties who have established appropriate marketing, sales and distribution capabilities. We cannot make any assurances that we will be able to enter into marketing arrangements with any marketing partner or that if such arrangements are established, our marketing partners will be able to commercialize our products successfully. Other companies offering similar or substitute products may have well-established and well-funded marketing and sales operations in place that will allow them to market their products more successfully. Failure to establish sufficient marketing capabilities would materially impair our ability to successfully market and sell our pharmaceutical products.
If healthcare insurers and other organizations do not pay for our products, or impose limits on reimbursement, our business may suffer.
The drugs we hope to develop may be rejected by the marketplace due to many factors, including cost. The continuing efforts of governments, insurance companies, health maintenance organizations and other payors of healthcare costs to contain or reduce healthcare costs may affect our future revenues and profitability and those of our potential customers, suppliers and collaborative partners, as well as the availability of capital. In Australia and certain foreign markets, the pricing or profitability of prescription pharmaceuticals is already subject to government control. We expect initiatives for similar government control at both the state and federal level to continue in the United States. The adoption of any such legislative or regulatory proposals could have a material adverse effect on our business and prospects.
Our ability to commercially exploit our products successfully will depend in part on the extent to which reimbursement for the cost of our products and related treatment will be available from government health administration authorities, private health coverage insurers and other organizations. Third-party payors, such as government and private health insurers, are increasingly challenging the price of medical products and services. Uncertainty exists as to the reimbursement status of newly approved health care products thereafter and in foreign markets, including the United States. If third-party coverage is not available to patients for any of the products we develop, alone or with collaborators, the market acceptance of these products may be reduced, which may adversely affect our future revenues and profitability. In addition, cost containment legislation and reductions in government insurance programs may result in lower prices for our products and could materially adversely affect our ability to operate profitably.
We may be exposed to product liability claims, which could harm our business.
The testing, marketing and sale of human health care products also entails an inherent risk of product liability. We may incur substantial liabilities or be required to limit development or commercialization of our products if we cannot successfully defend ourselves against product liability claims. We have obtained no fault compensation insurance (of A$10 million) with respect to our recent clinical trial and extension study and intend to obtain similar coverage for future clinical trials. We cannot be certain that such coverage will be available in the future on acceptable terms, or at all. This may result in our inability to pursue further clinical trials or to obtain adequate protection in the event of a successful claim. No assurance can be given that we will be able to obtain product liability insurance in the event of the commercialization of a
product or that it will be available on commercially reasonable terms. Even if we have adequate insurance coverage, product liability claims or recalls could result in negative publicity or force us to devote significant time, attention and financial resources to those matters.
Changes in government legislation and policy may adversely affect us.
While we do not anticipate in the near future any specific material changes in government legislation that may adversely affect us, any material changes in interest rate, exchange rate, relevant taxation and other legal regimes and government policies may adversely affect us and the market price of our securities.
We are dependent upon a sole supplier of our key component and could incur significant costs if we are unable to promptly find a replacement.
Our lead compound, PBT-2, and our earlier product, PBT-1, are manufactured by one manufacturer, the Institute of Drug Technology Limited. We intend to continue this relationship with further compounds if it remains financially viable. We have not had any prior manufacturer of PBT-1 cease its relationship with our company. We cannot assure you that we will be able to promptly find a replacement manufacturer, if required, without incurring material additional costs.
Risks Relating to Our Ordinary Shares
Our stock price may be volatile and the U.S. trading market for our American Depositary Shares is limited.
The market price for our securities, like that of the securities of other pharmaceutical and biotechnology companies, has fluctuated substantially and may continue to be highly volatile in the future. The market price for our ordinary shares has ranged from as low as A$0.435 to a high of A$2.39 during the last two fiscal years and the market price of our American Depositary Shares has ranged from as low as US$2.95 to a high of US$12.80 since our listing on the NASDAQ SmallCap Market on September 5, 2002 and until June 30, 2004. The market price for our ordinary shares has been affected by both broad market developments and announcements relating to actual or potential developments concerning products under development. We believe that the following factors, in addition to other risk factors described above and elsewhere in this annual report, will continue to significantly affect the market price of our ordinary shares:
o the results of pre-clinical testing and clinical trials by us and our competitors;
o developments concerning research and development, manufacturing, and marketing alliances or collaborations by us and our competitors;
o announcements of technological innovations or new commercial products by us and our competitors;
o determinations regarding our patent applications and those of others;
o publicity regarding actual or potential results relating to medicinal products under development by us and our competitors;
o proposed governmental regulations and developments in Australia, the United States and elsewhere;
o litigation;
o economic and other external factors; and
o period-to-period fluctuations in our operating results.
In addition, stock markets have experienced extreme price and volume fluctuations. These fluctuations have especially affected the stock market price of many high technology and healthcare related companies, including pharmaceutical and biotechnology companies, and, in many cases, are unrelated to the operating performance of the particular companies.
New corporate governance regulations could increase the cost of our operations
As a result of recent corporate governance scandals and the legislative and litigation environment resulting from those scandals, the costs of being a public company in general have increased. The Sarbanes-Oxley Act of 2002 requires changes in some of our corporate governance and securities disclosure or compliance practices. We expect that the on-going implementation of these regulations will further increase our legal compliance costs and will make some activities more time consuming. We are presently evaluating and monitoring regulatory developments and cannot estimate the magnitude of additional costs we may incur as a result of such developments. This and other proposed legislation may increase the fees of our professional advisors and our insurance premiums.
Holders of our ordinary shares or American Depositary Shares who are U.S. residents face adverse income tax consequences.
There is a risk that we will be classified as a passive foreign investment
company, or PFIC. Our treatment as a PFIC could result in a reduction in the
after-tax return to the holders of our ordinary shares or American Depositary
Shares and would likely cause a reduction in the value of such shares. For U.S.
federal income tax purposes, we will be classified as a PFIC for any taxable
year in which either (i) 75% or more of our gross income is passive income, or
(ii) at least 50% of the average value of all of our assets for the taxable year
produce or are held for the production of passive income. For this purpose,
passive income includes dividends, interest, royalties, rents, annuities and the
excess of gains over losses from the disposition of assets which produce passive
income. As a result of our cash position, which may increase if a substantial
portion of our outstanding options are exercised, there is a risk under the
asset test described above that we will be declared a PFIC in the event the
price of our ordinary shares declines substantially. If we were determined to be
a PFIC for U.S. federal income tax purposes, highly complex rules would apply to
U.S. holders owning ordinary shares. Accordingly, you are urged to consult your
tax advisors regarding the application of such rules. However, because the
determination of whether we are a PFIC is based upon the composition of our
income and assets from time to time, this determination can not be made with
certainty until the end of the calendar year.
We do not anticipate paying dividends on our ordinary shares.
We have never declared or paid cash dividends on our ordinary shares and do not expect to do so in the foreseeable future.
Risks Relating to our Location in Australia
It may be difficult to enforce a judgment in the United States against us and most of our officers and directors or to assert U.S. securities laws claims in Australia or serve process on most of our officers and directors.
We are incorporated in Australia. All but two of our executive officers and directors are nonresidents of the United States. Therefore, it may be difficult for an investor, or any other person or entity, to enforce a U.S. court judgment based upon the civil liability provisions of the U.S. federal securities laws in an Australian court against us or any of those persons or to effect service of process upon these persons in the United States. Additionally, it may be difficult for an investor, or any other person or entity, to enforce civil liabilities under U.S. federal securities laws in original actions instituted in Australia.
ITEM 4. INFORMATION ON THE COMPANY
A. HISTORY AND DEVELOPMENT OF THE COMPANY
Our legal and commercial name is Prana Biotechnology Limited. We were incorporated under the laws of the Commonwealth of Australia on November 11, 1997 and began limited operations shortly thereafter. Our registered office is located at Suite 2, 1233 High Street, Armadale, Victoria, 3143, Australia and our telephone number is 011-61-3-9824-8166. Our principal executive office is located at Level 2, 369 Royal Parade, Parkville, Victoria 3052, Australia and our telephone number is 011-61-3-9349-4906. Our address on the Internet is www.pranabio.com. The information in our website is not incorporated by reference into this annual report.
From our inception until our initial public offering registering our shares on the Australian Stock Exchange, or ASX, on March 28, 2000, we financed our operations with loans from two of our directors, totaling A$2,038,728. On March 28, 2000, we sold 16,000,000 of our ordinary shares and 8,000,000 options to purchase our ordinary shares in an initial public offering. We received net proceeds of A$7,474,323 from the sale of shares and exercise of options. On February 15, 2001, we completed a private placement of 6,666,666 ordinary shares to institutional investors at a price per share of A$0.75 and received net proceeds of A$4,745,599 from the private placement. During the years ended June 30, 2003 and 2002, we received net proceeds of A$3,569,792 and A$580,345, respectively, for the exercise of 7,427,584 and 1,160,690 options (including the conversion of 7,289,310 listed options in March 2003), which funds were added to our working capital. In September 2003, we raised an additional A$4,675,019 (net of issuance costs) through a private placement of 7,102,853 ordinary shares to institutional and accredited investors at a subscription price of A$0.70 per share. In April 2004, we raised A$26,352,147 (net of issuance costs) in a private placement in the United States, which was held in escrow pending receipt of the requisite approval of the transaction by our shareholders that was obtained on June 1, 2004, through the sale of 4,000,000 ADRs to institutional and accredited investors at a subscription price of US$0.50 per share and five-year
warrants to purchase 3,000,000 ADRs at an exercise price of US$8.00 per ADR. In the fiscal year ended June 30, 2004, we also received net proceeds of A$757,166 for the exercise of options to purchase 1,325,000 ordinary shares, which funds were added to our working capital. Additionally, during the fiscal year ended June 30, 2004 we issued ordinary shares for nil consideration at a cost of A$3,167 which was subtracted from our working capital. As at June 30, 2004, we had A$29,580,398 in cash and cash equivalents and our working capital was A$27,033,245.
Our mission is to develop therapeutic drugs designed to treat the underlying causes of degeneration of the brain and the eye as the aging process progresses, initially focusing on Alzheimer's disease. Other potential applications for our therapies include age-related cataracts, Creutzfeldt-Jakob disease (the human variant of Mad Cow disease), Motor Neuron disease and Parkinson's disease. Our technology is the outcome of many years of intense research from some of the leading scientists in the world in the area of age-related degenerative diseases.
Since completing our initial public offering and listing process on the ASX on March 28, 2000, we have concentrated our resources toward the pursuit of our diseases targets and in particular the progress of our clinical trial for PBT-1, as a successful therapeutic for the treatment of Alzheimer's disease. We commenced our planned phase II human clinical trial for PBT-1 in August 2000 at the Mental Health Research Institute and the Royal Melbourne Hospital. The trial was completed in January 2002 and in April 2002, Professor Colin Masters, Chairman of our Scientific Advisory Board, reported at the Seventh International Geneva/Springfield Symposium on Advances in Alzheimer Therapy in Geneva that the trial had demonstrated a significant slowing in the rate of progression of cognition (as measured by the ADAS-cog score) in patients with initial ADAS-cog scores of 25-40. Professor Masters presented that this provided encouraging proof of concept for PBT-1 and the (beta)Amyloid theory of Alzheimer's disease. The results were published in the Archives of Neurology in December 2003. All patients from this study were then provided the opportunity to roll into a further 48 week extension study. A complete set of results from this study have yet to be published however speaking at the eighth International Springfield/Montreal Symposium on Advances in Alzheimer's disease, Professor Masters was able to report that extended use of PBT-1 appears relatively well tolerated and appears to provide continued effectiveness in slowing the progress of cognitive function associated with Alzheimer's disease.
In early August 2003, we announced that a new lead MPAC molecule for Alzheimer's disease designated as PBT-2 that had been selected for development. PBT-2 is the result of rational drug design. It has been built "from the ground up" to fulfill very specific criteria. It was designed so that it will have no patent ambiguities, be orally bioavailable and cross the blood brain barrier. PBT-2 has been selected from over 300 Prana-developed compounds and has demonstrated significantly greater effectiveness in both pre-clinical in-vitro and in-vivo testing and has been designed to have an improved safety and efficacy profile compared to PBT-1. In February 2004, Prana was awarded a second research and development START grant of A$1.35 million to take PBT-2 through safety testing and Phase I clinical trials for Alzheimer's disease, PBT-2 is progressing through formal preclinical toxicology testing and is expected to be ready for human trialing in early 2005.
In March 2003, we announced our first major licensing and research collaboration with Schering A.G., or Schering, a major international pharmaceutical company, and Neurosciences Victoria Ltd., or NSV, an organization of the Universities of Melbourne and Monash, established to promote, commercialization of discoveries emanating from Victoria, Australia universities and medical research institutes. Under such collaboration, we appointed NSV to act as our agent for the purpose of receipt of funding from Schering for certain specified research and development projects that we will conduct and to facilitate the licensing of intellectual property to Schering, all under the terms of a separate research and collaboration agreement between Schering and NSV. Among other projects, we will concentrate on the development of a new Alzheimer's diagnostic. We are seeking to develop the first highly reliable diagnostic for Alzheimer's disease using brain imaging of specific compounds as markers to measure the debilitating amyloid deposits. Under the collaboration, Schering is providing to us funding of up to A$2.7 million over the life of the projects, with additional milestone payments and royalties from discoveries. While Schering has focused its Alzheimer's disease development efforts at diagnostics and imaging, this funding will allow discovery research for additional therapeutic and diagnostic targets and technologies.
We have also identified and provisionally patented a novel target for an Alzheimer's vaccine. We are currently collaborating with Prima Biomed Ltd., another publicly traded Australian biotech company, as well as utilizing the resources of the Austin Research Institute, the University of Melbourne and the Mental Health Research Institute to pursue this therapeutic approach. The research is investigating the feasibility of developing a vaccine to prevent the onset or progression of Alzheimer's. The research will assess the ability of the immune system to selectively produce specific antibodies which target the "toxic linked" forms of beta amyloid (not `normal' beta amyloid) associated with the pathology of the disease, as an effective Alzheimer's treatment. The Commonwealth of Australia government has provided a A$227,252 Biotechnology Innovation Fund, or BIF, grant for this work.
Since inception, we have not been required to invest material amounts for capital expenditures since our development efforts have taken place at research facilities operated by institutions with whom we have relationships. In the three fiscal years ended June 30, 2004 our capital expenditures have totaled A$272,980. We have not incurred any material capital expenditures since July 1, 2004.
B. BUSINESS OVERVIEW
Prana's Background
Medical science has made a significant number of breakthroughs over the past century. The average life span in western cultures has substantially increased. The diseases associated with aging have, however, yet to be fully understood or effectively treated. It is now believed that a number of age-related diseases may be capable of being treated.
Our platform technology was developed over a period of many years with the financial support of various institutions and from various grants. The majority of these funds were directed at research into Alzheimer's disease, however the outcomes demonstrated by this research have created strong implications for other age-related degenerative disorders where the
pathology of the disease is based on the inter-relationship between metals and proteins. Published studies in animal models of Parkinson's disease have reported positive effects of the lead compound PBT-1 and strengthen the "theory of metal related toxicity" in many neurodegenerative diseases. There is currently no cure or prevention for Alzheimer's disease nor any successful cure for any of the principal forms of neuron-generating diseases which comprise our disease targets.
The protein believed to be involved in Alzheimer's disease is
(beta)Amyloid. Very little was known about (beta)Amyloid protein until 1984 when
Professors Colin Masters, Konrad Beyreuther and the late Dr. Glenner sequenced
the chemistry of the protein which has since become the dominant focus
world-wide of Alzheimer's disease research.
In 1987, Drs. Masters and Beyreuther and Professor Rudolph Tanzi of Harvard Medical School discovered how (beta)Amyloid was produced and in 1994 Professor Ashley Bush of Harvard Medical School discovered that the interaction between metals and (beta)Amyloid is associated with the toxicity seen in Alzheimer's disease, hopefully paving the way for the development of therapeutic drugs to treat the disease.
Our intellectual property has been developed over an extended period through the collaborative efforts of highly regarded scientists and research institutions in this field.
Research Institutions
The intellectual property owned by our company has been developed at several internationally recognized institutional research facilities:
o The Massachusetts General Hospital, Genetics and Aging Unit in Boston. Massachusetts General Hospital is the largest teaching hospital for Harvard Medical School;
o The University of Melbourne, Department of Pathology; and
o The Biomolecular Research Institute in Melbourne.
Work conducted at the first two of these institutions identified an initial preferred compound codenamed PBT-1 which was used in our phase II human clinical trials. Our research program also aims to find further and potentially more effective preferred compounds for the treatment of Alzheimer's disease as well as for our other major disease targets. These efforts have lead to the development of PBT-2, a small molecular weighed chemical entity that demonstrates a significant improvement over PBT-1 and a portfolio of almost 400 other MPAC molecules. Initially concentrating on the development of novel MPAC within the same chemical class as PBT-1, the successful design and synthesis of PBT-2 the chemistry towards the synthesis of novel MPACs has now expanded to include multiple other chemical classes.
Platform Technology
We regard our intellectual property as a "platform technology" since we believe that it addresses the causes of a broad spectrum of age related diseases based on the interrelationship of metals and proteins. The most advanced research aimed at our disease targets is its potential
therapeutics for the treatment of Alzheimer's disease. However, we believe that the platform technology may also be applicable for:
o Age-related cataracts;
o Creutzfeldt-Jakob disease (CJD or Mad Cow disease);
o Motor Neuron disease; and
o Parkinson's disease.
Clinical Trials
Having demonstrated the effectiveness of PBT-1 in the laboratory, we received official Ethics Committee approval from the Royal Melbourne Hospital, Victoria, Australia, to test PBT-1 in human subjects. Phase II human clinical trials for PBT-1 commenced during August 2000 and were completed in January 2002 and an academic paper outlining the findings was published in the peer reviewed journal Archives of Neurology in December 2003. The clinical trials were conducted principally at our sponsored facilities at the Royal Melbourne Hospital and the Mental Health Research Institute, both based in Melbourne. Prescribed dosages of our preferred compound PBT-1 were administered to 50% of the study candidates, the other 50% received a placebo. The trial is a "double blind trial" so neither the administrating medical personnel nor the patients involved in the trial process were aware of who received PBT-1 and who received the placebo. All subjects were asked to perform various prescribed cognitive tests to determine if the introduction of PBT-1 had a demonstrable effect as compared to those subjects receiving the placebo. On completion of the initial 36 weeks of dosing all subjects were invited to continue into an extension arm where they received treatment with PBT-1 for an additional 48 weeks.
The trial was performed to contemporary "best practice" clinical trial standards. Prana contracted Kendle Pty Ltd., or Kendle, to manage the clinical trials, ensuring compliance to the required international standards of Good Clinical Practice as set out by the International Conference on Harmonisation. These protocols provide strict guidelines for the performance of clinical trials in an ethical and scientifically sound manner, and are mandatory for applications to international regulatory authorities for market access.
The Institutional Ethics Committee overseeing the trial carefully addressed safety concerns as follows:
o The dose of clioquinol to be used in the clinical trial is below the dose previously recommended for use as a short term antidiarria agent. All patients commenced on 250 mg per day, increasing to a maximum of 750 mg per day.
o The underlying biochemical mechanism associated with clioquinol toxicity is not fully understood. Recent work suggests that clioquinol may alter absorption and/or renal excretion of Vitamin B12. All patients in the study received supplementary Vitamin B12.
o The trial protocol required close monitoring of all patients by a safety committee of clinical experts. This committee independently monitored all
patient data including laboratory results and neurological test results on a regular basis
In April 2002, Professor Masters reported that the trial achieved its targeted benchmarks and that the two major initial findings of the study were:
o The (beta)Amyloid protein, which was a target of the activity of PBT-1, was significantly reduced in the blood of mild to moderate patients in the treatment group compared to an increase in the placebo group; and
o The progression of Alzheimer's disease was slowed down in the more severely affected patients in the treatment group compared to the placebo group. The initial findings of the study indicate the rate of cognitive deterioration was slowed in these patients.
In April 2004, the top-line findings of the 48-week extension study were presented for the first time by Professor Colin Masters at the 8th International Springfield/Montreal Symposium on Advances in Alzheimer's disease. The details of the trial findings have not been published as yet.
PBT-2 successfully completed in-house preclinical screening in 2003 and at present formal toxicology screening is being completed. If successful, it is intended that PBT-2 will move into clinical trials in early 2005. No assurance can be given that PBT-2 will succeed in formal toxicology testing or that such future clinical studies will commence, or if initiated will be completed and prove to be successful, or that we will be able to commercialize drugs based on our (beta)Amyloid theory of Alzheimer's disease.
It was reported that approximately 4.5 million persons in the United States suffered from Alzheimer's disease in 2000, more than double the number of persons in the United States who suffered from the disease in 1980. We and our scientific advisory board believe that our technology, if proven successful, will place our company among the leaders in the world in terms of developing a therapeutic means to treat Alzheimer's disease.
Rational Drug Design
Rational drug design employs computer-generated models, which target the molecular composition of various substances (in the case of Alzheimer's disease the (beta)Amyloid Protein) and design new chemical entities with the propensity to influence the targeted substances (proteins).
To date, our scientists have developed a pipeline of compounds that target the interaction of specific metals and the (beta)Amyloid Protein. These compounds continue to undergo the required early phase screening test before they are available for human testing. Based on the results of initial screening, our medicinal chemists continue to develop new chemical entities with novel design features.
Although we believe that we have demonstrated "proof of principle" in our phase II trials utilizing PBT-1, we also believe that rational drug design will provide new and specifically designed drugs which will display greater efficacy in disaggregating aggregation-prone proteins
such as (beta)Amyloid, paving the way for future therapeutics. PBT-2 is the first such new and specifically designed compound to move into formal development.
In early August 2003, we announced that PBT-2, a new lead MPAC molecule for Alzheimer's disease, had been selected for development. PBT-2 is the result of rational drug design. It has been built "from the ground up" to fulfill very specific criteria. It was designed so that it will have no patent ambiguities, be orally bioavailable and cross the blood brain barrier. PBT-2 has been selected from over 400 Prana-developed compounds and has demonstrated significantly greater effectiveness in both pre-clinical in-vitro and in-vivo testing and has been designed to have an improved safety and efficacy profile compared to PBT-1.
Creutzfeldt-Jakob Disease
In 2001, British studies revealed a much greater potential for the spread of fatal brain diseases such as Creutzfeldt-Jakob disease, or CJD, the human variant of Mad Cow disease. In August 2000, the London-based Medical Research Council warned that the disease could be more widespread than previously thought and that healthy appearing animals can be carriers of the disease. Mad Cow disease entered the human food chain in the 1980's leading to a collapse of the entire beef trade in the United Kingdom at the time. There is currently no cure for this fatal disease. In early 2001, the scientific journal Biochemistry published research results by Prana-sponsored scientist Dr. Roberto Cappai and colleagues confirming the role of metals in the aggregation and neurotoxicity of the abnormal form of the prion protein (PrP), believed to be responsible for the transmissible spongiform encephalopathics. Studies conducted by the University of Melbourne are ongoing to identify compounds that inhibit prion formation based on the PrP metal binding site. At present we are not undertaking specific research into the development of specific MPACs for prion diseases such as CJD, however through our close relationship with Professor Masters and his world-leading independent laboratory at the University of Melbourne, we believe that we have the capability to rapidly move into this field when and if it is deemed appropriate.
Age-Related Cataracts
Basic research in this area is being conducted by several independent groups of researchers around the world. Preliminary animal data suggests that the deposition of some proteins in age related cataracts may be related to the inappropriate interaction of metals and amyloid species. We are aware of the growing evidence in this area and when adequate information becomes available, will assess the data and determine if further company funds will be invested in this area.
Motor Neuron Disease (or Amyotrophic Lateral Sclerosis)
Amyotrophic Lateral Sclerosis, or ALS, is a fatal disease, manifested by progressive paralysis over five to ten years. There is currently no effective therapy for this tragic illness. The disease involves degeneration of the nerve cells in the spinal column, which has now been related to mutations of a protein that interacts with metal ions.
Studies through other internationally recognized research groups are progressing, and preliminary animal experiments are in progress to identify the role of SOD1 (superoxide dismutase) aggregation in Motor Neuron disease. The mechanisms underlying this disease have
not been fully discovered, but the oxidative changes associated with the aggregation of critical proteins in the spinal cord and brain stem continue to be at the center of a world-wide research effort. It is possible that the oxidative changes associated with ALS may be susceptible to treatment with Prana's drug technology. A more specific drug target is expected to emerge in the near future.
Parkinson's Disease
Parkinson's disease is another crippling disease of the aging population. It causes a progressive slowing of movement, tremor and the loss of fine motor control. Increasingly, dementia is being recognized as a significant component of Parkinson's disease. Existing therapies may provide some short term symptomatic relief but do not address the underlying cause of the disease. We believe that our platform technology may affect the aggregation of the proteins concerned and may provide a pathway for reversing the disease. Parkinson's disease is believed to affect 150 people per 100,000 or 2.5% of persons over the age of 85. It has been reported that approximately four million people suffer from Parkinson's disease worldwide.
The Melbourne research team is working on the key protein which aggregates to form the diagnostic marker of this disease. The aggregated form of this protein is susceptible to the same therapeutic strategy that is being used for Alzheimer's disease, and scientists associated with Prana have published results in the peer reviewed journal Neuron in March 2003, indicating that PBT-1 can prevent the neurotoxicity seen in the MPTP mouse model of Parkinson's disease. Experiments to confirm that other Prana MPACs have a similar effect and that these findings are applicable in human Parkinson's disease are planned but have not been conducted as yet.
Patent Portfolio
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Invention Status Comments
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Cation - APP Modulators for use in Five patents granted, two in The invention includes claims
Alzheimer's disease, entitled, "A method Australia and one in Europe, Japan directed to the use of specified
for assaying and treating Alzheimer's and in US. An application in US and modulators of cation interaction
disease" in Canada is under examination. with APP and the use of these
Prana agents in the treatment of
Alzheimer's disease. Granted
European claims include the use
of zinc binding agents for oral
administration in the treatment
of Alzheimer's disease.
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Metal binding domain inhibitors of This International (PCT) application The invention encompasses claims
B-amyloid, entitled, "Beta amyloid has entered national phase in Europe, to agents capable of inhibiting
peptide inhibitors" Canada, Japan, US and Australia. binding of specified metal ions
Prana/University of Melbourne Currently under examination in to the N-terminus of B-amyloid
Australia and pending elsewhere. and the use of these agents in
the treatment of amyloid related
conditions including Alzheimer's
disease.
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A screen for B-amyloid formation and One patent granted in the US and The invention is directed to an
inhibitors, entitled, "An in vitro Japan. Examination is pending for a assay for the formation of
system for determining the formation of further US and Japanese application. A-amyloid in a biological sample
A(beta) Amyloid" An application is under examination and inhibitors of B-amyloid
General Hospital Corporation in Canada. formation.
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A differential screen for 40/42 One patent granted in the US and a The invention is directed to an
B-amyloid, entitled, "A diagnostic assay further US application is under antibody based diagnostic assay
for Alzheimer's disease" examination. Examination is pending for the detection and
General Hospital Corporation in Canada. quantification of B-amyloid
species.
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Known metal binding agents for treatment Patent accepted in Australia and in The invention is directed to the
of Amyloidosis, entitled, Japan. Examination is pending in the use of specified metal binding
"Identification of agents for use in the Europe and Canada. A divisional agents to reduce B-amyloid
treatment of Alzheimer's disease" application has been filed in mediated neurotoxicity and assays
General Hospital Corporation Australia. An Appeal Brief has been to identify agents capable of
filed in an US application. modifying neurotoxic properties
of B-amyloid. The accepted case
in Australia is under opposition
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Clioquinol for treatment of Alzheimer's A US continuation application is The invention includes claims
disease, entitled, "Use of Clioquinol currently under examination. directed to the use of clioquinol
for the therapy of Alzheimer's disease" for the treatment of Alzheimer's
General Hospital Corporation/Prana disease and clioquinol
pharmaceutical compositions.
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Clioquinol and known metal binding One patent granted in the US and a The invention is directed to
agents for use in Amyloidosis, entitled, further US continuation application compositions containing
"Agents for use in the treatment of is under examination. An Australian clioquinol and known metal
Alzheimer's disease" application has been accepted and a binding agents and their use in
General Hospital Corporation further divisional case has been the treatment of amyloid related
filed. Examination is pending in diseases. The accepted case in
Canada and Japan. The case has been Australia is under opposition.
allowed in Europe.
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Screen for agents which alter B-amyloid A continuation-in-part application The invention is primarily
neurotoxic properties, entitled, has been granted in the US and directed to specified assays that
"Method for Screening drugs useful for further divisional case has been identify agents capable of
treating Alzheimer's disease" filed. Examination is pending in modifying neurotoxic properties
General Hospital Corporation Europe Canada, Japan and Australia. of B-amyloid.
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Immunotherapy, entitled, "Neurotoxic The International (PCT) Application The invention is directed to an
Oligomers" has entered national phase in immunotherapy strategy using
General Hospital Corporation/Prana Australia, Canada, Europe, Japan, NZ, tyrosine cross-linked protein
China and the US and is pending aggregates. The
examination. immunotherapeutic approach may be
used in the treatment of
Alzheimer's disease and other
amyloid related conditions.
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Cataracts, entitled, "Methods for the The International (PCT) Application The invention is directed to
Identification of Agents that Inhibit or has entered national phase in assays for the detection of
Promote Cataracts and Uses thereof" Australia, Europe, Japan and the US agents useful in the treatment of
General Hospital Corporation and is pending examination. cataract and a method of
treatment utilizing specified
chelators.
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APP Copper Binding Domain agonists, This case has entered national phase The invention encompasses claims
entitled, "Methods of screening for in the US and is pending examination. to the identification of agents
inhibitors of Alzheimer's disease" functioning as copper agonists
Prana/University of Melbourne and the use the agents in the
treatment of amyloid related
conditions including Alzheimer's
disease.
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8-OHq role in cognition, entitled, Filed as a provisional application in The invention encompasses the
"Treatment of Neurodegenerative the US, continued as an International utility of the 8-hydroxyquinoline
Conditions" (PCT) application pending national MPAC class in the treatment of
Prana phase entry. neurodegenerative cognitive
changes.
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8-OHq MPAC class, entitled, International (PCT) Application The invention is directed to
"8-Hydroxyquinoline derivatives" pending national phase entry. chemical structures of the
Prana 8-hydroxyquinoline MPAC class and
their utility in the treatment of
neurological conditions.
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'Follow up' MPAC classes, entitled, International (PCT) Application The invention is directed to
'Neurologically-Active Compounds' pending national phase entry. alternative MPAC chemical
Prana structures and their utility in
the treatment of neurological
conditions.
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MPAC 'class V' compounds, entitled, Australian provisional application The invention is directed to
'Compound V' 'compound V' MPAC chemical
Prana structures and their utility in
the treatment of neurological
conditions.
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MPAC 'class VI' compounds, entitled, Australian provisional application The invention is directed to
'Compound VI' 'compound VI' MPAC chemical
Prana structures and their utility in
the treatment of neurological
conditions.
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'F2' MPAC compounds, entitled, Australian provisional application The invention is directed to 'F2'
'Neurologically-Active Compounds' MPAC chemical structures and
Prana their utility in the treatment of
neurological conditions.
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'F4' MPAC compounds, entitled, Australian provisional application The invention is directed to 'F4'
'Neurologically- Active Compounds' MPAC chemical structures and
Prana their utility in the treatment of
neurological conditions.
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Patent Matters
Patent matters in biotechnology are highly uncertain and involve complex legal and factual questions. Accordingly, the availability and breadth of claims allowed in biotechnology and pharmaceutical patents cannot be predicted. Statutory differences in patentable subject matter may limit the protection we can obtain on some or all of our inventions outside Australia or prevent us from obtaining patent protection outside Australia, either of which could have a material adverse effect on our business, financial condition and results of operations. For example, methods of treating humans are not patentable in many countries outside Australia and the United States. Moreover, since patent applications are not published until at least 18 months from their first filing date and the publication of discoveries in the scientific literature often lags behind actual discoveries, we cannot be certain that we or any of our licensors were the first creator of inventions covered by pending patent applications or that we or our licensors were the first to file patent applications for such inventions. Additionally, the enforceability of a patent is dependent on a number of factors that may vary between jurisdictions. These factors may include the novelty of the invention, the requirement that the invention not be obvious in the light of prior art (including prior use or publication of the invention), the utility of the invention, and the extent to which the patent clearly describes the best method of working the invention.
While we intend to seek patent protection for our therapeutic products and technologies, we cannot be certain that any of the pending or future patent applications filed by us or on our behalf will be approved, or that we will develop additional proprietary products or processes that are patentable or that we will be able to license any other patentable products or processes. We also cannot be certain that others will not independently develop similar products or processes, duplicate any of the products or processes developed or being developed by us or licensed to us, or design around the patents owned or licensed by us, or that any patents owned or licensed by us will provide us with competitive advantages. Furthermore, we cannot be certain that patents held by third parties will not prevent the commercialization of products incorporating the technology
developed by us or licensed to us, or that third parties will not challenge or seek to narrow, invalidate or circumvent any of the issued, pending or future patents owned or licensed by us.
Our commercial success will also depend, in part, on our ability to avoid infringement of patents issued to others. If a court determines that we were infringing any third party patents, we could be required to pay damages, alter our products or processes, obtain licenses or cease certain activities. We cannot be certain that the licenses required under patents held by third parties would be made available on terms acceptable to us or at all. To the extent that we are unable to obtain such licenses, we could be foreclosed from the development, manufacture or commercialization of the product requiring such license or encounter delays in product introductions while we attempt to design around such patents, and any of these circumstances could have a material adverse effect on our business, financial condition and results of operations.
We may have to resort to litigation to enforce any patents issued or licensed to us or to determine the scope and validity of third party proprietary rights. Such litigation could result in substantial costs and diversion of effort by us. We may have to participate in opposition proceedings before the Australian Patent and Trademark Office or another foreign patent office, or in interference proceedings declared by the United States Patent and Trademark Office, to determine the priority of invention for patent applications filed by competitors. Any such litigation, interference or opposition proceeding, regardless of outcome, could be expensive and time consuming, and adverse determinations in any such proceedings could prevent us from developing, manufacturing or commercializing our products and could have a material adverse effect on our business, financial condition and results of operations.
In addition to patent protection, we rely on unpatented trade secrets and know-how and proprietary technological innovation and expertise that are protected in part by confidentiality and invention assignment agreements with our employees, advisors and consultants.
Competition
We believe that we will face competition in differing levels of intensity in all of the areas in which we are conducting research. Our competitors in Australia and elsewhere are numerous and include, among others, major pharmaceutical companies, biotechnology firms, universities and other research institutions. These competitors may develop technologies and products that are more effective than any that we are developing, or which would render our technology and products obsolete or non-competitive. Many of these competitors have greater financial and technical resources and manufacturing and marketing capabilities than we do. In addition, many of our competitors have much more experience than we do in pre-clinical testing and human clinical trials of new or improved drugs, as well as in obtaining FDA, TGA and other regulatory approvals.
Regulatory Considerations
Our ongoing research and development activities are, and the production and marketing of our pharmaceutical product candidates derived therefrom will be, subject to regulation by numerous governmental authorities in Australia, principally the TGA, and by the FDA in the United States, the Medicines Control Agency in the United Kingdom and the European Medicines Evaluation Authority. Prior to marketing, any therapeutic product developed must
undergo rigorous pre-clinical testing and clinical trials, as well as an extensive regulatory approval process mandated by the TGA and, to the extent that any of our pharmaceutical products under development are marketed abroad, by foreign regulatory agencies, including the FDA in the United States and the Medicines Control Agency in the United Kingdom. Clinical trials are conducted in three sequential phases but the phases may overlap.
Pre-clinical studies involve laboratory evaluation of product characteristics and animal studies to assess the initial efficacy and safety of the product. Clinical trials involve the administration of the investigational product to humans under the supervision of a qualified principal investigator. Phase I clinical trials may be performed in healthy human subjects or, depending on the disease, in patients. The goal of phase I clinical trials is to establish initial data about the safety and tolerance of the product in humans. In phase II clinical trials, in addition to safety, the efficacy of the product is evaluated in limited patients with the target disease. Phase III trials typically involve additional testing for safety and clinical efficacy in expanded, large-scale, multi-center studies of patients with the target disease.
Clinical trials can take many years to complete and require the expenditure of substantial resources. The length of time varies substantially according to the type, complexity, novelty and intended use of the product candidate. Delays in obtaining regulatory approvals could adversely affect the development and commercialization of our pharmaceutical product candidates and could have a material adverse impact on our business, financial condition and results of operations.
We completed a phase II human clinical trial of PBT-1 in late 2002 and its associated extension study in 2003 and will need to complete further and more detailed trials before we will be able to make any application to any of the governmental authorities. We have completed a detailed in-house review of requirements to progress the development of PBT-1 to enable application to regulatory agencies. Initially the focus is on FDA requirements for registration in the United States. Harmonization of regulatory requirements through the International Conference on Harmonization (ICH) and the Common Technical Document (CTD), will enable the regulatory application for the United States to be utilized for applications in Europe and other countries including Australia, providing some limited country specific requirements are addressed. A decision on the path forward with PBT-1 will be made based on this assessment, taking account of the potential requirements of future partners and the progress with PBT-2 and other future compounds. We cannot make any assurances that we will enter further clinical trials with PBT-1.
We cannot make any assurances that we will be able to enter into a collaborative arrangement with a large pharmaceutical or biotechnology company to commercialize PBT-1. Nor can we make any assurances that once clinical trials are completed by us or a collaborative partner, we will be able to submit as scheduled a marketing approval request to the applicable governmental regulatory authority, or that such request and application will be reviewed and cleared by such governmental authority in a timely manner, or at all. Although we intend to make use of fast-track and abbreviated regulatory approval programs when possible, we cannot be certain that we will be able to obtain the clearances and approvals necessary for clinical testing or for manufacturing and marketing our pharmaceutical products candidates.
During the course of clinical trials and toxicology studies, product candidates may exhibit unforeseen and unacceptable drug-related toxicities or side effects. If any unacceptable toxicities or side effects were to occur, we may, or regulatory authorities may require us to, interrupt, limit, delay or abort the development of our potential products. In addition, unacceptable toxicities could ultimately prevent the clearance of our product candidates by the TGA or the FDA for any or all targeted indications. Even after being cleared by the TGA or the FDA, any of our products may later be shown to be unsafe or not to have its purported effect, thereby preventing widespread use or requiring withdrawal from the market. We cannot make any assurances that PBT-1 or any of our other product candidates will be safe or effective when administered to patients.
Manufacturing and Raw Materials
We use a third party manufacturer to produce the primary drug product (API) and secondary drug forms for our clinical supplies of PBT-1 and PBT-2. We have not faced any difficulty in obtaining raw materials for our research and development activities or our clinical studies to date, although recognize that this is a costly, complex and time consuming process. Future supplies of PBT-2 for clinical trials have been commissioned within Australia, while supplies of PBT-1 will most likely be manufactured outside Australia. No assurance can be given that we would be able to replace this supplier on a timely basis, if we were required to find another source of PBT-1 or PBT-2.
Government Grants
We announced on July 26, 2001 that we were granted a START grant from the Australian Industry Research and Development Board, or IR&D Board, to expand our core intellectual property for drug treatment of neuro-degenerative diseases. Under the terms of the grant, we received A$1.7 million during the three year period commencing January 1, 2001 for up to 50% of the project costs related to our development of a treatment for Alzheimer's disease. The grant was payable on the achievement of each of six milestones and we received the final payment under the START grant in October 2003.
In May 2003, we announced that the IR&D Board approved our application for funding under the BIF grant for the amount of A$227,252 for research into the development of an immunotherapy for Alzheimer's disease.
In the first quarter of 2004, we were granted a new START grant from the Australian IR&D Board to support further development of PBT-2 and other Alzheimer's disease research. Like the first START grant, the grant is payable, in arrears, on the achievement of pre-specified milestones. We can make no assurances that we can achieve these milestones or receive all of the A$1.35 million made available over a two year period under the grant.
Business Plan
To date, the majority of our research efforts have been directed at research into the Alzheimer's disease. Our initial findings have provided strong indications that the pathology for other certain age-related and degenerative disorders may also be based on the inter-relationship between certain metals and proteins. These diseases include:
o Age-related cataracts
o Creutzfeldt-Jakob disease
o Motor Neuron disease/Amyotrophic Sclerosis (ALS)
o Parkinson's disease
We believe that our phase II human clinical trial of PBT-1 has
demonstrated proof of principle of our theory of Alzheimer's disease and that
rational drug design will provide new and specifically designed drugs which will
display greater efficacy in disaggregating aggregation prone proteins such as
(beta)-amyloid, paving the way for the development of new therapeutic agents. To
that end, we have established a drug discovery and development program at the
School of Chemistry, and Department of Pathology at the University of Melbourne
and the Mental Health Research Institute of Victoria.
Rational Drug Design
Our medicinal chemistry program is based at the University of Melbourne. Rational drug design employs computer-generated models, which target the molecular composition of various substances, in the case of Alzheimer's disease the a-amyloid protein, and designs new chemical entities with the propensity to influence the targeted proteins and metal-mediated oxyradical formation which leads to neurodegenerative changes.
A series of in vitro assays have been established to screen compounds developed by the medicinal chemistry group. During 2002/03 a program to undertake preliminary in vivo pharmacology and kinetic studies of the new compounds demonstrating activity in the in vitro screens has been established. The transgenic mouse model that demonstrated efficacy of PBT-1 is continuing to be used to evaluate in vivo efficacy and confirm lead compounds to take to formal pre clinical studies.
In early August 2003, we announced that PBT-2, a new lead MPAC molecule for Alzheimer's disease, had been selected for development. PBT-2 is the result of rational drug design. It has been built "from the ground up" to fulfill very specific criteria. It was designed so that it will have no patent ambiguities, be orally bioavailable and cross the blood brain barrier. PBT-2 has been selected from over 400 Prana-developed compounds and has demonstrated significantly greater effectiveness in both pre-clinical in-vitro and in-vivo testing and has been designed to have an improved safety and efficacy profile compared to PBT-1. The new drug is expected to enter into Phase I human clinical trials in 2005, following a formal toxicology program.
Data generated by in vitro and in vivo screens will also be incorporated into the medicinal chemistry program to further refine development strategies for new compounds.
Commercial Collaboration
In March 2003, we announced that Schering A.G. (FSE:SCH, NYSE:SHR) of Germany will fund and license discoveries on new drug targets, especially in the area of diagnostics, under project agreements between us and Neurosciences Victoria Ltd. and a separate research and
collaboration agreement between Schering A.G. and Neurosciences Victoria Ltd. The commercial arrangements that we entered into in connection with such collaboration are subject to ongoing confidentiality. Under the collaboration, Schering A.G. is providing to us up to A$2.7 million of funding for new discovery research over the life of specified research and development projects that we will conduct, with additional milestone payments and royalties from discoveries. See Item 4A. "Information on the Company - History and Development of the Company."
In August 2003, we and Prima Biomed, or Prima (ASX code: PRR) formed a collaboration with the Austin Research Institute and the University of Melbourne to develop the world's first vaccine for Alzheimer's disease. The collaboration will enable Prima Biomed's highly encouraging new Panvax vaccine technology, called DCtag, to be used in conjunction with our metal protein attenuating compounds (MPAC) to assist the body's immune system to recognize the protein or peptide extracts associated with Alzheimer's disease. DCtag has already been shown to be effective in targeting diseases such as malaria and cancer. In February 2003, Panvax announced the results of animal studies confirming the potential of DCtag technology for the development of vaccines and immunotherapies. The research and development will be conducted by the Austin Research Institute and the University of Melbourne and is supported by a Commonwealth government grant of A$227,252. The research will assess the feasibility of developing a vaccine to prevent the onset or progression of Alzheimer's disease. It will also assess the effectiveness of the technology to enhance the production of antibodies as an effective Alzheimer's disease treatment. We and Prima will jointly share in the benefit of any intellectual property produced from the collaboration including milestone payments and royalties that may accrue as a consequence of producing a successful vaccine therapy.
Research programs
Alzheimer's disease. Research is ongoing to increase our understanding of the neuropathology of Alzheimer's disease. In the next 12 months, our research will focus on the structure and function of (beta)-amyloid and its precursor, and protein structural studies specifically around the sites of interaction between metals, metal complexes and our MPACs and the significant proteins in Alzheimer's disease such as APP and (beta)-amyloid. Phase I clinical trials are planned for 2005 in order to advance PBT-2 toward commercialization. Leading clinical institutes in both the United States and Europe are investigating the possibility of clinical trials with PBT-1. Prana is investigating the possibility of partnering with these institutes to optimize the clinical trials they are planning. The possibility of partnering with these institutions or leading the development of PBT-1 through these institutes is under investigation. We can give no assurance that trials will be initiated with either PBT-1 or PBT-2, or if initiated that they will be completed or prove to be successful.
The research and development projects under our licensing and research collaboration with Schering A.G. and Neurosciences Victoria Ltd. will concentrate on the development of a new Alzheimer's diagnostic. We are seeking to develop the first highly reliable diagnostic for Alzheimer's disease using brain imaging of specific compounds as markers to measure the debilitating amyloid deposits. See Item 4A. "Information on the Company - History and Development of the Company."
Creutzfeldt-Jakob disease. In early 2001, the scientific journal Biochemistry published research results by our sponsored scientist, Dr. Roberto Cappai, and his colleagues confirming the role of metals in the aggregation and neurotoxicity of the abnormal form of the prion protein (PrP), believed to be responsible for the transmissible spongiform encephalopathies.
Age-Related Cataracts. Basic research in this area is continuing with ongoing studies. Data to date indicate that some age-related cataracts contain the same protein aggregation as that seen in Alzheimer's disease. At present Prana is not undertaking active research in this area, although through the close ties with Professor Masters and the University of Melbourne Prana retains the ability and opportunity to investigate the usefulness of its MPAC portfolio in treating and/or preventing Age Related Cataracts, if and when additional evidence arises to prioritise this opportunity. We can give no assurance that such research will continue or if continuing will be successful.
Motor Neuron disease/Amyotrophic Lateral Sclerosis. Collaborative studies with other internationally recognized research groups are progressing, and preliminary animal experiments are in progress to identify the role of SOD1 (superoxide dismutase) aggregation in Motor Neuron disease. The mechanisms underlying this disease have not been fully elucidated, but the oxidative changes associated with the aggregation of critical proteins in the spinal cord and brain stem continue to be at the center of a world-wide research effort. A drug target is expected to emerge in the near future.
Parkinson's disease. Our Melbourne research team is working on the key protein (alfa-synuclein) that aggregates to form the diagnostic marker of this disease. We believe that the aggregated form of this protein is susceptible to the same therapeutic strategy that is being used for Alzheimer's disease, and laboratory tests are in progress to confirm this approach. Experimental animal models are developed and are being integrated into the rationale drug design screening regime. Further targets for drug development are expected to be available within the next 12 months. The molecules already developed as part of the Alzheimer's disease program are being used to clarify the rationale drug development strategy required to optimize molecules for Parkinson's disease. This testing is expected to continue through 2005.
C. ORGANIZATIONAL STRUCTURE
In August 2004, we established two wholly owned subsidiaries, Prana Biotechnology Inc., incorporated in the United States, and Prana Biotechnology UK plc, incorporated in the United Kingdom. Prana Biotechnology Inc. was established in the United States due to the increase in our U.S. operations, including the appointment of Mr. Jonas Alsenas, a U.S.-based director, as our Chief Executive Officer, and the increase in U.S. investors in our company. Prana Biotechnology UK plc was established in the United Kingdom to allow us to conduct commercial and clinical operations in the United Kingdom.
D. PROPERTY, PLANTS AND EQUIPMENT
We own computer equipment, office furniture and lab equipment, the major item being a mass spectrometer that is being used at the University of Melbourne. We are party to a three year property lease signed in May 2004 that provides executive office space at 369 Royal Parade, Parkville, Victoria 3052, Australia, at an annual rental of A$105,551, which is increased by 3.5% on a cumulative basis on the May anniversary of the lease.
ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
A. OPERATING RESULTS
You should read the following discussion and analysis in conjunction with Item 3A., "Key Information - Selected Financial Data", as well as our financial statements and related notes which appear elsewhere in this annual report.
All of our revenues are generated in Australian dollars and the majority of our expenses are incurred in Australian dollars.
Overview
We are a development stage enterprise at an early stage in the development of our pharmaceutical products that are designed to treat the underlying causes of degeneration of the brain and the eye as aging progresses. We have incurred net losses since inception and expect to incur substantial and increasing losses for the next several years as we expand our research and development activities and move our product candidates into later stages of development. All of our product candidates are in early stages of development and we face the risks of failure inherent in developing drugs based on new technologies. The process of carrying out the development of our products to later stages of development may require significant additional research and development expenditures, including pre-clinical testing and clinical trials, as well as for obtaining regulatory approval. To date, we have funded our operations primarily through the sale of equity securities, proceeds from the exercise of options, government grants and interest income.
Recently Issued But Not Yet Adopted Accounting Pronouncements Applicable to Us
Australian Pronouncements
The revised Australian Accounting Standard AASB 1020, "Income Taxes," is applicable to financial years ended on or after December 31, 2005 (fiscal year 2006 for our company). The key implication of this revised standard is that for our intangible assets that have previously been revalued upwards, we will recognize the equivalent deferred tax liability. When these assets are subsequently depreciated, the additional depreciation will be tax effected and will result in an increased profit after tax compared to the existing standard. We have not yet completed an assessment of the impact of this revised standard on our results of operations or financial position.
On July 3, 2002, the Australian Financial Reporting Council announced that Australia would adopt International Financial Reporting Standards, or IFRS, for financial years beginning on or after January 1, 2005 (fiscal year 2006 for our company). Our management is assessing
the significance of these changes and preparing for their implementation. We are of the opinion that the key differences in our accounting policies which will arise from the adoption of IFRS are:
o Our policy is to expense the value of shares issued in lieu of payment for goods or services by valuing them at their cost under the respective contract; however, under IFRS we will be required to expense the cost of such shares based on the fair value (i.e., market price) of the shares. Additionally, under IFRS we will be required to expense the cost of share options issued based on the fair value of the options at the grant date. Currently, we do not recognize compensation cost for option grants.
o We currently have intangible assets which were revalued upward by A$14.7 million in 1999, which are being amortized over their useful life of up to 15 years. For the revaluation increment to continue to be recognized under IFRS there must be an active market in which the intangible can be traded. The intangible assets must also be the result of contractual or legal rights or separable from the business. It is anticipated that the intangible assets will not be able to be separately identified and that there will be no active market in which to value the intangible assets. As a result, the revaluation increment may be derecognized from the statement of financial position and the amortization previously taken up may be reversed.
United States Pronouncements
In January 2003, the Financial Accounting Standards Board, or FASB, issued FASB Interpretation No. 46, "Consolidation of Variable Interest Entities--an Interpretation of ARB No. 51," or FIN 46. FIN 46 is applicable immediately for Variable Interest Entities, or VIEs, created after January 31, 2003 and is effective for us on July 1, 2003 for VIEs created prior to February 1, 2003. FIN 46 addresses consolidation by business enterprises of VIEs that either: (1) do not have sufficient equity investment at risk to permit the entity to finance its activities without additional subordinated financial support or (2) the equity investors lack an essential characteristic of a controlling financial interest. In December 2003, the FASB published a revision to FIN 46, or FIN 46R, to clarify some of the provisions of FIN 46 and to defer the effective date of implementation for certain entities. Under the guidance of FIN 46R, public companies that have interests in VIEs that are commonly referred to as special purpose entities are required to apply the provisions of FIN 46R for periods ending after December 15, 2003. A public company that does not have any interests in special purpose entities but does have a variable interest in a VIE created before February 1, 2003 must apply the provisions of FIN 46R by the end of the first reporting period ending after March 14, 2004. The adoption of FIN 46 and FIN 46R during the year ended June 30, 2004 did not have a material impact on our financial condition or results of operations.
Differences Between Australian Accounting Standards and U.S. Accounting Standards
We prepare our financial statements in accordance with A-GAAP, which differ in certain significant respects from U.S. GAAP. The following table sets forth a comparison of our net loss and total equity in accordance with A-GAAP and U.S. GAAP as of the dates and for the periods indicated:
As of and for the years ended June 30,
----------------------------------------
2004 2003 2002
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Net loss in accordance with:
A-GAAP......................... (9,885,614) (4,584,838) (5,448,467)
U.S. GAAP...................... (9,208,199) (3,244,397) (4,728,019)
Total equity in accordance with:
A-GAAP......................... 38,702,559 15,823,703 16,668,986
U.S. GAAP...................... 31,484,956 7,378,083 6,715,803
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See Note 25 to our financial statements for a description of the differences between A-GAAP and U.S. GAAP as they relate to us, and a reconciliation of net loss and total equity for the dates and periods indicated therein. Differences between A-GAAP and U.S. GAAP that have a material effect on net loss and total equity relate to share-based compensation and intangible assets.
Critical Accounting Policies
We prepare our financial statements in accordance with A-GAAP. As such, we are required to make certain estimates, judgments, and assumptions that management believes are reasonable based upon the information available. These estimates, judgments and assumptions affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the periods presented. The significant accounting policies listed in Note 1 of the financial statements that management believes are the most critical to aid in fully understanding and evaluating our financial condition and results of operations under A-GAAP are discussed below.
Recoverable amount of non-current assets. Each reporting period, our Board of Directors assesses the recoverable amount of all non-current assets. Where the carrying amount of a non-current asset is greater than its recoverable amount, the asset is revalued down to its recoverable amount. The recoverable amount is estimated based on expected net cash flows discounted to their present values using a market-determined, risk-adjusted discounted rate.
Intangible assets and patents, research and development expense. Until December 1999, costs associated with the acquisition and development of our core intellectual property were capitalized as intangible assets. After considering an independent valuation of our core intellectual property at December 1999, our Board of Directors revalued the assets upwards by A$14,661,942 to A$16,500,000. The revaluation was recorded in the asset revaluation reserve in equity. Subsequent to the revaluation, all costs associated with the acquisition and development of core intellectual property are charged to patents, research and development expense. On July 1, 2000 our Board of Directors deemed the revalued carrying amount of core intellectual property to be cost for financial reporting purposes.
Our core intellectual property is being amortized on a straight-line basis over a period of 15 years, the period in which the future benefits are expected to arise.
Revenue recognition. We recognize revenue to the extent that it is probable that the economic benefits will flow to us and the revenue can be reliably measured.
o Interest income is recognized as earned and collectibility is reasonably assured.
o Government grants are recorded as income when key milestones set within each agreement are achieved and accepted by all parties to the grant. The agreements provide for payments at different phases based on product development. Milestones are based on the phases of each product development, for example phase 1, phase 2 and phase 3. Revenue is not recognized prior to acceptance that the milestones have been achieved, as collectibility is not assured until this point is reached. Once each milestone is reached and approved, the grantor is obligated to pay and there are no further significant obligations as to that part of the milestone. Grant income for achievement of such milestones is agreed between the parties in legally binding contracts. Revenue for each milestone achieved is fixed up front. The START grant is expected to complete advance toxicology in December 2004, commence Phase 1 clinical trials in March 2005 and conclude Phase 1 trials in August 2005. The BIF grant is expected to confirm proof of principle in January 2005.
o Reimbursements of expenses are recognized as revenue when the reimbursement is received and the related expenses have been incurred.
o Corporate partner revenues are comprised of amounts received for certain research and development activities under our collaboration with Schering A.G. and Neurosciences Victoria Ltd. Revenues are recognized as earned on a straight line basis over the lives of the respective agreements that we entered into with Neurosciences Victoria Ltd. in connection with the collaboration. The straight line basis is considered appropriate as such agreements do not contain clearly defined milestones. Such agreements are performed on a "best efforts" basis with no guarantee of either technological or commercial success.
Significant Costs and Expenses
Depreciation and amortization expense. Depreciation of equipment is provided on a straight-line basis over the estimated useful lives of three to 14 years. Amortization of our core intellectual property is provided on a straight-line basis over the estimated useful lives of 15 years. See Notes 1(c) and 1(d) to the financial statements.
Patents, research and development expenses. Our patents, research and development expenses consist primarily of compensation and related costs for research and development personnel, expenses for testing facilities and payments under our research agreements. Such costs are charged to operations as incurred. Patents, research and development expenses also include costs associated with the acquisition and development of patents, which have been expensed subsequent to December 1999. See Note 1(d) to the financial statements.
Legal expenses. Our legal expenses consist of fees paid to our outside counsel for various legal matters dealt with in the ordinary course of business as well as legal fees associated with patent applications and for the defense of patents.
Consulting fee expenses. Our consulting fee expenses consist primarily of directors fees and other consultancy fees paid to members of our Scientific Advisory Board.
Employee benefits expenses. Employee benefit expenses consist primarily of payments to employees for their services as employees.
Corporate compliance expenses. Corporate compliance expenses consist primarily of costs incurred by us to satisfy the requirements under Australian and U.S. listing and accounting standards. Costs include items such as share register fees, listing fees, audit fees and accounting and administration attributed to corporate compliance.
Other expenses from ordinary activities. Other expenses from ordinary activities consist primarily of foreign exchange gains / losses, accounting and administrative services, travel, insurance, marketing and overhead expenses.
Results of Operations
Year ended June 30, 2004 compared to year ended June 30, 2003
Revenues from ordinary activities
Revenues from ordinary activities increased to A$2,321,227 for the year ended June 30, 2004 from A$1,816,478 for the year ended June 30, 2003, an increase of A$504,749, or 27.8%. Revenues in the year ended June 30, 2004 consisted of A$211,327 interest income, A$647,400 government grant income, and A$1,462,500 received under the licensing and research collaboration we entered into with Schering A.G. and Neurosciences Victoria Ltd. in March 2003. Revenues in the year ended June 30, 2003 consisted of A$111,686 interest income, A$967,000 government grant income, A$231,304 reimbursements attributable to an agreement with the Bank of New York (under which 50% of the costs associated with the NASDAQ listing were reimbursed) and A$506,250 under our licensing and research collaboration with Schering A.G. and Neurosciences Victoria Ltd. The increase in revenues is attributable to our collaboration with Schering A.G. and Neurosciences Victoria Ltd. which was in force during the entire 2004 fiscal year, as well as the increase in interest income arising primarily from the funds we received in June 2004 in connection with our US$20 million private placement. We estimate that our revenues in the 2005 fiscal year will consist of A$260,000 interest income, A$920,660 government grant income and A$843,750 under our collaboration with Schering A.G. and Neurosciences Victoria Ltd. Initially, we entered into three agreements in connection with our collaboration with Schering A.G and Neurosciences Victoria Ltd, one of which expired in fiscal year 2004. We are currently renegotiating the remaining two agreements. We expect that our revenues under the agreements being renegotiated in connection with such collaboration will be substantially the same as if the existing two agreements continued in full force and effect, however the new agreements could result in a different level of revenues in fiscal year 2005 than estimated.
Depreciation and amortization expenses
Depreciation and amortization expenses remained substantially consistent at A$1,195,006 for the year ended June 30, 2004 compared to A$1,185,973 for the year ended June 30, 2003.
Patents, research and development expenses
Patents, research and development expenses increased to A$5,232,581 for the year ended June 30, 2004 from A$1,861,295 for the year ended June 30, 2003, an increase of A$3,371,286, or 181.1%. The increase in expenses is attributable to expenses of A$1,873,125 incurred in connection with the licensing and research collaboration we entered into with Schering A.G. and Neurosciences Victoria Ltd. and pre-clinical trial fees of A$1,984,181 in connection with the new government START grant that commenced in September 2003. See Item 5C. "Operating and Financial Review and Prospects - Research and Development, Patents and Licenses". We expect that our patents, research and development expenses will increase in the 2005 fiscal year to approximately A$17,000,000, primarily due to an increase in research expenses for clinical development as PBT-1 may advance into Phase II and III trials and PBT-2 is expected to begin Phase I clinical trials.
Legal expenses
Legal expenses increased to A$1,650,467 for the year ended June 30, 2004 from A$848,660 for the year ended June 30, 2003, an increase of A$801,807, or 94.5%. The increase in legal expenses was primarily due to the settlement of the dispute with P.N. Gerolymatos S.A for which a provision of A$971,764 was made in the 2004 fiscal year.
Employee benefits expense
Employee benefits expenses increased to A$1,060,730 for the year ended June 30, 2004 from A$760,980 for the year ended June 30, 2003, an increase of A$299,750, or 39.4%. The increase in employee benefits expenses was primarily due to an increase in staff from six persons to 12 persons. The increase in staff in fiscal 2004 was due to the increase of research and development for our new lead product candidate PBT-2 during such period, in addition to our earlier product PBT-1, and our move towards commercialization.
Consulting fee expenses
Consulting fee expenses increased to A$1,706,809 for the year ended June 30, 2004 from A$567,730 for the year ended June 30, 2003, an increase of A$1,139,079, or 200.6%. The increase in consulting fee expenses was primarily due to a A$777,721 increase in fees paid (in cash, shares and options) to Professor Ashley Bush under his new contract (see Item 5B. "Operating and Financial Review and Prospects - Liquidity and Capital Resources") as well as an increase in directors' fees. In the 2003 fiscal year we engaged the outside expertise of Mercer Human Resources to determine the appropriate level of compensation for directors. This resulted in an increase in directors' fees of A$467,746 (consisting of part cash and 249,999 ordinary shares valued at A$120,000) during the year ended June 30, 2004 to bring the directors fees into line with industry standards. These increases are partially offset by a A$106,388 decrease in consulting fees paid to other various consultants in the year ended June 30, 2004, primarily due to a decrease in the activities of our scientific advisory board and scientific commercial optimization group, the latter of which was disbanded in 2003 because it was not providing our company the advice it required, and in the 2003 fiscal year we received services from a number of one-off consultants that were longer required in fiscal 2004.
Corporate compliance expenses
Corporate compliance expenses remained substantially consistent at A$419,708 for the year ended June 30, 2004 compared to A$395,604 for the year ended June 30, 2003.
Other expenses from ordinary activities
Other expenses from ordinary activities increased to A$941,540 for the year ended June 30, 2004 from A$781,074 for the year ended June 30, 2003, an increase of A$160,466, or 20.5%. The increase in expenses from ordinary activities is primarily due to an increase in foreign exchange loss because the funds that we received in connection with our June 2004 private placement in the United States are being held in U.S. dollars.
Year ended June 30, 2003 compared to year ended June 30, 2002
Revenues from ordinary activities
Revenues from ordinary activities increased to A$1,816,478 for the year ended June 30, 2003 from A$793,970 for the year ended June 30, 2002, an increase of A$1,022,508, or 128.8%. Revenues in the in year ended June 30, 2003 consisted of A$945,250 government research grants, A$111,686 interest income, A$253,054 reimbursements attributable to an agreement with the Bank of New York (whereby 50% of the costs associated with the NASDAQ listing were reimbursed) and A$506,250 received under the licensing and research collaboration we entered into with Schering A.G. and Neurosciences Victoria Ltd. in March 2003. Revenues in year ended June 30, 2002 consisted of A$567,250 from government research grants and A$226,720 of interest income.
Depreciation and amortization expenses
Depreciation and amortization expenses increased to A$1,185,973 for the year ended June 30, 2003 from A$1,160,595 for the year ended June 30, 2002, an increase of A$25,378 or 2.2%. The increase in expenses is attributable to the depreciation of the equipment purchased during the year ended June 30, 2003.
Patents, research and development expenses
Patents, research and development expenses decreased to A$1,861,295 for the year ended June 30, 2003 from A$2,498,486 for the year ended June 30, 2002, a decrease of A$637,191, or 26%. The decrease in expenses is attributable to a reduction in our expenditure on phase II human clinical trials of PBT-1 (which concluded in early 2002) and a reduction in the amounts paid to certain of our research partners (including the effect of the appreciating of the Australian dollar on certain of these payments which are contracted in U.S. dollars), as well as the acquisition of additional patents that were charged to expense.
Legal expenses
Legal expenses decreased to A$848,660 for the year ended June 30, 2003 from A$923,816 for the year ended June 30, 2002, a decrease of A$75,156, or 9%. The decrease in
legal expenses was primarily due to a reduction in legal costs associated with patent litigation and in prosecuting patent claims.
Employee benefits expense
Employee benefits expenses increased to A$760,980 for the year ended June 30, 2003 from A$378,853 for the year ended June 30, 2002, an increase of A$382,127, or 101%. The increase in employee benefits expenses was primarily due to an increase in key employees from four employees as at June 30, 2002 to six employees as at June 30, 2003.
Consulting fee expenses
Consulting fee expenses decreased to A$567,730 for the year ended June 30, 2003 from A$604,873 for the year ended June 30, 2002, a decrease of A$37,143, or 6%. The decrease in consulting fee expenses was primarily due to an increase in employees, reducing the cost of outside consultants.
Corporate compliance expenses
Corporate compliance expenses increased to A$395,604 for the year ended June 30, 2003 from A$339,383 for the year ended June 30, 2002, an increase of A$56,221, or 16.6%. The increase in corporate compliance expenses is primarily attributable to the costs related to our listing on the NASDAQ SmallCap Market in September 2002.
Other expenses from ordinary activities
Other expenses from ordinary activities increased to A$ 781,074 for the year ended June 30, 2003 from A$336,431 for the year ended June 30, 2002, an increase of A$444,643, or 132%. The increase in expenses from ordinary activities is primarily due to the increase in operations, which resulted in increases in rental expense, office overhead costs, marketing expenses (primarily in the United States) and overseas travel expense. Much of this additional expenditure was due to our increasing discussions with potential corporate partners and our listing on the NASDAQ SmallCap Market.
Inflation and Seasonality
Management believes inflation has not had a material impact on our company's operations or financial condition and that our operations are not currently subject to seasonal influences.
B. LIQUIDITY AND CAPITAL RESOURCES
We are a development stage company and have had no sales income to date, and as of June 30, 2004 are accumulated deficit totaled $25,464,876. From inception until our initial public offering in March 2000 we financed our operations primarily through borrowings from two of our directors, which were repaid from the proceeds of such offering. Since our initial public offering we have financed our operations primarily through sales of equity securities,
proceeds from the exercise of options, government grants, licensing and research collaborations and interest earned on investments.
In March 2003, we completed the conversion of our 7,289,310 outstanding listed options into ordinary shares. As a result of the conversion, we received A$3.5 million in net proceeds, which funds were added to our working capital.
In September 2003, we raised an additional A$4.7 million, net of issuance costs, through a private placement of 7.1 million ordinary shares to institutional and accredited investors at a subscription price of A$0.70 per share.
In April 2004, we raised US$20 million before issuance costs (A$26.4 million net of issuance costs) in a private placement in the United States, which was held in escrow pending receipt of the requisite approval of the transaction by our shareholders that was obtained on June 1, 2004. The private placement was for 4,000,000 ADRs to institutional and professional investors at a price of US$5.00 per ADR. The private placement also involved the acquisition by the investors of five-year warrants to purchase an additional 3,000,000 ADRs at an exercise price of US$8.00 per ADR. Should these warrants be exercised in full, we would raise an additional US$24 million.
Cash and cash equivalents totaled A$29,580,398 at June 30, 2004, compared to A$3,463,783 at June 30, 2003.
Net cash used in operating activities was A$5,347,420, A$3,590,613 and A$3,799,515 during the years ended June 30, 2004, 2003 and 2002, respectively. Our payments to suppliers and employees during the years ended June 30, 2004, 2003 and 2002 were A$7,896,711, A$5,293,087 and A$4,885,444, respectively. The increase in payments from the year ended June 30, 2003 to the year ended June 30, 2004 consisted primarily of the increase in directors' fees, costs associated with the preclinical trials, expenses associated with our collaboration with Schering A.G and Neurosciences Victoria Ltd. and the increase of costs associated with Professor Ashley Bush's new consultancy agreement. During the years ended June 30, 2004, 2003 and 2002, our payments to suppliers and employees were offset by government grants of A$909,946, A$836,335 and A$843,714, respectively, and interest income of A$176,845, A$106,835 and A$242,215, respectively. Additionally, during the years ended June 30, 2004 and 2003, our payments to suppliers and employers were further offset by A$1,462,500 and A$506,250, respectively, for research funding attributable to our collaboration with Schering A.G. and Neurosciences Victoria Ltd.
Net cash used in investing activities was A$134,362 during the year ended June 30, 2004 and A$87,929 during the year ended June 30, 2003 and A$50,689 during the year ended June 30, 2002. The increase in the 2004 fiscal year was primarily the result of fit-out costs associated with the move to our new premises.
Net cash provided by financing activities was A$31,781,165, A$3,569,792 and A$580,345 during the years ended June 30, 2004, 2003 and 2002, respectively. Cash flows from financing activities during the year ended June 30, 2004 reflected net proceeds of A$4,675,019 from a private placement in September 2003, net proceeds of A$26,352,147 from a private placement of
our ADRs to institutional and professional investors in the United States and net proceeds of A$757,166 from the exercise of our publicly traded options. Additionally, during the fiscal year ended June 30, 2004 we issued ordinary shares for nil consideration at a cost of A$3,167. Cash flows from financing activities during the years ended June 30, 2003 and 2002 reflected the exercise of options into ordinary share capital.
From inception to June 30, 2004, our capital expenditures totaled A$506,523 consisting of computer equipment, furniture and fixtures, fit-out costs and laboratory equipment that is being used in connection with our research at the University of Melbourne. Capital expenditures for equipment are being depreciated on a straight-line basis over the estimated useful lives of three to 14 years, with a net balance at June 30, 2004 of A$180,971. We currently do not have significant capital spending requirements, but we expect to continue to engage in capital spending consistent with anticipated growth in our operations and personnel.
As of June 30, 2004, our principal commitments consisted of obligations under our agreements with Neurosciences Victoria Ltd. (in connection with our collaboration with Neurosciences Victoria Ltd. and Schering A.G.) and Professor Ashley Bush. In accordance with the terms of our current project agreements with Neurosciences Victoria Ltd. in connection with such collaboration, we are obliged to spend A$759,375 on research and development activities at the University of Melbourne during the nine months ending March 31, 2005, however we are currently renegotiating our contracts with Neurosciences Victoria Ltd. and such amount may change. Under the ten year contract we recently entered into with Professor Ashley Bush, we agreed to pay Professor Bush a consulting fee of US$100,000 per year, to issue to Professor Bush 1,650,000 ordinary shares, of which 825,000 were issued during the 2004 fiscal year, and to grant Professor Bush options to purchase 824,000 ordinary shares at an exercise price $0.50 per share, of which options to purchase 412,000 ordinary shares were granted during the 2004 fiscal year. We also have a commitment under a three year lease for our new principal office that we moved to in June 2004. The total lease commitment over the three year period is A$306,781.
Under our agreement with Kendle, a director-related company, we are required to pay A$1,280-A$1,520 per day for their services in connection with the commercialization of our technology. In fiscal year 2004, we paid Aroma Science, a director-related company, on arms length commercial rates, for computer, administration and meeting facilities. This agreement ended following our move to our new premises. We also pay Malvern Administrative Services Pty Ltd. A$15,000 per month under an ongoing agreement for administrative, accounting, company secretarial services and corporate advice.
We believe our existing cash and cash equivalents as well as anticipated cash flow from government grants, a licensing and research collaboration agreement and potential option exercises will be sufficient to support our current operating plan to December 31, 2005; however, we have based this estimate on assumptions that may prove to be incorrect. Our future funding requirements will depend on many factors, including, but not limited to:
o costs and timing of obtaining regulatory approvals;
o the costs and timing of obtaining, enforcing and defending our patent and intellectual property;
o the progress and success of pre-clinical and clinical trials of our product candidates; and
o the progress and number of our research programs in development.
Conditions in Australia
We are incorporated under the laws of, and our principal offices and research and development facilities are located in, the Commonwealth of Australia. Therefore, we are directly affected by political and economic conditions in Australia.
C. RESEARCH AND DEVELOPMENT, PATENTS AND LICENSES
Our primary activity since incorporation in 1997 has been the acquisition and development of patents as well as research and development of our core technology. Research and development expenses amounted to A$5,232,581, A$1,717,770 and A$1,827,536 during the years ended June 30, 2004, 2003 and 2002, respectively. In addition to these expenses, A$143,525 and A$670,950 was spent in relation to patent costs during the years ended June 30, 2003 and 2002, respectively. We did not incur any patent costs during the year ended June 30, 2004.
Our patents, research and development expenses consist primarily of compensation and related costs for research and development personnel, expenses for testing facilities and payments under our research agreements. Such costs are charged to operations as incurred. Research and development expenses also include costs associated with the acquisition and development of patents subsequent to December 1999. See Note 1(d) to the financial statements.
In March 2003, we announced our first major licensing and research collaboration with Schering A.G., a major international pharmaceutical company, and Neurosciences Victoria Ltd.. Under such collaboration, Schering A.G. is providing to us funding of up to A$2.7 million over the life of specified research and development projects that we will conduct, with additional milestone payments and royalties from discoveries. See Item 4A., "Information on the Company - History and Development of the Company."
We have also identified and provisionally patented a novel target for an Alzheimer's vaccine. We are collaborating with Prima Biomed Ltd., a publicly traded Australian biotech company, and use the resources of the Austin Research institute, the University of Melbourne and the Mental Health Research Institute to pursue this therapeutic approach. The research is investigating the feasibility of developing a vaccine to prevent the onset or progression of Alzheimer's. The research is assessing the ability of the immune system to selectively produce specific antibodies which target the "toxic linked" forms of beta amyloid (not `normal' beta amyloid) associated with the pathology of the disease, as an effective Alzheimer's treatment. The Commonwealth of Australia government has provided a A$227,252 BIF grant for this work.
We announced on July 26, 2001 that we were granted a START grant from the Australian IR&D Board in the amount of A$1.74 million to expand our core intellectual property for drug treatment of neuro-degenerative diseases. Under the terms of the grant we received A$1.7 million during the three year period commencing January 1, 2001, for up to 50% of the project
costs related to our development of a treatment for Alzheimer's disease. The grant was payable on the achievement of each of six milestones and we received the final payment under the START grant in October 2003.
On May 7, 1999, we entered into a patent assignment and license agreement with the University of Melbourne. The agreement provided for the assignment of various patents and patent rights to us. In consideration of the assignment of the patents, we were required to make certain payments to the University of Melbourne and to pay a royalty of 1.5% on the net price of products sold utilizing such patents. In addition we must also pay the lesser of 1.5% of the net invoice price of products sold or 10% of royalties received from any license or sub-licensee we appoint to utilize the patents.
Under the terms of a research funding and intellectual property assignment agreement dated December 1, 2000 between us and the University of Melbourne, we are required to pay the University for research projects an agreed minimum of A$297,000 (inclusive of goods and services tax), each year for a period of three years from December 1, 2000. Since the natural expiration of such agreement, the parties have continued to conduct research and perform all other acts and obligations in accordance with the terms and conditions of the agreement as if it had remained in full force and effect, and in addition have incorporated into such agreement the projects under the agreements we entered into with Neurosciences Victoria Ltd. in March 2003 (see Item 4A. "Information on the Company - History and Development of the Company"). We are currently negotiating the renewal of our research funding and intellectual property assignment agreement with the University of Melbourne (see Item 10C. "Additional Information - Material Contracts"). Although we have every intention of continuing our relationship with the University of Melbourne and Mental Health Research Institute of Victoria to support our drug screening program, we cannot give any assurance that this can be or will be undertaken.
On February 8, 2000, we entered into a patent assignment agreement with The Biomolecular Research Institute, or BRI. The agreement provides for the assignment of various patent applications and patent rights from BRI to us. In consideration of the assignment of the patents, we are required to pay BRI a royalty of 1.5% on the net invoiced price of products sold utilizing such patents.
Under the terms of a license agreement between us and GHC, we were required to pay GHC a total of US$166,590 for the 30 month period beginning January 1, 2001 and US$182,000 for a period of 30 months from August 1, 2001 for the right to use the results of research under a license for certain patent rights. These obligations have subsequently been satisfied.
On January 1, 2001, we entered into another license agreement with GHC whereby we obtained an exclusive license with respect to certain patents and permits us to sublicense the patent rights to others. In consideration of the license we are required to pay GHC royalties of 1.5% of the net sales price of products sold utilizing patents exclusively licensed to us.
Under the terms of our strategic alliance agreement with Kendle, Kendle provides us with consultancy services in relation to the coordination, planning and management of intellectual property, research and development, planning, management and commercialization strategy. Kendle provides its services to us at a rate of A$1,280-A$1,520 per day. For the years ended
June 30, 2004, 2003 and 2002, fees earned by Kendle amounted to A$379,045, A$475,289 and A$537,327, respectively. These fees are included in our statements of financial performance as consulting fees.
D. TREND INFORMATION
We are a development stage company and it is not possible for us to predict with any degree of accuracy the outcome of our research or commercialization efforts.
E. OFF-BALANCE SHEET ARRANGEMENTS
We are not a party to any material off-balance sheet arrangements. In addition, we have no unconsolidated special purpose financing or partnership entities that are likely to create material contingent obligations.
F. TABULAR DISCLOSURE OF CONTRACTUAL OBLIGATIONS
The following table summarizes our minimum contractual obligations and commercial commitments as of June 30, 2004 and the effect we expect them to have on our liquidity and cash flow in future periods.
Payments due by period
-------------------------------------------------------------------------------------
less than 1 more than 5
Contractual Obligations Total year 1-3 years 3-5 years years
------------------------------------- ----------- ----------- ----------- ----------- -----------
Operating lease obligations ......... A$ 316,955 A$ 108,432 A$ 205,883 A$ 2,640 A$ --
Purchase obligations * .............. 2,408,515 1,109,363 352,186 287,686 659,280
----------- ----------- ----------- ----------- -----------
Total ............................... A$2,725,470 A$1,217,795 A$ 558,069 A$ 290,326 A$ 659,280
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* Includes obligations under our contract with Professor Ashley Bush and under our licensing and research collaboration with Neurosciences Victoria Ltd. and Schering A.G.
ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
A. DIRECTORS AND SENIOR MANAGEMENT
Our directors and executive officers are as follows:
Name Age Position
------------------------- --- -------------------------------------------
Geoffrey P. Kempler ..... 49 Chairman of the Board of Directors
Jonas V. Alsenas ........ 43 Chief Executive Officer and Director
Ross Thomas Murdoch ..... 39 President and Chief Operating Officer
Richard Revelins ........ 42 Chief Financial Officer and Secretary
Dianne Angus ............ 44 Senior Vice President of Intellectual
Property, Business Development and Research
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Name Age Position ------------------------- --- ------------------------------------------- Colin L. Masters ........ 57 Director Brian D. Meltzer ........ 50 Director George W. Mihaly ........ 51 Director |
Geoffrey Paul Kempler has served as Chairman of our Board of Directors since November 1997, and between November 1997 and August 2004, served as our Chief Executive Officer. Mr. Kempler is one of the founders of our company and has been primarily responsible for the successful negotiation of our company's existing contractual relationships with Massachusetts General Hospital, the University of Melbourne and the Biomolecular Research Institute. Mr. Kempler is a qualified psychologist and the major shareholder of Aroma Science Pty Ltd., which holds the Australian distribution and marketing rights to the Aveda range of products. Mr. Kempler, who has extensive experience in investment and business development, has managed our operations to date and has been responsible for the implementation of our strategic plan and the commercialization of our technology. Mr. Kempler has a B.Sc degree in science from Monash University and Grad. Dip. App. Soc. Psych. degree from Swinburne University.
Dr. Jonas Vytautas Alsenas has served as a director of our company since March 2004 and was appointed as our Chief Executive Officer in August 2004. Prior to joining us, Dr. Alsenas was a leading U.S. biotechnology and pharmaceutical company analyst. Until December 2003, Dr. Alsenas served as a Managing Director (Research Analyst/Portfolio Manager) of ING Investment Management, New York, where he co-managed a hedge fund with an emphasis on investments in biotechnology. From April 1996 through June 2000, Dr. Alsenas was Principal and ultimately Managing Director as a research analyst at the investment banking firm Furman Selz, LLC and its successor ING Barings, LLC, where he provided research coverage of the biotechnology sector. Dr. Alsenas began his career in 1991 with Scheer & Company in Branford, Connecticut, where he provided strategic consulting and due diligence for biotechnology and pharmaceutical industry clients and investors, including venture capital groups and portfolio managers. Dr. Alsenas received a Doctor of Veterinary Medicine (DVM) degree from the Ohio State University and a B.A. from Northwestern University.
Dr. Ross Thomas Murdoch has served as Chief Operating Officer and Head of Research and Development of our company since July 2002 and was appointed President of our company in July 2004. Dr. Murdoch has almost 16 years of experience in the local and international pharmaceutical industry and has accumulated extensive experience in all the scientific, operational and commercial aspects of drug research and development. Prior to joining our company and since February 2001, Dr. Murdoch served as chief executive officer and chief scientific officer of Kinacia Pty Ltd, an Australian based pharmaceutical company. Previously and since June 1998, Dr. Murdoch was employed by Astra Merck and after its merger with Zeneca he served as global head of clinical project management for AstraZeneca. From 1990 to May 1998, Dr. Murdoch was employed by SmithKline Beecham, where he managed its Australian research program until his transfer to SmithKline Beecham in the United States in 1995, where he became a director in global project management, leading drug development in
the cardiovascular, pulmonary and metabolism therapeutic areas. Dr. Murdoch has a B.Sc degree with honors from Monash University, a PhD in Pharmacology from the University of Melbourne, a postgraduate certificate in health economics from the Monash University Business School, and is a graduate of the Australian Institute of Company Directors.
Richard Revelins has served as our company Secretary since February 2000 and was appointed Chief Financial Officer of our company in June 2004. Mr. Revelins is an executive director and principal of Peregrine Corporate Limited, an Australian based investment bank. Mr. Revelins has held senior positions in international merchant banks and is currently a director of a number of companies listed on the Australian Stock Exchange, including Prima Biomed Limited, IM Medical Limited, Gaming and Entertainment Group Limited, Yamarna Goldfields Limited and Cangold Inc., a company listed on the Canadian Venture Exchange. Mr. Revelins serves as our Chief Financial Officer on a part-time basis and devotes approximately one to two work days a week to such position.
Dianne Angus has served as Vice President of Intellectual Property and Licensing of our company since August 2002 and was promoted to Senior Vice President of Intellectual Property, Business Development and Research in July 2004. From October 1997 to June 2000, Ms. Angus was the Manager for Intellectual Property for Florigene Limited. From June 2000 to August 2002, Ms. Angus was a Director of Dianne Angus and Associates Pty Ltd. providing strategic business development and intellectual property services to the biotech sector. Ms. Angus has worked in the commercial biotechnology sector for 12 years, directing technology evaluation and acquisition and product licensing. During such time, Ms. Angus has managed large and diverse intellectual property portfolios, conducting global patent and trademark prosecution, contract rights and enforcement. Ms. Angus has also negotiated many commercial licenses, research and product development agreements ranging from major entities such as Novartis, Monsanto, Suntory, Du Pont to numerous Australian, Japanese and American research institutes. Ms. Angus has undertaken due diligence assessments on several Australian biotechnology companies for investment brokers. Ms. Angus has a Bachelor of Science (Education) and a Bachelor of Science (Honour's) degree from the University of Melbourne, a Masters degree in Biotechnology from Monash University, a Graduate Diploma in Intellectual Property Law from the University of Melbourne, a Diploma in Intellectual Property Practice from the Institute of Patent and Trade Mark Attorneys of Australia and is a registered Australian Patent and Trade Mark Attorney.
Professor Colin Louis Masters has served as director of our company since December 1999. Professor Masters graduated with a degree in Medicine from the University of Western Australia in 1970. Since such time, Professor Masters has held many senior scientific research positions predominantly in the area of Alzheimer's disease research and is currently a Professor and Head of the Department of Pathology at the University of Melbourne. Professor Masters is Chief of Neuropathology and Director of Research Laboratories at the Mental Health Research Institute of Victoria and Consultant in Pathology at the Royal Melbourne Hospital. Professor Masters chairs our Scientific Advisory Board and is primarily responsible for the implementation of the research strategy of our company. Professor Masters has a B.Med.Sci. degree with Honours, an M.B., B.S., M.D., F.R.C. Path (U.K.) degree and F.R.C. Path (Aust), F.A.A. degree, all from the University of Western Australia.
Brian Derek Meltzer has served as a director of our company since December 1999. Mr. Meltzer is a merchant banker with the international investment bank Babcock & Brown. He has 20 years experience in finance, including 12 years at AIDC Ltd where he was Director of Non-Executive Director Investment Advisory Services. He is a director of Momentum Ventures Limited, licensed by the government as an Innovation Investment Fund with venture capital investments including biotechnology. Mr. Meltzer is a non-executive director on the boards of a number of private companies. He is also a director on the boards of the Australia-Israel Chamber of Commerce and the Paraplegic and Quadriplegic Association of Victoria (Paraquad). Mr. Meltzer is also a member of our Audit Committee. Mr. Meltzer has B. Com. and MEc. degrees from the University of Auckland and Monash University, respectively.
Dr. George William Mihaly has served as director of our company since December 1999. Dr. Mihaly has had an extensive and successful career spanning the research and commercial facets of the pharmaceutical industry. During the period from mid. 1994 to early 2000, Dr. Mihaly was the founding Executive Chairman and Managing Director of Synermedica Pty Ltd., or Synermedica, one of Australia's leading independent consultant research organizations, or CRO, to the pharmaceutical industry. Synermedica merged with the global CRO, Kendle International Inc., in April 2000 and Dr. Mihaly continues as Managing Director of the merged entity in Australia (now called Kendle Pty Ltd.). Over the course of the last 22 years in academia and industry, Dr. Mihaly has amassed extensive experience in both the science and logistics of setting up, monitoring, managing and evaluating results from Phase I, II, III and IV clinical trials. Dr. Mihaly has B.Pharm., M.Sc. and Ph.D. degrees and is a fellow of the Australian Institute of Company Directors.
B. COMPENSATION
Compensation of directors and officers is determined by our Board of Directors and reviewed by our Audit Committee.
The Audit Committee assesses the appropriateness of the nature and amount of emoluments on a periodic basis by reference to relevant employment market conditions with the overall objective of ensuring maximum shareholder benefit from the retention of a high quality board of directors and executive officers.
Remuneration for the services of Dr. J Alsenas, a director and our Chief Executive Officer, is formalized in a service agreement. See Item 6C., "Directors, Senior Management and Employees - Board Practices - Directors' Service Contract."
The following table sets forth all compensation we paid to each of our directors and with respect to all of our directors and executive officers as a group for the year ended June 30, 2004:
Salaries, fees, Pension, retirement
commissions and and other similar
bonuses benefits
--------------- -------------------
Geoffrey P. Kempler A$266,818 A$18,182
Jonas V. Alsenas A$ 32,365 --
Colin L. Masters A$ 48,333 --
Brian D. Meltzer A$ 90,000 --
George W. Mihaly A$118,858 347
All directors and officers as a group, then
consisting of eight persons A$943,618 A$53,381
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As of June 30, 2004, our directors and executive officers as a group, then consisting of eight persons, held options to purchase an aggregate 11,187,167 of our ordinary shares, at an exercise price of A$0.50 per share. Of such options, options to purchase 10,767,500 ordinary shares expire on December 1, 2004 and options to purchase 419,667 ordinary shares expire on June 30, 2005. Options to purchase 724,667 ordinary shares were granted to our directors and executive officers during the 2004 fiscal year, of which options to purchase 450,000 ordinary shares were exercised.
C. BOARD PRACTICES
Our Board of Directors is elected by and accountable to our shareholders. Our Board of Directors' responsibilities are divided into operating activities, financial and capital markets activities and scientific activities. The Chairman of our Board of Directors, currently Mr. Geoffrey Kempler, is responsible for the management of the Board of Directors and its functions.
Our Board of Directors currently has five directors, of which two are non-executive directors under Australian law. The NASDAQ Stock Market currently requires us, as a foreign private issuer, to have at least two independent directors on our Board of Directors and to establish an audit committee comprised solely of independent directors. However, under a letter from NASDAQ dated August 29, 2002, NASDAQ granted us an exemption from such NASDAQ rules, which is in effect until July 31, 2005. Under NASDAQ rules promulgated pursuant to the Sarbanes-Oxley Act of 2002, by July 31, 2005 a majority of our Board of Directors must qualify as independent directors and we will be required to have at least three independent directors on our Audit Committee. Mr. Brian Meltzer is the only director that currently qualifies as an independent director under the NASDAQ Stock Market and Securities and Exchange Commission requirements.
Term of Directors
Directors are elected at our annual general meeting of shareholders. Under our Constitution, the term of office of our directors are staggered, such that at every annual general meeting of shareholders one-third, or the nearest whole number, of the directors, except a Managing Director, must retire from office and may offer himself/herself for re-election. No director, except a Managing Director, shall retain office for a period in excess of three years without submitting for re-election. Under Australian law, directors who have reached the age of 72 must stand for re-election annually. Our Board of Directors has the power to appoint any person to be a director, either to fill a vacancy or as an additional director (provided that the total
number of directors does not exceed the maximum allowed by law), and any director so appointed may hold office only until the next annual general meeting when he or she shall be eligible for election. Mr Kempler must retire and may stand for re-election at our 2004 annual general meeting of shareholders. Messrs. Meltzer and Mihaly must retire and may stand for re-election at our 2005 annual general meeting of shareholders. Dr. Masters must retire and may stand for re-election at our 2006 annual general meeting of shareholders. Jonas Alsenas, as Managing Director, is not subject to the rotation provisions of our Constitution but is required to be elected by the shareholders at the 2004 annual general meeting of shareholders. A Managing Director would cease to serve in such capacity if he/she ceased to be eligible to be a director of a company under the relevant provisions of the Australian Corporations Law.
Directors' Service Contracts
On July 1, 2004, we entered into an employment contract with Dr. Jonas
Alsenas, which was subsequently amended by a letter agreement dated September
20, 2004, effective as of the date of the original agreement, under which Dr.
Alsenas agreed to serve as our Chief Executive Officer as of such date. Dr.
Alsenas agreed to devote his best efforts and full business time and attention
to the performance of service to our company. We agreed to provide Dr. Alsenas
the following payments and benefits: (i) base annual salary of US$200,000 per
year (which may be increased at the discretion of the Board of Directors); (ii)
annual bonus of US$100,000 for the first year of employment, which will be paid
upon completion of the first 15 months of employment. Thereafter the annual
bonus will be based on Dr. Alsenas's success in satisfying pre-established
performance targets to be mutually agreed upon, in an amount no less than
US$100,000; (iii) options to purchase 380,000 ADRs at an exercise price of
US$5.00 per ADR. The options will vest over a period of four years, in four
equal installments, at the end of each of the four years following the option
grant. The options will expire at the end of the eight years from the date of
grant. Such option grant is subject to shareholder approval and our shareholders
will be asked to approve the grant at our 2004 annual general meeting of
shareholders to be held in November 2004. The options will be granted under a
new share option plan that will be subject to shareholder approval at our 2004
annual general meeting of shareholders; (iv) up to 20 days vacation a year.
Vacation days that are not used in any calendar year will be carried over for
use in the following year to a maximum carry of two years; and (v) reimbursement
of reasonable business expenses incurred in the performance of his duties. Dr.
Alsenas will be entitled to participate in the employee benefits established by
our company, as applicable to executives, including, without limitation, a
Section 401(k) retirement plan, health, dental, life insurance and short and
long term disability plans.
In the event of termination of Dr. Alsenas's employment:
o By our company without Cause (as defined in the agreement) or by Dr Alsenas with Good Reason (as defined in the agreement), Dr Alsenas's shall be entitled to: (i) a lump sum of US$300,000 within 20 days of the termination date; (ii) business expenses that have not been reimbursed and accrued, unused vacation days; and (iii) the acceleration of the vesting of any unvested options to purchase ADRs, which may be purchased during the remainder of the exercise period for such options.
o By our company with Cause (as defined in the agreement) or by Dr. Alsenas without Good Reason (as defined in the agreement), Dr Alsenas' bonus compensation will be pro-rated if the termination occurs in the first year and he will be entitled to business expenses that have not been reimbursed and accrued, unused vacation days. He will not be able to exercise any unvested options to purchase ADRs.
o Due to death or Disability (as defined in the agreement), we shall pay Dr. Alsenas or his estate, as applicable, all accrued base salary, pro-rata bonus, business expenses that have not been reimbursed and accrued, unused vacation days (and in the case of disability, less such amounts under any disability policy maintained by our company). Dr. Alsenas or his estate, as applicable, will be entitled to exercise vested options for ADRs.
The agreement contains customary confidentiality provisions.
Indemnification of Directors and Officers
Our Constitution provides that, subject to the Australian Corporations Act, every director, secretary, manager or officer of our company or any person employed by our company as auditor shall be indemnified out of our funds against all liability incurred by such person as a director or officer in defending proceedings, whether civil or criminal, in which judgment is given in the persons favor or in which the person is acquitted in connection with any application under the Australian Corporations Act in which relief is granted to the person by a Court.
Under our Constitution no director, auditor or other officer shall be liable for any acts, receipts, neglect or defaults of any other director or officer for joining in any receipt or other act for conformity or for any loss or expense that may happen to us through the inefficiency or deficiency of title to any property acquired by order of the directors or on our behalf or for the inefficiency or deficiency of any security in or upon which any of our monies shall be invested or for any loss or damage arising from bankruptcy, insolvency or tortuous act of any person with whom any monies, securities or effects shall be deposited or for any loss occasioned by any error of judgment, omission, default or oversight on the persons part or for an other loss damage or misfortune whatsoever which shall happen in relation to those things unless the same shall happen through the persons own negligence, default, breach or duty, breach of trust or dishonesty.
In addition, our Constitution provides that to the extent permitted by law, we may pay, or agree to pay, a premium in respect of a contract insuring a person who is liable or has been an officer of our company or one of our subsidiaries against a liability:
o incurred by the person in his or her capacity as an officer of our company or a subsidiary of our company provided that the liability does not arise out of a conduct involving a willful breach of duty in relation to our company or a subsidiary of our company; or
o for costs and expenses incurred by that person defending proceedings, whatever their outcome.
We have established a policy for the indemnification of our directors and officers against certain liabilities incurred as a director or officer, including costs and expenses associated in successfully defending legal proceedings.
Audit Committee
Our Audit Committee, which was established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934, assists our Board of Directors in overseeing the accounting and financial reporting processes of our company and audits of our financial statements, including the integrity of our financial statements, compliance with legal and regulatory requirements, our independent public accountants' qualifications and independence, the performance of our internal audit function and independent public accountants, and such other duties as may be directed by our Board of Directors. The Audit Committee is also required to assess risk management.
Our Audit Committee currently consists of one board member who satisfies the respective "independence" requirements of the Securities and Exchange Commission and NASDAQ for audit committee members. By July 31, 2005, we will be required to have at least three independent directors on our Audit Committee. See Item 6B. "Directors, Senior Management and Employees - Compensation." Our Audit Committee is currently composed of Messrs. Meltzer and Alsenas. The Audit Committee meets at least once each quarter.
Scientific Advisory Board
Our Scientific Advisory Board oversees and administers our research activities. Our company's Scientific Advisory Board is comprised of a number of the leading scientists in the field of age related degenerative disorders. Professor Colin Masters is the Chairman of our Scientific Advisory Board. The current members of our Scientific Advisory Board are as follows:
Professor Colin Louis Masters has served as an executive director of our company since December 1999. Professor Masters graduated with a degree in Medicine from the University of Western Australia in 1970. Since such time Professor Masters has held many senior scientific research positions predominantly in the area of Alzheimer's disease research and is Professor and Head of the Department of Pathology at the University of Melbourne. Professor Masters is Chief of Neuropathology and Director of Research Laboratories at the Mental Health Research Institute of Victoria and Consultant in Pathology at the Royal Melbourne Hospital. Professor Masters chairs our Scientific Advisory Board and is primarily responsible for the implementation of the research strategy of our company. Professor Masters has a B.Med.Sci. degree with Honors, an M.B., B.S., M.D., F.R.C. Path (U.K.) degree and F.R.C. Path (Aust), F.A.A. degree, all from the University of Western Australia.
Professor Ashley Ian Bush is the Director of the Laboratory for Oxidation Biology within the Genetics and Aging Unit at the Massachusetts General Hospital and Associate Professor in the Department of Psychiatry of Harvard Medical School. Professor Bush is also Principal Fellow/Associate Professor, Departments of Pathology and Psychiatry, University of Melbourne. Professor Bush, born and educated in Melbourne, established his laboratory at the Massachusetts General Hospital after receiving the distinguished Harness Fellowship in 1992.
His discovery of the role of metals and oxidative stress in Neurological disorders has formed the basis of our platform technology.
Professor Rudolph Emile Tanzi is Professor of Neurology at the Harvard Medical School and Associate Geneticist, Neurology Services, the Director of Genetics and the Aging Unit, at the Massachusetts General Hospital. Professor Tanzi played a lead role in the discovery of genes and the mechanisms that underlie the cause of Alzheimer's disease, particularly as they relate to the molecular genetics of this disorder. His laboratory at the Massachusetts General Hospital is one of the leaders in the field. Over the last ten years Professor Tanzi has helped guide the development of our platform technology.
D. EMPLOYEES
At June 30, 2004, we had 12 employees. Of such employees, five persons were employed in research and development, five persons in management and administration and two persons in operations.
At June 30, 2003, we had eight employees. Of such employees, three persons were employed in research and development, three persons in management and administration and two persons in operations.
At June 30, 2002, we had four employees including two directors. Of such employees, two persons were employed in research and development, no persons in management and administration and two persons in operations.
During the fiscal years ended June 30, 2004, 2003 and 2002, all of our employees were located in Australia.
Australian labor laws and regulations are applicable to all of our employees. The laws concern various matters, including severance pay rights at termination, retirement or death, length of work day and work week, minimum wage, overtime payments and insurance for work-related accidents.
E. SHARE OWNERSHIP
Beneficial Ownership of Executive Officers and Directors
The following table sets forth certain information as of August 16, 2004 regarding the beneficial ownership of our ordinary shares by each of our directors and executive officers and by all of our directors and executive officers as a group:
Number of Ordinary Shares Percentage of
Name Beneficially Owned (1) Ownership (2)
---- ------------------------- -------------
Geoffrey P. Kempler ......................... 26,222,500(3)(4) 15.68%
Jonas V. Alsenas ............................ 70,000(5) *
Richard Revelins ............................ 92,808(6)(7) *
Ross Thomas Murdoch ......................... 331,667 *
Dianne Angus ................................ 30,000 *
Colin L. Masters ............................ 1,101,333(8) *
Brian D. Meltzer ............................ 543,333(9)(10) *
George W. Mihaly ............................ 443,333(11)(12) *
All directors and executive officers as
a group (eight persons) ..................... 28,834,974 17.24%
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(1) Beneficial ownership is determined in accordance with the rules of the SEC, and generally includes voting or investment power with respect to securities. Ordinary shares relating to options currently exercisable or exercisable within 60 days of the date of this annual report are deemed outstanding for computing the percentage of the person holding such securities but are not deemed outstanding for computing the percentage of any other person. Except as indicated by footnote, and subject to community property laws where applicable, the persons named in the table above have sole voting and investment power with respect to all shares shown as beneficially owned by them.
(2) The percentages shown are based on 167,253,547 ordinary shares issued and outstanding as of August 16, 2004.
(3) Of such shares, 30,000 ordinary shares are held directly by Mr. Kempler, 13,965,000 ordinary shares are held of record by Baywick Pty Ltd., an Australian corporation owned by Mr. Kempler, 90,000 ordinary shares are held of record by Crystal Triangle Pty Ltd., an Australian corporation owned by Mr. Kempler and 2,970,000 ordinary shares are held of record by NRB Developments Pty Ltd., an Australian corporation in which Mr. Kempler holds a 50% interest. Mr. Kempler may be deemed to be the beneficial owner of the ordinary shares held directly by Baywick Pty Ltd., Crystal Triangle Pty Ltd. and NRB Developments Pty Ltd.
(4) Includes 9,167,500 ordinary shares issuable upon the exercise of options expiring in December 2004 (of which, options to purchase 1,000,000 ordinary shares are held by Mr. Kempler, options to purchase 6,682,500 ordinary shares are held by Baywick Pty Ltd., and options to purchase 1,485,000 ordinary shares are held by NRB Developments Pty Ltd.). All of such options have an exercise price of A$0.50 per share.
(5) Of such shares, 70,000 ordinary shares are held by ANZ Nominees Ltd., an Australian corporation which holds ADR's on behalf of U.S. investors.
(6) Of such shares, 42,808 are held of record by Darontack Pty Ltd., an Australian corporation owned by Mr. Revelins.
(7) Includes 50,000 ordinary shares issuable upon the exercise of options expiring in June 2005 that have an exercise price of A$0.50 per share which are held by Darontack Pty Ltd., an Australian corporation owned by Mr. Revelins. These options are held under the Employee and Consultants Option Plan 2000.
(8) Of such shares, 16,000 ordinary shares are held by Helen Masters, Dr. Masters' wife, 1,000 ordinary shares are held by Seth Masters, Dr. Masters' son, and 1,000 ordinary shares are held by Kate Masters, Dr. Masters' daughter.
(9) Of such shares, 243,333 ordinary shares are held by Navon Pty Ltd., an Australian corporation owned by Mr. Meltzer.
(10) Includes 300,000 ordinary shares issuable upon the exercise of options expiring in December 2004. All of such options have an exercise price of A$0.50 per share and are held by Navon Pty Ltd, an Australian corporation owned by Mr. Meltzer.
(11) Of such shares 4,000 ordinary shares are held by each of Kieren Mihaly and Warwick Mihaly, Dr. Mihaly's sons, and 52,000 ordinary shares are held of record by Waide Pty Ltd., an Australian corporation owned by Mr. Mihaly.
(12) Includes 300,000 ordinary shares issuable upon the exercise of options expiring in December 2004 . All of such options have an exercise price of A$0.50 per share.
Employee and Consultants Option Plan 2000
In November 2000, we adopted our Employee and Consultants Option Plan 2000, or the Plan. The Plan is designed to reward executives, employees and consultants for their contributions to our company and to provide a method of retaining key personnel for the growth and development of our intellectual property rights. The Plan is administered by our Board of Directors, who have the power to determine procedures for the administration of the Plan, amend or modify the Plan, and resolve conclusively all questions of fact or interpretation arising in connection with the Plan. The number of ordinary shares issuable upon exercise of options granted under the Plan from time to time, that have not expired and have not been exercised, will not exceed 3,000,000. Options granted under the Plan are exercisable (irrespective of the date of grant) at any time from 12 months after the date of issue until October 31, 2004. The exercise price of options granted under the Plan is A$0.50 per share. The options cannot be transferred and will not be quoted on the ASX.
A holder of options under the Plan will be permitted to participate in any new pro-rata issue of securities of our company, subject to the prior exercise of the options.
As of June 30, 2004, options to purchase 1,360,441 ordinary shares had been issued under the Plan, at an exercise price of A$0.50 per share. Of such options, options to purchase 463,274 ordinary shares have been exercised and options to purchase 897,167 ordinary shares are outstanding and exercisable. 1,639,559 ordinary shares are available for future option grants under the Plan.
ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
A. MAJOR SHAREHOLDERS
The following table sets forth certain information, as of August 16 , 2004, regarding the beneficial ownership by all shareholders known to us to own beneficially more than 5% of our ordinary shares. The voting rights of our major shareholders do not differ from the voting rights of other holders of our ordinary shares.
Percentage of
Number of Ordinary Shares Outstanding Ordinary
Name Beneficially Owned (1) Shares (2)
---- ------------------------- --------------------
Geoffrey P. Kempler .......... 26,222,500(3)(4) 15.68%
Jagen Nominees Pty Ltd ....... 20,691,000(5) 12.37%
OrbiMed Advisers LLC ......... 15,624,000(6) 9.34%
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(1) Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission and generally includes voting or investment power with respect to securities. Ordinary shares relating to options currently exercisable or exercisable within 60 days of the date of this annual report are deemed outstanding for computing the percentage of the person holding such securities but are not deemed outstanding for computing the percentage of any other person. Except as indicated by footnote, and subject to community property laws where applicable, the persons named in the table above have sole voting and investment power with respect to all shares shown as beneficially owned by them.
(2) The percentages shown are based on 167,253,547 ordinary shares issued and outstanding as of August 16, 2004.
(3) Of such shares, 30,000 ordinary shares are held directly by Mr. Kempler, 13,965,000 ordinary shares are held of record by Baywick Pty Ltd., an Australian corporation owned by Mr. Kempler, 90,000 ordinary shares are held of record by Crystal Triangle Pty Ltd., an Australian corporation owned by Mr. Kempler and 2,970,000 ordinary shares are held of record by NRB Developments Pty Ltd., an Australian corporation in which Mr. Kempler holds a 50% interest. Mr. Kempler may be deemed to be the beneficial owner of the ordinary shares held directly by Baywick Pty Ltd., Crystal Triangle Pty Ltd. and NRB Developments Pty Ltd.
(4) Includes 9,167,500 ordinary shares issuable upon the exercise of options expiring in December 2004 (of which, options to purchase 1,000,000 ordinary shares are held by Mr. Kempler, options to purchase 6,682,500 ordinary shares are held by Baywick Pty Ltd., and options to purchase 1,485,000 ordinary shares are held by NRB Developments Pty Ltd.). All of such options have an exercise price of A$0.50 per share.
(5) Includes 6,682,500 ordinary shares issuable upon the exercise of options expiring in December 2004. All of such options have an exercise price of A$0.50 per share. Mr. Boris Liberman may be deemed to hold the voting and investment powers for the ordinary shares held by Jagen Nominees Pty Ltd.
(6) Includes 6,000,000 ordinary shares, or 600,000 ADRs, issuable upon the exercise of currently exercisable five-year warrants, exercisable at an exercise price of US$8.00 per ADR.
Significant Changes in the Ownership of Major Shareholders
In June 2004, we completed a private placement of four million ADRs and five-year warrants to purchase an additional three million ADRs to institutional and professional investors, as a result of which the ownership interest of our major shareholders at such time was diluted. Fifteen of the investors, who appointed OrbiMed Advisors LLC as their nominee, acquired 8,000,000 ADRs and warrants to purchase 6,000,000 ADRs. See Item 5B. "Operating and Financial Review and Prospects - Liquidity and Capital Resources."
Record Holders
As of August 16, 2004, there were 2,164 holders of record of our ordinary shares. Based on a review of the information provided to us by our transfer agent, eight record holders, holding approximately 0.40% of our ordinary shares, had registered addresses in the United States. The majority of trading by our U.S. investors is done by means of ADRs which are held by ANZ Nominees Ltd. on our share registry. As of August 16, 2004, ANZ Nominees Ltd. held 44.96% of our ordinary shares.
B. RELATED PARTY TRANSACTIONS
Dr. Mihaly serves as a director of Kendle, formerly known as Synermedica Pty Ltd. Kendle provides analysis and review of the commercialization of our technology, intellectual property management and clinical trial management and monitoring. An ongoing agreement at normal commercial rates that is terminable at will exists between us and Kendle, with costs incurred on a daily basis. We paid Kendle A$379,045 in the year ended June 30, 2004 for its services. On August 9, 2004, we received invoices from Kendle totaling A$65,817 for services it has provided to us to date in the 2005 fiscal year.
Aroma Science, a company owned by Mr. Kempler, provided us with computer, administration and meeting facilities. We paid Aroma Science A$81,470 for its services in the fiscal year ended June 30, 2004. These services are no longer provided as we moved to new premises in Parkville in June 2004.
See Note 21 to the financial statements.
C. INTERESTS OF EXPERTS AND COUNSEL
Not applicable.
ITEM 8. FINANCIAL INFORMATION
A. FINANCIAL STATEMENTS AND OTHER FINANCIAL INFORMATION
See our financial statements, including the notes thereto in Item 17.
Legal Proceedings
On July 28, 2004, we and The General Hospital Corporation of Massachusetts settled all outstanding litigation with P.N. Gerolymatos S.A., or P.N.G., regarding the exploitation rights to
certain patents relating to pharmaceutical compositions and uses of clioquinol, or PBT-1. Pursuant to the settlement agreement, all patent oppositions in Europe and Australia will be withdrawn and the law suits then pending before the U.S. District Court for the District of Columbia and the Court of Athens in Greece have been dismissed. Under the settlement agreement, we and P.N.G. agreed to recognize the rights of each other to develop clioquinol in our respective territories. As a result of the settlement agreement, we now hold the rights to selected uses of clioquinol and pharmaceutical compositions in the United States and selected uses clioquinol in Japan, while P.N.G. holds certain patent rights on the uses of clioquinol for Europe and other territories. Under the settlement agreement, we issued 1,350,000 of our ordinary shares to P.N.G., which are being held in escrow for 12 months, and made a payment to of US$150,000 to it. Such settlement in the total value of A$971,764 was expensed in fiscal 2004 (see Note 9 to the financial statements). Under the settlement agreement we also agreed to pay a sales royalty to P.N.G on sales of PBT-1 in the United States and Japan and we are entitled to receive a percentage of P.N.G.'s income on sales of PBT-1 in the other territories.
We are not involved in any legal proceedings. See Note 16 to the financial statements.
Dividend Distribution Policy
We have never paid cash dividends to our shareholders. We intend to retain future earnings for use in our business and do not anticipate paying cash dividends on our ordinary shares in the foreseeable future. Any future dividend policy will be determined by the Board of Directors and will be based upon conditions then existing, including our results of operations, financial condition, current and anticipated cash needs, contractual restrictions and other conditions as the Board of Directors may deem relevant.
B. SIGNIFICANT CHANGES
In August 2004, we established two wholly owned subsidiaries, Prana Biotechnology Inc., incorporated in the United States, and Prana Biotechnology UK plc, in the United Kingdom. Prana Biotechnology Inc. was established in the United States due to the increase in our U.S. operations, including the appointment of Jonas Alsenas, a U.S.-based director, as our Chief Executive Officer, and the increase in U.S. investments in our company. Prana Biotechnology UK plc was established in the United Kingdom to allow us to conduct commercial and clinical operations in the United Kingdom.
Other than as disclosed above or referred to elsewhere in this annual report, there have been no further significant changes in the operation or financial condition of our company since June 30, 2004.
Item 9. THE offer and listing
A. OFFER AND LISTING DETAILS
Australian Stock Exchange
Our ordinary shares have traded on the ASX since our initial public offering on March 29, 2000. The following table sets forth, for the periods indicated, the high and low market quotations for our ordinary shares, as quoted on the ASX.
Per Ordinary Share (A$)
-----------------------
High Low
---- ---
Fiscal Year Ended June 30,
--------------------------
2000 (since March 29)................ 1.05 0.22
2001................................. 1.29 0.36
2002................................. 2.60 0.50
2003................................. 2.39 0.435
2004................................. 1.18 0.445
Fiscal Year Ended June 30, 2003:
--------------------------------
First Quarter........................ 2.39 1.55
Second Quarter....................... 2.07 1.20
Third Quarter........................ 1.50 0.77
Fourth Quarter....................... 0.80 0.435
Fiscal Year Ended June 30, 2004:
--------------------------------
First Quarter........................ 1.15 0.55
Second Quarter....................... 0.72 0.445
Third Quarter........................ 0.65 0.48
Fourth Quarter....................... 1.18 0.58
Month Ended:
------------
March 2004........................... 0.63 0.58
April 2004........................... 1.18 0.58
May 2004............................. 0.95 0.64
June 2004............................ 0.65 0.73
July 2004............................ 0.69 0.51
August 2004.......................... 0.58 0.51
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NASDAQ SmallCap Market
Since September 5, 2002 our Level II ADR's have traded on the NASDAQ SmallCap Market under the symbol "PRAN." The following table sets forth, for the periods indicated, the range of high ask and low bid prices of our Level II ADR's on the NASDAQ SmallCap Market:
Per ADR (US$)
-------------
High Low
---- ---
Fiscal Year Ended June 30,
--------------------------
2003 (from September 5).............. 12.80 2.96
2004................................. 10.50 2.95
Fiscal Year Ended June 30, 2003:
--------------------------------
First Quarter (from September 5)..... 12.80 11.00
Second Quarter....................... 11.50 6.86
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Third Quarter........................ 8.15 4.40
Fourth Quarter....................... 5.19 2.96
Fiscal Year Ended June 30, 2004:
--------------------------------
First Quarter........................ 7.49 3.87
Second Quarter....................... 5.65 2.95
Third Quarter........................ 5.21 3.69
Fourth Quarter....................... 10.50 4.43
Month Ended:
------------
March 2004........................... 5.21 3.69
April 2004........................... 10.50 4.50
May 2004............................. 7.13 4.78
June 2004............................ 5.00 4.43
July 2004............................ 5.19 3.60
August 2004.......................... 4.41 3.55
B. PLAN OF DISTRIBUTION
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Not applicable.
C. MARKETS
The principal listing of our ordinary shares and listed options to purchase ordinary shares is on the ASX. As of April 5, 2002, our ADRs were eligible to trade on the NASDAQ SmallCap OTC Bulletin Board in the United States and since September 5, 2002, our ADRs have traded on the NASDAQ SmallCap Market under the symbol "PRAN." We entered into a Deposit Agreement with the Bank of New York under which the Bank of New York, acting as depositary, issues ADRs, each of which evidences an American Depositary Share, or ADS, which in turn represents ten of our ordinary shares.
D. SELLING SHAREHOLDERS
Not applicable.
E. DILUTION
Not applicable.
F. EXPENSES OF THE ISSUE
Not applicable.
ITEM 10. ADDITIONAL INFORMATION
A. SHARE CAPITAL
Not applicable.
B. MEMORANDUM AND ARTICLES OF ASSOCIATION
Incorporated by reference to our Registration Statement on Form 20-F dated August 26, 2002.
C. MATERIAL CONTRACTS
On May 7, 1999, we entered into an agreement for the assignment of patents and intellectual property licensing with the University of Melbourne. The agreement provides for the assignment of various patents and patent rights to our company. In consideration of the assignment of the patents, we agreed to make certain payments to the University of Melbourne and to pay a royalty of 1.5% on the net price of products sold utilizing such patents. In addition, we agreed to pay the lesser of 1.5% of the net invoice price of products sold or 10% of royalties received from any license or sub-licensee we appoint to utilize the patents.
Under the terms of a research funding and intellectual property assignment agreement dated December 1, 2000, between us and the University of Melbourne, we were required to pay the University of Melbourne for research projects an agreed minimum of A$297,000 (inclusive of goods and services tax) each year for a period of three years from December 1, 2000. Since the natural expiration of such agreement, the parties have continued to conduct research and perform all other acts and obligations in accordance with the terms and conditions of the agreement as if it had remained in full force and effect, and in addition have incorporated into such agreement the projects under the agreements we entered into with Neurosciences Victoria Ltd. in March 2003 (see Item 4A. "Information on the Company - History and Development of the Company"). We are currently finalizing with the University of Melbourne a new research funding and intellectual property assignment agreement with an increased budget, which will be deemed to be effective on the date of expiration of the original agreement, with a three-year term expiring on December 1, 2006, and will incorporate any changes that may be made to our agreements with Neurosciences Victoria Ltd. that we are currently renegotiating.
We have paid the University of Melbourne a total of A$3,312,043 through June 30, 2004 under our agreements dated May 7, 1999 and December 1, 2000.
On February 8, 2000, we entered into an agreement for the assignment of patents and intellectual property licensing with BRI. The agreement provides for the assignment of various
patent applications and patent rights from BRI to us. In consideration of the assignment of the patents, we are required to pay BRI a royalty of 1.5% on the net invoiced price of products sold utilizing such patents. In addition, we must also pay the lesser of 1.5% of the net invoice price of products sold or 10% of royalties received from any licensee or sub-licensee we appoint to utilize such patents, or a minimum of A$2,000 a year. If the patent rights are assigned before a total of A$20,000 has been paid as royalties, the difference between the royalties paid and A$20,000 must be paid to BRI.
On January 1, 2001, we entered into a license agreement with GHC, whereby we obtained an exclusive license with respect to certain patents that permits us to sublicense the patent rights to others. The agreement also provides us with the non-exclusive right to use materials, substances and information that were used by GHC in research sponsored by us. In consideration of the license, we are required to pay GHC royalties of 1.5% of the net sales price of products sold utilizing patents exclusively licensed to us. We are also required to pay certain advance milestone payments, to be reduced from the royalties. In addition to the royalties we are obligated to pay GHC 1.5% of any and all non-royalty payments, including license fees received from our affiliates. Each party to the agreement may terminate the agreement if the other party defaults in its materials obligations and does not remedy the default within sixty days after notice is given. GHC can terminate the licenses and rights granted to us under the agreement in any country in the event that after the first commercial sale in that country there will be a continuous one year period in which no products are sold.
Under the terms of our strategic alliance agreement dated 6 January 2004, with Kendle, it provides us with consultancy services in relation to the co-ordination, planning and management of intellectual property, research and development, planning, management and commercialization strategy. Kendle provides its services to us at a rate of A$70-A$200 per hour. For the years ended June 30, 2004, 2003 and 2002, we paid Kendle A$379,045, A$475,289 and A$537,327, respectively.
In March 2003, we announced our first major licensing and research collaboration with Schering A.G., a major international pharmaceutical company, and Neurosciences Victoria Ltd. Under such collaboration, Schering A.G. is providing to us funding of up to A$2.7 million over the life of specified research and development projects that we will conduct, with additional milestone payments and royalties from discoveries. See Item 4A. "Information on the Company - History and Development of the Company."
We entered into a consulting agreement dated January 17, 2000 with Professor Ashley Bush for the provision of research and development services relating to inventions and treatments for diseases caused by metal-mediated oxidative stress, which expired in January 2003. On January 8 , 2004, we entered into a new consulting agreement with Professor Bush , under which Professor Bush agreed to provide us with consulting services for a period of ten years. In consideration of his services, we agreed to pay Professor Bush an annual consulting fee of US$100,000, to issue to Professor Bush 1,650,000 ordinary shares, of which 825,000 ordinary shares were issued during the 2004 fiscal year, and to grant Professor Bush options to purchase 824,000 ordinary shares at an exercise price $0.50 per share, of which options to purchase 412,00 ordinary shares were granted during the 2004 fiscal year.
On July 28, 2004, we entered into a settlement agreement with P.N. Gerolymatos S.A., or P.N.G, under which we issued 1,350,000 of our ordinary shares to P.N.G., which are being held in escrow for 12 months, and made a payment of US$150,000 to it. Under the settlement agreement, we agreed to pay a sales royalty to P.N.G on the sales of PBT-1 in the United States and Japan, and we are entitled to receive a percentage of P.N.G.'s income on sales of PBT-1 in the other territories. See Item 8A., "Financial Information - Financial Statements and Other Financial Information - Legal Proceedings."
D. EXCHANGE CONTROLS
Australia has largely abolished exchange controls on investment transactions. The Australian dollar is freely convertible into U.S. dollars. In addition, there are currently no specific rules or limitations regarding the export from Australia of profits, dividends, capital, or similar funds belonging to foreign investors, except that certain payments to non-residents must be reported to the Australian Cash Transaction Reports Agency, which monitors such transactions, and amounts on account of potential Australian tax liabilities may be required to be withheld unless a relevant taxation treaty can be shown to apply.
The Foreign Acquisitions and Takeovers Act 1975
Under Australian law, foreign persons are prohibited from acquiring more than a limited percentage of the shares in an Australian company without approval from the Australian Treasurer or in certain other limited circumstances. These limitations are set forth in the Australian Foreign Acquisitions and Takeovers Act, or the Takeovers Act.
Under the Takeovers Act, as currently in effect, any foreign person, together with associates, is prohibited from acquiring 15% or more of our outstanding shares (or else the Treasurer may make an order requiring the acquirer to dispose of those shares within a specified period of time). In addition, if a foreign person acquires shares in our company and as a result the total holdings of all foreign persons and their associates exceeds 40% in aggregate without the approval of the Australian Treasurer, then the Treasurer may make an order requiring the acquirer to dispose of those shares within a specified time. Under the current Australian foreign investment policy, however, it is unlikely that the Treasurer would make such an order where the level of foreign ownership exceeds 40% in the ordinary course of trading, unless the Treasurer finds that the acquisition is contrary to the national interest. The same rule applies if the total holdings of all foreign persons and their associates already exceeds 40% and a foreign person (or its associate) acquires any further shares, including in the course of trading in the secondary market of the ADRs.
If the level of foreign ownership exceeds 40% at any time, we would be considered a foreign person under the Takeovers Act. In such event, we would be required to obtain the approval of the Treasurer for our company, together with our associates, to acquire (i) more than 15% of an Australian company or business with assets totaling over A$5 million; or (ii) any direct or indirect ownership interest in Australian residential real estate.
The percentage of foreign ownership in our company would also be included in determining the foreign ownership of any Australian company or business in which it may choose to invest. Since we have no current plans for any such acquisitions and do not own any property, any such approvals required to be obtained by us as a foreign person under the Takeovers Act will not affect our current or future ownership or lease of property in Australia.
Our Constitution does not contain any additional limitations on a non-resident's right to hold or vote our securities.
Australian law requires the transfer of shares in our company to be made in writing. No stamp duty will be payable in Australia on the transfer of ADRs.
E. TAXATION
Australian Tax Consequences
In this section we discuss the material Australian tax considerations that apply to non-Australian tax residents with respect to the acquisition, ownership and disposal by the absolute beneficial owners of ADSs, which are evidenced by ADRs. This discussion is based upon existing Australian tax law as of the date of this annual report, which is subject to change, possibly retrospectively. This discussion does not address all aspects of Australian income tax law which may be important to particular investors in light of their individual investment circumstances, such as ADSs or shares held by investors subject to special tax rules (for example, financial institutions, insurance companies or tax exempt organizations). In addition, this summary does not discuss any foreign or state tax considerations, other than stamp duty. Prospective investors are urged to consult their tax advisors regarding the Australian and foreign income and other tax considerations of the purchase, ownership and disposition of the ADSs or shares.
Nature of ADRs for Australian Taxation Purposes
ADSs held by a U.S. holder will be treated for Australian taxation purposes as held under a `bare trust' for such holder. Consequently, the underlying ordinary shares will be regarded as owned by the ADS holder for Australian income tax and capital gains tax purposes. Dividends paid on the underlying ordinary shares will also be treated as dividends paid to the ADS holder, as the person beneficially entitled to those dividends. Therefore, in the following analysis we discuss the tax consequences to non-Australian resident holders of ordinary shares which, for Australian taxation purposes, will be the same as to U.S. holders of ADSs.
Taxation of Dividends
Australia operates a dividend imputation system under which dividends may be declared to be `franked' to the extent of tax paid on company profits. Fully franked dividends are not subject to dividend withholding tax. Dividends payable by our company to non-Australian resident stockholders will be subject to dividend withholding tax, to the extent the dividends are unfranked. Dividend withholding tax will be imposed at 30%, unless a stockholder is a resident of a country with which Australia has a double taxation agreement. Under the provisions of the
current Double Taxation Convention between Australia and the United States, the Australian tax withheld on unfranked dividends paid by us to which a resident of the United States is beneficially entitled is generally limited to 15% if the U.S. resident holds less than 10% of the voting rights of our company, unless the shares are effectively connected to a permanent establishment or fixed base in Australia through which the stockholder carries on business or provides independent personal services, respectively. Where the U.S. resident holds 10% or more of the voting rights of our company, the withholding tax rate is reduced to 5%.
Tax on Sales or other Dispositions of Shares - Capital Gains Tax
Non-Australian resident stockholders will not be subject to Australian capital gains tax on the gain made on a sale or other disposal of our shares, unless they, together with associates, hold 10% or more of our issued capital at any time during the five years before the disposal of the shares.
If a non-Australian resident stockholder did own a 10% or more interest, that stockholder would be subject to Australian capital gains tax to the same extent as Australian resident stockholders. The Australian Taxation Office maintains the view that the Double Taxation Convention between the United States and Australia does not limit Australian capital gains tax. Australian capital gains tax applies to net capital gains at a taxpayer's marginal tax rate but for certain stockholders a discount of the capital gain may apply if the shares have been held for 12 months or more. For individuals, this discount is 50%. Net capital gains are calculated after reduction for capital losses, which may only be offset against capital gains.
Tax on Sales or other Dispositions of Shares - Stockholders Holding Shares on Revenue Account
Some non-Australian resident stockholders may hold shares on revenue rather than on capital account, for example, share traders. These stockholders may have the gains made on the sale or other disposal of the shares included in their assessable income under the ordinary income provisions of the income tax law, if the gains are sourced in Australia.
Non-Australian resident stockholders assessable under these ordinary income provisions in respect of gains made on shares held on revenue account would be assessed for such gains at the Australian tax rates for non-Australian residents, which start at a marginal rate of 29%. Some relief from the Australian income tax may be available to such non-Australian resident stockholders under the Double Taxation Convention between the United States and Australia, for example, because the stockholder does not have a permanent establishment in Australia.
To the extent an amount would be included in a non-Australian resident stockholder's assessable income under both the capital gains tax provisions and the ordinary income provisions, the capital gain amount would generally be reduced, so that the stockholder would not be subject to double tax on any part of the income gain or capital gain.
Dual Residency
If a stockholder were a resident of both Australia and the United States under those countries' domestic taxation laws, that stockholder may be subject to tax as an Australian resident. If, however, the stockholder is determined to be a U.S. resident for the purposes of the
Double Taxation Convention between the United States and Australia, the Australian tax would be subject to limitation by the Double Taxation Convention. Stockholders should obtain specialist taxation advice in these circumstances.
Stamp Duty
Any transfer of shares through trading on the Australian Stock Exchange, whether by Australian residents or foreign residents are not subject to stamp duty within Australia.
Australian Death Duty
Australia does not have estate or death duties. No capital gains tax liability is realized upon the inheritance of a deceased person's shares. The disposal of inherited shares by beneficiaries, may, however, give rise to a capital gains tax liability.
Goods and Services Tax
The issue or transfer of shares will not incur Australian goods and services tax and does not require a stockholder to register for Australian goods and services tax purposes.
United States Federal Income Tax Consequences
The following is a summary of certain material U.S. federal income tax consequences that generally apply to U.S. Holders who hold ADRs as capital assets. This summary is based on the United States Internal Revenue Code of 1986, as amended, or the Code, Treasury regulations promulgated thereunder, judicial and administrative interpretations thereof, the bilateral taxation convention between Australia and the United States, or the Tax Treaty, all as in effect on the date hereof and all of which are subject to change either prospectively or retroactively. This summary does not address all tax considerations that may be relevant with respect to an investment in ADRs. This summary does not discuss all the tax consequences that may be relevant to a U.S. Holder in light of such holder's particular circumstances or to U.S. Holders subject to special rules, including broker-dealers, financial institutions, certain insurance companies, investors liable for alternative minimum tax, tax-exempt organizations, regulated investment companies, non-resident aliens of the United States or taxpayers whose functional currency is not the U.S. dollar, persons who hold the ADRs through partnerships or other pass-through entities, persons who acquired their ADRs through the exercise or cancellation of any employee stock options or otherwise as compensation for their services, investors that actually or constructively own 10% or more of our voting shares, and investors holding ADRs as part of a straddle or appreciated financial position or as part of a hedging or conversion transaction.
This summary does not address the effect of any U.S. federal taxation other than U.S. federal income taxation. In addition, this summary does not include any discussion of state, local or foreign taxation.
You are urged to consult your tax advisors regarding the foreign and U.S. federal, state and local tax considerations of an investment in ADRs.
For purposes of this summary, the term "U.S. Holder" means an individual who is a citizen or, for U.S. federal income tax purposes, a resident of the United States, a corporation or other entity taxable as a corporation created or organized in or under the laws of the United States or any political subdivision thereof, an estate whose income is subject to U.S. federal income tax regardless of its source, or a trust if (a) a court within the United States is able to exercise primary supervision over administration of the trust, and one or more U.S. persons have the authority to control all substantial decisions of the trust or (b) it has a valid election in effect under applicable U.S. Treasury regulations to be treated as a U.S. person.
Taxation of Dividends
For U.S. federal income tax purposes, U.S. Holders of ADRs will be treated as owning the underlying ordinary shares, or ADSs, represented by the ADRs held by them. The gross amount of any distributions received with respect to the underlying ordinary shares represented by the ADRs, including the amount of any Australian taxes withheld there from, will constitute dividends for U.S. federal income tax purposes, to the extent of our current and accumulated earnings and profits as determined for U.S. federal income tax principles. You will be required to include this amount of dividends in gross income as ordinary income (see "Tax Law Applicable to Dividends and Long-Term Capital Gain" below). Distributions in excess of our earnings and profits will be treated as a non-taxable return of capital to the extent of your tax basis in the ADRs, and any amount in excess of your tax basis will be treated as gain from the sale of ADRs. See "Disposition of ADRs" below for the discussion on the taxation of capital gains. Dividends will not qualify for the dividends-received deduction generally available to corporations under Section 243 of the Code.
Dividends that we pay, including the amount of any Australian taxes withheld there from, will be included in your income in a U.S. dollar amount calculated by reference to the exchange rate in effect on the day such dividends are received. A U.S. Holder who receives payment in A$ and converts A$ into U.S. dollars at an exchange rate other than the rate in effect on such day may have a foreign currency exchange gain or loss that would be treated as ordinary income or loss. U.S. Holders should consult their own tax advisors concerning the U.S. tax consequences of acquiring, holding and disposing of our ADRs.
Any Australian withholding tax imposed on such dividends will be a foreign income tax eligible for credit against a U.S. Holder's U.S. federal income tax liability, subject to certain limitations set out in the Code (or, alternatively, for deduction against income in determining such tax liability). The limitations set out in the Code include computational rules under which foreign tax credits allowable with respect to specific classes of income cannot exceed the U.S. federal income taxes otherwise payable with respect to each such class of income (see "Tax Law Applicable to Dividends and Long-Term Capital Gain" below). Dividends generally will be treated as foreign-source passive income or financial services income for U.S. foreign tax credit purposes. Foreign income taxes exceeding the credit limitation for the year of payment or accrual may be carried back for two taxable years and forward for five taxable years in order to reduce U.S. federal income taxes, subject to the credit limitation applicable in each of such years. Other restrictions on the foreign tax credit include a prohibition on the use of the credit to reduce liability for the U.S. individual and corporation alternative minimum taxes by more than 90%. A U.S. Holder will be denied a foreign tax credit with respect to Australian income tax withheld
from dividends received with respect to the underlying ordinary shares represented by the ADRs to the extent such U.S. Holder has not held the ADRs for at least 16 days of the 30-day period beginning on the date which is 15 days before the ex-dividend date or to the extent such U.S. Holder is under an obligation to make related payments with respect to substantially similar or related property. Any days during which a U.S. Holder has substantially diminished its risk of loss on the ADRs are not counted toward meeting the 16-day holding period required by the statute. The rules relating to the determination of the foreign tax credit are complex, and you should consult with your personal tax advisors to determine whether and to what extent you would be entitled to this credit.
Disposition of ADRs
If you sell or otherwise dispose of ADRs, you will recognize gain or loss for U.S. federal income tax purposes in an amount equal to the difference between the amount realized on the sale or other disposition and your adjusted tax basis in the ADRs. Subject to the discussion below under the heading "Passive Foreign Investment Companies," such gain or loss generally will be capital gain or loss and will be long-term capital gain or loss if you have held the ADRs for more than one year at the time of the sale or other disposition. In general, any gain that you recognize on the sale or other disposition of ADRs will be U.S.-source for purposes of the foreign tax credit limitation; losses will generally be allocated against U.S. source income. Deduction of capital losses is subject to certain limitations under the Code.
In the case of a cash basis U.S. Holder who receives A$ in connection with the sale or disposition of ADRs, the amount realized will be based on the U.S. dollar value of the A$ received with respect to the ADRs as determined on the settlement date of such exchange. A U.S. Holder who receives payment in A$ and converts A$ into U.S. dollars at a conversion rate other than the rate in effect on the settlement date may have a foreign currency exchange gain or loss that would be treated as ordinary income or loss.
An accrual basis U.S. Holder may elect the same treatment required of cash basis taxpayers with respect to a sale or disposition of ADRs, provided that the election is applied consistently from year to year. Such election may not be changed without the consent of the Internal Revenue Service, or the IRS. In the event that an accrual basis U.S. Holder does not elect to be treated as a cash basis taxpayer (pursuant to the Treasury regulations applicable to foreign currency transactions), such U.S. Holder may have a foreign currency gain or loss for U.S. federal income tax purposes because of differences between the U.S. dollar value of the currency received prevailing on the trade date and the settlement date. Any such currency gain or loss would be treated as ordinary income or loss and would be in addition to gain or loss, if any, recognized by such U.S. Holder on the sale or disposition of such ADRs.
Tax Law Applicable to Dividends and Long-Term Capital Gain
Dividends received by noncorporate U.S. Holders from certain foreign corporations, and long-term capital gain realized by noncorporate U.S. Holders, generally are subject to U.S. federal income tax at a reduced maximum tax rate of 15 percent through December 31, 2008. Dividends received with respect to the underlying ordinary shares represented by the ADRs should qualify for the 15 percent rate. The rate reduction does not apply to dividends received
from "foreign investment companies," "foreign personal holding company" or "passive foreign investment companies" (see below), or in respect of certain short-term or hedged positions in the ordinary shares or in certain other situations. There are special rules for computing the foreign tax credit limitation of a taxpayer who receives dividends subject to the rate reduction. U.S. Holders of ADRs should consult their own tax advisors regarding the implications of these rules in light of their particular circumstances.
Passive Foreign Investment Companies
For U.S. federal income tax purposes, we will be considered a passive foreign investment company, or PFIC, for any taxable year in which either (i) 75 percent or more of our gross income is passive income, or (ii) at least 50 percent of the average value of all of our assets for the taxable year produce or are held for the production of passive income. For this purpose, passive income includes dividends, interest, royalties, rents, annuities and the excess of gains over losses from the disposition of assets which produce passive income. If we were determined to be a PFIC for U.S. federal income tax purposes, highly complex rules would apply to U.S. Holders owning ADRs. Accordingly, you are urged to consult your tax advisors regarding the application of such rules.
Based on our current and projected income, assets and activities, we believe that we are not currently a PFIC nor do we expect to become a PFIC in the foreseeable future. However, because the determination of whether we are a PFIC is based upon the composition of our income and assets from time to time, there can be no assurances that we will not become a PFIC for any future taxable year.
If we are treated as a PFIC for any taxable year, then, unless you elect either to treat your investment in ADRs as an investment in a "qualified electing fund", OR a "QEF election", or to "mark-to-market" your ADRs, as described below, dividends would not qualify for the reduced maximum tax rate, discussed above, and:
o you would be required to allocate income recognized upon receiving certain dividends or gain recognized upon the disposition of ADRs ratably over the holding period for such ADRs,
o the amount allocated to each year during which we are considered a PFIC other than the year of the dividend payment or disposition would be subject to tax at the highest individual or corporate tax rate, as the case may be, in effect for that year and an interest charge would be imposed with respect to the resulting tax liability allocated to each such year,
o the amount allocated to the current taxable year and any taxable year before we became a PFIC, would be taxable as ordinary income in the current year, and
o you would be required to make an annual return on IRS Form 8621 regarding distributions received with respect to the underlying ordinary shares represented by the ADRs and any gain realized on your ADRs.
If you make either a timely QEF election or a timely mark-to-market election in respect of your ADRs, you would not be subject to the rules described above. If you make a timely QEF election, you would be required to include in your income for each taxable year your pro rata share of our ordinary earnings as ordinary income and your pro rata share of our net capital gain as long-term capital gain, whether or not such amounts are actually distributed to you. You would not be eligible to make a QEF election unless we comply with certain applicable information reporting requirements.
Alternatively, if the ADRs are considered "marketable stock" and if you elect to "mark-to-market" your ADRs, you will generally include in income any excess of the fair market value of the ADRs at the close of each tax year over your adjusted basis in the ADRs. If the fair market value of the ADRs had depreciated below your adjusted basis at the close of the tax year, you may generally deduct the excess of the adjusted basis of the ADRs over its fair market value at that time. However, such deductions generally would be limited to the net mark-to-market gains, if any, that you included in income with respect to such ADRs in prior years. Income recognized and deductions allowed under the mark-to-market provisions, as well as any gain or loss on the disposition of ADRs with respect to which the mark-to-market election is made, is treated as ordinary income or loss.
Backup Withholding and Information Reporting
Payments in respect of ADRs may be subject to information reporting to the U.S. Internal Revenue Service and to U.S. backup withholding tax at a rate equal to the fourth lowest income tax rate applicable to individuals (which, under current law, is 28%). Backup withholding will not apply, however, if you (i) are a corporation or come within certain exempt categories, and demonstrate the fact when so required, or (ii) furnish a correct taxpayer identification number and make any other required certification.
Backup withholding is not an additional tax. Amounts withheld under the backup withholding rules may be credited against a U.S. Holder's U.S. tax liability, and a U.S. Holder may obtain a refund of any excess amounts withheld under the backup withholding rules by filing the appropriate claim for refund with the IRS.
Any U.S. holder who holds 10% or more in vote or value of our ordinary shares will be subject to certain additional U.S. information reporting requirements.
U.S. Gift and Estate Tax
An individual U.S. Holder of ADRs will be subject to U.S. gift and estate taxes with respect to ADRs in the same manner and to the same extent as with respect to other types of personal property.
F. DIVIDEND AND PAYING AGENTS
Not applicable.
G. STATEMENT BY EXPERTS
Not applicable.
H. DOCUMENTS ON DISPLAY
We are subject to the reporting requirements of the United States Securities Exchange Act of 1934, as amended, as applicable to "foreign private issuers" as defined in Rule 3b-4 under the Exchange Act, and in accordance therewith, we are required to file annual and interim reports and other information with the Securities and Exchange Commission.
As a foreign private issuer, we are exempt from certain provisions of the
Exchange Act. Accordingly, our proxy solicitations are not subject to the
disclosure and procedural requirements of Regulation 14A under the Exchange Act,
transactions in our equity securities by our officers and directors are exempt
from reporting and the "short-swing" profit recovery provisions contained in
Section 16 of the Exchange Act. We make our Securities and Exchange Commission
filings electronically and they are available on the Securities and Exchange
Commission's website. We are not required under the Exchange Act to file
periodic reports and financial statements as frequently or as promptly as U.S.
companies whose securities are registered under the Exchange Act. However, we
will distribute annually to our shareholders an annual report containing
financial statements that have been examined and reported on, with an opinion
expressed by, an independent public accounting firm, and we will file reports
with the Securities and Exchange Commission on Form 6-K containing unaudited
financial information for the first six months of each fiscal year.
This annual report and the exhibits thereto and any other document that we have to file pursuant to the Exchange Act may be inspected without charge and copied at prescribed rates at the Securities and Exchange Commission public reference room at 450 Fifth Street, N.W., Judiciary Plaza, Room 1024, Washington, D.C. 20549; and on the Securities and Exchange Commission Internet site (http://www.sec.gov). You may obtain information on the operation of the Securities and Exchange Commission's public reference room in Washington, D.C. by calling the Securities and Exchange Commission at 1-800-SEC-0330 or by visiting the Securities and Exchange Commission's website at http://www.sec.gov. The Exchange Act file number for our Securities and Exchange Commission filings is 000-49843.
The documents concerning our company which are referred to in this annual report may also be inspected at our offices located at Suite 2, 1233 High Street, Armadale, Victoria, Australia, 3133.
I. SUBSIDIARY INFORMATION
Not applicable.
ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISKS
We invest our excess cash in interest-bearing accounts and time deposits with government-insured institutions. Certain of our cash equivalents are subject to interest rate risk. Due to the short duration and conservative nature of these instruments, we do not believe that we have a material exposure to interest rate risk. Our major market risk is changes in foreign exchange rates as we have approximately A$26.7 million in time deposits held in U.S. dollars as of June 30, 2004. A hypothetical 10% adverse movement in end-of-period exchange rates would reduce the cash balance by approximately A$2.7 million. We are currently reviewing our cash balances in order to reduce foreign currency exchange risk. We do not utilize derivative financial instruments or other financial instruments subject to market risk.
We conduct our activities almost exclusively in Australia. However, we are required to make certain payments in U.S. dollars and other currencies. A hypothetical 10% adverse movement in end-of-period exchange rates would not have a material impact on future earnings.
ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
Not applicable.
PART II
ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
Not applicable.
ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
Not applicable
ITEM 15. CONTROLS AND PROCEDURES
At June 30, 2004, we carried out an evaluation, under the supervision and with the participation of our senior management, including our chief executive officer and chief financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rule 13(a)-14 of the Securities Exchange Act of 1934. Based upon that evaluation, our management, including our chief executive officer and chief financial officer, concluded that our company's disclosure controls and procedures are effective in timely alerting them to material information relating to us required to be included in the our periodic SEC filings.
There have been no significant changes in our internal controls or other factors which could significantly affect internal controls subsequent to the date of the evaluation.
It should be noted that any system of controls, however well designed and operated, can provide only reasonable, and not absolute, assurance that the objectives of the system are met. In addition, the design of any control system is based in part upon certain assumptions about the likelihood of future events. Because of these and other inherent limitations of control systems, there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.
ITEM 16. RESERVED
ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT
Our Board of Directors has determined that Mr. Brian Meltzer, an independent director, meets the definition of an audit committee financial expert, as defined in Item 401(h) of Regulation S-K.
ITEM 16B. CODE OF ETHICS
We have adopted a code of ethics that applies to our chief executive officer and all senior financial officers of our company, including the chief financial officer, chief accounting officer or controller, or persons performing similar functions. The code of ethics is publicly available on our website at www.pranabio.com. Written copies are available upon request. If we make any substantive amendment to the code of ethics or grant any waivers, including any implicit waiver, from a provision of the codes of ethics, we will disclose the nature of such amendment or waiver on our website.
ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Fees Paid to Principal Accountants
Aggregate fees billed to us for the fiscal years ended June 30, 2004 and 2003 by our principal accounting firm, Deloitte Touche Tohmatsu, the other member firms of Deloitte Touche Tohmatsu and their respective affiliates, were as follows.
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Year Ended June 30,
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2004 2003
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Services Rendered Fees Percentages Fees Percentages
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Audit (1)................. A$129,522 66% A$126,178 80%
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Audit-related (2)......... -- -- -- --
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Tax (3)................... A$ 59,580 30% A$ 23,400 15%
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Other (4)................. A$ 6,900 4% A$ 7,400 5%
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Total .................... A$196,002 A$156,978
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(2) Audit-related fees relate to assurance and associated services that
traditionally are performed by the independent accountant, including:
attest services that are not required by statute or regulation; accounting
consultation and audits in connection with mergers, acquisitions and
divestitures; employee benefit plans audits; and consultation concerning
financial accounting and reporting standards.
(3) Tax fees relate to services performed by the tax division for tax compliance, planning, and advice.
(4) Other fees relate to services performed in respect of the audit of grants.
Pre-Approval Policies and Procedures
Our Audit Committee has adopted policies and procedures for the pre-approval of audit and non-audit services rendered by our independent registered public accounting firm, Deloitte Touche Tohmatsu. Pre-approval of an audit or non-audit service may be given as a general pre-approval, as part of the audit committee's approval of the scope of the engagement of our independent registered public accounting firm, or on an individual basis. Any proposed services exceeding general pre-approved levels also requires specific pre-approval by our audit committee. The policy prohibits retention of the independent registered public accounting firm to perform the prohibited non-audit functions defined in Section 201 of the Sarbanes-Oxley Act or the rules of the Securities and Exchange Commission, and also requires the audit committee to consider whether proposed services are compatible with the independence of the registered public accounting firm.
ITEM 16D. EXEMPTIONS FROM THE LISTING REQUIREMENTS AND STANDARDS FOR AUDIT COMMITTEE
Not applicable.
ITEM 16E. PURCHASE OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATES AND PURCHASERS
Issuer Purchase of Equity Securities
Neither we, nor any affiliated purchaser of our company, have purchased any of our securities during the year ended June 30, 2004.
Item 17. FINANCIAL STATEMENTS
Page
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Index to Financial Statements................................... F-0
Report of Independent Registered Public Accounting Firm......... F-1
Statements of Financial Position................................ F-2
Statements of Financial Performance............................. F-3
Statements of Cash Flows........................................ F-4
Statements of Changes in Stockholders' Equity................... F-5
Notes to Financial Statements................................... F-7
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ITEM 18. FINANCIAL STATEMENTS
Our company has elected to furnish financial statements and related information specified in Item 17.
ITEM 19. EXHIBITS
Index to Exhibits
Exhibit Description
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1.1 Constitution of Registrant (1)
2.1 Deposit Agreement dated March 23, 2001, among the Registrant
and the Bank of New York, as Depositary, and owners and
holders of American Depositary Receipts issued thereunder,
including the Form of American Depositary Receipts (2)
4.1 Research Funding and Intellectual Property Assignment
Agreement dated December 1, 2000, between the Registrant and
the University of Melbourne(1)
4.2 Agreement for the Assignment of Patents and Intellectual
Property Licensing dated May 7, 1999, between the Registrant
and the University of Melbourne University of Melbourne
University of Melbourne (1)
4.3 Agreement for the Assignment of Patents and Intellectual
Property Licensing dated February 8, 2000, between
Registrant and the Biomolecular Research Institute (1)
4.4 License Agreement dated January 1, 2001, between the
Registrant and The General Hospital Corporation (1)
4.5 Variation Agreement dated August 8, 2001, between the
Registrant and The General Hospital Corporation, which
amends the License Agreement dated January 1, 2001, between
the parties (1)
4.6 Second Amendment to Exclusive License Agreement dated
January 1, 2001, between the Registrant and The General
Hospital Corporation, dated March 15, 2004, between the
between the Registrant and The General Hospital Corporation
4.7 Agreement for Services dated February 7, 2000, between the
Registrant and Prof. Colin Masters (1)
4.8 Agreement to Provide Accounting, Administration, Corporate
Advice and Company Secretarial Services dated February 23,
2000, between the Registrant and Malvern Administrative
Services (1)
4.9 Form of Indemnity for Clinical Trials dated September 2000,
between the Registrant and Melbourne Health (Royal Melbourne
Hospital Campus), Royal Melbourne Hospital Research
Foundation Incorporated, University of Melbourne, Mental
Health Research Institute of Victoria (1)
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4.10 Commitment dated November 7, 2001, between the Registrant
and University of Melbourne (1)
4.11 Grant Deed agreement dated August 25, 2003, commencing
August 1, 2003, between the Registrant and the Industry
Research and Development Board on behalf of the Commonwealth
of Australia
4.12 Grant Agreement, commencing September 1, 2003, between the
Registrant and the Industry Research and Development Board
on behalf of the Commonwealth of Australia
4.13 Letter agreement dated January 6, 2004, between the
Registrant and Kendle Pty Ltd. regarding strategic alliance.
4.14 Project Agreement dated March 11, 2004, between the
Registrant and Neurosciences Victoria Ltd.
4.15 Project Agreement dated March 11, 2004, between the
Registrant and Neurosciences Victoria Ltd.
4.16 Project Agreement dated March 11, 2004, between the
Registrant and Neurosciences Victoria Ltd.
4.17 Purchase Agreement dated April 27, 2004, among the
Registrant and the investors signatory thereto (3)
4.18 Registration Rights Agreement dated April 27, 2004, among
the Registrant and the investors signatory thereto (4)
4.19 Form of Warrant (5)
4.20 Employment Agreement dated July 1, 2004, among the
Registrant and Dr. Alsenas
4.21 Settlement Agreement dated July 28, 2004, among the
Registrant, P.N. Gerolymatos S.A, or PNG, Mr. Gerolymatos,
The General Hospital Corporation of Massachusetts, or The
GHC, Professor Ashley Bush, Dr. Rudolph Tanzi and Dr. Robert
Cherny and the ancillary agreements of even date therewith
exhibited thereto, including the Patent Assignment and
Settlement Agreement among the Registrant and PNG, Patent
Rights Security Agreement among the Registrant and PNG and
the Derivatives Agreement among the Registrant and PNG
4.22 Prana Biotechnology Limited, Employees and Consultants
Option Plan 2000 (1)
23.1 Consent of Deloitte Touche Tohmatsu, Independent Registered
Public Accounting Firm.
31.1 Certification of Chief Executive Officer pursuant to Rule
13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act,
as amended
31.2 Certification of Chief Financial Officer pursuant to Rule
13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act,
as amended
32.1 Certification of Chief Executive Officer pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002
|
32.2 Certification of Chief Financial Officer pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002
----------
(1) Incorporated by reference to our Registration Statement on
Form 20-F filed with the Securities and Exchange Commission
on May 28, 2002 (File No. 000-49843).
(2) Incorporated by reference to our Registration Statement on
Form F-6 filed with the Securities and Exchange Commission
on March 9, 2001 (File No. 333-13264).
(3) Incorporated by reference to Item 1 of our Report on Form
6-K for the month of April, 2004 (File No. 000-49843).
(4) Incorporated by reference to Item 2 of our Report on Form
6-K for the month of April, 2004 (File No. 000-49843).
(5) Incorporated by reference to Item 3 of our Report on Form
6-K for the month of April, 2004 (File No. 000-49843).
|
PRANA BIOTECHNOLOGY LIMITED
INDEX TO FINANCIAL STATEMENTS
Page Number
Report of Independent Registered Public Accounting Firm F-1
Statements of Financial Position F-2
Statements of Financial Performance F-3
Statements of Cash Flows F-4
Statements of Changes in Stockholders' Equity F-5
Notes to Financial Statements F-7
|
F-0
PRANA BIOTECHNOLOGY LIMITED
(A Development Stage Enterprise)
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
Prana Biotechnology Limited
We have audited the accompanying statements of financial position of Prana Biotechnology Limited (a development stage enterprise) (the "Company") as of 30 June 2004 and 2003, and the related statements of financial performance, stockholders' equity and cash flows for each of the three years in the period ended 30 June 2004 and for the period from 11 November 1997 (date of inception) to 30 June 2004. 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 conducted our audits in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material respects, the financial position of Prana Biotechnology Limited as of 30 June 2004 and 2003, and the results of its operations and its cash flows for each of the three years in the period ended 30 June 2004 and for the period from 11 November 1997 (date of inception) to 30 June 2004, in conformity with accounting principles generally accepted in Australia.
Accounting principles generally accepted in Australia differ in certain significant respects from accounting principles generally accepted in the United States of America. The application of the latter would have affected the determination of net loss for each of the three years in the period ended 30 June 2004 and the determination of total equity as of 30 June 2004 and 2003, to the extent summarized in Note 25 to the financial statements.
/s/ Deloitte Touche Tohmatsu DELOITTE TOUCHE TOHMATSU Chartered Accounants Melbourne, Victoria, Australia 13 September, 2004 except for Notes 11(f), 17 and 25 as to which the date is 24 September, 2004 |
PRANA BIOTECHNOLOGY LIMITED
(A Development Stage Enterprise)
STATEMENTS OF FINANCIAL POSITION
(in Australian dollars)
30 June
--------------------------------
Notes 2004 2003
----------- -----------
Current assets
Cash assets 29,580,398 3,463,783
Receivables 5 92,917 143,823
Other 6 72,769 52,362
----------- -----------
Total Current Assets 29,746,084 3,659,968
----------- -----------
Non Current Assets
Equipment 7 180,971 141,611
Intangible assets 8 11,488,343 12,588,347
----------- -----------
Total Non Current Assets 11,669,314 12,729,958
----------- -----------
Total Assets 41,415,398 16,389,926
----------- -----------
Current Liabilities
Payables 9 2,661,950 541,217
Provisions 10 42,597 23,831
----------- -----------
Total Current Liabilities 2,704,547 565,048
----------- -----------
Non-Current Liabilities
Provisions 10 8,292 1,175
----------- -----------
Total Non-Current Liabilities 8,292 1,175
----------- -----------
Total Liabilities 2,712,839 566,223
----------- -----------
Net Assets 38,702,559 15,823,703
=========== ===========
Equity
Contributed equity 11 49,505,493 16,741,023
Reserve 12 14,661,942 14,661,942
Accumulated deficit during the development stage 12 (25,464,876) (15,579,262)
----------- -----------
Total Equity 38,702,559 15,823,703
=========== ===========
|
See notes to the financial statements.
PRANA BIOTECHNOLOGY LIMITED
(A Development Stage Enterprise)
STATEMENTS OF FINANCIAL PERFORMANCE
(in Australian dollars)
Period from
Years ended 30 June Inception (11
---------------------------------------------- November
1997) to 30
2004 2003 2002 June 2004
----------- ----------- ----------- -------------
Notes
Revenue from ordinary activities 2 2,321,227 1,816,478 793,970 5,526,615
Depreciation and amortization
expense 3 (1,195,006) (1,185,973) (1,160,595) (5,337,209)
Patents, research and development
expense 3 (5,232,581) (1,861,295) (2,498,486) (12,390,699)
Legal expense (1,650,467) (848,660) (923,816) (3,688,700)
Employee benefits expense (1,060,730) (760,980) (378,853) (2,246,528)
Consulting fee expense (1,706,809) (567,730) (604,873) (3,365,940)
Corporate compliance expense (419,708) (395,604) (339,383) (1,427,323)
Other expenses from ordinary
activities (941,540) (781,074) (336,431) (2,535,092)
----------- ----------- ----------- -----------
Loss from ordinary activities
before income tax expense (9,885,614) (4,584,838) (5,448,467) (25,464,876)
Income tax expense relating to
ordinary activities 4 -- -- -- --
----------- ----------- ----------- -----------
Net loss 12(b) (9,885,614) (4,584,838) (5,448,467) (25,464,876)
=========== =========== =========== ===========
Loss per share (basic and diluted) 18 (0.13) (0.08) (0.10) N/a
=========== =========== =========== ===========
|
See notes to the financial statements.
PRANA BIOTECHNOLOGY LIMITED
(A Development Stage Enterprise)
STATEMENTS OF CASH FLOWS
(in Australian dollars)
Period from
Years Ended 30 June Inception (11
-------------------------------------------- November
1997) to 30
2004 2003 2002 June 2004
----------- ----------- ----------- -------------
Notes
Cash Flows from
Operating Activities
Payments to suppliers and employees (7,896,711) (5,271,577) (4,885,444) (21,678,446)
Interest received 176,845 106,835 242,215 857,830
Government grant received 909,946 836,575 843,714 2,590,235
Nasdaq reimbursements received -- 231,304 -- 231,304
Neuroscience Victoria monies received 1,462,500 506,250 -- 1,968,750
----------- ----------- ----------- -----------
Net cash flows used in
operating activities 13(a) (5,347,420) (3,590,613) (3,799,515) (16,030,327)
----------- ----------- ----------- -----------
Cash Flows from Investing Activities
Payments for purchase of equipment (134,362) (87,929) (50,689) (306,523)
----------- ----------- ----------- -----------
Net cash flows used in
investing activities (134,362) (87,929) (50,689) (306,523)
----------- ----------- ----------- -----------
Cash Flows from Financing Activities
Proceeds from issue of shares 33,853,606 -- -- 46,854,565
Payment of share issue costs (2,834,941) -- -- (3,618,478)
Proceeds from exercise of options 762,500 3,713,792 580,345 5,059,138
Payment of underwriting costs -- (144,000) -- (144,000)
Repayment of borrowings -- -- -- (2,038,728)
----------- ----------- ----------- -----------
Net cash flows from
financing activities 31,781,165 3,569,792 580,345 46,112,497
----------- ----------- ----------- -----------
Net increase/(decrease) in
cash held 26,299,383 (108,750) (3,269,859) 29,775,647
Opening cash brought forward 3,463,783 3,585,014 6,854,873 --
Exchange rate adjustments on the balance of cash
held in foreign currencies (182,768) (12,481) -- (195,249)
----------- ----------- ----------- -----------
Closing cash carried forward 13(b) 29,580,398 3,463,783 3,585,014 29,580,398
=========== =========== =========== ===========
|
See notes to the financial statements.
PRANA BIOTECHNOLOGY LIMITED
(A Development Stage Enterprise)
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(in Australian dollars)
Accumulated
Deficit During Asset
Number of Contributed Development Revaluation
Shares Equity Stage Reserve Total
----------- ----------- -------------- ----------- -----------
Balance, 11 November 1997
(Inception) -- -- -- -- --
Net loss -- -- (690) -- (690)
Issuance of shares to founders 20 20 -- -- 20
----------- ----------- ----------- ----------- -----------
Balance, 30 June 1998 20 20 (690) -- (670)
Net loss -- -- (80,000) -- (80,000)
----------- ----------- ----------- ----------- -----------
Balance, 30 June 1999 20 20 (80,690) -- (80,670)
Net loss -- -- (1,326,288) -- (1,326,288)
Revaluation of intangible assets
to directors' valuation -- -- -- 14,661,942 14,661,942
297 for 1 share split 5,920 -- -- -- --
Issuance of shares in
connection with private
placement 960 960 -- -- 960
5,000 for 1 share split 34,493,100 -- -- -- --
Issuance of shares in
connection with initial public
offering, net of issue costs 16,000,000 7,470,863 -- -- 7,470,863
Issuance of shares in
connection with exercise of
options 5,000 2,500 -- -- 2,500
----------- ----------- ----------- ----------- -----------
Balance, 30 June 2000 50,505,000 7,474,343 (1,406,978) 14,661,942 20,729,307
Net loss -- -- (4,138,979) -- (4,138,979)
Issuance of shares in
connection with private
placements, net of issue costs 6,666,666 4,745,599 -- -- 4,745,599
Compensation expense
attributable to issuance of
shares to consultants 88,600 48,950 -- -- 48,950
Compensation expense
attributable to issuance of
options to consultants -- 8,000 -- -- 8,000
----------- ----------- ----------- ----------- -----------
Balance, 30 June 2001 57,260,266 12,276,892 (5,545,957) 14,661,942 21,392,877
Net loss -- -- (5,448,467) -- (5,448,467)
Issuance of shares in
connection with exercise of
options 1,160,690 580,346 -- -- 580,346
Compensation expense
attributable to issuance of
shares to consultants 191,794 144,230 -- -- 144,230
----------- ----------- ----------- ----------- -----------
Balance, 30 June 2002 58,612,750 13,001,468 (10,994,424) 14,661,942 16,668,986
|
PRANA BIOTECHNOLOGY LIMITED
(A Development Stage Enterprise)
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY continued
(in Australian dollars)
Accumulated
Deficit
During Asset
Number of Contributed Development Revaluation
Shares Equity Stage Reserve Total
----------- ----------- ----------- ----------- -----------
Net loss -- -- (4,584,838) -- (4,584,838)
Issuance of shares in
connection with exercise of
options, net of underwriting
costs 7,427,584 3,569,792 -- -- 3,569,792
Compensation expense
attributable to issuance of
shares to consultants 146,969 169,763 -- -- 169,763
----------- ----------- ----------- ----------- -----------
Balance, 30 June 2003 66,187,303 16,741,023 (15,579,262) 14,661,942 15,823,703
Net loss -- -- (9,885,614) -- (9,885,614)
Issuance of shares in
connection with private
placements, net of issue costs 47,102,853 31,018,665 -- -- 31,018,665
Issuance of shares in
connection with exercise of
options 1,325,000 762,500 -- -- 762,500
Compensation expense
attributable to issuance of
shares to consultants and
directors 1,369,224 983,305 -- -- 983,305
----------- ----------- ----------- ----------- -----------
Balance, 30 June 2004 115,984,380 49,505,493 (25,464,876) 14,661,942 38,702,559
=========== =========== =========== =========== ===========
|
See notes to the financial statements.
PRANA BIOTECHNOLOGY LIMITED
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS - in Australian dollars (unless otherwise noted)
1 BACKGROUND AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Background
Prana Biotechnology Limited ("Prana" or the "Company") was incorporated on 11 November 1997 in Melbourne, Australia and is a development stage enterprise engaged in the research and development of therapeutic drugs designed to treat the underlying cause of degeneration of the brain and the eye as the aging process progresses.
On 28 March 2000, the Company completed its initial public offering in Australia and listed on the Australian Stock Exchange. In September 2002, the Company's shares were approved for listing on the Nasdaq SmallCap Market (Code: PRAN).
Financial Reporting Framework
The financial report is a general purpose financial report which has been prepared in accordance with the requirements of the Corporations Act 2001, Accounting Standards and Urgent Issues Group Consensus Views and complies with other requirements of the law.
The financial report has been prepared on the basis of historical cost and except where stated, does not take into account changing money values or current valuations of non-current assets. Cost is based on the fair values of the consideration given in exchange for assets.
Development Stage - Risks and uncertainties
As a development stage enterprise, the Company's prospects are subject to the risks, expenses and uncertainties frequently encountered by companies, which have not yet commercialized any applications of their technology, particularly in new and evolving markets. Prana's operating results may fluctuate significantly in the future as a result of a variety of factors, including capital expenditure and other costs relating to establishing, maintaining and expanding the operations, the number and mix of potential customers, potential pricing of future products by the Company and its competitors, new technology introduced by the Company and its competitors, delays or expense in obtaining necessary equipment, economic and social conditions in the biotechnology industry and general economic conditions.
Prana will continue to review the need to seek additional funding through public and private financing and/or through collaboration or other arrangements with corporate partners. The Company cannot be certain that they will be able to raise any required funding or capital, on favorable terms or at all, or that they will be able to establish corporate collaborations on acceptable terms, if at all. If the Company is unable to obtain such additional funding or capital, they may be required to reduce the scope of their development plans.
Prana's experience in exploiting their technology is limited. The Company cannot be certain that their operations will be profitable in the short-term, or at all. If Prana fails in any of their efforts to establish or expand their business, the results of operations, financial condition and liquidity of the Company could be materially adversely affected. The Company cannot be certain that they will be able to obtain or retain any permits required by the Company to market, sell and deliver its technology. Any of these factors could result in the cessation of Prana's operations.
Significant Accounting Policies
Accounting policies are selected and applied in a manner which ensures that the resulting financial information satisfies the concepts of relevance and reliability, thereby ensuring that the substance of the underlying transactions or other events is reported.
The following significant accounting policies have been adopted in the preparation and presentation of the financial report:
PRANA BIOTECHNOLOGY LIMITED
(A Development Stage Enterprise)
1 BACKGROUND AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued
(a) Cash and cash equivalents
For the purposes of the Statement of Cash Flows, cash includes cash on hand and in banks and money market investments readily convertible to cash.
(b) Recoverable amount of non-current assets
Each reporting period, the directors assess the recoverable amount of all non-current assets. Where the carrying amount of a non-current asset is greater than its recoverable amount, the asset is revalued down to its recoverable amount. The recoverable amount is estimated based on expected net cash flows discounted to their present values using a market-determined, risk-adjusted discounted rate.
(c) Equipment
Equipment consists of computer, laboratory equipment and costs associated with the fitout of our premises at Parkville and is recorded at cost. Depreciation is provided on a straight-line basis over the estimated useful lives of three to 14 years.
(d) Intangible assets and research and development expense
Until December 1999, costs associated with the acquisition and development of the Company's core intellectual property were capitalized as intangible assets. After considering an independent valuation of the Company's core intellectual property at December 1999, the directors revalued the assets upwards by $14,661,942 to $16,500,000. The revaluation was recorded in the asset revaluation reserve in equity. Subsequent to the revaluation, all costs associated with the acquisition and development of core intellectual property are charged to patents, research and development expense.
Core intellectual property is being amortised on a straight-line basis over a period of 15 years, being the period in which the future benefits are expected to arise. The directors regularly review the carrying value of core intellectual property to ensure its carrying value does not exceed its recoverable amount.
In accordance with Australian Accounting Standard AASB 1041: Revaluation of Non-Current Assets ("AASB 1041"), on 1 July 2000 the directors deemed the revalued carrying amount of core intellectual property to be cost for financial reporting purposes.
(e) Payables
Liabilities for trade creditors and other amounts are carried at cost, which is the fair value of the consideration to be paid in the future for goods and services received, whether or not billed to the Company.
Payables to related parties are carried at the principal amount.
(f) Share capital
Ordinary share capital is recognized at the fair value of the consideration received by the Company, as determined by the directors.
PRANA BIOTECHNOLOGY LIMITED
(A Development Stage Enterprise)
1 BACKGROUND AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued
(g) Revenue recognition
Revenue is recognized to the extent that it is probable that the economic benefits will flow to the entity and the revenue can be reliably measured.
Interest
Interest income is recognized as earned and collectibility is reasonably assured.
Government grants
Government grants are recorded as income when key milestones set within each
agreement are achieved and accepted by all parties to the grant. The agreements
comprise different phases based on product development. Milestones are based on
the phases of each product development, for example Phase 1, Phase 2 and Phase
3. Revenue is not recognized prior to acceptance that the milestones have been
achieved, as collectibility is not assured until this point is reached. Once
each milestone is reached and approved, the grantor is obligated to pay and
there are no further significant obligations as to that part of the milestone.
Grant income for achievement of such milestones is agreed between the parties in
legally binding contracts. Revenue for each milestone achieved is fixed up
front.
Reimbursements
Reimbursements of expenses are recognized as revenue when the reimbursement is received and the related expenses have been incurred.
Corporate partner revenues
Corporate partner revenues are comprised of amounts earned under agreements with Schering A.G. and Neuroscience Victoria Ltd. for certain research and development activities. Revenues are recognized as earned on a straight line basis over the lives of the relevant agreements. The straight line basis is considered appropriate as the agreements do not contain clearly defined milestones. Such agreements are performed on a "best efforts" basis with no guarantee of either technological or commercial success.
(h) Income tax
Tax-effect accounting is applied using the liability method whereby income tax is regarded as an expense and is calculated on the accounting profit after allowing for permanent differences. To the extent timing differences occur between the time items are recognized in the financial statements and when items are taken into account in determining taxable income, the net related taxation benefit or liability, calculated at current rates, is disclosed as a future income tax benefit or a provision for deferred income tax. The net future income tax benefit relating to tax losses is not carried forward as an asset unless the benefit is virtually certain of being realized. The future income tax benefit relating to timing differences is not carried forward as an asset unless its realization is assured beyond reasonable doubt.
Where assets are revalued, no provision for potential capital gains tax has been made.
PRANA BIOTECHNOLOGY LIMITED
(A Development Stage Enterprise)
1 BACKGROUND AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued
(i) Employee entitlements
Provision is made for employee entitlement benefits accumulated as a result of employees rendering services up to the reporting date. These benefits include wages and salaries, annual leave and long service leave.
Employee entitlements expenses and revenues arising in respect of the following categories:
o Wages and salaries, non-monetary benefits, annual leave, long service leave, sick leave and other leave entitlements; and
o Other types of employee entitlements;
are charged against profits on a net basis in their respective categories.
The value of the options issued under the Employee and Consultants Option Plan 2000 described in Note 15 (b) is not being charged as an expense.
(j) Loss per share
Basic loss per share is determined by dividing the loss from ordinary activities after income tax by the weighted average number of ordinary shares outstanding during the period. The computation of diluted loss per share is similar to basic loss per share, except that it assumes the potentially dilutive securities, such as share options, were converted to shares as of the beginning of the period. For all periods presented, diluted loss per share is equivalent to basic loss per share as the potentially dilutive securities are excluded from the computation of diluted loss per share because the effect is anti-dilutive. See Note 18.
(k) Financial instruments issued by the Company
Debt and equity instruments are classified as either liabilities or as equity in accordance with the substance of the contractual arrangement.
Transaction costs arising on the issue of equity instruments are recognized directly in equity as a reduction of the proceeds of the equity instruments to which the costs relate. Transaction costs are the costs that are incurred directly in connection with the issue of those equity instruments and which would not have been incurred had those instruments not been issued.
Interest and dividends are classified as expenses or as distributions of profit consistent with the Statements of Financial Position classification of the related debt or equity instruments or component parts of compound instruments.
(l) Goods and services tax
Revenues, expenses and assets are recognized net of the amount of goods and services tax (GST), except:
i. Where the amount of GST incurred is not recoverable from the taxation authority, it is recognized as part of the cost of acquisition of an asset or as part of an item of expense; or For receivables and payables which are recognized inclusive of GST.
The gross amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables.
Cash flows attributable to GST are included in the Statements of Cash Flows on a gross basis.
PRANA BIOTECHNOLOGY LIMITED
(A Development Stage Enterprise)
1 BACKGROUND AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued
(m) Receivables
Trade receivables and other receivables are recorded at amounts due less any provision for doubtful debts.
(n) Foreign currency
All foreign currency transactions during the financial year are brought to account using the exchange rate in effect at the date of the transaction. Accounts payable and receivable balances at reporting date are translated at the exchange rate in effect at that date.
(o) Start-up and organization costs
Costs of start-up activities and organizational costs are expensed as incurred.
(p) Reclassifications
Certain prior year amounts have been reclassified to conform to the current year presentation.
(q) Adoption of Australian Equivalents to International Financial Reporting Standards
Australia is currently preparing for the introduction of International Financial Reporting Standards ("IFRS") effective for financial years commencing 1 January 2005. This requires the production of accounting data for future comparative purposes at the beginning of the next financial year.
The Company's management is assessing the significance of these changes and preparing for their implementation. The Company will seek to keep stakeholders informed as to the impact of these new standards as they are finalized.
The directors are of the opinion that the key differences in the Company's accounting policies which will arise from the adoption of IFRS are:
Share-based Payments - The Company currently has the policy of expensing shares issued in lieu of payment for goods or services by valuing them at their cost under the contract; however, under IFRS the Company will be required to expense the cost of such shares based on the fair value (i.e., market price) of the shares. Additionally, under IFRS the Company will be required to expense the cost of share options based on the fair value of the options at the grant date. Currently, the Company does not recognize compensation cost for option grants.
Intellectual Property - The Company currently has intangible assets which were revalued upward by $14,661,942 in December 1999. For the revaluation increment to continue to be recognized under IFRS there must be an active market in which the intangible can be traded. The intangible assets must also be the result of contractual or legal rights or separable from the business. It is anticipated that the intangible assets will not be able to be separately identified and that there will be no active market in which to value the intangible assets. As a result, the revaluation increment may be derecognized from the Statement of Financial Position and the amortization previously taken up may be reversed.
PRANA BIOTECHNOLOGY LIMITED
(A Development Stage Enterprise)
Years Ended 30 June
------------------------------------------------
2004 2003 2002
------------ ------------ ------------
2 REVENUE FROM ORDINARY ACTIVITIES
Interest - Other persons/corporations 211,327 111,686 226,720
Government grant (i) 647,400 967,000 567,250
Nasdaq reimbursements (ii) -- 231,304 --
Corporate partner revenues (iii) 1,462,500 506,250 --
Other revenues -- 238 --
------------ ------------ ------------
Total revenues from ordinary activities 2,321,227 1,816,478 793,970
============ ============ ============
|
(i) On 26 July 2001, the Company announced the grant of a $1.74 million START grant from the Australian Industry Research and Development Board to expand the Company's core intellectual property for drug treatment of neurodegenerative diseases. During the year ended 30 June 2001, $226,000 of the grant was recognized as revenue as the Company received written notification of the grant prior to 30 June 2001 and met the revenue recognition criteria disclosed in Note 1(g) for this portion of the grant. During the years ended 30 June 2003 and 2002, the Company met the revenue recognition criteria to record an additional $967,000 and $567,250, respectively, of this grant as revenue. This grant was completed ahead of schedule on 30 June 2003. At 30 June 2003, revenue was over accrued by $21,750.
On 5 May 2003, the Company announced a Biotechnology Innovation Fund grant of $227,252 from the Australian Industry Research and Development Board to research the development of an immunotherapy from Alzheimer's Disease. During the year ended 30 June 2004, the Company met the revenue recognition criteria to record revenue of $125,515.
On 18 February 2004, the Company announced a further START grant of $1.35 million from the Australian Industry Research and Development Board to take its second generation drug candidate for Alzheimer's disease, PBT-2, through safety testing and Phase 1 Clinical Trials. During the year ended 30 June 2004, the Company met the revenue recognition criteria to record revenue of $543,635.
(ii) In September 2002, the Company listed on the Nasdaq SmallCap Market. Under an agreement with the Bank of New of York, 50% of the costs associated with the listing were reimbursed. This reimbursement of $231,304 is recognized as revenue in the year ended 30 June 2003.
(iii) In March 2003, Prana entered into various agreements with Schering A.G. and Neuroscience Victoria Ltd. for certain research and development activities. The revenue under these agreements is recognized as earned on a straight line basis over the lives of the relevant agreements.
Years Ended 30 June
------------------------------------------------
2004 2003 2002
------------ ------------ ------------
3 EXPENSES FROM ORDINARY ACTIVITIES
Depreciation of non-current assets
Equipment 95,002 85,971 60,591
Amortization of non-current assets
Core intellectual property 1,100,004 1,100,002 1,100,004
------------ ------------ ------------
Total depreciation and amortization expense 1,195,006 1,185,973 1,160,595
============ ============ ============
Patents, research and development expense
Research and development 5,232,581 1,717,770 1,827,536
Patents -- 143,525 670,950
------------ ------------ ------------
Total patents, research and development expense 5,232,581 1,861,295 2,498,486
============ ============ ============
|
PRANA BIOTECHNOLOGY LIMITED
(A Development Stage Enterprise)
Years Ended 30 June
--------------------------------------------
2004 2003 2002
---------- ---------- ----------
4 INCOME TAX
(a) Prima facie income tax benefit
calculated at 30% on the loss from
ordinary activities before income tax 2,965,684 1,375,451 1,634,540
---------- ---------- ----------
Tax losses not previously recognized 1,052,868 -- --
Non-deductible amortization (330,001) (330,001) (330,001)
Other non-deductible expenses (497,360) (300,312) (169,528)
Timing differences and tax losses not brought to
account as future income tax benefits (Note 4(b)) (3,191,191) (745,138) (1,135,011)
---------- ---------- ----------
Income tax expense relating to ordinary activities -- -- --
---------- ---------- ----------
(b) Potential future tax benefits at 30% not
brought to account attributable to:
Tax losses - revenue 6,097,949 3,005,525 2,269,938
Timing differences 108,318 9,551 7,500
---------- ---------- ----------
6,206,267 3,015,076 2,277,438
========== ========== ==========
|
The Company has future income tax benefits of tax losses not recognized as assets because recovery is not virtually certain. Such benefits will only be obtained if:
(i) future assessable income is derived of a nature and of an amount sufficient to enable the benefit to be realized;
(ii) the conditions for deductibility imposed by tax legislation continue to be complied with; and
(iii) no changes in tax legislation adversely affect the Company in realizing the benefit.
The Company has no franking credits available at year end.
30 June
-------------------------------
2004 2003
----------- -----------
5 RECEIVABLES (CURRENT)
Government grant receivable (inclusive of GST) 1,390 108,675
Sundry debtors and other 39,571 23,312
Goods and services tax receivable 51,956 11,836
----------- -----------
92,917 143,823
=========== ===========
6 OTHER ASSETS (CURRENT)
Prepayments 71,609 52,362
Withholding tax 1,160 --
----------- -----------
72,769 52,362
=========== ===========
|
PRANA BIOTECHNOLOGY LIMITED
(A Development Stage Enterprise)
30 June
-----------------------------
2004 2003
----------- -----------
Notes
7 EQUIPMENT
Gross carrying amount
Balance at beginning of year 372,161 284,232
Additions 134,362 87,929
Disposals -- --
----------- -----------
Balance at end of year 506,523 372,161
----------- -----------
Accumulated depreciation
Balance at beginning of year (230,550) (144,579)
Disposals -- --
Depreciation expense 3 (95,002) (85,971)
----------- -----------
Balance at end of year (325,552) (230,550)
----------- -----------
Net book value at end of year 180,971 141,611
=========== ===========
|
Aggregate depreciation allocated during the year is recognized as an expense and disclosed in Note 3.
8 INTANGIBLE ASSETS
Core intellectual property - at deemed cost 16,500,000 16,500,000
Accumulated amortization (5,011,657) (3,911,653)
----------- -----------
11,488,343 12,588,347
=========== ===========
|
Aggregate amortization allocated during the year is recognized as an expense and disclosed in Note 3.
9 PAYABLES (CURRENT)
Trade creditors 336,779 151,755
Accrual for settlement of patent dispute 16 971,764 --
Other creditors 1,095,110 340,002
Amounts payable to Directors 205,258 --
Amounts payable to Director-related entity 21 53,039 49,460
----------- -----------
2,661,950 541,217
=========== ===========
10 PROVISIONS
Current
-------
Annual leave 15 42,597 23,831
=========== ===========
Non-Current
-----------
Long service leave 15 8,292 1,175
=========== ===========
|
PRANA BIOTECHNOLOGY LIMITED
(A Development Stage Enterprise)
30 June
---------------------------------------------
2004 2003 2002
----------- ----------- -----------
11 CONTRIBUTED EQUITY
(a) Contributed equity
Ordinary shares fully paid 49,505,493 16,733,023 12,993,468
Options fully paid -- 8,000 8,000
----------- ----------- -----------
49,505,493 16,741,023 13,001,468
=========== =========== ===========
|
(b) Movements in shares on issue
30 June
------------------------------------------------------------------------------------------------
2004 2003 2002
------------------------------------------------------------------------------------------------
Number of $ Number of $ Number of $
Shares Shares Shares
------------------------------------------------------------------------------------------------
Beginning of the year 66,187,303 16,733,023 58,612,750 12,993,468 57,260,266 12,268,892
Movement during the year 49,797,077 32,772,470 7,574,553 3,739,555 1,352,484 724,576
------------------------------------------------------------------------------------------------
End of the year 115,984,380 49,505,493 66,187,303 16,733,023 58,612,750 12,993,468
================================================================================================
|
Details of share issuances are as follows:
---------------------------------------------------------------------------------------------------------------------
Date Details Notes Number Issue Price $
---------------------------------------------------------------------------------------------------------------------
4 February 2002 Exercise of options 134,000 0.50 67,000
12 February 2002 Exercise of options 2,000 0.50 1,000
22 February 2002 Exercise of options 76,000 0.50 38,000
27 February 2002 Exercise of options 40,000 0.50 20,000
6 March 2002 Exercise of options 90,000 0.50 45,000
8 March 2002 Non-cash share issue in
consideration for services
provided by consultants (i) 191,794 0.75 144,230
12 March 2002 Exercise of options 272,690 0.50 136,346
14 March 2002 Exercise of options 10,000 0.50 5,000
20 March 2002 Exercise of options 12,000 0.50 6,000
21 March 2002 Exercise of options 100,000 0.50 50,000
25 March 2002 Exercise of options 3,000 0.50 1,500
9 April 2002 Exercise of options 32,500 0.50 16,250
10 April 2002 Exercise of options 2,500 0.50 1,250
11 April 2002 Exercise of options 102,500 0.50 51,250
10 May 2002 Exercise of options 100,000 0.50 50,000
23 May 2002 Exercise of options 180,000 0.50 90,000
16 June 2002 Exercise of options 3,500 0.50 1,750
--------- --------
Year ended 30
June 2002 Total 1,352,484 724,576
--------- --------
|
PRANA BIOTECHNOLOGY LIMITED
(A Development Stage Enterprise)
11 CONTRIBUTED EQUITY (continued)
---------------------------------------------------------------------------------------------------------------------------
Date Details Notes Number Issue Price $
---------------------------------------------------------------------------------------------------------------------------
8 July 2002 Exercise of options 4,000 0.50 2,000
10 July 2002 Exercise of options 13,274 0.50 6,637
12 July 2002 Non-cash share issue in
consideration for services
provided by consultants (i) 13,550 2.02 27,371
18 September 2002 Exercise of options 32,000 0.50 16,000
30 September 2002 Exercise of options 25,000 0.50 12,500
15 October 2002 Exercise of options 20,081 0.50 10,040
20 November 2002 Exercise of options 113,000 0.50 56,500
22 November 2002 Exercise of options 33,072 0.50 16,536
25 November 2002 Exercise of options 7,000 0.50 3,500
4 December 2002 Non-cash share issue in
consideration for services
provided by consultants (i) 15,318 1.74 26,653
12 December 2002 Exercise of options 50,000 0.50 25,000
8 January 2003 Exercise of options 50,000 0.50 25,000
22 January 2003 Exercise of options 2,620 0.50 1,310
30 January 2003 Exercise of options 9,700 0.50 4,850
30 January 2003 Non-cash share issue in
consideration for services
provided by consultants (i) 118,101 0.98 115,739
14 February 2003 Exercise of options 499,403 0.50 249,702
20 February 2003 Exercise of options 483,746 0.50 241,873
28 February 2003 Exercise of options 2,530,483 0.50 1,265,242
5 March 2003 Exercise of options 3,107,891 0.50 1,553,945
15 March 2003 Exercise of options 25,000 0.50 12,500
March 2003 Underwriting costs (ii) -- -- (144,000)
3 April 2003 Exercise of options 421,314 0.50 210,657
---------- ----------
Year ended 30
June 2003 Total 7,574,553 3,739,555
---------- ----------
11 August 2003 Exercise of options 50,000 0.50 25,000
13 August 2003 Exercise of options 25,000 0.50 12,500
27 August 2003 Exercise of options 16,000 0.50 8,000
27 August 2003 Non-cash share issue in
consideration for services
provided by consultants (i) 70,768 0.70 49,538
29 August 2003 Exercise of options 34,000 0.50 17,000
16 September 2003 Share issue to professional
investors for cash 7,102,853 0.70 4,971,997
12 January 2004 Non-cash share issue to directors (iii) 249,999 0.48 120,000
12 January 2004 Non-cash share issue in
consideration for services
provided by consultants (i) 67,955 0.64 43,491
20 February 2004 Non-cash share issue in
consideration for services
provided by consultants (i) 155,502 0.55 85,526
8 April 2004 Exercise of options 200,000 0.70 140,000
15 April 2004 Exercise of options 100,000 0.70 70,000
16 April 2004 Exercise of options 200,000 0.50 100,000
16 April 2004 Exercise of options 200,000 0.70 140,000
20 April 2004 Exercise of options 300,000 0.50 150,000
22 April 2004 Exercise of options 200,000 0.50 100,000
|
PRANA BIOTECHNOLOGY LIMITED
(A Development Stage Enterprise)
11 CONTRIBUTED EQUITY (continued)
-------------------------------------------------------------------------------------------------------------------------
Date Details Notes Number Issue Price $
-------------------------------------------------------------------------------------------------------------------------
10 May 2004 Non-cash share issue in 825,000 0.83 684,750
consideration for services
provided by consultants (i)
1 June 2004 Share issued to US investors for
cash 40,000,000 0.72 28,881,609
Expired options -- 8,000
Capital raising costs -- (2,834,941)
----------- -----------
Year ended 30
June 2004 Total 49,797,077 32,772,470
----------- -----------
|
(i) The Company recognized non-cash compensation expense for shares issued in consideration for services provided by consultants based on the director's valuation of the services rendered.
(ii) Underwriters subscribed the balance of the listed options with an expiration date of 1 March 2003 that had not been exercised by existing option holders and charged $144,000 for their services.
(iii) The base fee for three of the Company's directors was paid by the issue of 83,333 shares each as approved at the 2003 Annual General Meeting.
(c) Movements in share options
Years Ended 30 June
----------------------------------------------------------------------------------------------------
2004 2003 2002
----------------------------------------------------------------------------------------------------
Number of Comp. Number of Comp. Number of Comp.
Options Expense Options Expense Options Expense
----------------------------------------------------------------------------------------------------
Beginning of the year 21,085,000 8,000 27,894,310 8,000 28,655,000 8,000
Issued during the year 1,709,167 -- 618,274 -- 400,000 --
Expired during the year (200,000) (8,000) -- -- -- --
Exercised during the
year (Note 11(b)) (1,325,000) -- (7,427,584) -- (1,160,690) --
----------------------------------------------------------------------------------------------------
End of the year 21,269,167 -- 21,085,000 8,000 27,894,310 8,000
====================================================================================================
|
Details of option issuances are summarized as follows. The Company did not record any compensation expense in connection with the issuance of the options.
2002
o On 23 January 2002, the Company issued 200,000 options to an outside consultant in consideration for services rendered. Such options are exercisable on or before 20 March 2004 at an exercise price of $0.50 per option.
o On 7 March 2002, the Company issued 200,000 options to outside consultants under the Employee and Consultants Option Plan 2000 (see Note 15(b)) as a reward for services rendered to the Company. Of the 200,000 options, one-third are exercisable beginning May 2001, another third May 2002 and the final third May 2003. Such options are exercisable until 30 June 2005 at an exercise price of $0.50 per option. These options are forfeited in the event the consultants terminate employment with the Company.
PRANA BIOTECHNOLOGY LIMITED
(A Development Stage Enterprise)
11 CONTRIBUTED EQUITY (continued)
2003
o On 10 July 2002, the Company issued 13,274 options to an employee and 100,000 options to an outside consultant under the Employee and Consultants Option Plan 2000 (see Note 15(b)) as a reward for services rendered to the Company. Of the 100,000 options issued to the consultant, one-third are exercisable beginning May 2001, another third May 2002 and the final third May 2003. The options are exercisable until 30 June 2005 at an exercise price of $0.50 per option. These options are forfeited in the event the employee or consultant terminate employment with the Company.
o On 31 October 2002, the Company issued 100,000 options to an outside
consultant under the Employee and Consultants Option Plan 2000 (see Note
15(b)) as a reward for services rendered to the Company. Such options are
exercisable on or before 30 June 2005 at an exercise price of $0.50 per
option. These options are forfeited in the event the consultant terminates
employment with the Company.
o On 31 October 2002, the Company issued 200,000 options to an outside consultant in consideration for services rendered. Such options are exercisable on or before 1 October 2005 at an exercise price of $0.50 per option.
o On 1 March 2003, the Company issued 55,000 options to underwriters in connection with the underwriters' subscription of the remaining balance of the listed options with an expiration date of 1 March 2003 that had not been exercised by existing option holders. Such options were exercisable on the same day at an exercise price of $0.50 per option.
o On 6 June 2003, the Company issued 5,000 options to an outside consultant in consideration for services rendered. Such options are exercisable beginning 1 March 2005 through 30 June 2005 at an exercise price of $1.50 per option.
o On 6 June 2003, the Company issued 145,000 options to employees under the Employee and Consultants Option Plan 2000 (see Note 15(b)) as a reward for services rendered to the Company. Of the 145,000 options, 50,000 options are immediately exercisable, 20,000 options are exercisable beginning 1 August 2003, 25,000 options are exercisable beginning 25 December 2003, and 50,000 options are exercisable beginning 31 May 2004. All options have an exercise price of $0.50 per option and are exercisable until 30 June 2005. These options are forfeited in the event the employees terminate employment with the Company.
2004
o On 8 August 2003, the Company issued 10,000 options to outside consultants under the Employee and Consultants Option Plan 2000 (see Note 15(b)) as a reward for services rendered to the Company. Of the 10,000 options issued to the consultants, half are exercisable beginning 1 December 2003 and the other half are exercisable beginning 1 January 2005. The options are exercisable until 30 June 2005 at an exercise price of $0.50 per option. These options are forfeited in the event the consultants terminate employment with the Company.
o On 10 September 2003, the Company issued 5,000 options to an outside consultant in consideration for services rendered to the Company. Such options are exercisable between 2 March 2005 and 30 June 2005 at an exercise price of $1.50 per option.
o On 15 September 2003, the Company issued 244,667 options to employees and 17,500 options to outside consultants under the Employee and Consultants Option Plan 2000 (see Note 15(b)) as a reward for services rendered to the Company. Of the 244,667 options issued to employees, 58,000 are escrowed until 1 August 2004, 166,667 are escrowed until 31 May 2004 and 20,000 are escrowed until 31 August 2004. Of the options issued to the consultants, 2,500 are exercisable beginning 1 July 2004, 7,500 are escrowed until 31 July 2004 and 7,500 are escrowed until 31 August 2004. The options are exercisable until 30 June 2005 at an exercise price of $0.50 per option. These options are forfeited in the event the employees or consultants terminate employment with the Company.
o On 23 October 2003, the Company issued 500,000 options to an outside consultant in consideration for services rendered to the Company. Such options were exercisable on or before 23 April 2004 at an exercise price of $0.70 per option. The options were exercised in April 2004.
o On 27 November 2003, the Company issued 500,000 options to an outside
consultant under the Employee and Consultants Option Plan 2000 (see Note
15(b)) as a reward for services rendered to the Company. Such options are
exercisable on or before 30 June 2004 at an exercise price of $0.50 per
option.
PRANA BIOTECHNOLOGY LIMITED
(A Development Stage Enterprise)
11 CONTRIBUTED EQUITY (continued)
o On 5 December 2003, the Company issued 20,000 options to employees under the Employee and Consultants Option Plan 2000 (see Note 15(b)) as a reward for services rendered to the Company. The options are exercisable between 1 July 2004 and 30 June 2005 at an exercise price of $0.50 per option. These options are forfeited in the event the employees terminate employment with the Company.
o On 10 May 2004, the Company issued 412,000 options to an outside consultant in consideration for services rendered to the Company. Such options are exercisable on or before 1 February 2007 at an exercise price of $0.50 per option.
(d) Warrants
On 4 June 2004, the Company issued 3,000,000 warrants to US investors as part of the 1 June 2004 US capital raising disclosed in (b) above. These warrants are convertible to 30,000,000 shares (3,000,000 ADRs) at an exercise price of US$8.00 per warrant on or before 4 June 2009.
(e) Terms and Conditions of Contributed Equity
Ordinary Shares
Ordinary shares have the right to receive dividends as declared and, in the event of winding up the Company, to participate in the proceeds from the sale of all surplus assets in proportion to the number of and amounts paid up on shares held. Ordinary shares entitle their holder to one vote, either in person or by proxy, at a meeting of the Company.
Options and Warrants
Optionholders and Warrantholders do not have the right to receive dividends and are not entitled to vote at a meeting of the Company. Options and warrants may be exercised at any time from the date they vest to the date of their expiry. Share options convert into ordinary shares on a one for one basis on the date they are exercised. Warrants convert into ordinary shares, one warrant for ten ordinary shares on the date they are exercised.
(f) Shares and options issued after reporting date
Details of share issuances are as follows:
Date Details Number Issue Price $
---------------------------------------------------------------------------------------------------------------------
9 August 2004 Issue of shares in settlement of 1,350,000 0.56 756,000
patent litigation (Note 16)
16 September 2004 Issue of shares in lieu of 49,775 0.82 40,816
payment to a consultant
------------- ----------
1,399,775 796,816
============= ==========
|
30 June
-----------------------------------------------------
2004 2003 2002
----------- ----------- -----------
Notes
12 RESERVE AND ACCUMULATED DEFICIT
Asset revaluation reserve 12(a) 14,661,942 14,661,942 14,661,942
Accumulated deficit during the development stage 12(b) (25,464,876) (15,579,262) (10,994,424)
|
(a) Asset revaluation reserve
i Nature and purpose of reserve
The asset revaluation reserve is used to record increments and decrements in the value of non-current assets
ii Movements in reserve
Balance at beginning of year 14,661,942 14,661,942 14,661,942
Revaluation of core intellectual property to
directors' valuation -- -- --
----------- ----------- -----------
Balance at end of year 14,661,942 14,661,942 14,661,942
=========== =========== ===========
|
On 1 July 2000, as allowed by AASB 1041, the directors have deemed the carrying value of the Company's core intellectual property at valuation to be cost. As a result, the asset revaluation reserve is no longer available to absorb any future write-downs of core intellectual property. Subsequent to 1 July 2000, future write-downs of these assets to the recoverable amount must be made through the Statements of Financial Performance.
PRANA BIOTECHNOLOGY LIMITED
(A Development Stage Enterprise)
30 June
-----------------------------------------------
2004 2003 2002
----------- ----------- -----------
12 RESERVE AND ACCUMULATED DEFICIT continued
(b) Accumulated deficit during the development stage
Balance at beginning of year (15,579,262) (10,994,424) (5,545,957)
Net loss for the year (9,885,614) (4,584,838) (5,448,467)
----------- ----------- -----------
Balance at end of year (25,464,876) (15,579,262) (10,994,424)
=========== =========== ===========
Years Ended 30 June
-----------------------------------------------
2004 2003 2002
----------- ----------- -----------
13 STATEMENTS OF CASH FLOWS
(a) Reconciliation of the net loss to the net
cash flows from operations
Net loss (9,885,614) (4,584,838) (5,448,467)
Non-cash items
Depreciation of property, plant and equipment 95,002 85,971 60,591
Amortization of intangible assets 1,100,004 1,100,002 1,100,004
Non-cash issue of shares in consideration of
operating expenses 983,305 169,763 144,230
Unrealized foreign exchange loss 182,768 12,481 --
Changes in assets and liabilities
Increase/(decrease) in payables 2,120,733 (371,116) 29,644
Decrease/(increase) in receivables 50,906 (35,887) 218,117
(Increase)/decrease in prepayments (20,407) 8,005 105,974
Increase/(decrease) in provision for employee
entitlements 25,883 25,006 (9,608)
----------- ----------- -----------
Net cash flows used in operating activities (5,347,420) (3,590,613) (3,799,515)
=========== =========== ===========
(b) Reconciliation of cash
Cash balance comprises:
- cash on hand 8,531,593 2,263,783 385,014
- term deposit 21,048,805 1,200,000 3,200,000
----------- ----------- -----------
Closing cash balance 29,580,398 3,463,783 3,585,014
=========== =========== ===========
|
(c) Non-cash financing and investing activities
During the years ended 30 June 2004, 2003 and 2002, the Company issued shares and options in consideration for services rendered. See Notes 11(b) and 11(c).
PRANA BIOTECHNOLOGY LIMITED
(A Development Stage Enterprise)
14 EXPENDITURE COMMITMENTS
In accordance with the terms of the research funding agreement between Neurosciences Victoria Ltd. and Prana, at 30 June 2004 Prana is obliged to spend $759,375 on research and development activities at the University of Melbourne in the nine months to 31 March 2005. These contracts are currently being renegotiated and the amount may alter but represents the maximum commitment under existing contractual arrangements.
The Company has entered into a ten year contract with Professor Ashley Bush, including payment of US$100,000 per annum for ten years, the issue of 1,650,000 bonus shares of which 825,000 were issued during the current year and 824,000 options at an exercise price $0.50 of which 412,000 were issued during the current year.
The Company moved premises in June 2004 and entered into a lease for a three year period totaling $305,675.
In June 2004, the Company entered into a four year rental agreement for a photocopier, at a total cost over four years of $11,280.
The CFO Solution provides administrative support at a rate of $15,000 per month which can be terminated with three months' notice by either party.
30 June
------------------------------
2004 2003
------------ ------------
15 EMPLOYEE ENTITLEMENTS AND SUPERANNUATION COMMITMENTS
Notes
(a) Employee Entitlements
The aggregate employee entitlement liability is composed of:
Provisions (current) 42,597 23,831
Provisions (non-current) 8,292 1,175
------------ ------------
10 50,889 25,006
============ ============
|
Number of employees: 12 (2003: 6 employees)
(b) Employee and Consultants Option Plan 2000
At the Annual General Meeting held on 22 November 2000, shareholders approved the establishment of an Employee and Consultants Option Plan 2000 designed to reward executives, employees and consultants for their contributions to the Company. It is also proposed as a method of retaining key personnel for the growth and development of the Company's intellectual property rights. The options cannot be transferred and are not quoted on the Australian Stock Exchange. At 30 June 2004, there were no Directors, two executives, four employees and five consultants participating in the Scheme. To date, all options have been issued with a $0.50 exercise price.
Information with respect to the number of options granted under the Employee and Consultants Option Plan 2000 is as follows:
Years Ended 30 June
---------------------------------------------------------------------------------
2004 2003 2002
---------------------------------------------------------------------------------
Number of Exercise Number of Exercise Number of Exercise
Options Price Options Price Options Price
---------------------------------------------------------------------------------
Beginning of the year 555,000 0.50 210,000 0.50 10,000 0.50
Issued during the year 792,167 0.50 358,274 0.50 200,000 0.50
Exercised during the year (450,000) 0.50 (13,274) 0.50 -- --
--------------------------------------------------------------------------------
End of the financial year 897,167 555,000 210,000
================================================================================
|
PRANA BIOTECHNOLOGY LIMITED
(A Development Stage Enterprise)
16 CONTINGENT LIABILITIES
On 28 July 2004, the Company resolved its patent dispute with P.N. Gerolymatos by the issue of 1,350,000 shares and payment of US$150,000. This has been fully provided for in the accounts in note 9, resulting in a provision of $971,764 as of 30 June 2004. Under the settlement agreement the Company could be potentially liable for royalty payments to P.N. Gerolymatos upon the successful commercialization of the Company's research.
The Company has entered into various agreements under which they may be liable to pay royalties upon the successful commercialization of the Company's research. In particular these obligations exist to the University of Melbourne, Massachusetts General Hospital and P.N. Gerolymatos.
The Company is not involved in any legal or arbitration proceedings and, so far as Directors are aware, no such proceedings are pending or threatened against the Company.
17 SUBSEQUENT EVENTS
In August 2004, the Company set up a subsidiary in the United States due to the increase in US operations following the appointment of Jonas Alsenas, a US-based Director and Chief Executive Officer, and the increase in US investors in the Company. Also in August 2004, the Company set up a subsidiary in the United Kingdom to allow them to conduct commercial and clinical operations in the UK. Neither of these subsidiaries are currently trading.
See Note 16 with respect to the resolution of the patent dispute with P.N. Gerolymatos.
Other than as disclosed above, no other matters or circumstances have arisen since the end of the financial year which significantly affected or may significantly affect the operations of the Company, the results of those operations, or the state of affairs of the Company in subsequent financial years.
Years Ended 30 June
-------------------------------------------------
2004 2003 2002
---------- ---------- ----------
18 LOSS PER SHARE
Basic loss per share (0.13) (0.08) (0.10)
Weighted average number of ordinary shares on issue used
in the calculation of basic loss per share 75,701,818 61,131,313 57,623,389
|
The options in place do not have the effect to dilute the loss per share.
19 DIRECTORS' AND EXECUTIVES' REMUNERATION
(a) The directors and executive information has been prepared in accordance with the new Accounting Standard AASB 1046: Directors and Executives Disclosures by Disclosing Entities:
Specified Directors of Prana
Biotechnology Ltd during the year:
Geoffrey Kempler Executive Chairman Appointed 11 November 1997
Jonas Alsenas Executive Director Appointed 25 March 2004
CEO Appointed 9 August 2004
Colin Master Executive Director Appointed 9 December 1999
George Mihaly Non-Executive Director Appointed 9 December 1999
Brian Meltzer Non-Executive Director Appointed 9 December 1999
Specified Executives of Prana
Biotechnology Ltd during the year:
Ross Murdoch COO Employed May 2002
Dianne Angus Vice President of IP and Licensing Employed August 2002
|
PRANA BIOTECHNOLOGY LIMITED
(A Development Stage Enterprise)
19 DIRECTORS' AND EXECUIVES' REMUNERATION (continued)
(b) Specified Directors and Specified Executives Remuneration
Consistent with best practice the Directors' sought outside expertise in 2003 from Mercer Human Resources. The remuneration below was determined in accordance with their independent advice.
Primary Post
2004 Consultant Employment Equity
Base Fee Fee Super Options Total
Specified Directors: $ $ $ $ $
Geoffrey Kempler 266,818 -- 18,182 -- 285,000
Jonas Alsenas 32,365 -- -- -- 32,365
Colin Master* 40,000 8,333 -- -- 48,333
George Mihaly* 40,000 78,858 347 -- 119,205
Brian Meltzer* 40,000 50,000 -- -- 90,000
-------- -------- -------- -------- --------
419,183 137,191 18,529 -- 574,903
-------- -------- -------- -------- --------
|
* The base fee was paid by issue of 83,333 shares each as approved at the 2003 Annual General Meeting.
Specified Executives Primary Post
Consultant Employment Equity
Base Fee Fee Super Options (i) Total
2004 $ $ $ $ $
Ross Murdoch 235,417 -- 21,188 100,748 357,353
Dianne Angus 151,827 -- 13,665 31,751 197,243
-------- -------- -------- -------- --------
387,244 -- 34,853 132,499 554,596
-------- -------- -------- -------- --------
|
There are only two executive officers of the Company
Mr. R. Murdoch has a contract dated 31 May 2004 which provides for a base annual salary of $275,000, superannuation at a rate of 9% and options in the Company to the value of 25% of the base salary per annum based on the achievement of performance milestones. The terms and conditions of the issue of options may be subject to change in future years as the Company develops its remuneration policies. The term of the employment contact will last for a period of three years.
Ms D. Angus has a contract dated 21 October 2003 which provides for a base annual salary of $150,000, superannuation at a rate of 9% and options in the Company to the value of 20% of the base salary per annum based on the achievement of performance milestones. The terms and conditions of the issue of options may be subject to change in future years as the Company develops its remuneration policies. The term of the employment contact will last for a period of three years.
PRANA BIOTECHNOLOGY LIMITED
(A Development Stage Enterprise)
19 DIRECTORS' AND EXECUIVES' REMUNERATION (continued)
(i) Remuneration Options
Value per option
at Grant Date
using Black Exercise Last
Options Granted as Scholes Price First Exercise Exercise
Remuneration Granted No. Grant Date (cents) (cents) Date Date
Specified Executives:
Ross Murdoch 50,000 6 June 2003 34.5 0.50 31 May 2004 30 June 2005
25 December
Ross Murdoch 15,000 6 June 2003 34.5 0.50 2003 30 June 2005
Ross Murdoch 166,667 15 Sept 2003 48.3 0.50 31 May 2004 30 June 2005
Dianne Angus 20,000 6 June 2003 34.5 0.50 1 August 2003 30 June 2005
25 December
Dianne Angus 10,000 6 June 2003 34.5 0.50 2003 30 June 2005
Dianne Angus 58,000 15 Sept 2003 48.3 0.50 1 August 2004 30 June 2005
-----------
319,667
-----------
|
As of and For the Years Ended 30 June
------------------------------------------
2004 2003 2002
---------- ---------- ----------
20 AUDITORS' REMUNERATION
Amounts received or due and receivable for:
- an audit or review of the financial report of the entity 129,522 126,178 89,078
- audit-related fees -- -- --
- tax fees 59,580 23,400 36,775
- all other fees 6,900 7,400 10,500
---------- ---------- ----------
196,002 156,978 136,353
========== ========== ==========
|
PRANA BIOTECHNOLOGY LIMITED
(A Development Stage Enterprise)
21 RELATED PARTY AND SPECIFIED EXECUTIVE DISCLOSURES
Specified Directors' and Specified Executives' Remuneration
Details of specified directors' and specified executives' remuneration are disclosed in note 19 to the financial statements.
As of and For the Years Ended 30 June
-------------------------------------
2004 2003 2002
------- ------- -------
Director-related entity transactions
Kendle Pty Ltd, a Director-related company to G. Mihaly, provided
continuous analysis and reviews of the Company's commercialization
and intellectual property management as well as clinical trial
management and monitoring (on normal commercial terms and
conditions).
Fees paid to Kendle Pty Ltd during the year were: 379,045 475,289 537,327
Amount owing to Kendle Pty Ltd (included in Payables, inclusive of GST) 53,039 48,968
Aroma Science Pty Ltd, a Director-related company to G Kempler,
provides office, computer administration and meeting facilities (on
normal commercial terms and conditions).
Fees paid to Aroma Science Pty Ltd during the year were: 81,470 114,247 30,000
Amount owing to Aroma Science Pty Ltd (included in Payables, inclusive
of GST) -- 492
|
Specified Directors' and Specified Executives' Equity Holdings
Number of Shares held by Specified Directors' and Specified Executives'
Received as Options Net Change Balance
Balance 1.7.03 Remuneration Exercised Other 30.6.04
Specified Directors
Geoffrey Kempler 17,055,000 -- -- -- 17,055,000
Jonas Alsenas 70,000 -- -- -- 70,000
Colin Master 18,000 83,333 -- -- 101,333
George Mihaly 60,000 83,333 -- -- 143,333
Brian Meltzer 160,000 83,333 -- -- 243,333
Specified Executives
Ross Murdoch 50,000 -- -- -- 50,000
Dianne Angus -- -- -- -- --
|
"Net change other" refers to shares purchased or sold during the financial year.
PRANA BIOTECHNOLOGY LIMITED
(A Development Stage Enterprise)
21. RELATED PARTY AND SPECIFIED EXECUTIVE DISCLOSURES continued
Specified Directors' and Specified Executives' Equity Holdings
Number of Options held by Specified Directors' and Executives'
Total Total Not
Balance Granted as Options Balance Exercisable Exercisable
1.7.03 Remuneration Exercised 30.6.04 30.6.04 30.6.04
No. No. No. No. No. No.
Specified Directors
Geoffrey Kempler 9,167,500 -- -- 9,167,500 9,167,500 --
Jonas Alsenas -- -- -- -- -- --
Colin Master 1,000,000 -- -- 1,000,000 1,000,000 --
George Mihaly 300,000 -- -- 300,000 300,000 --
Brian Meltzer 300,000 -- -- 300,000 300,000 --
Specified Executives
Ross Murdoch 115,000 166,667 -- 281,667 281,667 --
Dianne Angus 30,000 58,000 -- 88,000 30,000 58,000
|
22 SEGMENT INFORM ATION
The Company's activities are predominantly within Australia and cover research into Alzheimer's Disease and other major age-related degenerative disorders.
23 FINANCIAL INSTRUMENTS
(a) Significant accounting policies
Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of measurement and the basis on which revenues and expenses are recognized, in respect of each class of financial asset, financial liability and equity instrument are disclosed in Note 1 to the financial statements.
(b) Interest rate risk
The Company has cash on deposit which is professionally managed by external parties to optimize the impact of interest rate fluctuations pursuant to conservative investment guidelines. At 30 June 2004, the Company has $30,000 in a six month term deposit at a fixed interest rate of 5.20%, $1,600,000 in 120 day term deposits at fixed interest rates between 5.35% and 5.44%, US$13,500,000 (A$19,418,805) in a 27 day term deposit at a fixed interest rate of 0.60%, $1,299,608 in Australian dollar cheque accounts at variable interest rates ranging from 3.97% to 4.40% and US$5,027,554 (A$7,231,785) in a US cheque account at a variable interest rate of 0.05%. The Company also has $200 in petty cash which does not earn any interest. The weighted average interest rate is 0.89% and apart from usual variances in general rates of interest the Company is not exposed to any significant interest rate risk.
At 30 June 2003, the Company has $800,000 in 90 day term deposits at fixed interest rates between 4.44% and 4.61%, $400,000 in a 30 day term deposit at a fixed interest rate of 4.64%, $2,044,918 in an Australian dollar cheque account at a variable interest rate of 2.80% and $218,665 (AUS$ value) in a US dollar cheque account at 30 June 2003. The Company also has $200 in petty cash which does not earn any interest. The weighted average interest rate is 3.31% and apart from usual variances in general rates of interest the Company is not exposed to any significant interest rate risk.
Receivables and payables are non-interest bearing.
PRANA BIOTECHNOLOGY LIMITED
(A Development Stage Enterprise)
23 FINANCIAL INSTRUMENTS (continued)
The Company's exposure to interest rates and the effective weighted average interest rate for classes of financial assets and liabilities is set out below:
Floating Non- Average
Interest Fixed Interest Interest Interest
2004 Rate Maturing in bearing Total Rate
1 year
or less 1-5 years
FINANCIAL ASSETS $ $ $ $ $
Cash 8,531,393 21,048,805 -- 200 29,580,398 0.89%
Receivables -- -- -- 92,917 92,917 --
---------- ---------- ---------- ---------- ----------
8,531,393 21,048,805 -- 93,117 29,673,315
========== ========== ========== ========== ==========
FINANCIAL LIABILITIES
Payables -- -- -- 2,661,950 2,661,950 --
Provisions -- -- -- 50,889 50,889 --
---------- ---------- ---------- ---------- ----------
-- -- -- 2,712,839 2,712,839
========== ========== ========== ========== ==========
Floating Non- Average
Interest Fixed Interest Interest Interest
2003 Rate Maturing in bearing Total Rate
1 year
or less 1-5 years
FINANCIAL ASSETS $ $ $ $ $
Cash 2,044,918 1,200,000 -- 218,865 3,463,783 3.31%
Receivables -- -- -- 143,823 143,823 --
---------- ---------- ---------- ---------- ----------
2,044,918 1,200,000 -- 362,688 3,607,606
========== ========== ========== ========== ==========
FINANCIAL LIABILITIES
Payables -- -- -- 541,217 541,217 --
Provisions -- -- -- 25,006 25,006 --
---------- ---------- ---------- ---------- ----------
-- -- -- 566,223 566,223
========== ========== ========== ========== ==========
|
(c) Net fair values
The carrying amount of financial assets and financial liabilities recorded in the financial statements represents their respective net fair values, determined in accordance with the accounting policies disclosed in Note 1 to the financial statements.
(d) Credit risk
Financial assets, which potentially expose the Company to concentrations of credit risk, consist primarily of cash and receivables. The Company's cash and cash equivalents are placed with high credit quality financial institutions and receivables are presented net of any allowances for estimated doubtful receivables. Accordingly, the Directors believe the Company has no significant concentration of credit risk.
PRANA BIOTECHNOLOGY LIMITED
(A Development Stage Enterprise)
24 ADDITIONAL COMPANY INFORMTION
Prana Biotechnology Limited is a listed public company, incorporated and operating in Australia.
Registered Office Principal Place of Business Suite 2 Level 2 1233 High Street 369 Royal Parade |
Armadale Vic 3148 Parkville Vic 3052
Tel: +61 (03) 9824 8166 Tel: +61 (03) 9349 4906
PRANA BIOTECHNOLOGY LIMITED
(A Development Stage Enterprise)
25 RECONCILIATION TO US GAAP
The financial statements have been prepared in accordance with accounting principles generally accepted in Australia ("A-GAAP"), which differ in certain significant respects from accounting principles generally accepted in the United States of America ("US GAAP"). The following is a summary of the adjustments to net loss and total equity required when reconciling such amounts recorded in the financial statements to the corresponding amounts in accordance with US GAAP, considering the differences between A-GAAP and US GAAP.
Reconciliation of net loss
Years Ended 30 June
-----------------------------------------------
2004 2003 2002
----------- ----------- -----------
Net loss in accordance with A-GAAP (9,885,614) (4,584,838) (5,448,467)
US GAAP adjustments:
Share-based compensation (a)
400,000 options issued to consultants -- -- (352,000)
Options issued to consultants for services rendered (429,811) (81,610) (656,600)
Options issued to employees for services rendered (87,768) (28,108) --
Options issued to underwriters in connection with
subscription of listed options -- (26,400) --
Shares issued to consultants and directors for services
rendered (33,023) (31,004) (306,485)
Intangible assets (b)
Reversal of amortisation expense attributable to
costs capitalised under A-GAAP but expensed
under US GAAP 60,670 60,670 60,670
Reversal of amortisation expense attributable to
upward asset revaluation 977,463 977,463 977,463
Costs capitalised under US GAAP but expensed
under A-GAAP 477,390 717,119 1,181,792
Amortisation expense attributable to above (287,506) (247,689) (184,392)
Deferred tax effect of US GAAP adjustments (c) -- -- --
----------- ----------- -----------
Net loss in accordance with US GAAP (9,208,199) (3,244,397) (4,728,019)
=========== =========== ===========
Loss per share in accordance with US GAAP:
Basic and diluted (0.12) (0.05) (0.08)
Weighted average shares - basic and diluted 75,701,818 61,131,313 57,623,389
|
PRANA BIOTECHNOLOGY LIMITED
(A Development Stage Enterprise)
25 RECONCILIATION TO US GAAP continued
30 June
-----------------------------
2004 2003
----------- -----------
Total equity in accordance with A-GAAP 38,702,559 15,823,703
US GAAP adjustments:
Intangible assets (b)
Costs capitalised under A-GAAP but expensed under US GAAP (910,058) (910,058)
Reversal of amortisation expense attributable to above 276,415 215,745
Reversal of upward asset revaluation (14,661,942) (14,661,942)
Reversal of amortisation expense attributable to above 4,453,360 3,475,897
Costs capitalised under US GAAP but expensed under A-GAAP 4,551,285 4,073,895
Amortisation expense attributable to above (926,663) (639,157)
Deferred tax effect of US GAAP adjustments (c) -- --
------------------------------
Total equity in accordance with US GAAP 31,484,956 7,378,083
==============================
|
30 June
-----------------------------
2004 2003
----------- -----------
Balance in accordance with US GAAP, beginning of year 7,378,083 6,715,803
Issuance of shares in connection with private placements, net of
issue costs 31,018,665 --
Issuance of shares in connection with exercise of options, net of
underwriting costs 762,500 3,569,792
Compensation expense attributable to issuance of options to
consultants for services rendered (a) 429,811 81,610
Compensation expense attributable to issuance of options to
employees for services rendered (a) 87,768 28,108
Compensation expense attributable to issuance of options to
underwriters in connection with subscription of listed options (a) -- 26,400
Compensation expense attributable to issuance of shares to
consultants and directors for services rendered (a) 1,016,328 200,767
Net loss in accordance with US GAAP (9,208,199) (3,244,397)
------------------------------
Balance in accordance with US GAAP, end of year 7,378,083 31,484,956
==============================
|
PRANA BIOTECHNOLOGY LIMITED
(A Development Stage Enterprise)
25 RECONCILIATION TO US GAAP continued
a. Share-based compensation
400,000 options issued to consultants
On 6 January 2000, the Company issued 400,000 share options as an
incentive for outside consultants. Under A-GAAP, no compensation cost has
been recognised in respect of the share options issued by the Company.
Under US GAAP, the options issued to the consultants are accounted for
under Statements of Financial Accounting Standards ("SFAS") No. 123:
Accounting for Stock-Based Compensation ("SFAS 123") and Emerging Issues
Task Force Issue No. 96-18: Accounting for Equity Instruments That Are
Issued to Other than Employees for Acquiring, or in Conjunction with
Selling, Goods or Services ("EITF 96-18"). Under SFAS 123 and EITF 96-18,
compensation cost is calculated based on the fair value of options on the
date at which the counterparty's performance is complete. The fair value
of the options was estimated on the date of grant using the Black-Scholes
model with the following weighted average assumptions:
o risk-free interest rate of 5.6%;
o no dividends;
o expected volatility of 21%; and
o expected life of four years.
The compensation cost is charged to earnings over the period from the date of grant (6 January 2000) to the date the consultants' performance was complete (28 March 2002) and adjusted at each statement of financial position date (up to 28 March 2002) for changes in the fair value of the options.
Options issued to consultants for services rendered
The Company issued 1,444,500, 405,000 and 400,000 share options to outside consultants during the years ended 30 June 2004, 2003 and 2002, respectively. Certain options were issued under the Employee and Consultants Option Plan 2000 as a reward for services rendered and the remaining options were issued in consideration for services rendered to the Company. Under A-GAAP, no compensation cost has been recognised in respect of the share options issued by the Company. Under US GAAP, the options issued to the outside consultants are accounted for under SFAS 123 and EITF 96-18. Accordingly, the Company has calculated compensation cost based on the estimated fair value of the options measured on the date the services were completed by the respective consultants, using the Black-Scholes model with the following weighted average assumptions:
o risk-free interest rate of 5.50% for 2004, 4.47% for 2003 and 5.48% for 2002;
o no dividends;
o expected volatility of 82% for 2004, 48% for 2003 and 25% for 2002; and
o expected life of two years for 2004, two years for 2003 and three years for 2002.
The compensation cost is charged to operations ratably over the vesting period.
Options issued to employees for services rendered
As disclosed in Note 11(c), the Company issued 264,667 and 158,274 share options to employees under the Employee and Consultants Option Plan 2000 as a reward for services rendered to the Company during the years ended 30 June 2004 and 2003 respectively. Under A-GAAP, no compensation cost has been recognised in respect of the share options issued by the Company. Under US GAAP, the Company has elected to account for the issuance of share options to the employees in accordance with Accounting Principles Board Opinion No. 25: Accounting for Stock Issued to Employees and related interpretations ("APB 25"). Under APB 25, compensation cost is recognised to the extent that the quoted market price of the stock exceeds the exercise price of the options at the grant date, and is charged to earnings ratably over the vesting period.
PRANA BIOTECHNOLOGY LIMITED
(A Development Stage Enterprise)
25 RECONCILIATION TO US GAAP continued
Options issued to underwriters in connection with subscription of listed options
As disclosed in Note 11(c), the Company issued 55,000 share options to underwriters on 1 March 2003 in connection with the underwriters' subscription of the remaining balance of the listed options with an expiration date of 1 March 2003 that had not been exercised by existing option holders. Under A-GAAP, no compensation cost has been recognised in respect of the share options issued by the Company. Under US GAAP, the options issued to the underwriters are accounted for under SFAS 123. Accordingly, the Company has calculated compensation cost based on the estimated fair value of the options measured on 1 March 2003. Because the options are exercisable only on the date of grant, the Company estimated the fair value of the options based on the intrinsic value of the options.
Shares issued to consultants and directors for services rendered
As disclosed in Note 11(b), the Company issued 1,119,225, 146,969 and 191,794 shares to outside consultants in consideration for services rendered to the Company during the years ended 30 June 2004, 2003, and 2002, respectively. The Company also issued 249,999 shares to directors in consideration for services rendered to the Company during the year ended 30 June 2004. Under A-GAAP, the Company recognised compensation expense based on the director's valuation of the shares issued. Under US GAAP, the shares issued to the outside consultants and directors are accounted for under SFAS 123 and EITF 96-18. Accordingly, compensation expense is based on the quoted market price of the shares measured on the date the services were completed. The resulting difference between the A-GAAP compensation expense and the US GAAP compensation expense is recognised in the reconciliation.
b. Intangible assets
Under A-GAAP, the Company capitalised costs associated with the acquisition and development of core intellectual property (primarily patents) until December 1999. Such costs are amortised on a straight-line basis over the estimated useful lives of 15 years. In December 1999, the directors revalued the intangible assets upwards by $14,661,942 and recorded the revaluation in the asset revaluation reserve in equity. The increased asset value resulted in additional amortisation for periods subsequent to the revaluation. All costs associated with the acquisition and development of core intellectual property incurred subsequent to the December 1999 revaluation are expensed as incurred under A-GAAP.
For US GAAP purposes, the Company capitalises costs associated with the acquisition of patents and other core intellectual property, legal costs incurred in connection with successful patent defences and costs associated with successful patent applications. Such costs are amortised on a straight-line basis over the estimated useful lives of 15 years. All other costs associated with patents and other core intellectual property are expensed as incurred. Upward revaluations of intangible assets are not allowed under US GAAP (except in connection with a purchase business combination).
c. Deferred tax effect of US GAAP adjustments
The deferred tax effect of US GAAP adjustments is nil because it is more likely than not that the net deferred tax asset will not be realized, and accordingly, the Company has recorded a 100% valuation allowance against the net deferred tax asset.
d. Statement of cash flows
The presentation of the statements of cash flows in accordance with A-GAAP differs from that required in accordance with SFAS No. 95: Statement of Cash Flows ("SFAS 95") under US GAAP. Under A-GAAP, cash held in term deposits with original maturities of less than one year is classified as cash. Under US GAAP, term deposits with original maturities greater than 90 days do not qualify as cash or cash equivalents; rather, such term deposits are classified as current investments. Accordingly, the net change in term deposits with original maturities greater than 90 days is classified as a component of cash flows from investing activities for US GAAP purposes.
The following is a reconciliation of the Statements of Cash Flows had the statement been prepared using the presentation requirements of SFAS 95 (A GAAP measurement principles have been adopted):
PRANA BIOTECHNOLOGY LIMITED
(A Development Stage Enterprise)
25 RECONCILIATION TO US GAAP continued
Years Ended 30 June
------------------------------------------------
2004 2003 2002
Net cash flows used in operating
activities, as reported (5,347,420) (3,590,613) (3,799,515)
=========== =========== ===========
Net cash flows used in investing
activities, as reported (134,362) (87,929) (50,689)
Less: Term deposits with original
maturities greater than 90 days (1,630,000) -- --
----------- ----------- -----------
Net cash outflows used in investing
activities, as adjusted (1,764,362) (87,929) (50,689)
=========== =========== ===========
Net cash flows from financing
activities, as reported 31,781,165 3,569,792 580,345
=========== =========== ===========
Net increase/(decrease) in cash held,
as adjusted 24,669,383 (108,750) (3,269,859)
Opening cash brought forward 3,463,783 3,585,014 6,854,873
Exchange rate adjustments on the
balance of cash held in foreign
currencies (182,768) (12,481) --
Cash at end of year, as reported 29,580,398 3,463,783 3,585,014
Less: Term deposits with original
maturities greater than 90 days (1,630,000) -- --
----------- ----------- -----------
Cash at end of year, as adjusted 27,950,398 3,463,783 3,585,014
=========== =========== ===========
|
e. Other
Under A-GAAP, cash held in short term deposits with original maturities of less than one year is classified as a component of cash. Under US GAAP, only term deposits with original maturities of 90 days or less qualify as cash equivalents.
Under A-GAAP, interest income is reported as a component of revenue from ordinary activities. Under US GAAP, interest income is reported as a component of non-operating income.
Under A-GAAP, amortisation of intangible assets used in research and development projects is reported in depreciation and amortisation expense. Under US GAAP, amortisation of intangible assets used in research and development projects is reported in research and development expense.
PRANA BIOTECHNOLOGY LIMITED
(A Development Stage Enterprise)
25 RECONCILIATION TO US GAAP continued
Under A-GAAP, other expenses from ordinary activities consist of the following:
Years Ended 30 June
--------------------------------------
2004 2003 2002
-------- ------- -------
Travel 284,105 295,257 78,483
Insurance 53,451 62,403 41,158
Marketing 230,459 198,832 71,690
Office overhead costs 190,488 198,704 139,404
Foreign exchange loss 182,768 12,481 --
Other 269 13,397 5,696
--------------------------------------
Total 941,540 781,074 336,431
======================================
|
Under US GAAP, travel, insurance, marketing and office overhead costs are classified as general and administrative costs.
SIGNATURES
The Registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.
Prana Biotechnology Limited
By: /s/Jonas V. Alsenas
---------------------------
Dr. Jonas V. Alsenas
Chief Executive Officer
Dated: September 24, 2004
|
EXHIBIT 4.6
Second Amendment to Exchange License Agreement, dated January 1st 2001 ("2001 License Agreement") between The General Hospital Corporation ("General") and Prana Biotechnology Limited ("Prana")
Whereas General has exclusively licensed General's rights in Patent Rights and non-exclusively licensed General Materials and Research Information to Prana, according to the terms of the 2001 License Agreement; and
Whereas General and Prana have initially amended the 2001 License Agreement, as per the terms of an August 6th 2001 Variation Agreement ("Variation Agreement"), between the parties; and
Whereas, as of September 27th 2001, Prana, on behalf of Prana, General and Drs. Ashley Bush and Rudolph Tanzi, has been engaged in an Inventorship Dispute ("Dispute") versus P.N. Gerolymatos, Athens, Greece ("Gerolymatos") in relation to the correct inventorship of issued US patents 6,001,852 and 5,994,323; and
Whereas Prana, General and Gerolymatos have agreed to resolve the Dispute as per the terms of the 2004 Base Term Sheet between Prana, General and Gerolymatos ("2004 Agreement") and pursuant to Article X of the 2004 Agreement, MGH will agree to a third party analysis of General's rights, if any, to issued US patents 6,001,852 and 5,994,323 ("Analysis");
Now Therefor, in consideration of General's participation in the 2004 Agreement, the Parties hereby agree to amend and clarify the 2001 License Agreement as follows:
(1) Prana will pay General the royalties as provided in Article 7 of the 2001 License Agreement so long as Products are sold and regardless of whether Dr. Ashley Bush or Dr. Rudolph Tanzi are named inventors pursuant to the Analysis. This royalty payment by Prana to General will survive any cessation or abandonment by General of General's Patent Rights that may occur as a result of the Analysis.
(2) That in the event the Analysis determines that neither Gerolymatos nor Mikis Xilinas are inventors, then Prana will not deduct fifty percent (50%) of any royalties due to General in any Accounting Period, as contemplated under Article 7.12 of the 2001 License Agreement.
All other terms and conditions of the 2001 License Agreement and Variation Agreement remain in effect. The effective date of this Second Amendment is March 15th 2004.
Signed on behalf of GENERAL Signed on behalf of PRANA By: Frances Toneguzzo, Ph.D. By: Mr. Geoffrey Kempler Signature: /s/ Frances Toneguzzo Signature: /s/ Geoffrey Kempler Title: Director, C.S.R.L Title: Executive Chairman Date: 3/17/04 Date: March 18, 2004 |
EXHIBIT 4.11
Project No. BIF02806
[LOGO] AusIndustry(TM)
--------------------
Industry
--------------------
--------------------
Research and
--------------------
--------------------
Development
-------------------- Biotechnology Innovation Fund
-------------------- Grant Deed
Board
-------------------- Dated: 25 August 2003
========================================
BETWEEN
The Industry Research and
Development Board on behalf of
the Commonwealth of Australia
- ABN 51 835 430 479 001
- postal address Manager
Biotechnology Innovation Fund Program
AusIndustry
GPO BOX 9839
CANBERRA CITY ACT 2601
AND
The Grantee
Prana Biotechnology Limited
- ABN 37080699065
- ACN 080 699 065
- postal address P.O. Box 46
ARMADALE VIC 3143
Level 1
- business address 100 Dorcas Street
South Melbourne VIC 3205
Biotechnology Innovation Fund Grant Deed Page 1
|
Version Number 3: Release Date 25 October 2002 Author: Biotechnology Innovation Fund Program Section
Table of contents
Clause Page
1 Interpretation 3
2 Warranties 5
3 Payment of Grant 7
4 Conduct of Project 8
5 Evaluation 11
6 Commercialisation 11
7 Other Financial Assistance 11
8 Acquittal of Grant 12
9 Termination 12
10 No Dealing With Grantee's rights 13
11 Acknowledgment and Public Statements 13
12 Regulatory and ethical approvals 13
13 Changes to the law or government policy 14
14 Goods and Services tax 15
15 Notices 16
16 General 16
|
The Schedule
Biotechnology Innovation Fund Grant Deed Page 2 Version Number 3: Release Date 25 October 2002 Author: Biotechnology Innovation Fund Program Section |
-------------------------------------------------------------------------------- |
Operative provisions
1.1 Unless the contrary intention appears:
Application means the application submitted by the Grantee in relation to the Project referred to in item 2 of the schedule;
Biotechnology means biotechnology of a kind set out in a Guideline or Determination;
Biotechnology Innovation Fund means the merit-based program designed to encourage Australian industry to commercialise promising biotechnology developed in Australia and to assist in attracting private sector investments in biotechnology;
Board means the Industry, Research and Development Board established by section 6 of the Industry Research and Development Act 1986;
Business Day means a day other than a Saturday, Sunday or Public Holiday in the Australian Capital Territory;
Budget has the meaning given in clause 4.12, and Budgeted has a corresponding meaning;
Commencement Date means the commencement date for the Project set out in item 3(a) of the schedule;
Completion Date means the completion date for the Project set out in item 3(b) of the schedule;
Control has the meaning given by section 50AA of the Corporations Act 2001;
Deal With means:
(a) sell, transfer, novate, declare a trust over, grant or create an Encumbrance or otherwise dispose of or procure or effect the disposal of, any interest or right; or
(b) effect a change in the beneficial interest in or beneficial unit holding under a trust which has an interest or right;
Department means the Department of Industry Tourism and Resources or any successor;
Determination means a determination of the Board under the Directions;
Directions means the Biotechnology Innovation Fund Directions No. 1 of 2002,
Eligible Expenditure means expenditure determined by the Commonwealth to be expenditure on the Project that is:
Biotechnology Innovation Fund Grant Deed Page 3 Version Number 3: Release Date 25 October 2002 Author: Biotechnology Innovation Fund Program Section |
(a) eligible expenditure under the Directions;
(b) incurred in the Project Period, and
(c) paid for by the Grantee no later than three months after the Completion Date;
Encumbrance means a security interest or any other legal or equitable interest or right which is either imposed by law or which is given to any person, over property or rights under a contract;
Floating Charge has the meaning given by section 9 of the Corporations Act 2001;
Financial Year means the 12 month period beginning 1 July of one year and ending 30 June of the following year.
Gene Technology Regulator means the Gene Technology Regulator established by section 26 of the Gene Technology Act 2000;
Grant means the amount set out in item 4 of the schedule;
Grant Percentage means the percentage of Eligible Expenditure to be paid to the Grantee as the Grant, as set out in item 5 of the schedule;
GST has the same meaning as in the A New Tax System (Goods and Services Tax) Act 1999;
Guideline means a Guideline under the Directions;
Input tax credit has the same meaning as in the A New Tax System (Goods and Services Tax) Act 1999;
Insolvent means being an insolvent under administration or insolvent (each as defined in the Corporations Act 2001), or having a controller (as defined in the Corporations Act) appointed, or being in receivership, in receivership and management, in liquidation, in provisional liquidation, under administration, wound up, subject to any arrangement, assignment or composition, protected from creditors under any statute, dissolved (other than to carry out a reconstruction while solvent) or being otherwise unable to pay debts when they fall due or having something with the same or a similar effect happen under the laws of any jurisdiction.
Intellectual Property means all statutory and other proprietary rights in respect of trade marks, patents, circuit layouts, copyrights, designs, moral rights, confidential information, expertise, knowledge, skills, techniques, methods, procedures, ideas and concepts, plant varieties and all other rights with respect to intellectual property as defined in Article 2 of the July 1967 Convention Establishing the World Intellectual Property Organisation;
National Health and Medical Research Council means the National Health and Medical Research Council established by section 6 of the National Health and Medical Research Council Act 1992;
Biotechnology Innovation Fund Grant Deed Page 4 Version Number 3: Release Date 25 October 2002 Author: Biotechnology Innovation Fund Program Section
Performance Milestone means a performance milestone sat out in item 8 of the schedule;
Planned Outcomes means the planned outcomes set out in item 7 of the schedule;
Program Funding means the funding made available by the Parliament of the Commonwealth of Australia for the Biotechnology Innovation Fund in any given Financial Year, being the funding specified in the Portfolio Budget Statement (as varied by any Portfolio Additional Estimates Statement) for that year.
Project means the project described in items 1, 7 and 8 of the schedule;
Project Intellectual Property means Intellectual Property created in the course of the Project including improvements, inventions and discoveries arising out of the conduct of the Project;
Project Period, means the period beginning on the Commencement Date and ending on the Completion Date;
Proof of Concept means work or activities, necessary to establish the commercial and technical viability of a process or product, of a kind set out in a Guideline or Determination;
Quarter means the period 1 July to 30 September, 1 October to 31 December, 1 January to 31 March or 1 April to 30 June in a Financial Year; and
Retention Amount means the retention amount set out in item 6 of the schedule.
1.2 Unless the contrary intention appears:
(a) a person includes a firm, a body corporate, an unincorporated association or an authority;
(b) the singular includes the plural and vice versa; and
(c) a reference to a statute, ordinance, code or other law includes regulations and other instruments made under it and consolidations, amendments, re-enactments or replacements of any of them.
1.3 Headings are inserted for convenience of reference only and are not to be used in the interpretation of this deed.
2.1 The Grantee warrants that as at the date of this deed and on each day during the term of this deed:
(a) all information that the Grantee provides to the Commonwealth, including the Application, from time to time is true and correct;
Biotechnology Innovation Fund Grant Deed Page 5 Version Number 3: Release Date 25 October 2002 Author: Biotechnology Innovation Fund Program Section
(b) the Grantee is registered for GST purposes pursuant to the A New Tax System (Goods and Services Tax) Act 1999 with the Australian Business Number set out in the front page of this deed;
(c) the Project is for:
(i) the commercialisation of Biotechnology; and
(ii) the Proof of Concept stage of development;
(d) the Grantee does not have any interests or obligations that conflict with its interests or obligations under this deed;
(e) the Grantee has and will have, at all times, the Intellectual Property rights and technical information, including designs, specifications, data, drawings, plans, reports, models, prototypes and other things, necessary to carry out the Project and to commercialise the Project's outcome;
(f) the Grantee is not aware of any circumstances which adversely affect or might adversely affect the Grantee's ability to fulfil its obligations under this deed; and
(g) when conducting research using genetic material from humans (including human embryos, stem cells and all other human organs, tissues and cells), animals or plants, and/or undertaking projects involving experimentation in humans (including human embryos, stem cells and all other human organs, tissues and cells) or animals, the Grantee will ensure that those activities:
(i) will have received formal prior approval by a qualified regulatory body(s) or committee(s) as complying with all relevant ethics codes and guidelines adopted by the National Health and Medical Research Council, the office of the Gene Technology Regulator and all other relevant regulatory agencies operating in Australia and any other place in which the research will be conducted, that are applicable during the Project Period; and,
(ii) will comply with all relevant legal requirements of the Commonwealth and any State or Territory of Australia, and of any other place in which the research will be conducted, that are applicable during the Project Period.
2.2 If the Grantee becomes aware of a breach of warranty, the Grantee must immediately notify the Commonwealth of that breach.
2.3 The Commonwealth warrants that as at the date of this deed, and on each day during the term of this deed, the Department is registered for GST purposes pursuant to the A New Tax System (Goods and Services Tax) Act 1999 with the Australian Business Number set out in the front page of this deed.
Biotechnology Innovation Fund Grant Deed Page 6 Version Number 3: Release Date 25 October 2002 Author: Biotechnology Innovation Fund Program Section
3.1 The Commonwealth must make payments of the Grant to the Grantee in accordance with item 10 of the schedule subject to the Commonwealth having sufficient Program Funding available at the time a payment is due to be made to the Grantee, and the other terms of this deed.
3.2 The Grantee must submit a payment request for each payment. The payment request must be in the form of the Report 1 - Payment Request Report, a subsequent payment request report or a progress report in accordance with item 10 of the schedule.
3.3 A payment will be made by electronic transfer to the bank account nominated by the Grantee, within 30 days of receipt of the relevant report.
Amount of payments
3.4 Subject to clause 3.7, each payment (except the second-last payment) will be for an amount determined by the Commonwealth using the formula:
Payment = Grant Percentage x (A + E) - P
Where:
A = actual Eligible Expenditure incurred before the Quarter in which the payment request is made
E = estimated Eligible Expenditure for the Quarter in which the payment request is made
P = payments already made by the Commonwealth under this deed.
Second-last payment and Retention Amount
3.5 Subject to clause 3.7, the second-last payment will be for an amount calculated in accordance with clause 3.4 less the Retention Amount.
3.6 The Commonwealth will pay the Retention Amount within 30 days of the Commonwealth being satisfied that the Grantee has completed the Project, provided all reports and otherwise complied with this deed.
Application of payment formula
3.7 The Commonwealth may in its absolute discretion determine the amount of a payment other than by applying the formula set out in clause 3.4, if the amount so calculated would result in the Grantee receiving in total during a Financial Year more than the amount specified in item 4A of the schedule for that year.
Maximum Commonwealth liability
3.8 The maximum amount the Commonwealth liable to pay to the Grantee under this deed:
Biotechnology Innovation Fund Grant Deed Page 7 Version Number 3: Release Date 25 October 2002 Author: Biotechnology Innovation Fund Program Section |
(a) in any given Financial Year - is the amount specified in item 4A of
the schedule for that year; and
|
(b) in respect of the Project - is the lesser of:
(i) the Grant; or
(ii) the Grant Percentage of total Eligible Expenditure incurred by the Grantee on the Project.
Commonwealth rights
3.9 Notwithstanding any other clause in this deed, the Commonwealth is not obliged to make a payment under clause 3.1:
(a) if, in the reasonable opinion of the Commonwealth:
(i) the Grantee has not demonstrated satisfactory progress and expenditure on the Project in accordance with the deed; or
(ii) the Grantee has not complied with all its obligations under this deed; or
(b) if the Grantee becomes Insolvent; or
(c) after the Commonwealth has become entitled to terminate the deed.
3.10 In the last quarter of a Financial Year, the Commonwealth may defer a payment otherwise due in that quarter to the next Financial Year if, in the Commonwealth's opinion, insufficient Program Funding may be available to meet that commitment in the first mentioned Financial Year.
3.11 The Commonwealth's determination as to whether expenditure on the Project is Eligible Expenditure is final and binding on the Grantee.
The Grant to be applied only to Eligible Expenditure
4.1 The Grantee must only use the Grant to pay for Eligible Expenditure.
Matching Funding
4.2 The Grantee must contribute matching funding which, together with payments made by the Commonwealth under this deed, is sufficient to pay for all Eligible Expenditure. Matching funding must not include:
(a) funding obtained by the Grantee under a program administered by the Board or the Department, except under:
(i) the Innovation Investment Fund program administered by the Board under directions given under sections 19 and 20 of the Industry Research and Development Act 1986; or
Biotechnology Innovation Fund Grant Deed Page 8 Version Number 3: Release Date 25 October 2002 Author: Biotechnology Innovation Fund Program Section
(ii) the Pooled Development Funds scheme established under the Pooled Development Funds Act 1992;
(b) funding of a kind that a Guideline or a Determination states is not to be regarded as matching funding; or
(c) non-financial (in-kind) assistance.
4.3 If the Grantee is or may be unable to comply with clause 4.2 it must immediately notify the Commonwealth.
4.4 If the Commonwealth considers in its absolute discretion that the Grantee is or may be unable to comply with clause 4.2, the Commonwealth may terminate this deed under clause 9.1.
Project performance
4.5 The Grantee must conduct the Project in accordance with the schedule and otherwise in accordance with this deed and any applicable law of the Commonwealth or any State or Territory of Australia.
4.6 If the Grantee does not or is unlikely to achieve a Performance Milestone by the due date set out in item 8 of the schedule the Grantee must immediately notify the Commonwealth.
4.7 When notifying the Commonwealth under clause 4.6, the Grantee must specify:
(a) why the Performance Milestone was not or is unlikely to be achieved by the due date;
(b) a proposal demonstrating how the Planned Outcomes of the Project will be achieved;
(c) the planned date for achievement of the Performance Milestone;
(d) the expected effect the delay will have on Project; and
(e) changes to Grantee personnel, if any, having an impact on the matters reported under paragraphs (a) to (d).
4.8 If the Commonwealth considers in its absolute discretion that the failure by the Grantee to achieve a Performance Milestone may compromise the capacity of the Grantee to achieve the Planned Outcomes for the Project the Commonwealth may terminate this deed in accordance with clause 9.1.
Reporting
4.9 The Grantee must give the Commonwealth reports, in form and content satisfactory to the Commonwealth, as set out in item 10 of the schedule.
4.10 The Commonwealth may require the Grantee to have a report audited by a member of the Institute of Chartered Accountants, a member of CPA Australia or a Public Practice Certified Member of the National Institute of
Biotechnology Innovation Fund Grant Deed Page 9 Version Number 3: Release Date 25 October 2002 Author: Biotechnology Innovation Fund Program Section
Accountants, not being an employee, shareholder, director or other officeholder of the Grantee.
4.11 If the form or content of a report is not satisfactory to the Commonwealth, the Commonwealth may by notice to the Grantee require the Grantee to submit a revised report satisfactory to the Commonwealth within 30 days of receipt of the notice.
Budget
4.12 The parties acknowledge and agree that the budget of total planned Eligible Expenditure for the Project (by Financial Year) ("Budget") is set out in item 9 of the schedule. The Commonwealth will use this Budget for planning and administration purposes related to the Biotechnology Innovation Fund.
Variations
4.13 The Grantee may change its work methods and incur Eligible Expenditure as it considers reasonably necesssary to undertake and complete the Project provided it does not materially change the Project.
4.14 If the Grantee wishes to alter a Performance Milestone or the Budget, otherwise materially change the Project, or there is any breach or likely breach of this deed, the Grantee must immediately request the Commonwealth's consent to a variation of this deed.
4.15 A request under clause 4.14 must include a proposal demonstrating how the Planned Outcomes of the Project will be achieved.
Records to be kept
4.16 The Grantee must keep to the Commonwealth's satisfaction all records (including original receipts and invoices) relating to the conduct and management of the Project and commercialisation of its outcomes, necessary to provide a complete, detailed record and explanation of:
(a) expenditure by the Grantee on the Project;
(b) the conduct of the Project and its commercialisation;
(c) any amounts of GST paid by the Grantee in respect of any supply made to the Commonwealth under this deed; and
(d) any other records relating to the Project which are required by the Commonwealth such as the regulatory and ethical approvals addressed in clause 12.
4.17 Those records must be retained by the Grantee during the Project and for 5 years after the Completion Date.
Inspection and audit
4.18 The Commonwealth or its auditor may at reasonable times and on reasonable notice enter the Grantee's premises and inspect the records kept by the
Biotechnology Innovation Fund Grant Deed Page 10 Version Number 3: Release Date 25 October 2002 Author: Biotechnology Innovation Fund Program Section
Grantee, and the progress of the Project, to review the Grantee's compliance with this deed.
4.19 The Grantee must give the Commonwealth and its auditor all necessary facilities and assistance to enable them to conduct a review under clause 4.18.
4.20 The Commonwealth or its auditor may take copies of any records (books, documents, invoices, receipts and any other papers) that the Commonwealth or the auditor considers relevant to the Project.
Affirmative Action
4.21 The Grantee must comply with its obligations, if any, under the Equal Opportunity for Women in the Workplace Act 1999.
5.1 The Grantee must cooperate in any evaluation of the Biotechnology Innovation Fund by the Commonwealth.
5.2 The Grantee must, if requested by the Commonwealth, provide information and completed survey forms relating to the Project and the Biotechnology Innovation Fund during the Project and for 5 years after the Completion Date.
5.3 The Grantee must comply with a request under clause 5.2 within 28 days of receiving the request.
6.1 The Grantee must use its best endeavours to exploit the results of the Project on normal commercial terms and otherwise in a manner that will be for the benefit of the Australian economy within a reasonable time of completion of the Project.
6.2 If, at any time, the Commonwealth is of the opinion that the results of the Project are not being exploited on normal commercial terms or otherwise in a manner that will be for the benefit of the Australian economy, the Commonwealth may by notice to the Grantee require the Grantee to repay some or all of the Grant within 28 days of receipt of the notice.
6.3 For the purposes of this clause 6, result means a result that is capable of being exploited.
7.1 The Grantee must immediately give the Commonwealth details of any financial assistance the Project receives from another Commonwealth, State or Territory government source (other than matching funding described in the Application).
7.2 After taking into account that other financial assistance, the Commonwealth may reduce the Grant by an amount if the Commonwealth considers that the
Biotechnology Innovation Fund Grant Deed Page 11 Version Number 3: Release Date 25 October 2002 Author: Biotechnology Innovation Fund Program Section
Project can proceed (or could have proceeded) satisfactorily without that amount.
8.1 If at any time the total amount paid to the Grantee under this deed exceeds:
(a) the Grant; or
(b) the Grant Percentage of total Eligible Expenditure incurred to date and proposed to be incurred by the Grantee by the end of the current Quarter,
the Grantee must immediately notify the Commonwealth and repay the amount of the excess to the Commonwealth.
8.2 If the Grantee expends any amount of the Grant other than in accordance with this deed:
(a) the Grantee must immediately notify the Commonwealth and repay that amount to the Commonwealth; and
(b) the Commonwealth may by notice require the Grantee to repay all or some of the Grant within 28 days of the notice.
9.1 The Commonwealth may terminate this deed by notice to the Grantee if:
(a) the Grantee is in breach of this deed, that breach is capable of being remedied and the Grantee fails to remedy that breach within 21 days of receipt of a notice from the Commonwealth requiring it to do so (or within any longer period specified in the notice);
(b) the Grantee is in breach of a warranty set out in this deed;
(c) the Grantee is otherwise in breach of this deed; or
(d) the Grantee is unable, or is about to become unable, to pay all of its debts as and when they become due, or goes, or is about to go, into administration or receivership.
9.2 On termination of this deed under clause 9.1
(a) the Commonwealth's obligation to pay any amount of the Grant that is unpaid as at the date of termination ceases;
(b) the Grantee must give the Commonwealth reports as required by the Commonwealth as at the date of termination; and
(c) the Commonwealth may by notice to the Grantee require the Grantee to repay some or all of the Grant within 28 days of receipt by the Grantee of the notice.
Biotechnology Innovation Fund Grant Deed Page 12 Version Number 3: Release Date 25 October 2002 Author: Biotechnology Innovation Fund Program Section
9.3 The Commonwealth may not take action under clause 9.1 for a breach of this deed due to a cause or causes beyond the Grantee's reasonable control which does not continue for more than 6 weeks in the aggregate.
9.4 This deed may be terminated at any time by the written agreement of the parties.
10.1 Unless expressly authorised to do so under this deed, the Grantee must not Deal With its rights under this deed or its interest in the Project Intellectual Property during the course of the Project without the prior written consent of the Commonwealth.
10.2 A change in Control of the Grantee is taken to be Dealing With the Grantee's rights under this deed.
10.3 If the Grantee Deals With its rights under this deed or its interest in the Project Intellectual Property during the course of the Project without the prior written consent of the Commonwealth and the Commonwealth reasonably considers that this event adversely affects or may adversely affect the objectives from time to time of the Biotechnology Innovation Fund, the Commonwealth may terminate this deed under clause 9.1.
10.4 The Commonwealth may impose conditions (a breach of which is a breach of this deed) in giving its consent under clause 10.1, including requiring the Grantee and any other person concerned in a transaction referred to in clause 10.1 to execute all documentation as required by the Commonwealth.
10.5 The giving of a Floating Charge over the assets and undertaking of the Grantee is not to be taken to be a breach of clause 10.1.
11.1 The Grantee must acknowledge the Grant and the Biotechnology Innovation Fund in any public statements about the Project until the Completion Date.
11.2 The Commonwealth may publicise the awarding of the Grant at any time after it is awarded.
11.3 The Commonwealth may include in media releases and general announcements about the Grant and in the Board's annual report:
(a) the name of the Grantee;
(b) the amount of the Grant; and
(c) the title and a brief description of the Project.
12.1 The Grantee must obtain and maintain any necessary legal or ethical approvals in relation to the conduct of the Project.
Biotechnology Innovation Fund Grant Deed Page 13 Version Number 3: Release Date 25 October 2002 Author: Biotechnology Innovation Fund Program Section
12.2 The Commonwealth may give a notice to the Grantee to obtain or restore an approval referred to in clause 12.1 within 28 days, or a further period allowed by the Commonwealth, of receipt of the notice. If the Grantee does not comply with the notice, the Commonwealth may terminate this deed under clause 9.1(c).
12.3 The Grantee expressly acknowledges that the Commonwealth, its employees and agents may make inquiries of the National Health and Medical Research Council, the Gene Technology Regulator or any other relevant regulatory agency within the scope of the warranties in paragraph 2.l(g) of this deed in connection with whether or not the Grantee is complying with those warranties or in connection with any other matter. The Grantee acknowledges that the Commonwealth may act in reliance on any documents or information obtained as a result of those inquiries. The Grantee expressly consents to the Commonwealth, its employees and agents making those inquiries and acting in reliance on any information resulting from those inquiries.
12.4 The Grantee must assist with any inquiry referred to in clause 12.3, including by executing any authority or other document, as reasonably required by the Commonwealth.
13.1 The Grantee acknowledges that either or both of relevant laws and government policies can be amended or changed and that law and/or government policy may change during the life of this deed in a way that is inconsistent with the Commonwealth continuing support for the Project.
13.2 If law and/or government policy changes during the life of this deed in a way that is inconsistent with the Commonwealth continuing support for the Project the Commonwealth may suspend further payments by notice to the Grantee.
13.3 If the Commonwealth gives the Grantee a notice under clause 13.2, the Grantee may propose a variation to the Project that is consistent with law and government policy for the Commonwealth's consideration.
13.4 If the Grantee does not propose a variation to the Project, or the Commonwealth and the Grantee are not able to agree on a variation, within 28 days of receipt of the notice under clause 13.2, or any further period allowed by the Commonwealth, the Commonwealth may terminate this deed by notice to the Grantee.
13.5 Upon receipt of a notice of termination under clause 13.4, the Grantee must take all available steps to minimise loss resulting from the termination.
13.6 Where there has been a termination under clause 13.4, the Commonwealth will be liable only for payment of:
(a) an amount which, in addition to any amounts already paid to the Grantee under this deed, is equal to the Grant Percentage of Eligible Expenditure incurred by the Grantee before termination; and
(b) reasonable costs incurred by the Grantee directly attributable to the termination.
Biotechnology Innovation Fund Grant Deed Page 14 Version Number 3: Release Date 25 October 2002 Author: Biotechnology Innovation Fund Program Section |
13.7 The Grantee is not entitled to payment under clause 13.6 for:
(a) compensation for loss of prospective profits, loss of opportunity or any other indirect or consequential loss; or
(b) an amount which would, in addition to any amounts already paid to the Grantee under this deed, together exceed the Grant.
13.8 On termination under clause 13.4:
(a) the Commonwealth's obligation to pay any amount of the Grant that is unpaid as at the date of termination ceases; and
(b) the Grantee must give the Commonwealth reports as required by the Commonwealth as at the date of termination.
13.9 If as a result of the termination under clause 13.4 the Grantee is wound up, the Commonwealth may, in its absolute discretion, pay the Grantee's reasonable costs of winding up.
14.1 Unless otherwise indicated, all consideration for any supply under this deed is exclusive of any GST imposed in relation to the supply.
14.2 If GST is imposed on any supply made by the Grantee to the Commonwealth under this deed, the Commonwealth must pay the amount imposed to the Grantee in addition to the consideration required under this deed.
14.3 If for any reason the Commonwealth pays to the Grantee an amount under clause 14.2 which is more that the GST imposed on the supply, the Grantee must repay the excess to the Commonwealth on demand, or the Commonwealth may set-off the excess against any other amounts due to the Grantee.
14.4 The Grantee must comply with Part VB of the Trade Practices Act 1974 in relation to any supply made to the Commonwealth under this deed.
14.5 The Commonwealth is not liable to reimburse the Grantee for any amount in relation to which the Grantee can claim an input tax credit.
14.6 If GST is imposed on any supply made by the Grantee to the Commonwealth under this deed in return for all or any part of the Grant, the Department may issue a 'recipient created tax invoice' to the Grantee for the supply in question and the Grantee must not issue a tax invoice for that supply.
14.7 If for any reason the Grantee or the Department ceases to be registered for GST purposes, becomes aware of any reason why its registration may be cancelled, or ceases to satisfy any of the requirements of public ruling GSTR 2000/10, it must immediately notify the other party.
14.8 If the Grantee is of the opinion that it is a 'government related entity' and that the Grant is 'specifically covered by an appropriation under an Australian law' for the purposes of section 9-15(3)(c) of the A New Tax System (Goods
Biotechnology Innovation Fund Grant Deed Page 15 Version Number 3: Release Date 25 October 2002 Author: Biotechnology Innovation Fund Program Section
and Services Tax) Act 1999, the Grantee must immediately notify the Department and provide materials supporting that opinion.
15.1 Any notice, request, approval, consent or other communication to be given under this deed must be in writing and addressed and signed as the case may be, as specified in item 11 of the schedule.
15.2 A notice, request, approval, consent or other communication must be delivered by hand, sent by prepaid post, transmitted electronically or transmitted by facsimile.
15.3 A notice, request approval, consent or other communication will be taken to be received:
(a) if delivered by hand, upon delivery;
(b) if sent by pre-paid ordinary post within Australia, upon the expiration of 2 Business Days after the date on which it was sent; and
(c) if transmitted electronically or by facsimile, upon receipt by the sender of an electronic or facsimile acknowledgment that the communication has been properly transmitted to the recipient.
16.1 A provision of, or a right created under, this deed may not be:
(a) waived except in writing signed by the party granting the waiver; or
(b) varied except in writing signed by the parties.
16.2 This deed and the transactions contemplated by this deed are governed by the laws in force the Australian Capital Territory.
16.3 Each party irrevocably and unconditionally submits to the non-exclusive jurisdiction of the courts of the Australian Capital Territory and courts of appeal from them for determining any dispute concerning this deed or the transactions contemplated by this deed.
16.4 Each party waives any right it has to object to an action being brought in those courts, including claiming that the action has been brought in an in inconvenient forum or that those courts do not have jurisdiction.
16.5 Obligations under this deed, unless otherwise stated, terminate 5 years after the Completion Date.
16.6 The Grantee must comply with any Special Conditions set out in item 12 of the schedule. If the Special Conditions are inconsistent with the rest of this deed, the Special Conditions will prevail to the extent of the inconsistency.
Biotechnology Innovation Fund Grant Deed Page 16 Version Number 3: Release Date 25 October 2002 Author: Biotechnology Innovation Fund Program Section |
EXECUTED as a deed
Date of deed: 25 August 2003
)
Commonwealth of Australia )
)
SIGNED for and on behalf of the )
COMMONWEALTH OF AUSTRALIA by )
)
)
PAM O'BRIEN ) /s/ Pam O'Brien
----------------------------------- ) --------------------------------
a delegate of the INDUSTRY RESEARCH )
AND DEVELOPMENT BOARD in the )
presence of: )
)
)
/s/ Craig Hildebrand )
----------------------------------- )
Signature of witness )
CRAIG HILDEBRAND
-----------------------------------
Name of witness (block letters)
Biotechnology Innovation Fund Grant Deed Page 17
|
Version Number 3: Release Date 25 October 2002 Author: Biotechnology Innovation Fund Program Section
Grantee
The Grantee accepts the terms and
conditions of this deed. [THE COMMON
SEAL OF PRANA
THE COMMON SEAL of ) BIOTECHNOLOGY
) LTD ACN
Prana Biotechnology Limited ) 080 699 065]
)
is duly affixed by the authority of its directors )
in the presence of ) /s/ Richard Revelins
|
) --------------------------- ) Signature of Director/
/s/ Geoffrey Kempler ) Secretary
--------------------------------- )
Signature of Director )
) RICHARD REVELINS
) ---------------------------
GEOFFREY KEMPLER ) Name of Director/Secretary
--------------------------------- ) (block letters)
Name of Director (block letters) )
|
Biotechnology Innovation Fund Grant Deed Page 18 Version Number 3: Release Date 25 October 2002 Author: Biotechnology Innovation Fund Program Section |
The Schedule
--------------------------------------------------------------------------------
1 Project Title (and reference number) BIF02806
Immunotherapy for Alzheimer's disease.
2 Application made 12 February 2003
3 Project Period
(a) Commencement Date: 1 August 2003
(b) Completion Date: 31 January 2005
4 Grant A maximum amount of $227,252
4A Maximum annual payments of Grant
-------------------------------------
Financial Year Amount ($)
-------------------------------------
2003/04 136,316
-------------------------------------
2004/05 90,936
-------------------------------------
5 Grant Percentage 50%
6 Retention Amount (clause 3.5) $11,363
|
7 Project Description and Planned Outcomes (clause 4)
The aim of the project is to establish that the dityrosine cross-link in Abeta can be used as a specific target for immunotherapy in Alzheimer's Disease. The project's activities involve:
1. The development of methods for identification and preparation of specific antigens suitable for eliciting an immune response specific for oxidatively modified toxic species of Abeta.
2. Demonstration that 'active' immunisation with a dityrosine containing fragment of Abeta in an Alzheimer's Disease animal model can reduce plaque burden and Abeta accumulation.
3. Demonstration that monoclonal antibodies against the 'specific antigen' have passive immunity in mice and may be used as diagnostic reagents.
Biotechnology Innovation Fund Grant Deed Page 19 Version Number 3: Release Date 25 October 2002 Author: Biotechnology Innovation Fund Program Section
8 Performancc Milestones and Planned Achievement Dates (clause 4)
----------------------------------------------------------------------------
Major Milestone Expected Achievement
Date
----------------------------------------------------------------------------
1 Six suitable Abeta fragments identified. 29 February 2004
----------------------------------------------------------------------------
2 Candidate Abeta fragments ligated with the 31 July 2004
T-cell epitope and adjuvant.
----------------------------------------------------------------------------
3 Antibodies generated recognising DT-Abeta in 30 November 2004
vitro and in PM tissue.
----------------------------------------------------------------------------
4 Immune response generated in transgenic 30 November 2004
mice.
----------------------------------------------------------------------------
5 Abeta deposition prevented or reduced in 31 December 2004
transgenic mice.
----------------------------------------------------------------------------
6 Generation of monoclonal antibodies which 31 January 2005
recognise the specific antigen.
----------------------------------------------------------------------------
7 Attenuation of amyloid pathalogy in 31 January 2005
immunised transgenic mice.
----------------------------------------------------------------------------
|
9 Budget of Eligible Expenditure by Financial Year
-------------------------------------------------
Financial Year Eligible Expenditure $
-------------------------------------------------
2003/04 271,632
-------------------------------------------------
2004/05 181,872
-------------------------------------------------
TOTAL 454,504
-------------------------------------------------
10 Payments and Reports
--------------------------------------------------------------------------------
Report or Payment Due Reporting Period
--------------------------------------------------------------------------------
Progress Report 28 October 2003 1 August 2003 to 30 September 2003
--------------------------------------------------------------------------------
Payment request 28 January 2004 1 October 2003 to 31 December 2003
--------------------------------------------------------------------------------
Progress report 28 April 2004 1 October 2003 to 31 March 2004
--------------------------------------------------------------------------------
Payment Request 28 July 2004 1 April 2004 to 30 June 2004
--------------------------------------------------------------------------------
Progress Report 28 October 2004 1 April 2004 to 30 September 2004
--------------------------------------------------------------------------------
Payment Request 28 January 2005 1 October 2004 to 31 December 2004
--------------------------------------------------------------------------------
Find Report and Audited 1 April 2005 1 August 2003 to 31 January 2005
Financial Report
--------------------------------------------------------------------------------
|
* in form and content satisfactory to the Commonwealth
Biotechnology Innovation Fund Grant Deed Page 20 Version Number 3: Release Date 25 October 2002 Author: Biotechnology Innovation Fund Program Section |
What payment requests and reports must contain
1. Report 1 - Payment Request Report must include:
(a) the total of actual Eligible Expenditure incurred before the Quarter in which the initial payment request is made;
(b) an estimate of Eligible Expenditure expected to be incurred in the Quarter in which the initial payment request is made;
(c) a declaration by the Grantee that it is not aware of any reason the Commonwealth would be entitled not to make the next payment; and
(d) a declaration whether or not the Grantee has incurred, or is likely to incur, a total amount of Eligible Expenditure during the current financia1 year that is less than 90% or more than 110% of the amount in the Budget for that financial year.
2. Subsequent Payment request reports must include:
(a) the total of actual Eligible Expenditure incurred from the Commencement Date until the end of the last completed Quarter;
(b) the total actual Eligible Expenditure incurred during the last completed Quarter;
(c) an estimate of Eligible Expenditure expected to be incurred in the Quarter in which the payment request report is submitted;
(d) a declaration by the Grantee that it is not aware of any reason the Commonwealth would be entitled not to make the next payment; and
(e) a declaration whether or not the Grantee has incurred, or is likely to incur, a total amount of Eligible Expenditure during the current financial year that is less than 90% or more than 110% of the amount in the Budget for that financial year.
3. Project Progress Reports must include:
(a) textual commentary on progress to date, and progress against Performance Milestones;
(b) a financial acquittal of expenditure of Grant payments for the last two completed Quarters; and
(c) an estimate of Eligible Expenditure expected to be incurred in the Quarter in which the project progress request report is submitted;
(d) a declaration by the Grantee that it is not aware of any reason the Commonwealth would be entitled not to make the next payment; and
(e) a declaration whether or not the Grantee has incurred, or is likely to incur, a total amount of Eligible Expenditure during the current financial year that is less than 90% or more than 110% of the amount in the Budget for that financial year.
Biotechnology Innovation Fund Grant Deed Page 21 Version Number 3: Release Date 25 October 2002 Author: Biotechnology Innovation Fund Program Section
4. The Final and Audited Financial Report must include:
(a) a brief report on the project as a whole and progress made towards the Planned Outcomes (eg, milestones achieved, what progress was made towards Proof of Concept and what commercialisation avenues seem to exist at the end of the project);
(b) an audited financial statement that acquits all expenditure of Grant payments.
Reports must conform with the requirements in the Project Reporting Guide supplied to the Grantee by the Commonwealth, as varied from time to time by the Commonwealth and notified to the Grantee.
Unless the Grantee is otherwise notified by the Commonwealth, the Grantee must give the Commonwealth post-project reports 1, 3 and 5 years after the Completion Date, in the format supplied by the Commonwealth at those times.
11 Notices (clause 15)
Notices must be addressed as follows:
11.1 if given to the Commonwealth, addressed and forwarded to the State Manager, AusIndustry Victoria, Department of Industry, Tourism and Resources for the attention of an AusIndustry Customer Service Manager at the following address:
Address: Level 9, 161 Collins Street, Melbourne 3000
Facsimile No: 03 9268 7599
Email address: aivic@industry.gov.au
or as otherwise notified in writing by an AusIndustry Customer Service Manager;
and
11.2 if given by the Commonwealth, signed by a member of staff assisting the Industry Research and Development Board and forwarded to the Grantee at the following address:
Mr P Hains
Financial Controlled/Accountant
Prana Biotechnology Limited
PO Box 46
Armadale VIC 3135
or as otherwise notified in writing by the Grantee.
12 Special Conditions
Nil.
Biotechnology Innovation Fund Grant Deed Page 22 Version Number 3: Release Date 25 October 2002 Author: Biotechnology Innovation Fund Program Section
Exhibit 4.12
[LOGO] AusIndustry(TM)
R&D Start Program Grant Agreement
Commonwealth of Australia acting
through the Industry Research and
Development Board
ABN 51 835 430 479 001
(Department of Industry, Tourism and
Resources)
Postal address Department of Industry, Tourism and Resources
GPO Box 85A
MELBOURNE VIC 3001
--------------------------------------------------------------------------------
The Grantee
Prana Biotechnology Limited
- ABN 37080699065
- ACN 080 699 065
- postal address Suite 2
1233 High street
ARMADALE VIC 3143
- business address Level 1
100 Dorcas Street
South Melbourne VIC 3205
--------------------------------------------------------------------------------
|
R&D Start Grant Agreement
Particular Conditions 1 SME Agreement Version 7
Version 7.2 - Release Date December 2002
Author: R&D Start Program Management
Operative provisions
1. This Grant is made to the Grantee in respect of the Project by the Industry Research and Development Board on behalf of the Commonwealth to the Grantee under the R&D Start Program.
2. The Grant is made pursuant to the Industry Research and Development Act 1986 and the relevant Ministerial Directions issued under sections 19 and 20 of that Act.
3. The Grant is made on the terms and conditions of the Grant Agreement, which comprises the General Conditions (version 7.2) and the Particular Conditions (including the schedule).
4. The Grantee acknowledges that it has received and read a copy of the General Conditions (version 7-2), and agrees that the terms and conditions of the General Conditions form part of the Grant Agreement.
5. Terms defined in the General Conditions (version 7.2) have the same meaning in the Particular Conditions.
6. If there is an inconsistency between the Particular Conditions and the General Conditions (version 7.2), the Particular Conditions prevail to the extent of the inconsistency.
R&D Start Grant Agreement
Particular Conditions 2 SME Agreement Version 7
Version 7.2 - Release Date December 2002
Author: R&D Start Program Management
--------------------------------------------------------------------------------
Acceptance of terms
--------------------------------------------------------------------------------
EXECUTED as a deed )
)
Date of deed: )
)
Ensure the applicant does not date the )
Deed, this is done by the )
Commonwealth )
Commonwealth of Australia )
)
SIGNED for and on behalf of the )
COMMONWEALTH OF AUSTRALIA by )
)
a delegate of the INDUSTRY RESEARCH )
AND DEVELOPMENT BOARD in the )
presence of: )
)
------------------------------------- )
Signature of witness )
) [SEAL]
------------------------------------- )
Name of witness (block letters) ) ----------------------------------
|
This signature block is for customers that have a Common Seal. Please delete if not necessary
Grantee
The terms and conditions pursuant to which the Grant is made are hereby accepted by the Grantee.
)
THE COMMON SEAL of )
Prana Biotechnology Limited )
is affixed in the presence of: )
)
)
/s/ Geoffrey Kempler ) /s/ George Mihaly
------------------------------------- ) ---------------------------------
Signature of director ) Signature of director/secretary
)
)
GEOFFREY KEMPLER ) GEORGE MIHALY
------------------------------------- ) ---------------------------------
Name of director (block letters) ) Name of director/secretary (block
) letters)
)
)
R&D Start Grant Agreement
Particular Conditions 3 SME Agreement Version 7
|
Version 7.2 - Release Date December 2002 Author: R&D Start Program Management
1 Project Title MPAC therapies for Alzheimer's disease.
2 Project Reference Number GRA02960
3 Project Duration
(a) Commencement Date: 1 September 2003
(b) Completion Date: 31 August 2005
4 Grant A maximum amount of $1,359,810
5 Grant Percentage of Eligible
Expenditure 50%
6 Interest Rates 5.65% per annum
7 Project Planned Eligible Expenditure by Financial Year
--------------------------------------------------------------------------
Head of Estimated Expenditure $ Total $
Expenditure
--------------------------------------------------------------------------
2002/03 2003/04 2004/05 2005/06
--------------------------------------------------------------------------
R&D Salary NIL 32,000 39,936 6,912 78,848
Expenditure
--------------------------------------------------------------------------
Contract NIL 813,605 1,401,760 289,256 2,504,621
Expenditure
--------------------------------------------------------------------------
Plant NIL NIL NIL NIL NIL
Expenditure
--------------------------------------------------------------------------
Prototype NIL NIL NIL NLL NIL
Expenditure
--------------------------------------------------------------------------
Other NIL 51,625 76,943 7,578 136,151
Expenditure
--------------------------------------------------------------------------
Project Eligible NIL 897,230 1,518,644 303,746 2,719,620
Expenditure
--------------------------------------------------------------------------
Annual Cap NIL 448,615 759,322 151,873 1,359,810
Amount
|
8 Initial Payment $177,939
R&D Start Grant Agreement
Particular Conditions 4
Version 7.2 - Release Date December 2002
Author: R&D Start Program Management
9 Project Description and Planned Outcomes
To progress the lead MPAC compound PBT-2, developed in R&D Start Project GRA01809, through pre clinical and clinical phase 1 trials for the Alzheimer's Disease.
10 Performance Milestones and Planned Achievement Dates
--------------------------------------------------------------------------
Major Milestone Expected Achievement
Date
--------------------------------------------------------------------------
1 Completion of preclinical studies of lead MPAC for 30 September 2004
Alzheimer's Disease.
--------------------------------------------------------------------------
2 Completion of Phase 1 clinical studies of MPAC's 31 August 2005
for Alzheimer's Disease.
--------------------------------------------------------------------------
11 Retention Amount $67,991
12 Reports
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-------------------------------------------------------------------------------------
Review Type Due Date Report Period Audit
Report
Y/N
-------------------------------------------------------------------------------------
Progress 28 January 2004 28 November 2003 to 31 December 2003
-------------------------------------------------------------------------------------
Progress 28 April 2004 1 January 2004 to 31 March 2004
-------------------------------------------------------------------------------------
Progress 28 July 2004 1 April 2004 to 30 June 2004
-------------------------------------------------------------------------------------
Progress 28 October 2004 1 July 2004 to 30 September 2004 Y
-------------------------------------------------------------------------------------
Progress 28 January 2005 1 October 2004 to 31 December 2004
-------------------------------------------------------------------------------------
Progress 28 April 2005 1 January 2005 to 31 March 2005
-------------------------------------------------------------------------------------
Progress 28 July 2005 1 April 2005 to 30 June 2005
-------------------------------------------------------------------------------------
Final 28 September 2005 1 July 2005 to 31 August 2005 Y
-------------------------------------------------------------------------------------
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Reports must conform with the requirements in the Project Reporting Guide supplied to the Grantee by the Commonwealth, as varied from time to time by the Commonwealth and notified to the Grantee.
Unless the. Grantee is otherwise notified by the Commonwealth, commercialisation reports will be required 1, 3 and 5 years after completion of the Project, in the format supplied by the Commonwealth at those times.
13 Notices
Notices must be addressed as follows:
a) if given to the Commonwealth, addressed and forwarded to the Director, AusIndustry State Office, Department of Industry, Tourism and Resources for the attention of an AusIndustry Customer Service Manager at the following address:
R&D Start Grant Agreement
Particular Conditions 5 SME Agreement Version 7
Version 7.2 - Release Date December 2002
Author: R&D Start Program Management
Address: GPO Box 85A
Melbourne 3001 VICTORIA
Facsimile No: 03 9268 7599
|
or as otherwise notified in writing by an AusIndustry Customer Service Manager; and
b) if given by the Commonwealth, signed by an authorised delegate of the Industry Research and Development Board and forwarded to the Grantee at the following address:
Prana Biotechnology Limited
Mr R Murdoch
Chief Operating Officer
Level 1, 100 Dorcas Street
South Melbourne VIC 3205
or as otherwise notified in writing by the Grantee.
14 Special Conditions
1. Prana Biotechnology providing satisfactory documentary evidence of its ability to meet its share of project costs beyond June 2004
2. Prana Biotechnology Limited demonstrating the successful completion of preclinical evaluation studies in Alzheimer's Disease as noted in major activities 1 and 2.
R&D Start Grant Agreement
Particular Conditions 6 SME Agreement Version 7
Version 7.2 - Release Date December 2002
Author: R&D Start Program Management
NATIONAL BENEFIT INDICATORS - COMMERCIALISATION
The Industry Research and Development (IR&D) Board understands the increasing global nature of business and the need for innovative companies to respond flexibly to market needs. For example, while the IR&D Board is keen to support projects which involve manufacturing or production in Australia, it accepts that there will be instances where Australian manufacture could limit the commercialisation prospects of intellectual property developed with its grant funding. This does dot remove the necessity for the commercialisation of project outcomes to provide national benefits,
Set out below are the indicators by which the IR&D Board will assess the level of national benefit contribution to Australia and the Australian economy from the commercialisation of R&D Start projects where commercialisation will not take place in Australia:
o the commercialisation plan includes Australia being maintained as the home base far future R&D, manufacture or product development;
o the ongoing development of the commercial outcomes, (product, process or service), arising from R&D activities involves interactions with other firms and research institutions (both domestic and international);
o the commercialisation of the products, processes or services arising from R&D activities result in an increase in the number of employees in the company's operations based in Austrilia;
o as a result of the commercialisation, Australian residents receive commercial compensation through royalties, licence fees, equity, dividends or outright sale; and
o production overseas could be considered reasonable as:
> local production is demonstrated to be uneconomic in terms of cost structure; and/or
> the production or commercialisation requires close physical interaction with overseas companies, customers, suppliers and competitors.
Where a company is proposing to conduct exploitation overseas due to economic viability in terms of cost structure, the Board will consider:
o the level of commitment to retaining or enhancing the companies R&D facilities in Australia;
o the degree of globalisation of the relevant industry sector;
o the relative input costs to production as identified by the company;
o the relative transport costs as identified by the company;
o the relative costs of skilled labour as identified by the company; and
o legal barriers to entry; or
o any other factors the Board considers relevant,
Where the company is proposing to conduct exploitation overseas due to close proximity to customers, suppliers and competitors, the Board will consider:
R&D Start Grant Agreement
Particular Conditions 7 SME Agreement Version 7
Version 7.2 - Release Date December 2002
Author: R&D Start Program Management
o the level of commitment to retaining or enhancing the companies R&D facilities in Australia;
o the mechanisms established to disseminate knowledge and market intelligence from overseas to the companies operations based in Australia;
o the industry norms in terms of proximity;
o the level of competition in the industry sector and the need to innovate quickly;
o the nature of the products' inputs which require close contact eg perishables, knowledge, etc; and
o any other factors the Board considers relevant.
R&D Start Grant Agreement
Particular Conditions 8 SME Agreement Version 7
Version 7.2 - Release Date December 2002
Author: R&D Start Program Management
EXHIBIT 4.13
Kendle
INTERNATIONAL
A Clinical Development
Organisation
Melbourne Office
156 Drummond Street
Oakleigh Victoria 3166
Australia
Tel + 6 13 9564 8090
Fax + 6 13 9564 8338
Sydney Office
2nd Floor, 20 Falcon Street
Crows Nest NSW 2085
Australia
Tel + 6 12 9437 3033
Fax + 6 12 9437 3044
Corporate Headquarters
Cincinnati, Ohio
North America
Europe
Asia/Pacific
6 January 2004
Dr Ross Murdoch
Chief Operating Officer
Prana Biotechnology Limited
Level 1, 100 Dorcas Street
South Melbourne Vic 3205
Dear Ross
Further to our recent discussions I am pleased to confirm the arrangements for continuation of our strategic alliance with Prana Biotechnology Limited.
Background to project involvement by Kendle Pty Limited
Prana is seeking an ongoing strategic alliance with Kendle Pty Limited to provide consultancy services to ensure that its commercialisation objectives are achieved. In particular, Kendle's Senior Management Consultants Business executives and Scientists are asked to provide services for the co-ordination, planning and management of Prana's Development program, including:
o coordination of drug discovery and development programs
o coordination of clinical trial programs
o regulatory submissions
o health economics studies and funding submissions
Kendle currently provides a range of development services to the biotechnology and pharmaceutical industries and has established relationships with many multinational pharmaceutical companies. This alliance with Kendle will make available a local team of commercialisation experts and provides access to experts in both the US and Europe through Kendle's global operations.
Kendle Pty Limited
ABN 81 379 182 044
www.kendle.com
Through this alliance Prana would secure preferential access for the provision of these services and Kendle provides priority consideration to Prana for provision of services at substantially reduced professional fees (10% to 25% below standard schedule of fees).
Proposal
It is proposed that implementation of the above brief be driven and co-ordinated by Judy Bingham, Director, Regulatory Development & Commercialisation and Susan Foran, Manager Regulatory, Development & Commercialisation, together with significant ongoing involvement by Dr George Mihaly (Managing Director).
The proposed contractual terms for 2004 at our preferred client rate are as follow:
-------------------------------------------------------------------------------- Director $200/hour -------------------------------------------------------------------------------- Manager or Project Manager $170/hour -------------------------------------------------------------------------------- Senior Associate $140/hour -------------------------------------------------------------------------------- Administration $70/hour -------------------------------------------------------------------------------- |
George will continue to provide general strategic advice and overall project liaison without charge. In the event of specific blocks of time for major activities, his time will be charged at $270/hour, discounted from his usual rate of $340/hour. General office administration expenses will be charged at 2% of the fees. In addition, specific project related expenses such as large volume photocopying, couriers and telephone charges will be disbursed at cost.
I hope that the above proposal meets with your approval and in this event would be grateful if you could arrange for the attached pro forma letter of agreement copied onto Prana letterhead and returned to me at your earliest convenience.
With best wishes and looking forward to our continued and successful co-operation in implementing this project.
Kind Regards
/s/ Judy Bingham Judy Bingham MHSc Director, Regulatory, Development & Commercialisation |
PRANA BIOTECHNOLOGY [LOGO]
Limited ACN 080 699 065
Level 1, 100 Dorcas Street
South Melbourne Vic 3205 Australia
Tel + 61 3 9690 7892
Fax + 61 3 9690 8587
ALLIANCE AGREEMENT
TO: Dr George Mihaly
Managing Director
Kendle Pty Limited
156 Drummond Street
Oakleigh Vic 3166
6 January 2004
Dear Dr Mihaly,
Re: Strategic alliance between Prana Biotechnology Limited and Kendle Pty Limited
I have read the proposal put forward in your letter of 6 January 2004
Prana Biotechnology Limited wish to commit to and proceed with the alliance as outlined. This Agreement will be ongoing with specific arrangement for each upcoming year to be discussed and agreed in the preceeding December.
Yours sincerely
Prana Biotechnology Limited
/s/ Ross Murdoch Ross Murdoch Chief Operating Officer |
Exhibit 4.14
Project Agreement
Neurosciences Victoria Limited
and
Prana Biotechnology Limited
Allens Arthur Robinson
Stock Exchange Centre
530 Collins Street
Melbourne 3000 Australia
Tel 61 3 9614 1011
Fax 61 3 9614 4661
Project Agreement
Neurosciences Victoria Ltd and Prana Biotechnology Ltd
--------------------------------------------------------------------------------
11. Settlement of Disputes and Arbitration 18
11.1 Dispute Resolution 18
11.2 Arbitration 19
12. Termination and Breach 20
12.1 Breach by Prana 20
12.2 Termination for unsatisfactory progress 21
12.3.Termination of RCA with SCHERING 21
12.5 Breach by NSV 22
13. Termination without prejudice 24
14. General Warranties and Indemnities 24
14.1 IP representations and warranties 24
14.2 Indemnities in relation to the Project 24
15. Assignment and Sub-Contracting 25
16. Force majeure 25
17. Clause severance 26
18. Waiver 26
19. Governing law 26
20. Notices 27
21. Entire Agreement 27
22. Amendments 28
23. Further assurances 28
24. Counterparts 28
Schedule 1 29
Financial Terms 29
Project Synopsis 29
Schedule 2 36
Project Management Committee 36
Schedule 3 37
Addresses for Service of Notices 37
Schedule 4 38
Budget, Shares of Project Results and Proceeds of Commercialisation 38
--------------------------------------------------------------------------------
Appendix 2.2c of the Research Collaboration Agreement Page ii
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Project Title = AB Interactions with mitochondrial respiratory chain complexes 3rd March 2003
Project Agreement
1. Neurosciences Victoria Limited (ABN 56 094 548 973) a company incorporated in the State of Victoria and having its registered office at The Gatehouse, 2 Park Drive, Parkville 3052, Australia (NSV).
2. Prana Biotechnology Limited (ABN 37 080 699 065) of 100 Dorcas St, Sth. Melbourne, Victoria (Prana)
A NSV is a company limited by guarantee to enhance scientific and technological capabilities and support scientific research in Victoria in the Field) by, amongst other things, facilitating funding, as agent for its members and certain Victorian research institutes.
B NSV has signed a research collaboration agreement ("RCA") with Schering Aktiengesellschaft, 13342 Berlin, Germany, ("SCHERING"), under which SCHERING is willing to provide financial funding to certain Projects in the Field and NSV agrees to provide certain rights to Project Results and Background IP to SCHERING.
C In furtherance of recital A and B, the Parties wish to conduct a Project in the Field.
D Prana hereby appoints NSV as agent for the purpose of receipt of Schering funding under the terms of the RCA between NSV and Schering and to facilitate the licensing of IP to Schering through NSV and for no other purposes.
E In furtherance of Recital A and B
(a) Prana has prepared a Project Synopsis detailing a project that it and NSV wish to have conducted in the Field;
(b) the Project Synopsis has been discussed with and approved by SCHERING; and
the Parties wish to agree on the terms and conditions under which
Project Agreement
the research and development project will be conducted.
It is agreed as follows.
1.1 Definitions
In this Agreement, unless a contrary intention appears from the context:
Account means an account opened in accordance with clause 6.
Background IP shall mean the Intellectual Property owned or controlled by Prana which is already in existence prior to the Commencement Date or is created independently of the Agreement and which is made available under this Agreement by Prana for the Project. Patented Background IP is identified in the Project Synopsis.
Budget means the budget for the Project set out in the Project Synopsis and amended by the Parties only upon approval by SCHERING.
Commencement Date means the date of this Agreement.
Commercialise, in relation to Intellectual Property, means to develop, manufacture, sell, hire or otherwise exploit a product or process, or to provide a service, incorporating that Intellectual Property, or to license SCHERING to do any of those things; and Commercialisation is similarly construed.
Commercialisation Proceeds means any and all royalties, licence fees and other receipts derived from Commercialisation of Project Results with or without Background IP under a Sub-licence by SCHERING.
Committee means the Project Management Committee established under clause 5.1.
Confidential information means all trade secrets and know-how, financial information and other commercially valuable information of whatever description and in whatever from (whether written or oral, visible or invisible) made available as Background IP or otherwise or arising as a result of the Project, but excludes the interpretation, analysis and application of general information in the public domain.
Core Criteria shall mean the general criteria as laid out in Appendix l.5 of the RCA, that need to be fulfilled independently of any specific Project Decision Criteria in order to enable SCHERING to make its decision as to the right of first negotiation granted by NSV to SCHERING under ss. 7 of the RCA.
Project Agreement
Decision Criteria means collectively the Core Criteria and the Project Decision Criteria.
Earmarked Funds has the meaning given in the Members Agreement dated November 2, 2001 between NSV and its founding members, namely research funding which NSV has arranged for a particular project.
Field means the mechanism by which beta-amyloid binds to, and inhibits, mitochondrial oxidative respiratory chain complexes resulting in Alzheimer's Disease related neurotoxicity.
[this space left blank]
Intellectual Property includes all industrial and intellectual property, whether protected at common law or under statute and includes (without limitation) all inventions (both patentable and unpatentable), designs (both registered and unregistered), copyrights, circuit layouts, plant variety rights, trademarks (both registered and unregistered), samples, materials, data, know-how, results and Confidential Information.
Key Alliance Manager - Research (KAMR) means the team established in accordance with ss. 10.4 of the RCA.
Party means a party to this Agreement.
Party means the research and development activities described in the Project Synopsis to be undertaken by Prana under this Agreement.
Project Decision Criteria means the Project specific set of scientific criteria (including timelines) as listed in each Project Synopsis which have to be fulfilled and presented by NSV to SCHERING under the RCA in order to enable SCHERING to make its decision as to the right of first negotiation granted under the RCA.
Project Results means all Intellectual Property, whether patentable or not, in relation to the Project that has been created, discovered or brought into existence as a result of or in connection with the Project by Prana at any time, excluding the Background IP.
Project Agreement
Project Leaders means the project leaders from Prana and SCHERING as appointed under clause 3 (a).
Project Management Committee means the committee established in accordance with clause 5.
Project Synopsis means the detailed description of a research project, including a detailed work-plan for the research and/or development for the Project (including the timeline, milestones and Decision Criteria) as set out in Schedule 1 amended as agreed between the Parties in writing from time to time.
Raw Data means that part of the Project Results comprising the data contained in the lab books regardless of their form, allowing for the verification and validation of the scientific results produced during the performance of a Project
Steering Committee means the decision body established in ss. 10.1 of the RCA and comprising of representatives of NSV and SCHERING.
Sub-licence is defined in clause 8.2.
Tax invoice means a document that complies with the requirements of subsection 29-70(1) and (if applicable) section 54-50 of the A New Tax System (Goods and Services Tax) Act 1999 (Cwth).
1.2 Interpretation
In this Agreement, unless the context indicates to the contrary:
(a) the expression person includes a natural person, an institution, a body corporate, an agency or other body;
(b) references to any Party to this Agreement will include the Party's legal successor (including executors and administrators) and permitted assigns;
(c) words importing the singular will include the plural (and vice versa) and words denoting a given gender Will include all other genders;
(d) clause headings and notes in square brackets are inserted for convenience only, and have no effect in limiting or extending the language of provisions, except for the purpose of rectifying any erroneous cross reference;
(e) references to any document or agreement will be taken to include references to such document or agreement as amended, novated, supplemented, varied or replaced from time to time;
(f) references to any legislation or to any provision of any legislation will include any modification or re-enactment of such legislation or any legislative provision substituted for, and all legislation and statutory instruments issued under such legislation;
Project Agreement
(g) all attachments to this Agreement form part of this Agreement;
(h) all monetary amounts referred to in this Agreement are in Australian currency.
In consideration of the mutual promises and undertakings set out in this Agreement, Prana hereby agrees to undertake the Project in accordance with the terms and conditions of this Agreement. Without limiting the generality of this clause 2.1, Prana must:
(a) Work to carry out and complete the Project in accordance with the Project Synopsis, the Budget and the terms and conditions of this Agreement and in a manner which is to the satisfaction of NSV; and
(b) obtain all licences, permits and authorities, and comply with all laws, by-laws and regulations, which may be required for the legal performance of its obligations under this Agreement.
Upon the start of a Project Prana must:
(a) appoint one key personnel to undertake the lead role on the Project on behalf of Prana (Project Leader), who will manage and monitor the day-to-day operations of the Project together with a Project Leader nominated by SCHERING. It is agreed that the Project Leader appointed by Prana may be a sub-contractor of Prana. Both Project Leaders shall be members of the Project Management Committee (see clause 5). All communication among Project Leaders shall be copied to the KAMR. If any Project Leader of Prana dies, becomes incapacitated or ceases to be employed by Prana, Prana will notify NSV immediately and nominate a suitable replacement to carry out and complete Prana's obligations in respect of the Project under this Agreement. If NSV or SCHERING reasonably considers that the nominated replacement is not suitable to perform those functions, NSV may exercise its rights under clause 12.l(b);
(b) be solely responsible for all scientists and other staff involved in the Project on behalf of the Institute, and for all their entitlements, including, but not limited to, any superannuation and workers' compensation contributions, as may legally be required to be made in respect of the engagement of each of those scientists or other staff;
Project Agreement
(c) do all things reasonably within its power to ensure that all scientists and other staff engaged by Prana undertake the Project work and act to the best of their respective skills and abilities in a diligent, professional and honest manner; and
(d) neither during, nor for six months after the term of this Agreement, employ or attempt to employ any key personnel of another Party who has been involved in the Project without the prior written consent of that Party.
4.1 Condition Precedent
It is a condition precedent to this Agreement that NSV submits to Prana (or vice versa) and NSV (or Prana, as appropriate) approves, a Project Synopsis that fully defines the Project and includes the following in respect of the Project:
(a) a statement of aims;
(b) an outline of the strategy to be followed;
(c) potential outcomes;
(d) milestones;
(e) the financial terms applicable to the Project as laid out in Appendix 7.5 of the RCA.
(f) a budget for Prana's contribution to the Project;
(g) resource requirements for Prana's contribution to the Project;
(h) Background IP in existence as at the Commencement Date proposed to be used in the Project and the terms, if any, on which Prana will make its Background IP available for use in the conduct and Commercialisation of the Project.
(i) Prana's share of the Commercialisation Proceeds; and
(j) the Project Decision Criteria.
4.2 Term
This Agreement will commence on the Commencement Date and will continue until the completion of the Project, unless terminated earlier in accordance with clause 12.
Project Agreement
5.1 Appointment
As soon as practicable after the Commencement Date, the Parties shall establish a project management committee to have overall management and evaluation of the Project (hereinafter "Project Management Committee" or simply "Committee").
5.2 Operation of Project Management Committee
The Committee will operate as follows:
(a) it will comprise one representative from Prana as well as the Project Leaders of Prana and SCHERING. The initial representatives are listed in Schedule 2;
(b) it will meet monthly to review the progress of the Project and determine the programs of work to be undertaken under the Project Synopsis;
(c) it may determine its own procedures and may confer by telephone or other electronic means;
(d) a resolution of the Committee must be passed by all representatives; and
(e) each Party bears the cost and expenses incurred by its representatives in relation to their attendance at Committee meetings.
5.3 Semi-annual reports
Prana's Project Leader, with support of the Schering Project Leader, must prepare and submit to the Committee and the KAMR a semi-annual report describing:
(a) work done and achievements made (including milestones and deliverables completed) during the 6 months to which the report relates;
(b) details of Project Results developed during the 6 months and steps taken to protect it;
(c) any departure from the Project Synopsis during those 6 months;
(d) current issues relating to the performance of the Project and recommendations as to their resolution;
(e) the amount of funding required fur the next 6 months; and
(f) such other matters as each Party (or its representative or appointee on the Committee) considers appropriate.
All reports have to be approved by the KAMR.
Project Agreement
5.4 Annual reporting review
During each year of the Project, the KAMR will review the adequacy of the reporting requirements set out in clause 5.3,and decide whether, and if so how, they should be amended for the following year of the Project.
5.5 Records management
The Committee must:
(a) maintain full and accurate data, information and records of and concerning work carried out in the Project; and
(b) disclose or make available all such data, information and records to the Parties as and when each Party requires;
(c) make sure that all Raw Data will be entered into a laboratory note book, dated, signed and witnessed.
NSV and I or SCHERING has the right to review the handling of all documents, data, records and Raw Data produced for the Project during the term of this Agreement. Time and location of such review shall be coordinated with Prana.
5.6 Final report
The Committee must submit through the Project Leaders to the KAMR and the Steering Committee a final report in writing within 30 days of completion of the Project. The final report will describe, in reasonably informative detail:
(a) the conduct of the Project;
(b) the results;
(c) Project Results obtained in the performance of the Project;
(d) Background IP used in the performance of the Project; and
(e) Background IP required for Commercialisation of the Project Results,
(a) The initial Budget for the Project is set out in Schedule 4 and shows:
(i) the amount of funds allocated to Prana to undertake and perform its responsibilities under the Project Synopsis (Research Funds); and
(ii) the proportion, if any, to which NSV is entitled as its administration fee in consideration of fulfilling its obligations under this Agreement, (NSV Proportion) provided that the NSV Proportion will be zero where an allocation has already been made in respect of the Project under the arrangements set out in the Members' Agreement.
Project Agreement
(b) On, before, or as soon as practicable after, the Commencement Date, NSV will, if it does not already have an appropriate account, open an account and will deposit into that existing or new account such funds as it has received from SCHERING as agent for Prana to enable the Project to be conducted.
(c) In consideration of Prana undertaking the Project, NSV will draw on
the Account to provide Prana the amount setout in sub-paragraph
(a)(i) above as quarterly instalments.
(d) If GST is payable on a Taxable Supply made under, by reference to or in connection with this Agreement, the party providing the Consideration for that Taxable Supply must also pay the GST Amount as additional Consideration. In this Agreement 'Consideration' and 'Taxable Supply' each has the meaning given by the A New Tax System (Goods and Services Tax) Act 1999 (Cth) and 'GST Amount' means in relation to a Taxable Supply the amount of GST payable in respect of that Taxable Supply.
(e) No Party is required to provide any amount of GST to any other (and may withhold any amount required at law) unless the other issues a Tax Invoices to that Party.
(f) NSV is not required to provide any amounts under this Agreement to the extent that SCHERING who has committed to provide research funding to NSV in respect of the Project defaults on those commitments leaving insufficient funds in the Account to enable NSV to provide such amounts.
(g) NSV must use all reasonable endeavours to enforce its rights against SCHERING if SCHERING defaults on the commitments referred to in paragraph (f).
7.1 Background IP
(a) For the specific purposes of allowing the Project to proceed and for commercialisation of Project Results (and only for those purposes), Prana will make available to the Project the Background IP (as defined) in respect of Prana whether directly as a result of Prana's ownership of that Background IP or as a result of agreements entered into with the owner(s) of that Background IP.
(b) The Parties acknowledge and agree that the Background IP will remain the property of Prana or the owner(s) referred to in paragraph (a).
Project Agreement
(c) The Project Leader will endeavour to maintain a register recording such Background IP as is made available by Prana for the Project, provided that failure to include an item of Background IP on this register does not preclude the Parties from using Background IP as permitted under this Agreement where that Background IP is made available under this Agreement or is included in the definition of 'Background IP'.
(d) Prana grants to NSV, a worldwide, non-exclusive, royalty-free, sub-licensable licence to Commercialise the Background IP but only to the extent required for NSV to exercise its rights to Commercialise the Project Results granted under clause 7.2.
7.2 Project Results
(a) All Project Results created in relation to the Project, upon creation, vest in and will become and remain the property of Prana only subject to Prana's contractual agreements with the University of Melbourne in relation to this Agreement. Prana is free to deal with, Commercialise, dispose of or encumber any interest which it might hold in Project Results outside the Field as it sees fit.
(b) Subject to clause 8.1, no Party will deal with, Commercialise, dispose of or encumber any interest which it might hold in Project Results in the Field, except as authorised in this Agreement, or with the written consent of the ether Party to this Agreement.
(c) Each Party will co-operate with each other Party and promptly do all acts and things and execute all documents which may be necessary for the purpose of vesting ownership of the Project Results in Prana as contemplated by this clause 7.2.
(d) Prana grants to NSV, a first right of refusal to negotiate a worldwide exclusive royalty-bearing sub-licensable licence to Commercialise the Project Results in the Field in accordance with clause 8 of this Agreement
(e) As soon as the Project Leaders are notified under clause 9.1 (a) of the creation of any Project Results then, if that Project Results alone or together with any Background IP, meets the Project Decision Criteria, the Project Leaders will within 14 days notify all Parties and the Steering Committee in writing that, from the date of notification, NSV may exercise its right of first refusal to license such Project Results and any relevant Background IP and present NSV with sufficient data to make a decision on the exercise of its right of first refusal.
Project Agreement
{f) The Parties are aware of the fact that after NSV has received such notification and data in accordance with clause 7.2(e), NSV has the obligation under the RCA to immediately notify SCHERING which has an exclusive right of first negotiation for a sublicence to all Project Results and Background IP notified to NSV under this Agreement.
(g) Under the RCA SCHERING has the right to evaluate the relevant Project Results and Background IP during a period of 90 days after notification and presentation of sufficient data by NSV. The Parties hereby acknowledge and agree to this right.
(h) SCHERING has further the right under the RCA, at its cost, to scientifically check the data, including, where necessary and applicable, a reevaluation of the experiments or tests. If such case the above mentioned period of 90 days may be extended by another 60 days to allow for such tests. If SCHERING requires access to Project Results in order to decide if the Project Decision Criteria have been met, Prana hereby agree (i) to SCHERING's right under ss. 8.2 of the RCA to perform a due diligence on the Project Results and the Background IP and (ii) to apply reasonable efforts to execute, support and facilitate such access for SCHERING.
(i) After SCHERING has informed NSV within the timelines mentioned in
7.2 (g) and (h) respectively above by written notice whether the
Decision Criteria have been met and whether SCHERING wishes to
obtain a sub-license from NSV, NSV will immediately notify Prana
accordingly whether NSV wants to exercise its right of first refusal
to negotiate a licence to the relevant Project Results and
Background IP.
(j) The Decision Criteria may only be amended in accordance with the RCA. Any amendment of the Decision Criteria will be notified to Prana in writing and will become an integral part of this Agreement and the Project Synopsis on the date of that notification.
(i) The rights granted to NSV or SCHERING in respect of Project Results are subject to a right in favour of Prana to use and disclose for educational and research purposes to the extent allowed by Clause 10 (Confidentiality and Publications)
7.3 NSV has no rights outside the Field
NSV Specifically acknowledges that it has no rights to use Project Results or Background IP outside the Field. Without limiting the generality of the foregoing, NSV specifically acknowledges that it has no rights to use Project IP or Background IP to develop products for therapeutic use or have any right of first
Project Agreement
refusal to negotiate any rights to Commercialise any Project Results or Background IP for therapeutic purposes outside the scope of this Agreement.
8.1 Decline of First Right of Refusal
If NSV does not exercise its first right of refusal in accordance with clause 7.2, unless the Parties agree otherwise, NSV's rights under clauses 7.1 and 7.2 will terminate and its rights to the Project Results and Background IP will revert; to Prana who, subject to clause 9.3, will be free to commercialise and otherwise deal in that Intellectual Property as they see fit.
8.2 Exercise of First Right of Refusal
If NSV does exercise its first right of refusal in accordance with clause
7.2 (i), Prana appoints NSV as its agent to negotiate a sub-licence in the
Field, (Sub-licence) with SCHERING to Commercialise the Project Results
and (as necessary to Commercialise the Project Results) the Background IP,
and the following provisions will apply:
(a) NSV will use all reasonable endeavours to negotiate the Sub-licence, according to the following:
(i) the Sub-licene will be world-wide and exclusive in respect of Project Results only, and non-exclusive in respect of Background IP;
(ii) the Sub-licence will be royalty-bearing, with royalty rates and any licence fees and milestone payments set out in Appendix 7.5 [(financial terms)] of the RCA and royalty payments calculated by reference to Net Sales as defined in the RCA;
(iii) the term of the Sub-licence will be for the duration of the last to expire anywhere in the world of the patents generated in respect of the Project Results, provided that the royalty obligations may expire on a country-by-country basis as patent protection in respect of the Commercialisation of the Project Results expires in each country; and
(iv) NSV may not enter into any binding Sub-licence without Prana's written approval, which may not be unreasonably withheld.
(b) If any Sub-licence is entered into, Prana will be deemed to have immediately:
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(i) granted to NSV a reciprocal licence to Commercialise the Project Results and Background IP as necessary to enable NSV to fulfil its obligations to SCHERING under the Sub-licence; and
(ii) appointed NSV its agent to receive Commercialisation Proceeds under the Sub-licence on their behalf.
(c) If NSV and SCHERING, after good faith negotiations, are unable to agree on the terms of a Sub-license within 6 months of NSV exercising its first right of refusal under clause 7.2, unless the Parties agree otherwise, NSV's rights under clauses 7.l and 7.2 will terminate and its rights to the Project Results and Background IP will revert to Prana who, subject to clause 9.3, will be free to commercialise and otherwise deal in that Intellectual Property as they see fit.
8.3 Share of Proceeds
NSV will receive and hold the Cmmercialisation Proceeds in accordance with clause 8.4 as agent for Prana in the proportions specified in Item 3 of Schedule 4. If no such proportions are specified, then the proportions specified in Item 2 of Schedule 4 will apply.
8.4 Use and Distribution of Proceeds
NSV will:
(a) collect and pay all Commercialisation Proceeds and any funds NSV receives from SCHERING for the purposes of identifying, maintaining, enforcing or defending Intellectual Property into the Account;
(b) draw on the Account to meet its agreed administration fee payable in connection with Commercialising the Project Results, which fee will be 12.5% of all Commercialisation Proceeds, unless otherwise specified in Item 3 of Schedule 4 or agreed in writing by all Parties;
(c) draw on the Account as permitted under clause 9.2; and
(d) draw on the Account to pay any money due to the owners of Background IP as a result of the Commercialisation.
(e) distribute the balance to Prana in accordance with the proportions determined under clause 8.3.
Project Agreement
9.1 Identification of Project Results
(a) Prana must notify the Project Leaders of the creation of any Project Results as soon as practicable after such creation.
(b) Prana will use its best efforts to ensure that its employees, agents and sub-contractors under its supervision or other persons participating in the Project:
(i) will identify Project Results generated or developed by them;
(ii) will promptly communicate details of it to the Project Leaders; and
(iii) will promptly do all acts and things and execute all documents necessary for the purpose of vesting ownership of the Project Results in Prana as contemplated by clause 7.2.
(c) If Prana considers that a particular development arising from that Project may be patentable or the subject of other forms of Intellectual Property protection, Prana will promptly communicate details of that development to the Project Leaders.
(d) The Project Leaders will advise the KAMR whether the development warrants pursuing patent protection, or other forms of Intellectual Property protection, and if it does, of what nature and in which countries protection should be sought.
(e) If required by the KAMR, the Committee will discuss with SCHERING the matters referred to in paragraph (d) and the question which party shall have the obligation to file, maintain, prosecute, enforce and defend such Intellectual Property. The Committee will allow any final decision under this clause to be solely up to SCHERING.
(f) All registrable Project Results will be applied for in the name of the owner of that Project Results as determined under clause 7.2.
(g) Except as expressly stated otherwise in this Agreement:
(i) Prana will be responsible for application, prosecution, maintenance, enforcement or defence of any form of Intellectual Property protection in respect of its Background IP and will keep NSV reasonably informed of, and co-operate, at NSV's cost, with any reasonable request of NSV in connection with, such matters; and
(ii) nothing will require Prana to apply its own funds (other than those held by NSV on its behalf) towards the application, prosecution.
Project Agreement
maintenance, enforcement or defence of any form of Intellectual Property protection in respect of Project Results.
9.2 Primary responsibility for Project Results
(a) NSV, subject to the rights of SCHERING and Prana referred to in clause 3.1 above and ss. 9 of the RCA, will be responsible for applying, maintaining, prosecuting, enforcing and defending any form of Intellectual Property protection in respect of Project Results in close consultation with SCHERING.
(b) NSV may meet any expenses incurred under this clause 9 out of any funds NSV receives from SCHERING dedicated explicitly to the purposes of maintaining, enforcing or defending any Intellectual Property and which NSV deposits into the Project Account.
9.3 Reversion of Project Results
If:
(a) SCHERING does not take reasonably adequate steps to protect the Project Results; or
(b) an NSV request under clause 9.2 for funds to obtain protection of Project Results is refused,
Prana may protect the Project Results and/or incur the expense (as the case may be) and all rights thereafter obtained as a result of those funds will be excluded from the first right of refusal under clause 7.2(d).
9.4 Assistance
Prana will, at its cost, provide all information to NSV and SCHERING (as the case may be) and execute all documents and do all acts and things necessary or desirable to enable the adequate and timely preparation of all documents necessary or desirable for the application, prosecution, maintenance, enforcement or defence of any registrations or other protection of the Project Results, including, without limitation:
(a) signing, and procuring all inventors to sign, all powers of attorney and other forms required for the orderly prosecution of patent applications; and
(b) lending its name to any infringement or defence action either as a direct party or a third party.
Other than the obligations in this 9.4, Prana will not be liable for any costs associated with an infringement or defence action initiated by NSV or SCHERING.
Project Agreement
9.5 Protection of Intellectual Property
(a) Prana will disclose to NSV immediately it becomes aware, details of:
(i) any infringement or alleged infringement by any person of any Project Results, Background IP or any Intellectual Property of a third party relevant to the Project or relevant to the Commercialisation of the Project Results and Background IP, in the Field; and
(ii) any claim or alleged claim by any person that Commercialisation of the Project Results, Background IP or any Intellectual Property of a third party relevant to the Commercialisation of the Project Results and Background IP constitutes an infringement of the rights of that person, in the Field.
(b) Unless the Parties otherwise agree, NSV will, in accordance with the terms of the Sub-licence (if any) take all reasonable steps to enforce and defend the Project Results, in the Field, as it sees fit, in consultation with Prana, but subject to any rights of SCHERING. At NSVs request, Prana agrees to give NSV all assistance which may be reasonably required in order to enforce and defend the Project Results.
(c) Prana will maintain, enforce and defend any Background IP which is the subject of a Schering sub-license under this Agreement, at Prana's own expense;
(d) If NSV decides not to initiate proceedings against any alleged infringer in relation to alleged infringements of Project IP in the Field, Prana will not do so without NSV's prior written consent, such consent to be given at NSV's discretion and on such conditions as NSV sees fit, including, without limitation, satisfaction of issues such as apportionment of proceeds, recovery of NSV's costs and indemnification of NSV against adverse judgment.
(e) NSV has the right to assign all rights vested in NSV under this Agreement with regard to filing, maintenance, prosecution, enforcement and defence of Project Results to SCHERING.
9.6 Proceeds of Infringement
If NSV recovers any damages or accounts of profit in taking any action against any alleged infringer of Project Results, in the Field, the amounts of any such judgment and any costs recovered by NSV will be first applied to reimburse reasonable external costs and expenses (including external legal costs) incurred by NSV, Prana and SCHERING. The balance, if any, will be apportioned in accordance
Project Agreement
with the terms of the Sub-licence (if any) and then to Prana in accordance with this Agreement as if it were Commercialisation Proceeds.
10.l Confidentiality Obligations
(a) Each Party agrees that it will keep secret and confidential and not use or disclose to any other legal entity all Confidential Information made available by another Party other than as necessary for the purposes of this Agreement, save that NSV may disclose Confidential Information to third parties in confidence as reasonably necessary for the Commercialisation of the Project Results.
(b) The obligations imposed on a Party by this clause will not apply to Confidential Information which:
(i) prior to disclosure is in the public domain or in published literature or subsequent to disclosure to the Party becomes part of the public domain or is published other than as a result of an unauthorised act or failure to act by that Party;
(ii) is received by a Party from a third party without any obligation to hold in confidence and which has not been obtained by that third party directly or indirectly from any Party;
(iii) is independently developed by an employee or officer of the Party owing the obligation of confidentiality while having no knowledge of the other Party's Confidential Information; or
(iv) the Party claiming confidentiality has identified in writing as being released from the obligation of confidentiality.
(c) A combination of information will not be taken to be in the public domain merely because it contains information in the public domain.
(d) Confidential Information will not be taken to be in the public domain merely because it is embraced by a general disclosure in the public domain.
(e) The receiving Party has the onus of showing that any of the above exceptions apply.
(f) Each Party will ensure that:
{i) its respective employees who participate in the Project or acquire access to Confidential Information, will comply with the obligations of confidentiality as though parties to this Agreement; and
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(ii) any of the above mentioned employees who cease to be employed by the Party will continue to be bound by such obligations of confidentiality.
(g) The obligations of confidentiality imposed on a Party will survive termination of this Agreement.
10.2 Publications
(a) The Parties will use their best endeavours to ensure nothing is done which might prejudice the subsistence or Commercialisation of Confidential Information or Project Results. In particular, the Parties will not publish or disclose any such Confidential Information or Intellectual Property to any third person so as to preclude the grant of a patent in respect of the Project Results or cause the loss of Intellectual Property in any Confidential Information.
(b) Prior to any publication the Party wishing to publish material (the Requesting Party) must forward a request in writing to NSV and/or SCHERING seeking permission to publish the material.
(c) The Requesting Party may not publish results of the Project without the consent of SCHERING. If the Requesting Party requests in writing that SCHERING consent to a publication, SCHERING may not withhold that consent unless in its reasonable view the publication includes Confidential Information being part of Project Results and within the Field and the publication would adversely affect protection or Commercialisation of the Project Results within the Field. If the Requesting Party makes such a written request and receives no response from SCHERING within 90 days, SCHERING will be deemed to have consented to the proposed publication.
11.1 Dispute Resolution
(a) If a dispute arises between the Parties in connection with the Agreement, the Parties undertake in good faith to settle the dispute,
(b) Any dispute or difference arising between the Parties which cannot be resolved between them will be resolved in accordance with the following procedure:
(i) the Party claiming that a dispute exists will notify the other Party that a dispute exists and forthwith submit such dispute or difference to
Project Agreement
the Committee for resolution. The Committee shall decide under consultation of the KAMR.
(ii) if the Committee and the KAMR are unable to resolve the dispute or difference within a reasonable time, a meeting will be convened forthwith between senior representatives of the disputing Parties not being members of the Committee for resolution of the dispute or difference. If the dispute or difference concerns any matter being of material interest for SCHERING (e.g. such as rights to Background IP or Project Results, or publication issues) the senior representatives shall also confer with the SCHERING member(s) of the Steering Committee to resolve the dispute or difference.
(c) Each Party acknowledges that the compliance with these provisions is
a condition precedent to any entitlement to a claim, relief or
remedy, whether by way of proceedings in a court of competent
jurisdiction or by arbitration proceedings under this Agreement or
otherwise in respect of such dispute or difference. However this
will not preclude any Party from seeking urgent interlocutory relief
in a court of competent jurisdiction.
11.2 Arbitration
If any dispute or difference arises between the Parties to this Agreement
which cannot be resolved between them in accordance with clause 11.1, and
which does not impinge upon a question of law or call for the
rectification of this Agreement, such dispute will forthwith be referred
for determination at Melbourne, by an arbitrator agreed on by the Parties
to the dispute or difference. If such Parties are unable to agree upon an
arbitrator the matter will be dealt with in accordance with the laws
relating to expedited commercial arbitration for the time being in force
in Victoria.
11.3 SCHERING as intended Third Party Beneficiary
Reference is hereby made to the RCA between SCHERING and NSV. The Parties
recognise that as a result of the above-referenced agreement SCHERING has
a material interest in the performance of this Agreement by the Parties
hereto. Accordingly, to the extent that this Agreement grants to NSV any
right, remedy or claim under or by reason of this Agreement, SCHERING may
also enforce any such right, remedy or claim against Prana on its own
behalf. Where this Agreement refers to a provision of the RCA under which
SCHERING has a right, remedy or claim against Prana, SCHERING may enforce
that right, remedy or claim directly against Prana under this Agreement.
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Project Agreement
12.1 Breach by Prana
(a) If Prana breaches or fails to perform any material term of this Agreement, and the breach is capable of remedy by performance or otherwise, NSV may serve on Prana a notice requiring it to remedy that breach. Prana must, at its cost, use its best endeavours and take all reasonable steps to remedy the breach within 90 days of receipt of the notice.
(b) Subject to NSV's rights under clause 3(a) Prana's inability or failure to carry out or complete the Project due to the loss of the services of key personnel (whether by way of resignation, dismissal, loss of tenure or otherwise) is considered to be a breach that is capable of remedy for the purposes of this clause 12.
(c) If Prana has not remedied the breach to NSV's reasonable satisfaction within 90 days of receipt of the notice, NSV may, in addition to any other rights it may have under this Agreement, take one or more of the following steps:
(i) require Prana to continue to make available to NSV (by way of licence, mutually agreed assignment, or otherwise), as necessary to enable NSV to fulfil its obligations to SCHERING, all of Prana's interest in any Project Results and any associated Background IP on terms to be agreed in good faith having regard to the nature of the material breach, the nature of the Intellectual Property, the nature of NSV's obligations to SCHERING and any other relevant factors;
(ii) if NSV enforces its right under paragraph (i) to have the Project Results and Background IP continue to be made available, require Prana to continue to comply with its obligations under clause 9 of this Agreement in relation to that Project Results and Background IP and not do anything in relation to that Project Results and Background IP which may prejudice NSV's ongoing rights in that Project Results and Background IP;
(iii) terminate Prana's participation in the Project;
(iv) require Prana to assist, at Prana's cost, NSV to find a suitable substitute to conduct any or all of Prana's outstanding role in the Project;
(v) require Prana to fully indemnify NSV in respect of all liabilities and expanses incurred by any of them in respect of Prana's default
under this Agreement, including the costs associated with finding a suitable substitute under paragraph (iv) above; and
(vi) terminate this Agreement in respect of Prana or in respect of all Parties without prejudice to the rights granted under clauses 7 and 8.
(d) If NSV terminates this Agreement under this clause than the following provisions shall apply to any funds still held by NSV as agent for Prana:
(i) Prana hereby authorises and directs NSV to transfer the funds
as agent for Prana to another project or new project(s) (the
new project or projects) as determined by NSV;
(ii) the participating institutes in respect of the new project or
projects may include Prana;
(iii) funds so transferred shall become 'Earmarked Funds' for the
new project or projects; and
(iv) upon NSV determining to transfer funds to a project or new
projects under this clause, NSV shall cease holding the
transferred funds as agent (and, to the extent that those
funds were also being held as agent on trust, on trust) for
Prana and commence holding them as agent (and, to the extent
that those funds will also be held as agent on trust, on
trust) far the participating institutes in respect of the new
project or projects.
12.2 Termination for unsatisfactory progress
The KAMR will regularly review the progress of the Project with the
Project Leaders and if the KAMR considers the Project is not progressing
to its reasonable satisfaction, NSV may terminate this Agreement by 6
months prior written notice to the Institute(s). If NSV terminates this
Agreement under this clause then NSV will have no further obligation to
provide funds after the effective date of termination and the provisions
of Section 12.1 (d) shall apply to any funds still held by NSV.
12.3 Termination of RCA with SCHERING
If in case of termination or expiry of the RCA the Project under this
Agreement is not completed, the Project may be continued until finished
under this Agreement and the RCA will still apply; provided however that
the funding provided in the Project budget will not be raised after
termination or expiry of the RCA.
12.4 Termination for insolvency etc.
Unless the Parties agree otherwise, this Agreement will terminate if NSV:
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(a) stops or suspends or threatens to stop or suspend payment of all or a class of its debts;
(b) is insolvent within the meaning of section 95A of the Corporations Act;
(c) must be presumed by a court to be insolvent by reason of Section 459C(2) of the Corporations Act;
(d) fails to comply with a statutory demand (within the meaning of
Section 459F(1) of the Corporations Act);
(e) has an administrator appointed over all or any of its assets or undertaking or any step preliminary to the appointment of an administrator is taken;
(f) has a controller within the meaning of section 9 of the Corporations Act or similar officer appointed to all or any of its assets or undertaking; or
(g) has an application or order made, proceedings commenced, a resolution passed or proposed in a notice of meeting, an application to a court made or other steps taken against or in respect of it (other than frivolous or vexatious applications, proceedings, notices or steps or voluntary applications or of proceedings for the purposes of reconstruction) but specifically excluding voluntary applications related to bankruptcy or insolvency for its winding up, deregistration or dissolution or for it to enter an arrangement, compromise or composition with or assignment for the benefit of its creditors, a class of them or any of them.
12.5 Breach by NSV
(a) If NSV breaches or fails to perform any material term of this Agreement, and the breach is capable of remedy by performance or otherwise, Prana may serve on NSV a notice requiring it to remedy that breach.
(b) NSV must, at its cost, use its best endeavours and take all reasonable steps to remedy the breach within 90 days of receipt of the notice.
(c) If NSV has not remedied the breach to Prana's reasonable satisfaction within 90 days of receipt of the notice, Prana may, in addition to any other rights it may have under this Agreement, take one or more of the following steps:
(i) require NSV to cease representing that it is an agent for Prana in relation to the Project;
(ii) require NSV to pay all monies held in the Project Account and any Commercial Proceeds to Prana in the proportions applicable under clause 8.3;
(iii) require NSV to assign or co-operate in procuring the assignment to Prana of the benefit of any arrangements NSV has with SCHERING; and
(iv) require NSV to fully indemnify Prana in respect of all liabilities and expenses incurred by it in respect of NSVs default under this Agreement, including the costs associated with the assignment referred to in paragraph (iii) above.
(d) In case of Section 12.5(c) Prana agrees to SCHERING having the right, at its option, to replace NSV as a contract partner to this Agreement to the extent that all indemnifications or obligations of NSV towards Prana, which are borne prior to such substitution by SCHERING will remain with NSV. All indemnification obligations of SCHERING towards Prana, which are borne after such substitution of NSV, will remain with SCHERING.
12.6 Termination report
(a) In all cases of termination of this Agreement under this clause 12, Prana will compose a termination report containing all Project Results created up to the date of termination of this Agreement. clause 5.6 shall apply to the termination report accordingly. The termination report shall be signed by the Project Leader of Prana and the Head of Prana as well as countersigned by the KAMR. The termination report shall be promptly submitted to the Steering Committee which shall be considered as notification of relevant Project Results under clause 7.2 (e) giving NSV and SCHERING the right to evaluate their interest in the Project Results and, if the case may be, to exercise their options, in accordance with the provisions of clauses 7.2 and 8.
(b) If NSV has notified Prana in accordance with clause 7.2 that NSV and SCHERING do not want to exercise their rights of first refusal, Prana shall will be free to continue the Project at its own expense; provided however that Prana will not raise funding from a third party for a period of 12 months after SCHERING has declined its option. Prana will notify NSV and SCHERING before they solicit third party funding after the 12 months period in order to give NSV and SCHERING the opportunity to reintegrate the Project into the Project portfolio under the RCA and to provide the funding under the RCA. NSV and SCHERING shall have 30 days to decide whether the Project shall be reintegrated into the portfolio and the funding requested by Prana. NSV shall notify Prana in writing upon the decision. The Parties hereby acknowledge that Prana will have the opportunity to demonstrate any added value created in the Project during the 12 months
period and to re-negotiate the commercial terms which would apply to reintegration of the Project, to reflect the added value that Prana has created during the 12 months period.
Termination of expiry of this Agreement for any reason, does not affect:
(a) any rights and obligations of the Parties which have accrued prior to such termination or expiry; and
(b) any rights and obligations of the Party which by their nature
survive termination including without limitation rights and
obligations under clauses 10 and 14.2.
14. General Warranties and Indemnities
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14.1 IP representations and warranties
Prana represents and warrants that:
(a) if is the owner of, or is otherwise entitled to provide, the
Background IP which makes it available under this Agreement; and
(b) it has adequate arrangements in place with its employees, agents and
sub-contractors to enable it to grant the licences to its Project
Results under this Agreement.
(c) to the best of its knowledge as at the Commencement Date any
Commercialisation of its Background IP and Project Results as
permitted under this Agreement does not (and, unless it notifies NSV
in writing to the contrary during the term of this Agreement, will
not) infringe the rights of any third party.
14.2 Indemnities in relation to the Project
Each Party will indemnify (Indemnifying Party) each other Party and the
officers, employees and any scientists engaged by it (Those Indemnified)
against all claims, liability, loss, damage, costs and expenses (including
but not limited to legal costs on a solicitor and own client basis) which
may be incurred by Those Indemnified arising out of or in connection with:
(a) any personal injury suffered by or the death of Those Indemnified or
any loss or damage to property, real or personal, of an Those
Indemnified caused by any negligent act or omission of the
Indemnifying Party or
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officers, employees and any scientists engaged by it in the course of carrying out the Project;
(b) any claims, actions or proceedings by any third party against Those Indemnified for any personal injury suffered by or the death of that third party, or any loss or damage to property, real or personal, of that third party caused by any negligent at or omission of the Indemnifying Party or officers, employees and any scientists engaged by it in the course of carrying out the Project; and
(c) any breach of any representation or warranty provided by the Indemnifying Party under this Agreement.
Prana may not assign or transfer any of its rights or obligations under this Agreement, nor sub-contract a substantial part of its obligations under the Project, without the prior written consent of NSV such consent not to be unreasonably withheld. NSV may not assign or transfer any of its rights or obligations under this Agreement without the prior written consent of Prana such consent not to be unreasonably withheld.
(a) Where a Party is unable, wholly or in part, by reason of force majeure, to carry out any obligation under this Agreement, and that Party:
(i) gives each other Party prompt notice of that force majeure including reasonable particulars, and, in so far as known, the probable extent to which it will be unable to perform or be delayed in performing that obligation; and
(ii) uses all possible diligence to remove that force majeure as quickly as possible,
that obligation is suspended so far as it is affected by force majeure during the continuance of that force majeure and that Party will be allowed a reasonable extension of time to perform its obligations.
(b) If, after 30 days, the force majeure has not ceased, the Parties will meet in good faith to discuss the situation and endeavour to achieve a mutually satisfactory resolution to the problem.
(c) The requirement that any force majeure must be removed with all possible diligence does not require the settlement of strikes, lockouts or other labour
disputes or claims or demands by any government on terms contrary to the wishes of the Party affected.
In this clause, force majeure means an act of God, strike, lockout or other interference with work, war (declared or undeclared), blockade, disturbance, lightning, fire, earthquake, storm, flood, explosion, governmental or quasi governmental restraint, expropriation, prohibition, intervention, direction or embargo, unavailability or delay in availability of equipment or transport, inability or delay in obtaining governmental or quasi governmental approvals, consents, permits, licenses, authorities or allocations, and any other cause, whether of the kind specifically enumerated above or otherwise which is not reasonably within the control of the Party affected.
Any provision of this Agreement that is held void by a court of competent jurisdiction or is voidable by a Party or is or becomes at that time unlawful or unenforceable will, to the extent to which it is void or voidable or is unlawful or unenforceable, be deemed to be excised from and not form part of this Agreement, without affecting the validity or enforceability of the remaining provisions to the fullest extent permitted by law or in equity.
A waiver by a Party of any rights arising from a breach or non-observance by any other Party of a term of this Agreement will not be taken to operate in any way as a waiver of any rights arising from any subsequent continuation of that breach or non-observance, or any further or other breach or non-observance of the same or any other term.
(a) This Agreement will be governed by and construed in accordance with the law for the time being in force in Victoria.
(b) With respect to any legal action or proceedings which may be brought in relation to this Agreement or any transaction contemplated by this Agreement, each Party irrevocably submits to the non-exclusive jurisdiction of courts exercising jurisdiction in Victoria.
(a) Any notice, request, consent or other communication in connection with this Agreement must be in writing and;
(i) left at the address of the addressee;
(ii) sent by prepaid- ordinary post (airmail if posted to or from a place outside Australia) to the address of the addressee;
(iii) sent by facsimile to the facsimile number of the addressee; or
(iv) if the addressee has given written notice of another address or facsimile number, sent to that address or facsimile number.
(b) The address and facsimile number of each Party is as specified in Schedule 3.
(c) A notice, request, consent or other communication takes effect from the time it is received unless a later time is specified in it.
(d) A notification of change of address will not take effect until each other Party notifies the Party changing its address that the notice of change of address has been received.
(e) A letter or facsimile is taken to be received:
(i) for a posted letter, on the third (seventh, if posted to or from a place outside Australia) day after posting; and
(ii) for a facsimile, on production of a transmission report by the machine from which the facsimile was sent which indicates that the facsimile was sent in its entirety to the facsimile number of the recipient. However, if transmission is completed after 5:00pm on a business day or is sent on a day that is not a business day, the message is taken to have been received at 8:00am on the next business day.
This Agreement and the Agency Agreement between NSV and Prana contain the entire agreement between the Parties with respect to their subject matter and supersede all prior agreements and understandings between the Parties in connection with it. In case that the Agency Agreement contradicts any provision contained in this Agreement, the provisions of this Agreement shall prevail.
No agreement or understanding varying or extending this Agreement will be legally binding unless it is in writing signed by all Parties.
Each Party agrees to do all things and execute all deeds, instruments, transfers or other documents as may be necessary or desirable to give full effect to the provisions of this Agreement and the transactions contemplated by it.
This Agreement may be executed in any number of counterparts. All counterparts together will be taken to constitute one instrument.
Schedule 1
This is a Financial Category 2 Project (Appendix 7.5 of the Research Collaboration Agreement):
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Payments Category 2
(Validated Drug Target)
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Down-Payment $AUD 300,000
New Leads from High none
Thoughput Screening
IND (or equivalent) $AUD 500,000
Commencement of Phase III $AUD 1,500,000
Study
First Market Approval in each US $AUD 1,5OO,OOO
of US, EU or JAP EURO $AUD 750,000
JAP $AUD 750,000
Royalties 1-2%
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Project Synopsis
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Name of Research Project: AB Interactions with mitochondrial respiratory chain complexes
Appendix 2.2b of the Research Collaboration Agreement
NSV-Project Code: U
PROJECT TEAM: DR. IAN TROUNCE (PROJECT LEADER/MELBOURNE):, WITH:
DR. ROBERTO CAPPAI, PROF. COLIN MASTERS AND PROF. ED BYRNE.
CONTACT PERSON AT SAG: DR. THOMAS DYRKS: Thomas.Dyrks@Schering.de
START OF PROJECT: AT SIGNATURE OF NSV/SAG RESEARCH CONTRACT
RESOURCES (FOR THE FIRST RESEARCH YEAR):
TOTAL NUMBER OF FTEs / POST DOCs AND TAs INVOLVED:
NSV: 3.5 FTE
SAG: Involvement of FTEs not planned within the first 2 years collaboration period
MITOCHONDRIA HAVE EMERGED AS CENTRAL PLAYERS IN DOWNSTREAM PATHOLOGICAL EVENTS IN ALZHEIMER (AD) AND PARKINSON'S DISEASE (PH). OPPORTUNITIES NOW EXIST TO DEFINE ENTIRELY NEW THERAPEUTIC TARGETS BY UNDERSTANDING PRECISELY HOW ABERRANT PROTEINS EXERT DAMAGING EFFECTS ON MITOCHONDRIA. IN THIS INITIATIVE WE COMBINE EXPERTISE IN MITOCHONDRIAL DISEASES, MITOCHONDRIAL BIOCHEMISTRY, GENETICS AND CELL BIOLOGY, AND AB AND a-SYNUCLEIN PROTEIN CHEMISTRY. HERE WE PLAN TO TEST THE HYPOTHESES THAT AB (OR a-SN) CAN DIRECTLY INHIBIT OXIDATIVE PHOSPHORYLATION (OXPHOS), DECREASING ATP PRODUCTION AND/OR INCREASING ROS AND CONTRIBUTING TO NEURONAL DEATH. IF VALIDATED, WE AIM TO IDENTIFY NEW MOLECULAR TARGETS TO ENABLE NOVEL NEUROPROTECTIVE STRATEGIES IN AD AND PD, AND PROVIDE IN VITRO SYSTEMS FOR TESTING THESE.
OXPHOS COMPRISES FIVE MULTIMERIC PROTEIN COMPLEXES (CALLED COMPLEXES I TO V, ALSO CALLED THE RESPIRATORY CHAIN) THAT CONTAIN SUBUNITS OF BOTH NUCLEAR AND MTDNA ORIGIN. MITOCHONDRIAL DNA DISEASES, TYPICALLY SYNDROMIC, EXHIBIT A RANGE OF NEUROPATHOLOGY, SOME OF WHICH OVERLAP WITH FEATURES OF AD AND PD (FOR REVIEW SEE WALLACE 1999). OXPHOS, TOGETHER WITH THE INTEGRATED PROCESSES OF GLYCOLYSIS AND THE KREBS CYCLE, COMPRISE THE 'CORE BUSINESS' OF MITOCHONDRIA, PRODUCING ATP. OXPHOS ALSO PRODUCES MOST OF THE REACTIVE OXYGEN SPECIES (ROS) PRODUCED BY CELLS, WHICH IS A BY-PRODUCT OF RESPIRATION, RESULTING FROM AROUND 2% OF THE OXYGEN CONSUMED BEING INCOMPLETELY REDUCED BY ELECTRON LEAKAGE FROM THE RESPIRATORY CHAIN. INHIBITION OF OXPHOS CAN RESULT IN INCREASED OUTPUT OF ROS.
BIOCHEMICAL, PATHOLOGICAL, GENETIC AND TOXICOLOGICAL EVIDENCE POINTS TO MITOCHONDRIAL INVOLVEMENT IN THE NEURODEGENERATIVE PROCESS IN BOTH ALZHEIMER AND PARKINSON'S DISEASE (SEE BEAL 1998). MORE PRECISELY, THE EVIDENCE SUGGESTS THAT SECONDARY DEFECTS IN OXPHOS EMERGE WITH DISEASE PROGRESSION IN THESE DISORDERS. A WELL-ESTABLISHED FINDING FROM BRAIN IMAGING METHODS HAS BEEN AN IMPAIRMENT OF GLUCOSE UTILIZATION IN BRAIN REGIONS EXHIBITING NEURITIC PLAQUES IN AD PATIENTS (SIMS 1990). DECREASED CYTOCHROME, OXIDASE (OXPHOS COMPLEX IV) IS COMMONLY FOUND IN AD BRAIN (WONG-RILEY ET AL 1997, OJAIMI ET AL 1999). ULTRASTRUCTURAL STUDIES ON POSTMORTEM BRAIN HAVE RECENTLY CONFIRMED THE PRESENCE OF GROSS MITOCHONDRIAL ABNORMALITIES IN VULNERABLE NEURONS IN AD (HIRAI ET AL 2001).
THE ESTABLISHED FINDING THAT AB CAN INDUCE APOPTOSIS IN CULTURED NEURONS AND OTHER CELL TYPES WAS TAKEN AN IMPORTANT STEP FURTHER BY BEHL ET AL (1994) WHO SHOWED THAT AB TOXICITY WAS MEDIATED BY HYDROGEN PEROXIDE. RECENTLY IT HAS BEEN FURTHER DEMONSTRATED THAT MITOCHONDRIAL MEMBRANE POTENTIAL AND RESPIRATION ARE DECREASED IN CELLS INCUBATED WITH AB (PEREIRA ET AL 1999, FU ET AL 1998). IT REMAINS UNCLEAR HOW THE AB PEPTIDE EXERTS THESE EFFECTS. POSSIBILITIES INCLUDE SECONDARY INHIBITION OF RESPIRATION CONSEQUENT TO MEMBRANE PERTURBATION OR ROS PRODUCED BY AB. THE OTHER POSSIBILITY IS THAT EXPLORED IN THIS PROJECT, THAT AB MAY DIRECTLY BIND AND INHIBIT ONE OR MORE SITES OF OXPHOS COMPLEXES, DECREASING ATP PRODUCTION AND INCREASING ROS, AND DIRECTLY CONTRIBUTING TO INCREASED CELL DEATH.
PHARMACOTOXIC MODELS HAVE ALSO IMPLICATED RESPIRATORY CHAIN INHIBITION IN SPECIFIC NEURONAL CELL LOSS IN PD. IN DRUG-INDUCED PARKINSONISM THE NEUROTOXIN MPTP WAS FOUND TO INHIBIT COMPLEX I OF OXPHOS, WHILE CHRONIC INTOXICATION OF RATS WITH ANOTHER COMPLEX I INHIBITOR, ROTENONE, PRODUCES A PARKINSON SYNDROME WITH CORRESPONDING DOPAMINERGIC NEURONAL DROPOUT
(BETABET ET AL 2001). BIOCHEMICAL STUDIES CONSISTENTLY SHOW DECREASES IN OXPHOS COMPLEX I IN BOTH BRAIN AND PERIPHERAL TISSUES IN PD. RECENTLY OVEREXPRESSION OF a-SYNUCLEIN IN MOUSE NEURONAL CELLS HAS BEEN FOUND TO INTERFERE WITH MITOCHONDRIAL RESPIRATION AND CAUSE MORPHOLOGICAL DETERIORATION OF MITOCHONDRIA, ALTHOUGH THE EXACT SITES OF INHIBITION ARE AGAIN NOT YET KNOWN (HSU ET AL 2000).
OXIDANTS INCLUDING CERTAIN PRO-APOPTOTIC PROTEINS, CALCIUM OVERLOAD, AND REACTIVE OXYGEN SPECIES APPEAR TO DRIVE MITOCHONDRIA TO RELEASE APOPTOGENIC PROTEINS INCLUDING CYTOCHROME C AND AIF (SEE KROEMER & REED 2000). AN IMPORTANT QUESTION IS WHETHER THE RESPIRATORY CHAIN IS RECRUITED DIRECTLY TO INCREASE ROS TO TRIGGER APOPTOSIS, OR IF THE OBSERVED ROS INCREASES ARE SECONDARY TO OTHER APOPTOTIC EVENTS INVOLVING MITOCHONDRIA. "ROGUE" PROTEINS SUCH AS AB OR a-SYNUCLEIN ARE CANDIDATES FOR INAPPROPRIATELY MIMICKING SUCH A PUTATIVE MECHANISM. IMPORTANTLY, EXPERIMENTAL NEUROPROTECTIVE STRATEGIES THAT INHIBIT DOWNSTREAM ADOPTOTIC EVENTS (SUCH AS CASPASE INHIBITION) OFTEN PREVENT THE MORPHOLOGICAL TRAITS OF APOPTOSIS WITHOUT PREVENTING CELL DEATH. NEUROPROTECTIVE STRATEGIES DESIGNED TO PROTECT MITOCHONDRIA FROM OXIDATIVE STRESS CONSEQUENT TO AB OR a-SYNUCLEIN BINDING MAY BE MORE SUCCESSFUL.
REFERENCES FOR BACKGROUND AND RESEARCH PLAN:
Beal M.F. 1998, Biochim Biophys Acta 1366:211-233.
Behl C. et al 1994. Cell 77:817-827.
Betabet et al Nat Neurosci. 2000 3:1301-6.
Fu W et al 1998. Neurobiol Dis 5:229-243.
Hirai K et al 2001. J Neurosci 21:3017-3023.
Hsu I.J. et al 2000. Am J Pathol 157:401-410.
Kroemer G. & Reed JC. 2000. Nature Med 6:513-519.
Ojaimi J. et al 1999. Annals Neurol 46:656-60.
Pereira C. et al 1999. Neurobiol Dis 6:209-219.
Schagger H. 1996. Methods Enzymol 264:555-566.
Sims NR. 1990. Annals Neurol 27:691-693.
Trounce I. et al 1996. Methods Enzymol 264.
Wallace D.C. 1999. Science 283:1482-8.
Wong-Riley M. et al 1997. Vision Res 37:3593-3608.
By combining established expertise in mitochondrial biology (Trounce) and AB protein chemistry (Cappai) we offer a unique project with clear no-go criteria for the first year.
These experiments have not been reported to date by others.
Alzheimer disease
Parkinson's disease, Ageing
WE EXPECT THIS AREA OF RESEARCH TO BE A HOT TOPIC OVER THE NEXT FEW YEARS BUT SPECIFIC APPROACHES AS OUTLINED WITHIN THIS PROJECT PROPOSAL ARE NOT KNOWN TO US SO FAR. OUR COMBINED EXPERTISE IN MITOCHONDRIAL BIOLOGY AND AB CELL BIOLOGY PLACES US IN A HIGHLY COMPETITIVE POSITION. THE PROPOSED EXPERIMENTS REQUIRE EXTENSIVE EXPERIENCE IN QUALITY CONTROL OF BOIH MITOCHONDRIAL PREPS AND AB HANDLING, AND COULD NOT BE UNDERTAKEN BY MOST "AD" RESEARCH GROUPS. OUR ACCESS TO FRESH BRAIN MATERIAL IS ALSO UNUSUAL AND MAY BE IMPORTANT IN ALLOWING US TO PROVE FUNCTIONAL IMPORTANCE IN THIS TARGET TISSUE.
THE COMPETITOR SITUATION WITH REGARD TO FREE RADICAL SCAVANGERS AND ANTIOXIDANTS, WHICH ARE IN CONTRAST TO THIS STRATEGY UNSPECIFIC APPROACHES, ARE SUMMARIES WITHIN THE TABLE BELOW.
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Drug Originator Mechanism of Action Phase Country
------------------------------------------------------------------------------------------------------------------
Idebenone Takeda Antioxidants, Undefined Launched Italy
mechanism Portugal
Preregistration Austria
Germany
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EGB 761 Beaufour-Ipsen, Dr Free radical scavengers, Clinical-Phase- Germany
Willmar Schwabe Platelet activating factor Unkown
Pharmaceuticals antagonists
------------------------------------------------------------------------------------------------------------------
Research programme: CeNeS Antioxidants Preclinical United
antioxidants - CeNeS Pharmaceuticals Kingdom
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Research programme: OXIS Therapeutics Antioxidants Preclinical USA
lipid soluble antioxidants
- OXIS
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NCX 2213 NicOx Antioxidants, Nitric oxide Preclinical France
donors
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NCX 2216 NicOx Antioxidants, Nitric oxide Preclinical France
donors
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Research programme: Centaur Free radical scavengers Preclinical USA
Nitrone-Related Pharmaceuticals
Therapeutics - Centaur
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Working-plan and corresponding milestones
1. ADAPTATION OF HOUSE RESPIRATION AND OXPHOS COMPLEX ASSAYS (1-6 MONTH).
ESTABLISH OPTIMAL BUFFER AND METAL CONDITIONS TO ENSURE PROPER FUNCTIONING OF THE OXOPHOS ASSAYS TOGETHER WITH DEFINED CONDITIONS FOR AB. WE WILL USE MITOCHONDRIA ISOLATED FROM CELL LINES FOR CONSISTENT PREP QUALITY (EBV-TRANSFORMED LYMPHOBLASTS FROM HEALTHY CONTROLS), BUT WE WILL ALSO USE FRESH HUMAN BRAIN MITOCHONDRIA TO TEST FOR TISSUE-SPECIFIC EFFECTS IN A SUB-SET OF EXPERIMENTS (ETHICS CLEARANCE IN PLACE). CRITICAL HERE WILL BE THE CAREFUL MONITORING OF AB PROPERTIES (AGGREGATION) IN THE BUFFER CONDITIONS USED FOR OXPHOS STUDIES, AND THE ADAPTATION OF THE BUFFERS WHERE NECESSARY.
2. ANALYSIS OF THE INHIBITORY POTENTIAL OF AB (3-6 MONTH).
WE WILL TEST AB 1-40, AB 1-42, AND CONTROLS INCLUDING SAME LENGTH REGIONS OF THE APP ECTODOMAIN AND A REVERSE PEPTIDE, AND THE RAT AB. PEPTIDES WILL BE TITRATED AGAINST INTACT MITOCHONDRIA OXIDISING BOTH COMPLEX I AND II-LINKED SUBSTRATES, AND OXYGEN CONSUMPTION MEASURED POLAROGRAPHICALLY. SPECTROPHOTOMETRIC ASSAYS WILL BE USED TO MEASURE ANY SPECIFIC
INHIBITION OF COMPLEX I, II, III OR IV (TROUNCE ET AL 1996). ROS WILL BE MEASURED UNDER THE SAME CONDITIONS WITH A FLOURESCENCE MULTIPLATE READER, USING DCF AS A PROBE OF HYDROPEROXIDE PRODUCTION. CONTROLS WILL INCLUDE REACTIONS WITHOUT MITOCHONDRIA TO ACCOUNT FOR THE KNOWN PEROXIDE PRODUCING ABILITY OF AB IN CELL-FREE SYSTEMS.
3.1 VALIDATION OF SPECIFICITY OF THE INHIBITION (6-12 MONTH).
IT IS POSSIBLE THAT SEVERAL INDEPENDENT INHIBITORY EFFECTS OF AB WILL BE IDENTIFIED. IF POSITIVE, INHIBITION OF A SPECIFIC RESPIRATORY COMPLEX WILL INDICATE A CANDIDATE COMPLEX TO FURTHER PURSUE SPECIFIC BINDING STUDIES. IT IS ALSO POSSIBLE THAT SIGNIFICANT INHIBITION OF RESPIRATION WILL OCCUR WITHOUT SPECIFIC RESPIRATORY CHAIN PROTEIN BINDING, AS WOULD OCCUR IF A CLYCOLYSIS OR KREBS CYCLE ENZYME WAS INHIBITED. THIS IS AN ADVANTAGE OF INCLUDING THE INTACT MITOCHONDRIA RESPIRATION STUDIES. SUCH A RESULT WOULD REQUIRE A REVIEW OF OUR COMPETITIVE SITUATION AND IF PURSUED, DEVISING A STRATEGY TO CO-IP CANDIDATE PROTEINS.
3.2 DEVELOPMENT OF ASSAY FOR FUNCTIONAL VALIDATION: CELL BASED IN VITRO AB TOXICITY AND ROS/ATP MEASUREMENT (6-12 MONTH).
FLUORESCENT PROBES ARE AVAILABLE FOR MULTIPLATE AND/OR CONFOCAL ANALYSIS OF ROS, MITOCHONDRIAL MEMBRANE POTENTIAL AND CELLULAR ATP LEVELS. STANDARD APOPTOTIC MARKERS USING FIXED CELLS. ISSUES INCLUDE NEED TO MEASURE AB LEVELS IN CELLS AFTER TREATMENTS AND CORRELATE WITH LEVELS FOUND IMPORTANT IN BIOCHEMICAL STUDIES IN 2 ABOVE. SEE 4 BELOW FOR SUGGESTED CELL MODEL SYSTEMS.
4. FUNCTIONAL VALIDATION ON VITRO: CORRELATION BETWEEN NEURONAL APOPTOSIS (OR NECROSIS) INDUCED BY AB WITH DECREASE IN ATP AND/OR INCREASE IN ROS (12-24 MONTH).
SUGGESTED MODEL SYSTEMS: MOUSE NEURONAL CELLS AND HUMAN NEUROBLASTOMA CELLS FOR ACUTE EFFECTS. ORGANOTYPIC BRAIN SLICE EXPERIMENTS SHOULD BE CONSIDERED TO TEST FOR LONGER TIME COURSE AND NEURONAL SPECIFICITY OF TOXIC EFFECT(S). FOR FUNCTIONAL VALIDATION NEURONAL CELL DEATH WILL BE INDUCED BY AB AND CHANGES IN ATP AND/OR ROS WILL BE MONITORED. DISCRIMINATION OF OXPHOS-LINKED AB-INDUCED APOPTOSIS WILL PROBABLY BE INFORMED BY THE INHIBITION STUDIES, E.G. POTENTIATION OF CELL DEATH BY RESPIRATORY CHAIN INHIBITORS IN THE PRESENCE OF AB, COMPARED WITH NON AB-TREATED CELLS, OR DISTINCT TIME COURSE CHANGES IN ROS OR ATP LEVELS, COMPARED WITH OTHER PRO-APOPTOTIC AGENTS SUCH AS STAUROSPORINE.
5. IDENTIFICATION OF THE BINDING DOMAIN (12 - 18 MONTH).
ALL FIVE OXPHOS HOLOCOMPLEXES CAN BE ISOLATED FROM
DODECYL-MALTOSIDE-SOLUBILIZED, AB-TREATED MITOCHONDRIA IN A SINGLE
ELECTROPHORETIC STOP, USING "BLUE NATIVE" GEL ELECTROPHORESES (SHAGGER 1996).
WESTERN BLOTTING USING ANTI-AB ANTIBODIES CAN THEN BE USED TO DEFINE BINDING
COMPLEX(ES). THE PRECEDING BIOCHEMICAL (INHIBITION) STUDIES WILL INDICATE
CANDIDATE COMPLEXES. 1D OR 2D GELS (2D GELS ONLY REQUIRED FOR COMPLEX I, WHICH
HAS AROUND 40 POLYPEPTIDE SUBUNITS) WILL THEN BE USED TO DEFINE BINDING
POLYPEPTIDE(S).
6. VERIFY SPECIFIC BINDING ON MOLECULAR LEVEL: CO-IP, ANTIBODY APPROACH, LABELED AB PEPTIDES (18-24 MONTH).
TEST SYNTHETIC PEPTIDES (MUTAGENESIS) OF THE AB SEQUENCE TO DEFINE BINDING MOTIF (HIS-RESIDUES...), INCLUDING VARYING PEPTIDE LENGTHS. CRYSTALLISATION OF THE AB/BINDING-DOMAIN: CLONING AND EXPRESSION OF AB-BINDING OXPHOS POLYPEPTIDE (BACTERIAL OR BACILLOVIRUS) AND PURIFICATION TO HOMOGENEITY. DEFINE BINDING KINETICS IN VITRO, THEN CRYSTALLISATION IF BINDING IS STABLE.
7.1 ASSAY DEVELOPMENT TOGETHER WITH SAG (24-30 MONTH).
7.2 FURTHER CHARACTERISATION OF BINDING MOTIF (24-36 MONTH).
1. THE IDENTIFICATION OF THE BINDING-MOLECULE/BINDING SITE TO DEVELOP AS SOON AS POSSIBLE A SUITABLE SCREENING ASSAY FOR SMALL MOLECULES AND
2. THE FUNCTIONAL PROCESS.
1. SHOW INHIBITION OF OXPHOS RESULTING IN, DECREASING ATP PRODCUTION AND/OR INCREASING ROS (6 MONTH)
2. VALIDATION OF THE SPECIFICITY OF THE INTERACTION WITH THE MITOCHONDRIAL OXIDATIVE PHOSPHORYLATION-COMPLEXES (12 MONTH)
3. IDENTIFICATION OF THE BINDING DOMAIN 18 MONTH
4. FUNCTIONAL VALIDATION IN VITRO: 24 MONTH
5. Verify specific binding on molecular level: 24 month.
o FAILURE TO VERIFY A SPECIFIC INTERACTION OF AB PEPTIDES WITH THE MITOCHONDRIAL OXIDATIVE PHOSPHORYLATION COMPLEXES AFTER 12 MONTHS.
o FAILURE TO VERIFY THE INTERACTION ON THE MOLECULAR LEVEL AFTER 18 MONTHS.
o Failure to show a correlation between neuronal apoptosis induced by AB with decrease in ATP and/or increase in ROS after 24 months.
Concept research with focus on target identification and validation. The target is a molecule involved in AB induced inhibition of mitochondrial oxidative phosphorylation complexes.
1(degree) The target should be validated: (see Milestones No 4 and 5 // no-go criteria) Functional validation in vitro and verification of specific binding on molecular level after 24 month
2(degree) The target should be suitable for HTS
3(degree) The patent situation should allow HTS and drug development
(For details see "Project Criteria(s) necessary for exercising the Option")
Schedule 2
Project Management Committee for Project described in Appendix 2.2b of the RCA and entitled AB Interactions with mitochondrial respiratory chain complexes
Institute Representative: Professor Edward Byrne
Project Leader Institute: Dr. Ian Trounce
Project Leader SCHERING: Dr. Thomas Dyrks
Schedule 3
Prana Biotechnology (ACN 080 699 065)
Attention: Chief Operating Officer
Fax No.: +61 3 9690 8587
Address: Suite 2, 1233 High Street, Armadale, Victoria, 3143, Australia
Neurosciences Victoria Ltd
Attention: Chief Executive Officer
Fax No.: +61 3 83443832
Address: The Gatehouse, 2 Park Drive, Parkville, Victoria, Australia, 3052
Schedule 4
Item 1: Budget (clause 6(a))
With respect to this Project, NSV is providing AUD $525,000 per annum to Prana Biotechnology for the first six months. Subject to Proof of Concept at 6 months, the funding will be maintained at AUD $525,000 for validation strategies. Total funds are shown for the anticipated 24-month period of this Project.
Research Funds The University of Melbourne $ 945,000 Prana Proportion $ 105,000 (10%) Total $1,050,000 |
Item 2: Parties' ownership share of Project Results (clause 7.2)
Prana 100% SCHERING 0% Total 100% |
Item 3: Parties' entitlement to Commercialisation Proceeds (clauses 8.3 & 8.4)
Prana 100%
Total 100%
Item 4: Restrictions on NSV's right to Commercialise Background IP (clause 7.1)
Rights to commercialise Background IP are non-exclusive
Executed in Melbourne, Victoria, Australia
Signatories to this Project Agreement:
Mr. Geoffrey Kempler Executive Chairman
Prana Biotechnology Limited
Date 11/03/2003
/s/ Geoffrey Kempler
-------------------------
--------------------------------------------------------------------------------
A/Prof William Hart Chief Executive Officer,
Neurosciences Victoria Limited
Date 11/03/2003
/s/ William Hart
-------------------------
Professor Edward Byrne Deputy Chair
Neurosciences Victoria Limited
Date 3/03/2003
/s/ Edward Byrne
-------------------------
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EXHIBIT 4.15
Project Agreement
Neurosciences Victoria Limited
and
Prana Biotechnology Limited
Allens Arthur Robinson
Stock Exchange Centre
530 Collins Street
Melbourne 3000 Australia
Tel 61 3 9614 1011
Fax 61 3 9614 4661
Table of Contents
1. Definitions and interpretation 2
1.1 Definitions 2
1.2 Interpretation 4
2. Agreement to undertake Project 5
3. Appointment, management and retention of staff 5
4. Condition Precedent and Term 6
4.1 Condition Precedent 6
4.2 Term 6
5. Project Management Committee and Reporting Requirements 7
5.1 Appointment 7
5.2 Operation of Project Management Committee 7
5.3 Semi-annual reports 7
5.4 Annual reporting review 8
5.5 Records management 8
5.6 Final report 8
6. Budget and GST 8
7. Ownership and rights in relation to Intellectual Property 9
7.1 Background IP 9
7.2 Project Results 10
7.3 NSV has no rights outside the Field 11
8. Commercialisation of IP 12
8.1 Decline of First Right of Refusal 12
8.2 Exercise of First Right of Refusal 12
8.3 Share of Proceeds l3
8.4 Use and Distribution of Proceeds 13
9. Identification, maintenance, enforcement and defence of Intellectual
Property 14
9.1 Identification of Project Results 14
9.2 Primary responsibility for Project Results 15
9.3 Reversion of Project Results 15
9.4 Assistance 15
9.5 Protection of Intellectual Property 16
9.6 Proceeds of Infringement 16
10. Confidentiality 17
10.1 Confidentiality Obligations 17
10.2 Publications 18
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11. Settlement of Disputes and Arbitration 18
11.1 Dispute Resolution 18
11.2 Arbitration 19
12. Termination and Breach 20
12.1 Breach by Prana 20
12.2 Termination for unsatisfactory progress 21
12.3 Termination of RCA with SCHERING 21
12.5 Breach by NSV 22
13. Termination without prejudice 24
14. General Warranties and Indemnities 24
14.1 IP representations and warranties 24
14.2 Indemnities in relation to the Project 24
15. Assignment and Sub-Contracting 25
16. Force majeure 25
17. Clause severance 26
18. Waiver 26
19. Governing law 26
20. Notices 27
21. Entire Agreement 27
22. Amendments 28
23. Further assurances 28
24. Counterparts 28
Schedule 1 29
Financial Terms 29
Project Synopsis 29
Schedule 2 33
Project Management Committee 33
Schedule 3 34
Addresses for Service of Notices 34
Schedule 4 35
Budget, Shares of Project Results and Proceeds of Commercialisation 35
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1. Neurosciences Victoria Limited (ABN 56 094 548 973) a company incorporated in the State of Victoria and having its registered office at The Gatehouse, 2 Park Drive, Parkville 3052, Australia (NSV).
2. Prana Biotechnology Limited (ABN 37 080 699 065) of 100 Dorcas St, Sth. Melbourne, Victoria (Prana)
A NSV is a company limited by guarantee to enhance scientific and
technological capabilities and support scientific research in
Victoria in the Field) by, amongst other things, facilitating
funding, as agent for its members and certain Victorian research
institutes.
B NSV has signed a research collaboration agreement ("RCA") with
Schering Aktiengesellschaft, 13342 Berlin, Germany, ("SCHERING"),
under which SCHERING is willing to provide financial funding to
certain Projects in the Field and NSV agrees to provide certain
rights to Project Results and Background IP to SCHERING.
C In furtherance of recital A and B, the Parties wish to conduct a
Project in the Field.
D Prana hereby appoints NSV as agent for the purpose of receipt of
Schering funding under the terms of the RCA between NSV and Schering
and to facilitate the licensing of IP to Schering through NSV and
for no other purposes.
E In furtherance of Recital A and B
(a) Prana has prepared a Project Synopsis detailing a Project that
it and NSV wish to have conducted in the Field;
(b) the Project Synopsis has been discussed with and approved by
SCHERING; and
the Parties wish to agree on the terms and conditions under which
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Appendix 2.2c of the Research Collaboration Agreement. Page 1
Project Title = Ab binding ligands for imaging of Alzheimer's Disease (AD)
3rd March 2003
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Project Agreement
Neurosciences Victoria Ltd and Prana Biotechnology Ltd
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the research and development project will be conducted.
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It is agreed as follows.
1.1 Definitions
In this Agreement, unless a contrary intention appears from the context:
Account means an account opened in accordance with clause 6.
Background IP shall mean the Intellectual Property owned or controlled by Prana which is already in existence prior to the Commencement Date or is created independently of the Agreement and which is made available under this Agreement by Prana for the Project. Patented Background IP is identified in the Project Synopsis.
Budget means the budget for the Project set out in the Project Synopsis and amended by the Parties only upon approval by SCHERING.
Commencement Date means the date of this Agreement.
Commercialise, in relation to Intellectual Property, means to develop, manufacture, sell, hire or otherwise exploit a product or process, or to provide a service, incorporating that Intellectual Property, or to license SCHERING to do any of those things; and Commercialisation is similarly construed.
Commercialisation Proceeds means any and all royalties, licence fees and other receipts derived from Commercialisation of Project Results with or without Background IP under a Sub-licence by SCHERING.
Committee means the Project Management Committee established under clause 5.1.
Confidential Information means all trade secrets and know-how, financial information and other commercially valuable information of whatever description and in whatever form (whether written or oral, visible or invisible) made available as Background IP or otherwise or arising as a result of the Project, but excludes the interpretation, analysis and application of general information in the public domain.
Core Criteria shall mean the general criteria as laid out in Appendix 1.5 of the RCA, that need to be fulfilled independently of any specific Project Decision Criteria in order to enable SCHERING to make its decision as to the right of first negotiation granted by NSV to SCHERING under ss. 7 of the RCA.
Decision Criteria means collectively the Core Criteria and the Project Decision Criteria.
Earmarked Funds has the meaning given in the Members Agreement dated November 2, 2001 between NSV and its founding members, namely research funding which NSV has arranged for a particular project.
Field means compounds which bind beta amyloid for the purpose of in vivo imaging of beta amyloid plaques in the human brain
[this space left blank]
Intellectual Property includes all industrial and intellectual property, whether protected at common law or under statute and includes (without limitation) all inventions (both patentable and unpatentable), designs (both registered and unregistered), copyrights, circuit layouts, plant variety rights, trademarks (both registered and unregistered), samples, materials, data, know-how, results and Confidential Information.
Key Alliance Manager - Research (KAMR) means the team established in accordance with ss. 10.4 of the RCA.
Party means a party to this Agreement.
Project means the research and development activities described in the Project Synopsis to be undertaken by Prana under this Agreement.
Project Decision Criteria means the Project specific set of scientific criteria (including timelines) as listed in each Project Synopsis which have to be fulfilled and presented by NSV to SCHERING under the RCA in order to enable SCHERING to make its decision as to the right of first negotiation granted under the RCA.
Project Results means all Intellectual Property, whether patentable or not, in relation to the Project that has been created, discovered or brought into existence as a result of or in connection with the Project by Prana at any time, excluding the Background IP.
Project Leaders means the project leaders from Prana and SCHERING as appointed under clause 3 (a).
Project Management Committee means the committee established in accordance with clause 5.
Project Synopsis means the detailed description of a research project, including a detailed work-plan for the research and/or development for the Project (including the timeline, milestones and Decision Criteria) as set out in Schedule 1 amended as agreed between the Parties in writing from time to time.
Raw Data means that part of the Project Results comprising the data contained in the lab books regardless of their form, allowing for the verification and validation of the scientific results produced during the performance of a Project
Steering Committee means the decision body established in ss. 10.1 of the RCA and comprising of representatives of NSV and SCHERING.
Sub-licence is defined in clause 8.2.
Tax Invoice means a document that complies with the requirements of subsection 29-70(1) and (if applicable) section 54-50 of the A New Tax System (Goods and Services Tax) Act 1999 (Cwth).
1.2 Interpretation
In this Agreement, unless the context indicates to the contrary:
(a) the expression person includes a natural person, an institution, a body corporate, an agency or other body;
(b) references to any Party to this Agreement will include the Party's legal successor (including executors and administrators) and permitted assigns;
(c) words importing the singular will include the plural (and vice versa) and words denoting a given gender will include all other genders;
(d) clause headings and notes in square brackets are inserted for convenience only, and have no effect in limiting or extending the language of provisions, except for the purpose of rectifying any erroneous cross reference;
(e) references to any document or agreement will be taken to include references to such document or agreement as amended, novated, supplemented, varied or replaced from time to time;
(f) references to any legislation or to any provision of any legislation will include any modification or re-enactment of such legislation or any legislative provision substituted for, and ail legislation and statutory instruments issued under such legislation;
-------------------------------------------------------------------------------- Appendix 2.2c of the Research Collaboration Agreement. Page 4 Project Title = Ab binding ligands for imaging of Alzheimer's Disease (AD) 3rd March 2003 |
Project Agreement Neurosciences Victoria Ltd and Prana Biotechnology Ltd -------------------------------------------------------------------------------- |
(g) all attachments to this Agreement form part of this Agreement;
(h) all monetary amounts referred to in this Agreement are in Australian currency.
In consideration of the mutual promises and undertakings set out in this Agreement, Prana hereby agrees to undertake the Project in accordance with the terms and conditions of this Agreement. Without limiting the generality of this clause 2.1, Prana must:
(a) Work to carry out and complete the Project in accordance with the Project Synopsis, the Budget and the terms and conditions of this Agreement and in a manner which is to the satisfaction of NSV; and
(b) obtain all licences, permits and authorities, and comply with all laws, by-laws and regulations, which may be required for the legal performance of its obligations under this Agreement.
Upon the start of a Project Prana must:
(a) appoint one key personnel to undertake the lead role on the Project on behalf of Prana (Project Leader), who will manage and monitor the day-to-day operations of the Project together with a Project Leader nominated by SCHERING. It is agreed that the Project Leader appointed by Prana may be a sub-contractor of Prana. Both Project Leaders shall be members of the Project Management Committee (see clause 5). All communication among Project Leaders shall be copied to the KAMR. If any Project Leader of Prana dies, becomes incapacitated or ceases to be employed by Prana, Prana will notify NSV immediately and nominate a suitable replacement to carry out and complete Prana`s obligations in respect of the Project under this Agreement. If NSV or SCHERING reasonably considers that the nominated replacement is not suitable to perform those functions, NSV may exercise its rights under clause 12.1(b);
(b) be solely responsible for all scientists and other staff involved in the Project on behalf of the Institute, and for all their entitlements, including, but not limited to, any superannuation and workers' compensation contributions, as may legally be required to be made in respect of the engagement of each of those scientists or other staff;
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(c) do all things reasonably within its power to ensure that all scientists and other staff engaged by Prana undertake the Project work and act to the best of their respective skills and abilities in a diligent, professional and honest manner; and
(d) neither during, nor for six months after the term of this Agreement, employ or attempt to employ any key personnel of another Party who has been involved in the Project without the prior written consent of that Party.
4.1 Condition Precedent
It is a condition precedent to this Agreement that NSV submits to Prana (or vice versa) and NSV (or Prana, as appropriate) approves, a Project Synopsis that fully defines the Project and includes the following in respect of the Project:
(a) a statement of aims;
(b) an outline of the strategy to be followed;
(c) potential outcomes;
(d) milestones;
(e) the financial terms applicable to the Project as laid out in Appendix 7.5 of the RCA.
(f) a budget for Prana's contribution to the Project;
(g) resource requirements for Prana's contribution to the Project;
(h) Background IP in existence as at the Commencement Date proposed to be used in the Project and the terms, if any, on which Prana will make its Background IP available for use in the conduct and Commercialisation of the Project.
(i) Prana's share of the Commercialisation Proceeds; and
(j) the Project Decision Criteria.
4.2 Term
This Agreement will commence on the Commencement Date and will continue until the completion of the Project, unless terminated earlier in accordance with clause 12.
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5.1 Appointment
As soon as practicable after the Commencement Date, the Parties shall establish a project management committee to have overall management and evaluation of the Project (hereinafter "Project Management Committee" or simply "Committee").
5.2 Operation of Project Management Committee
The Committee will operate as follows:
(a) it will comprise one representative from Prana as well as the Project Leaders of Prana and SCHERING. The initial representatives are listed in Schedule 2;
(b) it will meet monthly to review the progress of the Project and determine the programs of work to be undertaken under the Project Synopsis;
(c) it may determine its own procedures and may confer by telephone or other electronic means;
(d) a resolution of the Committee must be passed by all representatives; and
(e) each Party bears the cost and expenses incurred by its representatives in relation to their attendance at Committee meetings.
5.3 Semi-annual reports
Prana's Project Leader, with support of the Schering Project Leader, must prepare and submit to the Committee and the KAMR a semi-annual report describing:
(a) work done and achievements made (including milestones and deliverables completed) during the 6 months to which the report relates;
(b) details of Project Results developed during the 6 months and steps taken to protect it;
(c) any departure from the Project Synopsis during those 6 months;
(d) current issues relating to the performance of the Project and recommendations as to their resolution;
(e) the amount of funding required for the next 6 months; and
(f) such other matters as each Party (or its representative or appointee an the Committee) considers appropriate.
All reports have to be approved by the KAMR.
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5.4 Annual reporting review
During each year of the Project, the KAMR will review the adequacy of the reporting requirements set out in clause 5.3,and decide whether, and if so how, they should be amended for the following year of the Project.
5.5 Records management
The Committee must:
(a) maintain full and accurate data, information and records of and concerning work carried out in the Project; and
(b) disclose or make available all such data, information and records to the Parties as and when each Party requires;
(c) make sure that all Raw Data will be entered into a laboratory note book, dated, signed and witnessed.
NSV and / or SCHERING has the right to review the handling of all documents, data, records and Raw Data produced for the Project during the term of this Agreement. Time and location of such review shall be coordinated with Prana.
5.6 Final report
The Committee must submit through the Project Leaders to the KAMR and the Steering Committee a final report in writing within 30 days of completion of the Project. The final report will describe, in reasonably informative detail:
(a) the conduct of the Project;
(b) the results;
(c) Project Results obtained in the performance of the Project;
(d) Background IP used in the performance of the Project; and
(e) Background IP required for Commercialisation of the Project Results.
(a) The initial Budget for the Project is set out in Schedule 4 and shows:
(i) the amount of funds allocated to Prana to undertake and perform its responsibilities under the Project Synopsis (Research Funds); and
(ii) the proportion, if any, to which NSV is entitled as its administration fee in consideration of fulfilling its obligations under this Agreement, (NSV Proportion) provided that the NSV Proportion will be zero where an allocation has already been made in respect of the Project under the arrangements set out in the Members' Agreement.
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(b) On, before, or as soon as practicable after, the Commencement Date, NSV will, if it does not already have an appropriate account, open an account and will deposit into that existing or new account such funds as it has received from SCHERING as agent for Prana to enable the Project to be conducted.
(c) In consideration of Prana undertaking the Project, NSV will draw on
the Account to provide Prana the amount set out in sub-paragraph
(a)(i) above as quarterly installments.
(d) If GST is payable on a Taxable Supply made under, by reference to or in connection with this Agreement, the party providing the Consideration for that Taxable Supply must also pay the GST Amount as additional Consideration. In this Agreement 'Consideration' and 'Taxable Supply' each has the meaning given by the A New Tax System (Goods and Services Tax) Act 1999 (Cth) and 'GST Amount' means in relation to a Taxable Supply the amount of GST payable in respect of that Taxable Supply.
(e) No Party is required to provide any amount of GST to any other (and may withhold any amount required at law) unless the other issues a Tax Invoice to that Party.
(f) NSV is not required to provide any amounts under this Agreement to the extent that SCHERING who has committed to provide research funding to NSV in respect of the Project defaults on those commitments leaving insufficient funds in the Account to enable NSV to provide such amounts.
(g) NSV must use all reasonable endeavours to enforce its rights against SCHERING if SCHERING defaults on the commitments referred to in paragraph (f).
7.1 Background IP
(a) For the specific purposes of allowing the Project to proceed and for commercialisation of Project Results (and only for those purposes), Prana will make available to the Project the Background IP (as defined) in respect of Prana whether directly as a result of Prana's ownership of that Background IP or as a result of agreements entered into with the owner(s) of that Background IP.
(b) The Parties acknowledge and agree that the Background IP will remain the property of Prana or the owner(s) referred to in paragraph (a).
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(c) The Project Leader will endeavour to maintain a register recording such Background IP as is made available by Prana for the Project, provided that failure to include an item of Background IP on this register does not preclude the Parties from using Background IP as permitted under this Agreement where that Background IP is made available under this Agreement or is included in the definition of 'Background IP'.
(d) Prana grants to NSV, a worldwide, non-exclusive, royalty-free, sub- licensable licence to Commercialise the Background IP but only to the extent required for NSV to exercise its rights to Commercialise the Project Results granted under clause 7.2.
7.2 Project Results
(a) All Project Results created in relation to the Project, upon creation, vest in and will become and remain the property of Prana, only subject to Prana's contractual agreements with the University of Melbourne in relation to this Agreement. Prana is free to deal with, Commercialise, dispose of or encumber any interest which it might hold in Project Results outside the Field as it sees fit.
(b) Subject to clause 8.1, no Party will deal with, Commercialise, dispose of or encumber any interest which it might hold in Project Results in the Field, except as authorised in this Agreement, or with the written consent of the other Party to this Agreement.
(c) Each Party will co-operate with each other Party and promptly do all acts and things and execute all documents which may be necessary for the purpose of vesting ownership of the Project Results in Prana as contemplated by this clause 7.2.
(d) Prana grants to NSV, a first right of refusal to negotiate a worldwide exclusive royalty-bearing sub-licensable licence to Commercialise the Project Results in the Field in accordance with clause 8 of this Agreement.
(e) As soon as the Project Leaders are notified under clause 9.1(a) of the creation of any Project Results then, if that Project Results alone or together with any Background IP, meets the Project Decision Criteria, the Project Leaders will within 14 days notify all Parties and the Steering Committee in writing that, from the date of notification, NSV may exercise its right of first refusal to license such Project Results and any relevant Background IP and present NSV with sufficient data to make a decision on the exercise of its right of first refusal.
(f) The Parties are aware of the fact that after NSV has received such notification and data in accordance with clause 7.2(e), NSV has the obligation under the RCA to immediately notify SCHERING which has an exclusive right of first negotiation for a sublicence to ail Project Results and Background IP notified to NSV under this Agreement.
(g) Under the RCA SCHERING has the right to evaluate the relevant Project Results and Background IP during a period of 90 days after notification and presentation of sufficient data by NSV. The Parties hereby acknowledge and agree to this right.
(h) SCHERING has further the right under the RCA, at its cost, to scientifically check the data, including, where necessary and applicable, a re-evaluation of the experiments or tests. In such case the above mentioned period of 90 days may be extended by another 60 days to allow for such tests. If SCHERING requires access to Project Results in order to decide if the Project Decision Criteria have been met, Prana hereby agree (i) to SCHERING's right under ss. 8.2 of the RCA to perform a due diligence on the Project Results and the Background IP and (ii) to apply reasonable efforts to execute, support and facilitate such access for SCHERING.
(i) After SCHERING has informed NSV within the timelines mentioned in
7.2 (g) and (h) respectively above by written notice whether the
Decision Criteria have been met and whether SCHERING wishes to
obtain a sub-license from NSV, NSV will immediately notify Prana
accordingly whether NSV wants to exercise its right of first refusal
to negotiate a licence to the relevant Project Results and
Background IP.
(j) The Decision Criteria may only be amended in accordance with the RCA. Any amendment of the Decision Criteria will be notified to Prana in writing and will become an integral part of this Agreement and the Project Synopsis on the date of that notification.
(i) The rights granted to NSV or SCHERING in respect of Project Results are subject to a right in favour of Prana to use and disclose for educational and research purposes to the extent allowed by Clause 10 (Confidentiality and Publications)
7.3 NSV has no rights outside the Field
NSV specifically acknowledges that it has no rights to use Project Results or Background IP outside the field. Without limiting the generality of the foregoing, NSV specifically acknowledges that it has no rights to use Project IP or Background IP to develop products for therapeutic use or have any right of first
refusal to negotiate any rights to Commercialise any Project Results or Background IP for therapeutic purposes outside the scope of this Agreement.
8.1 Decline of First Right of Refusal
If NSV does not exercise its first right of refusal in accordance with clause 7.2, unless the Parties agree otherwise, NSV's rights under clauses 7.1 and 7.2 will terminate and its rights to the Project Results and Background IP will revert to Prana who, subject to clause 9.3, will be free to commercialise and otherwise deal in that Intellectual Property as they see fit.
8.2 Exercise of First Right of Refusal
If NSV does exercise its first right of refusal in accordance with clause
7.2 (i), Prana appoints NSV as its agent to negotiate a sub-licence in the
Field, (Sub-licence) with SCHERING to Commercialise the Project Results
and (as necessary to Commercialise the Project Results) the Background IP,
and the following provisions will apply:
(a) NSV will use all reasonable endeavours to negotiate the Sub-licence, according to the following:
(i) the Sub-licence will be world-wide and exclusive in respect of Project Results only, and non-exclusive in respect of Background IP,
(ii) the Sub-licence will be royalty-bearing, with royalty rates and any licence fees and milestone payments set out in Appendix 7.5 [(financial terms)] of the RCA and royalty payments calculated by reference to Net Sales as defined in the RCA;
(iii) the term of the Sub-licence will be for the duration of the last to expire anywhere in the world of the patents generated in respect of the Project Results, provided that the royalty obligations may expire on a country-by-country basis as patent protection in respect of the Commercialisation of the Project Results expires in each country; and
(iv) NSV may not enter into any binding Sub-licence without Prana's written approval, which may not be unreasonably withheld.
(b) If any Sub-licence is entered into, Prana will be deemed to have immediately:
(i) granted to NSV a reciprocal licence to Commercialise the Project Results and Background IP as necessary to enable NSV to fulfill its obligations to SCHERING under the Sub-licence; and
(ii) appointed NSV its agent to receive Commercialisation Proceeds under the Sub-licence on their behalf.
(c) If NSV and SCHERING, after good faith negotiations, are unable to agree on the terms of a Sublicense within 6 months of NSV exercising its first right of refusal under clause 7.2,unless the Parties agree otherwise, NSVs rights under clauses 7.1 and 7.2 will terminate and its rights to the Project Results and Background IP will revert to Prana who, subject to clause 9.3, will be free to commercialise and otherwise deal in that Intellectual Property as they see fit.
8.3 Share of Proceeds
NSV will receive and hold the Commercialisation Proceeds in accordance with clause 8.4 as agent for Prana in the proportions specified in Item 3 of Schedule 4. If no such proportions are specified, then the proportions specified in Item 2 of Schedule 4 will apply.
8.4 Use and Distribution of Proceeds
NSV will:
(a) collect and pay all Commercialisation Proceeds and any funds NSV receives from SCHERING for the purposes of identifying, maintaining, enforcing or defending Intellectual Property into the Account;
(b) draw on the Account to meet its agreed administration fee payable in connection with Commercialising the Project Results, which fee will be 12.5% of all Commercialisation Proceeds, unless otherwise specified in Item 3 of Schedule 4 or agreed in writing by all Parties;
(c) draw on the Account as permitted under clause 9.2; and
(d) draw on the Account to pay any money due to the owners of Background IP as a result of the Commercialisation.
(e) distribute the balance to Prana in accordance with the proportions determined under clause 8.3.
9.1 Indentification of Project Results
(a) Prana must notify the Project Leaders of the creation of any Project Results as soon as practicable after such creation.
(b) Prana will use its best efforts to ensure that its employees, agents and sub-contractors under its supervision or other persons participating in the Project:
(i) will identify Project Results generated or developed by them;
(ii) will promptly communicate details of it to the Project Leaders; and
(iii) will promptly do all acts and things and execute all documents necessary for the purpose of vesting ownership of the Project Results in Prana as contemplated by clause 7.2.
(c) If Prana considers that a particular development arising from that Project may be patentable or the subject of other forms of Intellectual Property protection, Prana will promptly communicate details of that development to the Project Leaders.
(d) The Project Leaders will advise the KAMR whether the development warrants pursuing patent protection, or other forms of Intellectual Property protection, and if it does, of what nature and in which countries protection should be sought.
(e) If required by the KAMR, the Committee will discuss with SCHERING the matters referred to in paragraph (d) and the question which party shall have the obligation to file, maintain, prosecute, enforce and defend such Intellectual Property. The Committee will allow any final decision under this clause to be solely up to SCHERING.
(f) All registrable Project Results will be applied for in the name of the owner of that Project Results as determined under clause 7.2.
(g) Except as expressly stated otherwise in this Agreement:
(i) Prana will be responsible for application, prosecution, maintenance, enforcement or defence of any form of Intellectual Property protection in respect of its Background IP and will keep NSV reasonably informed of, and co-operate, at NSV's cost, with any reasonable request of NSV in connection with, such matters; and
(ii) nothing will require Prana to apply its own funds (other than those held by NSV on its behalf) towards the application, prosecution,
maintenance, enforcement or defence of any form of Intellectual Property protection in respect of Project Results.
9.2 Primary responsibility for Project Results
(a) NSV, subject to the rights of SCHERING and Prana referred to in clause 7.1 above and ss. 9 of the RCA, will be responsible for applying, maintaining, prosecuting, enforcing and defending any form of Intellectual Property protection in respect of Project Results in close consultation with SCHERING.
(b) NSV may meet any expenses incurred under this clause 9 out of any funds NSV receives from SCHERING dedicated explicitly to the purposes of maintaining, enforcing or defending any Intellectual Property and which NSV deposits into the Project Account.
9.3 Reversion of Project Results
If:
(a) SCHERING does not take reasonably adequate steps to protect the Project Results; or
(b) an NSV request under clause 9.2 for funds to obtain protection of Project Results is refused,
Prana may protect the Project Results and/or incur the expense (as the case may be) and all rights thereafter obtained as a result of those funds will be excluded from the first right of refusal under clause 7.2(d).
9.4 Assistance
Prana will, at its cost, provide all information to NSV and SCHERING (as the case may be) and execute all documents and do all acts and things necessary or desirable to enable the adequate and timely preparation of all documents necessary or desirable for the application, prosecution, maintenance, enforcement or defence of any registrations or other protection of the Project Results, including, without limitation:
(a) signing, and procuring all inventors to sign, all powers of attorney and other forms required for the orderly prosecution of said patent applications; and
(b) lending its name to any infringement or defence action either as a direct party or a third party.
Other than the obligations in this 9.4, Prana will not be liable for any costs associated with an infringement or defence action initiated by NSV or SCHERING.
9.5 Protection of Intellectual Property
(a) Prana will disclose to NSV immediately it becomes aware, details of:
(i) any infringement or alleged infringement by any person of any Project Results, Background IP of a third party relevant to the Project or relevant to the Commercialisation of the Project Results and Background IP, in the Field; and
(ii) any claim or alleged claim by any person that Commercialisation of the Project Results, Background IP or any Intellectual Property of a third party relevant to the Commercialisation of the Project Results and Background IP constitutes an infringement of the rights of that person, in the Field.
(b) Unless the Parties otherwise agree, NSV will, in accordance with the terms of the Sub-licence (if any) take all reasonable steps to enforce and defend the Project Results, in the Field, as it sees fit, in consultation with Prana, but subject to any rights of SCHERING. At NSV's request, Prana agrees to give NSV all assistance which may be reasonably required in order to enforce and defend the Project Results.
(c) Prana will maintain, enforce and defend any Background IP which is the subject of a Schering sub-license under this Agreement, at Prana's own expense;
(d) If NSV decides not to initiate proceedings against any alleged infringer in relation to alleged infringement of Project IP in the Field, Prana will not do so without NSV's prior written consent, such consent to be given at NSV's discretion and on such conditions as NSV sees fit, including, without limitation, satisfaction of issues such as apportionment of proceeds, recovery of NSV's costs and indemnification of NSV against adverse judgment.
(e) NSV has the right to assign all rights vested in NSV under this Agreement with regard to filing, maintenance, prosecution, enforcement and defence of Project Results to SCHERING.
9.6 Proceeds of infringement
If NSV recovers any damages or accounts of profits in taking any action against any alleged infringer of Project Results, in the Field, the amounts of any such judgment and any costs recovered by NSV will be first applied to reimburse reasonable external costs and expenses (including external legal costs) incurred by NSV, Prana and SCHERING. The balance, if any, will be apportioned in accordance
with the terms of the Sub-licence (if any) and then to Prana in accordance with this Agreement as if it were Commercialisation Proceeds.
10. Confidentiality
10.1 Confidentiality Obligations
(a) Each Party agrees that it will keep secret and confidential and not use or disclose to any other legal entity all Confidential Information made available by another Party other than as necessary for the purposes of this Agreement, save that NSV may disclose Confidential Information to third parties in confidence as reasonably necessary for the Commercialisation of the Project Results.
(b) The obligations imposed on a Party by this clause will not apply to Confidential Information which:
(i) prior to disclosure is in the public domain or in published literature or subsequent to disclosure to the Party becomes part of the public domain or is published other than as a result of an unauthorised act or failure to act by that Party;
(ii) is received by a Party from a third party without any obligation to hold in confidence and which has not been obtained by that third party directly or indirectly from any Party;
(iii) is independently developed by an employee or officer of the Party owing the obligation of confidentiality while having no knowledge of the other Party's Confidential Information; or
(iv) the Party claiming confidentiality has identified in writing as being released from the obligation of confidentiality.
(c) A combination of information will not be taken to be in the public domain merely because it contains information in the public domain.
(d) Confidential Information will not be taken to be in the public domain merely because it is embraced by a general disclosure in the public domain.
(e) The receiving Party has the onus of showing that any of the above exceptions apply.
(f) Each Party will ensure that:
(i) its respective employees who participate in the Project or acquire access to Confidential Information, will comply with the obligations of confidentiality as though parties to this Agreement; and
(ii) any of the above mentioned employees who cease to be employed by the Party will continue to be bound by such obligations of confidentiality.
(g) The obligations of confidentiality imposed on a Party will survive termination of this Agreement.
10.2 Publications
(a) The Parties will use their best endeavours to ensure nothing is done which might prejudice the subsistence or Commercialisation of Confidential Information or Project Results. In particular, the Parties will not publish or disclose any such Confidential Information or Intellectual Property to any third person so as to preclude the grant of a patent in respect of the Project Results or cause the loss of any Intellectual Property in any Confidential Information.
(b) Prior to any publication the Party wishing to publish material (the Requesting Party) must forward a request in writing to NSV and/or SCHERING seeking permission to publish the material.
(c) The Requesting Party may not publish results of the Project without the consent of SCHERING. If the Requesting Party requests in writing that SCHERING consent to a publication, SCHERING may not withhold that consent unless in its reasonable view the publication includes Confidential Information being part of Project Results and within the Field and the publication would adversely affect protection or Commercialisation of the Project Results within the Field. If the Requesting Party makes such a written request and receives no response from SCHERING within 90 days, SCHERING will be deemed to have consented to the proposed publication.
11. Settlement of Disputes and Arbitration
11.1 Dispute Resolution
(a) If a dispute arises between the Parties in connection with the
Agreement, the Parties undertake in good faith to settle the
dispute.
(b) Any dispute or difference arising between the Parties which cannot
be resolved between them will be resolved in accordance with the
following procedure:
(i) the Party claiming that a dispute exists will notify the other
Party that a dispute exists and forthwith submit such dispute
or difference to
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the Committee for resolution. The Committee shall decide under consultation of the KAMR.
(ii) if the Committee and the KAMR are unable to resolve the dispute or difference within a reasonable time, a meeting will be convened forthwith between senior representatives of the disputing Parties not being members of the Committee for resolution of the dispute or difference. If the dispute or difference concerns any matter being of material interest for SCHERING (e.g. such as rights to Background IP or Project Results, or publication issues) the senior representatives shall also confer with the SCHERING member(s) of the Steering Committee to resolve the dispute or difference.
(c) Each Party acknowledges that the compliance with these provisions is
a condition precedent to any entitlement to a claim, relief or
remedy, whether by way of proceedings in a court of competent
jurisdiction or by arbitration proceedings under this Agreement or
otherwise in respect of such dispute or difference. However this
will not preclude any Party from seeking urgent interlocutory relief
in a court of competent jurisdiction.
11.2 Arbitration
If any dispute or difference arises between the Parties to this Agreement
which cannot be resolved between them in accordance with clause 11.1, and
which does not impinge upon a question of law or call for the
rectification of this Agreement, such dispute will forthwith be referred
for determination at Melbourne, by an arbitrator agreed on by the Parties
to the dispute or difference. If such Parties are unable to agree upon an
arbitrator the matter will be dealt with in accordance with the laws
relating to expedited commercial arbitration for the time being in force
in Victoria.
11.3 SCHERING as Intended Third Party Beneficiary
Reference is hereby made to the RCA between SCHERING and NSV. The Parties
recognize that as a result of the above-referenced agreement SCHERING has
a material interest in the performance of this Agreement by the Parties
hereto. Accordingly, to the extent that this Agreement grants to NSV any
right, remedy or claim under or by reason of this Agreement, SCHERING may
also enforce any such right, remedy or claim against Prana on its own
behalf. Where this Agreement refers to a provision of the RCA under which
SCHERING has a right, remedy or claim against Prana, SCHERING may enforce
that right, remedy or claim directly against Prana under this Agreement.
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12. Termination and Breach
12.1 Breach by Prana
(a) If Prana breaches or fails to perform any material term of this Agreement, and the breach is capable of remedy by performance or otherwise, NSV may serve on Prana a notice requiring it to remedy that breach. Prana must, at its cost, use its best endeavours and take all reasonable steps to remedy the breach within 90 days of receipt of the notice.
(b) Subject to NSV's rights under clause 3(a) Prana's inability or failure to carry out or complete the Project due to the loss of the services of key personnel (whether by way of resignation, dismissal, loss of tenure or otherwise) is considered to be a breach that is capable of remedy for the purposes of this clause 12.
(c) If Prana has not remedied the breach to NSV's reasonable satisfaction within 90 days of receipt of the notice, NSV may, in addition to any other rights it may have under this Agreement, take one or more of the following steps:
(i) require Prana to continue to make available to NSV (by way of licence, mutually agreed assignment, or otherwise), as necessary to enable NSV to fulfill its obligations to SCHERING, all of Prana's interest in any Project Results and any associated Background IP on terms to be agreed in good faith having regard to the nature of the material breach, the nature of the Intellectual Property, the nature of NSV's obligations to SCHERING and any other relevant factors;
(ii) if NSV enforces its right under paragraph (i) to have the Project Results and Background IP continue to be made available, require Prana to continue to comply with its obligations under clause 9 of this Agreement in relation to that Project Results and Background IP and not do anything in relation to that Project Results and Background IP which may prejudice NSV's ongoing rights in that Project Results and Background IP;
(iii) terminate Prana's participation in the Project;
(iv) require Prana to assist, at Prana's cost, NSV to find a suitable substitute to conduct any or all of Prana's outstanding role in the Project;
(v) require Prana to fully indemnify NSV in respect of all liabilities and expenses incurred by any of them in respect of Prana's default
under this Agreement, including the costs associated with finding a suitable substitute under paragraph (iv) above; and
(vi) terminate this Agreement in respect of Prana or in respect of all Parties without prejudice to the rights granted under clauses 7 and 8.
(d) If NSV terminates this Agreement under this clause then the following provisions shall apply to any funds still held by NSV as agent for Prana:
(i) Prana hereby authorises and directs NSV to transfer the funds
as agent for Prana to another project or new projects(s) (the
new project or projects) as determined by NSV;
(ii) the participating institutes in respect of the new project or
projects may include Prana;
(iii) funds so transferred shall become 'Earmarked Funds' for the
new project or projects; and
(iv) upon NSV determining to transfer funds to a project or new
projects under this clause, NSV shall cease holding the
transferred funds as agent (and, to the extent that those
funds were also being held as agent on trust, on trust) for
Prana and commence holding them as agent (and, to the extent
that those funds will also be held as agent on trust, on
trust) for the participating institutes in respect of the
project or new projects.
12.2 Termination for unsatisfactory progress
The KAMR will regularly review the progress of the Project with the
Project Leaders and if the KAMR considers the Project is not progressing
to its reasonable satisfaction, NSV may terminate this Agreement by 6
months prior written notice to the Institute(s). If NSV terminates this
Agreement under this clause then NSV will have no further obligation to
provide funds after the effective date of termination and the provisions
of Section 12.1(d) shall apply to any funds still held by NSV.
12.3 Termination of RCA with SCHERING
If in case of termination or expiry of the RCA the Project under this
Agreement is not completed, the Project may be continued until finished in
this Agreement
12.4 Termination for Insolvency etc.
Unless the Parties agree otherwise, this Agreement will terminate if NSV:
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(a) stops or suspends or threatens to stop or suspend payment of all or a class of its debts;
(b) is insolvent within the meaning of section 95A of the Corporations Act;
(c) must be presumed by a court to be insolvent by reason of section 459C(2) of the Corporations Act;
(d) fails to comply with a statutory demand (within the meaning of section 459F(1) of the Corporations Act);
(e) has an administrator appointed over all or any of its assets or undertaking or any step preliminary to the appointment of an administrator is taken;
(f) has a controller within the meaning of section 9 of the Corporations Act or similar officer appointed to all or any of its assets or undertaking; or
(g) has an application or order made, proceedings commenced, a resolution passed or proposed in a notice of meeting, an application to a court made or other steps taken against or in respect of it (other than frivolous or vexatious applications, proceedings, notices or steps or voluntary applications or proceedings for the purposes of reconstruction) but specifically excluding voluntary applications related to bankruptcy or insolvency for its winding up, deregistration or dissolution or for it to enter an arrangement, compromise or composition with or assignment for the benefit of its creditors, a class of them or any of them.
12.5 Breach by NSV
(a) If NSV breaches or fails to perform any material term of this Agreement, and the breach is capable of remedy by performance or otherwise, Prana may serve on NSV a notice requiring it to remedy that breach.
(b) NSV must, at its cost, use its best endeavours and take all reasonable steps to remedy the breach within 90 days of receipt of the notice.
(c) If NSV has not remedied the breach to Prana's reasonable satisfaction within 90 days of receipt of the notice, Prana may, in addition to any other rights it may have under this Agreement, take one or more of the following steps:
(i) require NSV to cease representing that it is an agent for Prana in relation to the Project;
(ii) require NSV to pay all monies held in the Project Account and any Commercial Proceeds to Prana in the proportions applicable under clause 8.3;
(iii) require NSV to assign or co-operate in procuring the assignment to Prana of the benefit of any arrangements NSV has with SCHERING; and
(iv) require NSV to fully indemnify Prana in respect of all liabilities and expenses incurred by it in respect of NSV's default under this Agreement, including the costs associated with the assignment referred to in paragraph (iii) above.
(d) In case of Section 12.5(c) Prana agrees to SCHERING having the right, at its option, to replace NSV as a contract partner to this Agreement to the extent that all indemnification obligations of NSV towards Prana, which are borne prior to such substitution by SCHERING will remain with NSV. All indemnification obligations of SCHERING towards Prana, which are borne after such substitution of NSV, will remain with SCHERING.
12.6 Termination report
(a) In all cases of termination of this Agreement under this clause 12, Prana will compose a termination report containing all Project Results created up to the date of termination of this Agreement, clause 5.6 shall apply to the termination report accordingly. The termination report shall be signed by the Project Leader of Prana and the Head of Prana as well as countersigned by the KAMR. The termination report shall be promptly submitted to the Steering Committee which shall be considered as notification of relevant Project Results under clause 7.2(e) giving NSV and SCHERING the right to evaluate their interest in the Project Results and, if the case may be, to exercise their options, in accordance with the provisions of Project Results 7.2 and 8.
(b) If NSV has notified Prana in accordance with clause 7.2 that NSV and SCHERING do not want to exercise their rights of first refusal, Prana shall will be free to continue the Project at its own expense; provided however that Prana will not raise funding from a third party for a period of 12 months after SCHERING has declined its option. Prana will notify NSV and SCHERING before they solicit third party funding after the 12 months period in order to give NSV and SCHERING the opportunity to reintegrate the Project into the Project portfolio under the RCA and to provide the funding under the RCA. NSV and SCHERING shall have 30 days to decide whether the Project shall be integrated into the portfolio and the funding requested by Prana. NSV shall notify Prana in writing upon the decision. The Parties hereby acknowledge that Prana will have the opportunity to demonstrate any added value created in the Project during the 12 months
period and to re-negotiate the commercial terms which would apply to reintegration of the Project, to reflect the added value that Prana has created during the 12 months period.
13. Termination without prejudice
Termination or expiry of this Agreement for any reason, does not affect:
(a) any rights and obligations of the Parties which have accrued prior to such termination or expiry; and
(b) any rights and obligations of the Party which by their nature survive termination including without limitation rights and obligations under clauses 10 and 14.2.
14. General Warranties and Indemnities
14.1 IP representations and warranties
Prana represents and warrants that:
(a) it is the owner of, or is otherwise entitled to provide, the
Background IP which it makes available under this Agreement; and
(b) it has adequate arrangements in place with its employees, agents and
sub-contractors to enable it to grant the licences to its Project
Results under this Agreement.
(c) to the best of its knowledge as at the Commencement Date any
Commercialisation of its Background IP and Project Results as
permitted this Agreement does not (and, unless it notifies NSV in
writing to the contrary during the term of this Agreement, will not)
infringe the rights of any third party.
14.2 Indemnities in relation to the Project
Each Party will indemnify (Indemnifying Party) each other Party and the
officers, employees and any scientists engaged by it (Those Indemnified)
against all claims, liability, loss, damage, costs and expenses (including
but not limited to legal costs on a solicitor and own client basis) which
may be incurred by Those Indemnified arising out of or in connection with:
(a) any personal injury suffered by or the death of Those Indemnified or
any loss or damage to property, real or personal, of Those
Indemnified caused by any negligent act or omission of the
Indemnifying Party or
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officers, employees and any scientists engaged by it in the course of carrying out the Project;
(b) any claims, actions or proceedings by any third party against Those Indemnified for any personal injury suffered by or the death of that third party, or any loss or damage to property, real or personal, of that third party caused by any negligent act or omission of the Indemnifying Party or officers, employees and any scientists engaged by it in the course of carrying out the Project; and
(c) any breach of any representation or warranty provided by Indemnifying Party under this Agreement.
15. Assignment and Sub-Contracting
Prana may not assign or transfer any of its rights or obligations under this Agreement, nor sub-contract a substantial part of its obligations under the Project, without the prior written consent of NSV such consent not to be unreasonably withheld. NSV may not assign or transfer any of its rights or obligations under this Agreement without the prior written consent of Prana such consent not to be unreasonably withheld.
16. Force majeure
(a) Where a Party is unable, wholly or in part, by reason of force majeure, to carry out any obligation under this Agreement, and that Party:
(i) gives each other Party prompt notice of that force majeure including reasonable particulars, and, in so far as known, the probable extent to which it will be unable to perform or be delayed in performing that obligation; and
(ii) uses all possible diligence to remove that force majeure as quickly as possible,
that obligation is suspended so far as it is affected by force majeure during the continuance of that force majeure and that Party will be allowed a reasonable extension of time to perform its obligations.
(b) If, after 30 days, the force majeure has not ceased, the Parties will meet in good faith to discuss the situation and endeavour to achieve a mutually satisfactory resolution to the problem.
(c) The requirement that any force majeure must be removed with all possible diligence does not require that the settlement of strikes, lockouts or other labour
disputes or claims or demands by any government on terms contrary to the wishes of the Party affected.
In this clause, force majeure means an act of God, strike, lockout or other interference with work, war (declared or undeclared), blockade, disturbance, lightning, fire, earthquake, storm, flood, explosion, governmental or quasi governmental restraint, expropriation, prohibition, intervention, direction or embargo, unavailability or delay in obtaining governmental or quasi governmental approvals, consents, permits, licenses, authorities or allocations, and any other cause, whether of the kind specifically enumerated above or otherwise which is not reasonably within the control of the Party affected.
17. Clause severance
Any provision of this Agreement that is held void by a court of competent jurisdiction or is voidable by a Party or is or becomes at that time unlawful or unenforceable will, to the extent to which it is void or voidable or is unlawful or unenforceable, be deemed to be exercised from and not form part of this Agreement, without affecting the validity or enforceability of the remaining provisions to the fullest extent permitted by law or in equity.
18. Waiver
A waiver by a Party of any rights arising from a breach or non-observance by any other breach of a term of this Agreement will not be taken to operate in any way as a waiver of any rights arising from any subsequent continuation of that breach or non-observance, or any further or other breach or non-observance of the same or any other term.
19. Governing law
(a) This Agreement will be governed by and construed in accordance with the law for the time being in force in Victoria.
(b) With respect to any legal action or proceedings which may be brought in relation to this Agreement or any transaction contemplated by this Agreement, each Party irrevocably submits to the non-exclusive jurisdiction of courts exercising jurisdiction in Victoria.
20. Notices
(a) Any notice, request, consent or other communication in connection with this Agreement must be in writing and:
(i) left at the address of the addressee;
(ii) sent by prepaid-ordinary post (airmail if posted to or from a place outside Australia) to the address of the addressee;
(iii) sent by facsimile to the facsimile number of the addressee; or
(iv) if the addressee has given written notice of another address or facsimile number, sent to that address or facsimile number.
(b) The address and facsimile number of each Party is as specified in Schedule 3.
(c) A notice, request, consent or other communication takes effect from the time it is received unless a later time is specified in it.
(d) A notification of change of address will not take effect until each other Party notifies the Party changing its address that the notice of change of address has been received.
(e) A letter or facsimile is taken to be received:
(i) for a posted letter, on the third (seventh, if posted to or from a place outside Australia) day after posting; and
(ii) for a facsimile, on production of a transmission report by the machine from which the facsimile was sent which indicates that the facsimile was sent in its entirety to the facsimile number of the recipient. However, if the transmission is completed after 5.00pm on a business day or is sent on a day that is not a business day, the message is taken to have been received at 8.00am on the next business day.
21. Entire Agreement
This Agreement and the Agency Agreement between NSV and Prana contain the entire agreement between the Parties with respect to their subject matter and supersede all prior agreements and understandings between the Parties in connection with it. In case that the Agency Agreement contradicts any provision contained in this Agreement, the provisions of this Agreement shall prevail.
22. Amendments
No agreement or understanding varying or extending this Agreement will be legally binding unless it is in writing signed by all Parties.
23. Further assurances
Each Party agrees to do all things and execute all deeds, instruments, transfers or other documents as may be necessary or desirable to give full effect to the provisions of this Agreement and the transactions contemplated by it.
24. Counterparts
This Agreement may be executed in any number of counterparts. All counterparts together will be taken to constitute one instrument.
Schedule 1
Financial Terms
This is a Financial Category 4 Project (Appendix 7.5 of the Research
Collaboration Agreement)
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Payments Category 4
(Set of Lead Components plus issued patents)
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Down-Payment $AUD 400,000
New Leads from High none
Throughput Screening
IND (or equivalent) $AUD 1,000,000
Commencement of Phase III $AUD 2,000,000
Study
First Market Approval in each US $AUD 2,000,000
of US, EU or JAP EURO $AUD 1,000,000
JAP $AUD 1,000,000
Royalties 4%
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Project Synopsis
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Name of Research Project: Aa binding ligands for imaging of Alzheimer's Disease
(AD)
Appendix 2.2i of the Research Collaboration Agreement
NSV-PROJECT CODE: VI
PROJECT TEAM: MASTERS. C. (PROJECT LEADER/MELBOURNE); CAPPAI, R.:
R.CAPPAI@UNIMELB.EDU DINKELBORG, L.: LUDGER.DINKELBORG@SCHERING.DE; DYRKS, T.:
THOMAS.DYRKS@SCHERING.DE; FRIEBE, M.: MATTHAIS.FRIEBE@SCHERING.DE
START OF PROJECT: AT SIGNATURE OF NSV/SAG RESEARCH CONTRACT
RESOURCES (FOR THE FIRST RESEARCH YEAR):
NSV: TOTAL NUMBER OF FTES / POST DOCS AND TAS INVOLVED: 3
SAG: Involvement of FTEs within the first 15 month collaboration period: 0
RATIONALE: Prove the concept that radiolabeled specific AB binding ligands allow in vivo imaging of AD.
SCIENTIFIC BACKGROUND:
Alzheimer's Disease usually comes along with progressive neurodegenerative
symptoms e.g. memory loss, confusion, apraxia and dementia. Currently no
scientific imaging method is available, since MRI, [F-18]-FDG PET and SPECT only
visualize defects which can also occur in other brain diseases. These other
causes need to be ruled out. However, this can only be achieved histologically
on post-mortem material. The deposition of amyloid plaques in an AD brain is a
key pathological marker of the disease. The ability to image plaques in a living
brain would provide an enormously powerful tool to diagnose the disease and to
monitor success of potential therapeutic strategies. Recently, various
approaches emerged aiming on detection and visualization of ab-plaques.
Compounds such as ZK810630 targeting the CCR1 are under investigation at the
moment in terms of PET imaging.
2-[4'-(4"-methylpiperazin-1-yl)phenyl]-6-iodobenzothiazole (TZPI) (Kung et al.,
J.Med.Chem., 2001, 12, 1841-2038) displayed promising results in vitro and in
vivo.
Transition metals such as copper, zinc, nickel or iron are proposed to induce the formation process of insoluble AB-sheets. Two principal approaches for therapy have been suggested by Victoria Neuroscience. They either intend to remove the metals, described vide supra, out of the respective brain regions by complexation (Clioquinol) in order to prevent the formation of AB-sheets or to block the amyloid peptide's metal binding moieties by administration of different structured metal bearing complex molecules that bind to the same moiety without inducing the formation of AB-sheets.
IN VIVO IMAGING OF AB IN THE BRAIN FOR DIAGNOSIS AND MONITORING OF THERAPY.
Congo red (CR) or Chrysamine G (CG) analogs such as 2-[4'-(4"- methylpiperazin-1-yl)phenyl]-6-iodobenzothiazole (TZPI) were labeled with I-123/I-125 for imaging. [F-18] radiofluorinated probes e.g. 1,1-dicyano-2-[6-(dimethyl-amino)naphtalen-2-yl]propene (FDDNP) (U.S. Provisional Patent Application No.60/097,320, UCLA) were labeled for PET imaging
US PATENT: Use of clioquinol for the therapy of Alzheimer's disease PATENT NO.09/224,953, WO 9310459, WO 200107442
Clioquinol labeled with I-123/I-125
- radiolabeling of clioquinol with I-125 and I-123 at the "cold" iodine position
- determine binding capabilities of clioquinol to AB-plaques in vitro
(Kd)
- determine blood-brain barrier passage of the labeled clioquinol in vivo (rat/mouse)
- do an autoradiography on AD's brain samples ex vivo
- perform imaging experiment in the animal model of AD's (established by Victoria NS)
Phtalocyanine labeled with In-111 and Co-57, respectively
- Indium-111 and Co-57 labeling of phtalocyanine
- determine binding capabilities of indium (III) and Co(II) phtalocyanine labeled/"cold") to AB-plaques in vitro (Kd)
- determine blood-brain barrier passage of the labeled [In-111]indium
(III) and [Co-57] cobalt(II) phtalocyanine in vivo (rat/mouse)
- do an autoradiography on AD's brain samples ex vivo
- perform imaging experiment in the animal model employing of AD's
(established by Victoria NS)
As a reference:
TZPI (Kung et al.) targeting AB-plaques
- radiolabeling of TZPI with I-123/I-125 (established by Kung et al.)
- determine binding capabilities of [I-125]TZPI to AD plaques in vitro
(Kd)
- determine blood-brain barrier passage of the labeled [I-125]TZPI in vivo (rat/mouse)
- do an autoradiography on AD's brain samples ex vivo
- perform imaging experiment in the animal model employing [I-123]TZPI
(established by Victoria NS)
1. radiolabeling of clioquinol and cobalt(II) phtalocyanine (to be determined 3month)
2. establishment of in-vitro assay (Prana/NSV 3 month)
3. show in vitro binding (Prana/NSV 6 month)
4. biodistribution studies (Prana/NSV 6 month)
5. autoradiography ex vivo (Prana/NSV 9 month)
6. imaging experiment in vivo (Prana/NSV 12 month)
PROJECT FEASIBILITY:
THE PROJECT'S FEASIBILITY IS GOVERNED BY THE EXPERTISE OF THE GROUP AND THEIR CLAIM TO HAVE SUITABLE IN-VITRO AND IN-VIVO MODELS
THE ABILITY OF THE COMPOUNDS TO CROSS THE BLOOD-BRAIN BARRIER. PATHOLOGICAL SIGNIFICANCE OF THE BINDING-PRINCIPLE/STAINED STRUCTURES/LABELLED MOLECULES. IP-SITUATION WITH PRANA
No proof of concept in vitro with one of the two compounds within 9 months (compound synthesis and blood-brain barrier passage).
CURRENT PROJECT STATUS: (TO BE FILLED OUT BY SAG AND TO BE DEFINED ACCORDING TO SAG CRITERIA)
HIT TO LEAD PROCESS
DEFINITION OF PROJECT STATUS / PROJECT CRITERIA(S) NECESSARY FOR EXERCISING THE NEGOTIATION RIGHT:
To exercise the Option the Lead compounds should fulfill the following criteria:
> Proven specificity in secondary in vitro (binding capabilities to AB-plaques in vitro and to AD's brain samples ex vivo) and basic in vivo models (transgenic AD mice) (12 month)
> Proven suitable physicochemical and toxicological properties (3 month (subsequent to proven specificity (vide supra)))
> Proven suitable pharmacokinetic properties (blood-brain barrier passage) (6 month)
> Preliminary SAR
> Patentability: Clear patent strategy
Earliest time to exercise the option will be 15 months after the collaboration started.
Schedule 2
Project Management Committee
Project Management Committee for Project described in Appendix 2.2i of the RCA and entitled AB binding ligands for imaging of Alzheimer's Disease (AD)
Institute Representative: Professor Edward Byrne
Project Leader Institute: Professor Colin Masters
Project Leader SCHERING: Dr. Ludger Dinkelborg
Schedule 3
Addresses for Service of Notices
Prana Biotechnology (ACN 080 699 065)
Attention: Chief Operating Officer
Fax No.: +61 3 9690 8587
Address: Suite 2, 1233 High Street, Armadale, Victoria, 3143, Australia
Neurosciences Victoria Ltd
Attention: Chief Executive Officer
Fax No.: +61 3 3443832
Address: The Gatehouse, 2 Park Drive, Parkville, Victoria, Australia, 3052
Schedule 4
Budget, Shares of Project Results and Proceeds of Commercialisation
Item 1: Budget (clause 6(a))
With respect to this Project, NSV is providing AUD $450,000 per annum to Prana Biotechnology. Total funds are shown for the anticipated 12-month period of this Project.
Research Funds The University of Melbourne $405,000 Prana Proportion $45,000(10%) TOTAL $450,000 |
Item 2: Parties' ownership share of Project Results (clause 7.2)
Prana 100% SCHERING 0% TOTAL 100% |
Item 3: Parties' entitlement to Commercialisation Proceeds (clauses 8.3 & 8.4)
NSV 12.5% Prana 87.5% Total 100% |
Item 4: Restrictions on NSV's right to Commercialise Background IP (clause 7.1)
Rights to Commercialise Background IP are non-exclusive
Executed in Melbourne, Victoria, Australia
Signatories to This Project Agreement:
Mr Geoffrey Kempler Executive Chairman,
Prana Biotechnology Limited
Date 11/03/2003
/s/ Geoffrey Kempler
--------------------------------
A/Prof William Hart Chief Executive Officer,
Neurosciences Victoria Limited
Date 11/03/2003
/s/ William Hart
--------------------------------
Professor Edward Byrne Deputy Chair
Neurosciences Victoria Limited
Date 3/03/2003
/s/ Edward Byrne
--------------------------------
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EXHIBIT 4.16
Project Agreement
Neurosciences Victoria Limited
and
Prana Biotechnology Limited
Allens Arthur Robinson
Stock Exchange Centre
530 Collins Street
Melbourne 3000 Australia
Tel 61 3 9614 1071
Fax 61 3 9614 4661
Project Agreement
Neurosciences Victoria Ltd and Prana Biotechnology Ltd
Table of Contents
1. Definitions and interpretation 2
1.1 Definitions 2
1.2 Interpretation 4
2. Agreement to undertake Project 5
3. Appointment, management and retention of staff 5
4. Condition Precedent and Term 6
4.l Condition Precedent 6
4.2 Term 6
5. Project Management Committee and Reporting Requirements 7
5.1 Appointment 7
5.2 Operation of Project Management Committee 7
5.3 Semi-annual reports 7
5.4 Annual reporting review 8
5.5 Records management 8
5.6 Final report 8
6. Budget and GST 8
7. Ownership and rights in relation to Intellectual Property 9
7.l Background IP 9
7.2 Project Results 10
7.3 NSV has no rights outside the Field 11
8. Commercialisation of IP 12
8.1 Decline of First Right of Refusal 12
8.2 Exercise of First Right of Refusal 12
8.3 Share of Proceeds 13
8.4 Use and Distribution of Proceeds 13
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9. Identification, maintenance, enforcement and defence of
Intellectual Property 14
9.1 Identification of Project Results 14
9.2 Primary responsibility for Project Results 15
9.3 Reversion of Project Results 15
9.4 Assistance 15
9.5 Protection of Intellectual Property 16
9.6 Proceeds of Infringement 16
10. Confidentiality 17
10.1 Confidentiality Obligations 17
10.2 Publications 18
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Appendix 2.2c of the Research Collaboration Agreement. Page i
Project Title = AB clearance mechanisms
3rd March 2003
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Project Agreement
Neurosciences Victoria Ltd and Prana Biotechnology Ltd
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11. Settlement of Disputes and Arbitration 18
11.1 Dispute Resolution 19
11.2 Arbitration 20
12. Termination and Breach 20
12.1 Breach by Prana 20
12.2 Termination for unsatisfactory Progress 21
12.3 Termination of RCA with SCHERING 21
12.5 Breach by NSV 22
13. Termination without prejudice 24
14. General Warranties and Indemnities 24
14.1 IP representations and warranties 24
14.2 Indemnities in relation to the Project 24
15. Assignment and Sub-Contracting 25
16. Force majeure 25
17. Clause severance 26
18. Waiver 26
19. Governing law 26
20. Notices 27
21. Entire Agreement 27
22. Amendments 28
23. Further assurances 28
24. Counterparts 28
Schedule 1 29
Financial Terms 29
Project Synopsis 29
Schedule 2 36
Project Management Committee 36
Schedule 3 37
Addresses for Service of Notices 37
Schedule 4 38
Budget, Shares of Project Results and Proceeds of Commercialisation 38
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Appendix 2.2c of the Research Collaboration Agreement. Page ii
Project Title = AB clearance mechanisms
3rd March 2003
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Project Agreement Neurosciences Victoria Ltd and Prana Biotechnology Ltd -------------------------------------------------------------------------------- Date --------- Parties --------- |
1. Neurosciences Victoria Limited (ABN 56 094 548 973) a company incorporated in the State of Victoria and having its registered office at The Gatehouse, 2 Park Drive, Parkville 3052,Australia (NSV).
2. Prana Biotechnology Limited (ABN 37 080 699 065) of 100 Dorcas St, Sth. Melbourne, Victoria (Prana)
A NSV is a company limited by guarantee to enhance scientific and
technological capabilities and support scientific research in
Victoria in the Field) by, amongst other things, facilitating
funding, as agent for its members and certain Victorian research
institutes.
B NSV has signed a research collaboration agreement ("RCA") with
Schering Aktiengesellschaft, 13342 Berlin, Germany, ("SCHERING"),
under which SCHERING is willing to provide financial funding to
certain Projects in the Field and NSV agrees to provide certain
rights to Project Results and Background IP to SCHERING.
C In furtherance of recital A and B, the Parties wish to conduct a
Project in the Field.
D Prana hereby appoints NSV as agent for the purpose of receipt of
Schering funding under the terms of the RCA between NSV and Schering
and to facilitate the licensing of IP to Schering through NSV
and for no other purposes.
E In furtherance of Recital A and B
(a) Prana has prepared a Project Synopsis detailing a Project that
it and NSV wish to have conducted in the Field;
(b) the Project Synopsis has been discussed with and approved by
SCHERING; and
the Parties wish to agree on the terms and conditions under which
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Appendix 2.2c of the Research Collaboration Agreement. Page 1
Project Title = AB clearance mechanisms
3rd March 2003
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Project Agreement
Neurosciences Victoria Ltd and Prana Biotechnology Ltd
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the research and development project will be conducted.
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It is agreed as follows:
1.1 Definitions
In this Agreement, unless a contrary intention appears from the context:
Account means an account opened in accordance with clause 6.
Background IP shall mean the Intellectual Property owned or controlled by Prana which is already in existence prior to the Commencement Date or is created independently of the Agreement and which is made available under this Agreement by Prana for the Project. Patented Background IP is identified in the Project Synopsis.
Budget means the budget for the Project set out in the Project Synopsis and amended by the Parties only upon approval by SCHERING.
Commencement Date means the date of this Agreement.
Commercialise, in relation to Intellectual Property, means to develop, manufacture, sell, hire or otherwise exploit a product or process, or to provide a service, incorporating that Intellectual Property, or to license SCHERING to do any of those things; and Commercialisation is similarly construed.
Commercialisation Proceeds means any and all royalties, licence fees and other receipts derived from Commercialisation of Project Results with or without Background IP under a Sub-licence by SCHERING.
Committee means the Project Management Committee established under clause 5.1.
Confidential Information means all trade secrets and know-how, financial information and other commercially valuable information of whatever description and in whatever form (whether written or oral, visible or invisible) made available as Background IP or otherwise or arising as a result of the Project, but excludes the interpretation, analysis and application of general information in the public domain.
Core Criteria shall mean the general criteria as laid out in Appendix 1.5 of the RCA, that need to be fulfilled independently of any specific Project Decision Criteria in order to enable SCHERING to make its decision as to the right of first negotiation granted by NSV to SCHERING under ss. 7 of the RCA.
Project Agreement
Neurosciences Victoria Ltd and Prana Biotechnology Ltd
Decision Criteria means collectively the Core Criteria and the Project Decision Criteria.
Earmarked Funds has the meaning given in the Members Agreement dated November 2, 2001 between NSV and its founding members, namely research funding which NSV has arranged for a particular project.
Field means Beta amyloid proteins which degrade beta amyloid and lead to the clearance of beta amyloid peptide from the brain.
[this space left blank]
Intellectual Property includes all industrial and intellectual property, whether protected at common law or under statute and includes (without limitation) all inventions (both patentable and unpatentable), designs (both registered and unregistered), copyrights, circuit layouts, plant variety rights, trademarks (both registered and unregistered), samples, materials, data, know-how, results and Confidential Information.
Key Alliance Manager- Research (KAMR) means the team established in accordance with ss. 10.4 of the RCA.
Party means a party to this Agreement.
Project means the research and development activities described in the Project Synopsis to be undertaken by Prana under this Agreement.
Project Decision Criteria means the Project specific set of scientific criteria (including timelines) as listed in each Project Synopsis which have to be fulfilled and presented by NSV to SCHERING under the RCA in order to enable SCHERING to make its decision as to the right of first negotiation granted under the RCA.
Project Results means all Intellectual Property, whether patentable or not, in relation to the Project that has been created, discovered or brought into existence as a result of or in connection with the Project by Prana at any time, excluding the Background IP.
Project Agreement
Neurosciences Victoria Ltd and Prana Biotechnology Ltd
Project Leaders means the project leaders from Prana and SCHERING as appointed under clause 3 (a).
Project Management Committee means the committee established in accordance with clause 5.
Project Synopsis means the detailed description of a research project, including a detailed work-plan for the research and/or development for the Project (including the timeline, milestones and Decision Criteria) as set out in Schedule 1 amended as agreed between the Parties in writing from time to time.
Raw Data means that part of the Project Results comprising the data contained in the lab books regardless of their form, allowing for the verification and validation of the scientific results produced during the performance of a Project.
Steering Committee means the decision body established in ss. 10.1 of the RCA and comprising of representatives of NSV and SCHERING.
Sub-licence is defined in clause 8.2.
Tax Invoice means a document that complies with the requirements of subsection 29-70(1) and (if applicable) section 54-50 of the A New Tax System (Goods and Services Tax) Act 1999 (Cwth).
1.2 Interpretation
In this Agreement, unless the context indicates to the contrary:
(a) the expression person includes a natural person, an institution, a body corporate, an agency or other body;
(b) reference to any Party to this Agreement will include the Party's legal successor (including executors and administrators) and permitted assigns;
(c) words importing the singular will include the plural (and vice versa) and words denoting a given gender will include all other genders;
(d) clause headings and notes in square brackets are inserted for convenience only, and have no effect in limiting or extending the language of provisions, except for the purpose of rectifying any erroneous cross reference;
(e) references to any document or agreement will be taken to include references to such document or agreement as amended, novated, supplemented, varied or replaced from time to time;
(f) references to any legislation or to any provision of any legislation will include any modification or reenactment of such legislation or any legislative provision substituted for, and all legislation and statutory instruments issued under such legislation;
Project Agreement
Neurosciences Victoria Ltd and Prana Biotechnology Ltd
(g) all attachments to this Agreement form part of this Agreement;
(h) all monetary amounts referred to in this Agreement are in Australian currency.
2. Agreement to undertake Project
In consideration of the mutual promises and undertakings set out in this Agreement, Prana hereby agrees to undertake the Project in accordance with the terms and conditions of this Agreement. Without limiting the generality of this clause 2.1, Prana must;
(a) Work to carry out and complete the Project in accordance with the Project Synopsis, the Budget and the terms and conditions of this Agreement and in a manner which is to the satisfaction of NSV; and
(b) obtain all licences, permits and authorities, and comply with all laws, by-laws and regulations, which may be required for the legal performance of its obligations under this Agreement.
3. Appointment, management and retention of staff
Upon the start of a Project Prana must:
(a) appoint one key personnel to undertake the lead role on the Project on behalf of Prana (Project Leader), who will manage and monitor the day-to-day operations of the Project together with a Project Leader nominated by SCHERING. It is agreed that the Project Leader appointed by Prana may be a sub-contractor of Prana. Both Project Leaders shall be members of the Project Management Committee (see clause 5). All communication among Project Leaders shall be copied to the KAMR. If any Project Leader of Prana dies, becomes incapacitated or ceases to be employed by Prana, Prana will notify NSV immediately and nominate a suitable replacement to carry out and complete Prana's obligations in respect of the Project under this Agreement. If NSV or SCHERING reasonably considers that the nominated replacement is not suitable to perform those functions, NSV may exercise its rights under clause 12.l(b);
(b) be solely responsible for all scientists and other staff involved in the Project on behalf of the Institute, and for all their entitlements, including, but not limited to, any superannuation and workers' compensation contributions, as may legally be required to be made in respect of the engagement of each of those scientists or other staff;
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(c) do all things reasonably within its power to ensure that all scientists and other staff engaged by Prana undertake the Project work and act to the best of their respective skills and abilities in a diligent, professional and honest manner; and
(d) neither during, nor for six months after the term of this Agreement, employ or attempt to employ any key personnel of another Party who has been involved in the Project without the prior written consent of that Party.
4. Condition Precedent and Term
4.1 Condition Precedent
It is a condition precedent to this Agreement that NSV submits to Prana (or vice versa) and NSV (or Prana, as appropriate) approves, a Project Synopsis that fully defines the Project and includes the following in respect of the Project:
(a) a statement of aims;
(b) an outline of the strategy to be followed;
(c) potential outcomes;
(d) milestones;
(e) the financial terms applicable to the Project as laid out in Appendix 7.5 of the RCA.
(f) a budget for Prana's contribution to the Project;
(g) resource requirements for Prana's contribution to the Project;
(g) Background IP in existence as at the Commencement Date proposed to be used in the Project and the terms, if any, on which Prana will make its Background IP available for use in the conduct and Commercialisation of the Project.
(i) Prana's share of the Commercialisation Proceeds; and
(j) the Project Decision Criteria
4.2 Term
This Agreement will commence on the Commencement Date and will continue until the completion of the Project, unless terminated earlier in accordance with clause 12.
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5. Project Management Committee and Reporting Requirements
5.1 Appointment
As soon as practicable after the Commencement Date, the Parties shall establish a project management committee to have overall management and evaluation of the Project (hereinafter "Project Management Committee" or simply "Committee").
5.2 Operation of Project Management Committee
The Committee will operate as follows:
(a) it will comprise one representative from Prana as well as the Project Leaders of Prana and SCHERING. The initial representatives are listed in Schedule 2;
(b) it will meet monthly to review the progress of the Project and determine the programs of work to be undertaken under the Project Synopsis;
(c) it may determine its own procedures and may confer by telephone or other electronic means;
(c) a resolution of the Committee must be passed by all representatives; and
(e) each Party bears the cost and expenses incurred by its representatives in relation to their attendance at Committee meetings.
5.3 Semi-annual reports
Prana's Project Leader, with support of the Schering Project Leader, must prepare and submit to the Committee and the WMR a semi-annual report describing:
(a) work done and achievements made (including milestones and deliverables completed) during the 6 months to which the report relates;
(b) details of Project Results developed during the 6 months and steps taken to protect it;
(c) any departure from the Project Synopsis during those 6 months:
(d) current issues relating to the performance of the Project and recommendations as to their resolution;
(e) the amount of funding required for the next 6 months; and
(f) such other matters as each Party (or its representative or appointee on the Committee) considers appropriate.
All reports have to be approved by the KAMR.
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5.4 Annual reporting review
During each year of the Project, the KAMR will review the adequacy of the reporting requirements set out in clause 5.3,and decide whether, and if so how, they should be amended for the following year of the Project.
5.5 Records management
The Committee must:
(a) maintain full and accurate data, information and records of and concerning work carried out in the Project; and
(b) disclose or make available all such data, information and records to the Parties as and when each Party requires;
(c) make sure that all Raw Data will be entered into a laboratory note book, dated, signed and witnessed.
NSV and/or SCHERING has the right to review the handling of all documents, data, records and Raw Data produced for the Project during the term of this Agreement. Time and location of such review shall be coordinated with Prana.
5.6 Final report
The Committee must submit through the Project Leaders to the KAMR and the Steering Committee a final report in writing within 30 days of completion of the Project. The final report will describe, in reasonably informative detail:
(a) the conduct of the Project;
(b) the results;
(c) Project Results obtained in the performance of the Project;
(d) Background IP used in the performance of the Project; and
(e) Background IP required for Commercialisation of the Project Results.
6. Budget and GST
(a) The initial Budget for the Project is set out in Schedule 4 and shows:
(i) the amount of funds allocated to Prana to undertake and perform its responsibilities under the Project Synopsis (Reseach Funds); and
(ii) the proportion, if any, to which NSV is entitled as its administration fee in consideration of fulfilling its obligations under this Agreement, (NSV Proportion) provided that the NSV Proportion will be zero where an allocation has already been made in respect of the Project under the arrangements set out in the Members' Agreement.
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(b) On, before, or as soon as practicable after, the Commencement Date, NSV will, if it does not already have an appropriate account, open an account and will deposit into that existing or new account such funds as it has received from SCHERING as agent for Prana to enable the Project to be conducted.
(c) In consideration of Prana undertaking the Project, NSV will draw on
the Account to provide Prana the amount set out in subparagraph
(a)(i) above as quarterly instalments.
(d) If GST is payable on a Taxable Supply made under, by reference to or in connection with this Agreement, the party providing the Consideration for that Taxable Supply must also pay the GST Amount as additional Consideration. In this Agreement 'Consideration' and 'Taxable Supply' each has the meaning given by the A New Tax System (Goods and Services Tax) Act 1999 (Cth) and 'GST Amount' means in relation to a Taxable Supply the amount of GST payable in respect of that Taxable Supply.
(e) No Party is required to provide any amount of GST to any other (and may withhold any amount required at law) unless the other issues a Tax Invoice to that Party.
(f) NSV is not required to provide any amounts under this Agreement to the extent that SCHERING who has committed to provide research funding to NSV in respect of the Project defaults on those commitments leaving insufficient funds in the Account to enable NSV to provide such amounts.
(g) NSV must use all reasonable endeavours to enforce its rights against SCHERING if SCHERING defaults on the commitments referred to in paragraph (f).
7. Ownership and rights in relation to Intellectual Property
7.1 Background IP
(a) For the specific purposes of allowing the Project to proceed and for commercialisation of Project Results (and only for those purposes), Prana will make available to the Project the Background IP (as defined) in respect of Prana whether directly as a result of Prana's ownership of that Background IP or as a result of agreements entered into with the owner(s) of that Background IP.
(b) The Parties acknowledge and agree that the Background IP will remain the property of Prana or the owner(s) referred to in paragraph (a).
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(c) The Project Leader will endeavour to maintain a register recording such Background IP as is made available by Prana for the Project, provided that failure to include an item of Background IP on this register does not preclude the Parties from using Background IP as permitted under this Agreement where that Background IP is made available under this Agreement or is included in the definition of 'Background IP'.
(d) Prana grants to NSV, a worldwide, non-exclusive, royalty-free, sub- licensable licence to Commercialise the Background IP but only to the extent required for NSV to Exercise its rights to Commercialise the Project Results granted under clause 7.2.
7.2 Project Results
(a) All Project Results created in relation to the Project, upon creation, vest in and will become and remain the property of Prana, only subject to Prana's contractual agreements with the University of Melbourne in relation to this Agreement. Prana is free to deal with, Commercialise, dispose of or encumber any interest which it might hold in Project Results outside the Field as it sees fit.
(b) Subject to clause 8.1, no Party will deal with, Commercialise, dispose of or encumber any interest which it might hold in Project Results in the Field, except as authorised in this Agreement, or with the written consent of the other Party to this Agreement.
(c) Each Party will co-operate with each other Party and promptly do all acts and things and execute all documents which may be necessary for the purpose of vesting ownership of the Project Results in Prana as contemplated by this clause 7.2.
(d) Prana grants to NSV, a first right of refusal to negotiate a worldwide exclusive royalty-bearing sub-licensable licence to Commercialise the Project Results in the Field in accordance with clause 8 of this Agreement.
(e) As soon as the Project Leaders are notified under clause 9.1(a) of the creation of any Project Results then, if that Project Results alone or together with any Background IP, meets the Project Decision Criteria, the Project Leaders will within 14 days notify all Parties and the Steering Committee in writing that, from the date of notification, NSV may exercise its right of first refusal to license such Project Results and any relevant Background IP and present NSV with sufficient data to make a decision on the exercise of its right of first refusal.
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(f) The Parties are aware of the fact that after NSV has received such notification and data in accordance with clause 7.2(e), NSV has the obligation under the RCA to immediately notify SCHERING which has an exclusive right of first negotiation for a sublicence to all Project Results and Background IP notified to NSV under this Agreement.
(g) Under the RCA SCHERING has the right to evaluate the relevant Project Results and Background IP during a period of 90 days after notification and presentation of sufficient data by NSV. The Parties hereby acknowledge and agree to this right.
(h) SCHERING has further the right under the RCA, at its cost, to scientifically check the data, including, where necessary and applicable, a reevaluation of the experiments or tests. In such case the above mentioned period of 90 days may be extended by another 60 days to allow for such tests. If SCHERING requires access to Project Results in order to decide if the Project Decision Criteria have been met, Prana hereby agree (i) to SCHERING's right under ss. 8.2 of the RCA to perform a due diligence on the Project Results and the Background IP and (ii) to apply reasonable efforts to execute, support and facilitate such access for SCHERING.
(i) After SCHERING has informed NSV within the timelines mentioned in
7.2 (g) and (h) respectively above by written notice whether the
Decision Criteria have been met and whether SCHERING wishes to
obtain a sub-license from NSV, NSV will immediately notify Prana
accordingly whether NSV wants to exercise its right of first refusal
to negotiate a licence to the relevant Project Results and
Background IP.
(j) The Decision Criteria may only be amended in accordance with the RCA. Any amendment of the Decision Criteria will be notified to Prana in writing and will become an integral part of this Agreement and the Project Synopsis on the date of that notification.
(i) The rights granted to NSV or SCHERING in respect of Project Results are subject to a right in favour of Prana to use and disclose for educational and research purposes to the extent allowed by Clause 10 (Confidentiality and Publications)
7.3 NSV has no rights outside the Field
NSV specifically acknowledges that it has no rights to use Project Results or Background IP outside the Field. Without limiting the generality of the foregoing, NSV specifically acknowledges that it has no rights to use Project IP or Background IP to develop products for therapeutic use or have any rights of first
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refusal to negotiate any rights to Commercialise any Project Results or Background IP for therapeutic purposes outside the scope of this Agreement.
8. Commercialisation of IP
8.1 Decline of First Right of Refusal
If NSV does not exercise its first right of refusal in accordance with clause 7.2, unless the Parties agree otherwise, NSV's rights under clauses 7.1 and 7.2 will terminate and its rights to the Project Results and Background IP will revert to Prana who, subject to clause 9.3, will be free to commmercialise and otherwise deal in that Intellectual Property as they see fit.
8.2 Exercise of First Right of Refusal
If NSV does exercise its first right of refusal in accordance with clause
7.2 (i), Prana appoints NSV as its agent to negotiate a sub-licence in the
Field, (Sub-licence) with SCHERING to Commercialise the Project Results
and (as necessary to Commercialise the Project Results) the Background IP,
and the following provisions will apply:
(a) NSV will use all reasonable endeavours to negotiate the Sub-licence, according to the following:
(i) the Sub-licence will be world-wide and exclusive in respect of Project Results only, and non-exclusive in respect of Background IP;
(ii) the Sub-licence will be royalty-bearing, with royalty rates and any licence fees and milestone payments set out in Appendix 7.5 [(financial terms)] of the RCA and royalty payments calculated by reference to Net Sales as defined in the RCA;
(iii) the term of the Sub-licence will be for the duration of the last to expire anywhere in the world of the patents generated in respect of the Project Results, provided that the royalty obligations may expire on a country-by-country basis as patent protection in respect of the Commercialisation of the Project Results expires in each country; and
(iv) NSV may not enter info any binding Sub-licence without Prana's written approval, which may not be unreasonably withheld.
(b) If any Sub-licence is entered into, Prana will be deemed to have immediately:
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(i) granted to NSV a reciprocal licence to Commercialise the Project Results and Background IP as necessary to enable NSV to fulfil its obligations to SCHERING under the Sub-licence; and
(ii) appointed NSV its agent to receive Commercialisation Proceeds under the Sub-licence on their behalf.
(c) If NSV and SCHERING, after good faith negotiations, are unable to agree on the terms of a Sub-licence within 6 months of NSV exercising its first right of refusal under clause 7.2, unless the Parties agree otherwise, NSV's rights under clauses 7.l and 7.2 will terminate and its rights to the Project Results and Background IP will revert to Prana who, subject to clause 9.3, will be free to commercialise and otherwise deal in that Intellectual Property as they see fit.
8.3 Share of Proceeds
NSV will receive and hold the Commercialisation Proceeds in accordance with clause 8.4 as agent for Prana in the proportions specified in Item 3 of Schedule 4. If no such proportions are specified, then the proportions specified in Item 2 of Schedule 4 will apply.
8.4 Use and Distribution of Proceeds
NSV will:
(a) collect and pay all Commercialisation Proceeds and any funds NSV receives from SCHERING for the purposes of identifying, maintaining, enforcing or defending Intellectual Property into the Account;
(b) draw on the Account to meet its agreed administration fee payable in connection with Commercialising the Project Results, which fee will be 12.5% of all Commercialisation Proceeds, unless otherwise specified in Item 3 of Schedule 4 or agreed in writing by all Parties;
(c) draw on the Account as permitted under clause 9.2; and
(d) draw on the Account to pay any money due to the owners of Background IP as a result of the Commercialisation.
(e) distribute the balance to Prana in accordance with the proportions determined under clause 8.3.
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9. Identification, maintenance, enforcement and defence of Intellectual Property
9.1 Identification of Project Results
(a) Prana must notify the Project Leaders of the creation of any Project Results as soon as practicable after such creation.
(b) Prana will use its best efforts to ensure that its employees, agents and sub-contractors under its supervision or other persons participating in the Project:
(i) will identify Project Results generated or developed by them;
(ii) will promptly communicate details of it to the Project Leaders; and
(iii) will promptly do all acts and things and execute all documents necessary for the purpose of vesting ownership of the Project Results in Prana as contemplated by clause 7.2.
(c) If Prana considers that a particular development arising from that Project may be patentable or the subject of other forms of Intellectual Property protection, Prana will promptly communicate details of that development to the Project Leaders.
(d) The Project Leaders will advise the KAMR whether the development warrants pursuing patent protection, or other forms of Intellectual Property protection, and if it does, of what nature and in which countries protection should be sought.
(e) If required by the KAMR, the Committee will discuss with SCHERING the matters referred to in paragraph (d) and the question which party shall have the obligation to file, maintain, prosecute, enforce and defend such Intellectual Property. The Committee will allow any final decision under this clause to be solely up to SCHERING.
(f) All registrable Project Results will be applied for in the name of the owner of that Project Results as determined under clause 7.2.
(g) Except as expressly stated otherwise in this Agreement:
(i) Prana will be responsible for application, prosecution, maintenance, enforcement or defence of any form of Intellectual Property protection in respect of its Background IP and will keep NSV reasonably informed of, and co-operate, at NSV's cost, with any reasonable request of NSV in connection with, such matters; and
(ii) nothing will require Prana to apply its own funds (other than those held by NSV on its behalf) towards the application, prosecution,
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maintenance, enforcement or defence of any form of
Intellectual Property protection in respect of Project
Results.
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9.2 Primary responsibility for Project Results
(a) NSV, subject to the rights of SCHERING and Prana referred to in clause 9.1 above and ss. 9 of the RCA, will be responsible for applying, maintaining, prosecuting, enforcing and defending any form of Intellectual Property protection in respect of Project Results in close consultation with SCHERING.
(b) NSV may meet any expenses incurred under this clause 9 out of any funds NSV receives from SCHERING dedicated explicitly to the purposes of maintaining, enforcing or defending any Intellectual Property and which NSV deposits into the Project Account.
9.3 Reversion of Project Results
If:
(a) SCHERING does not take reasonably adequate steps to protect the Project Results; or
(b) an NSV request under clause 9.2 for funds to obtain protection of Project Results is refused,
Prana may protect the Project Results and/or incur the expense (as the case may be) and all rights thereafter obtained as a result of those funds will be excluded from the first right of refusal under clause 7.2(d).
9.4 Assistance
Prana will, at its cost, provide all information to NSV and SCHERING (as the case may be) and execute all documents and do all acts and things necessary or desirable to enable the adequate and timely preparation of all documents necessary or desirable for the application, prosecution, maintenance, enforcement or defence of any registrations or other protection of the Project Results, including, without limitation:
(a) signing, and procuring all inventors to sign, all powers of attorney and other forms required for the orderly prosecution of patent applications; and
(b) lending its name to any infringement or defence action either as a direct party or a third party.
Other than the obligations in this 9.4, Prana will not be liable for any costs associated with an infringement or defence action initiated by NSV or SCHERING.
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9.5 Protection of Intellectual Property
(a) Prana will disclose to NSV immediately it becomes aware, details of:
(i) any infringement or alleged infringement by any person of any Project Results, Background IP or any Intellectual Property of a third party relevant to the Project or relevant to the Commercialisation of the Project Results and Background IP, in the Field; and
(ii) any claim or alleged claim by any person that Commercialisation of the Project Results, Background IP or any Intellectual Property of a third party relevant to the Commercialisation of the Project Results and Background IP constitutes an infringement of the rights of that person, in the Field.
(b) Unless the Parties otherwise agree, NSV will, in accordance with the terms of the Sub-licence (if any) take all reasonable steps to enforce and defend the Project Results, in the Field, as it sees fit, in consultation with Prana, but subject to any rights of SCHERING. At NSV's request, Prana agrees to give NSV all assistance which may be reasonably required in order to enforce and defend the Project Results.
(c) Prana will maintain, enforce and defend any Background IP which is the subject of a Schering sub-license under this Agreement, at Prana's own expense;
(d) If NSV decides not to initiate proceedings against any alleged infringer in relation to alleged infringements of Project IP in the Field, Prana will not do so without NSV's prior written consent, such consent to be given at NSV's discretion and on such conditions as NSV sees fit, including, without limitation, satisfaction of issues such as apportionment of proceeds, recovery of NSV's costs and indemnification of NSV against adverse judgment.
(e) NSV has the right to assign all rights vested in NSV under this Agreement with regard to filing, maintenance, prosecution, enforcement and defence of Project Results to SCHERING.
9.6 Proceeds of Infringement
If NSV recovers any damages or accounts of profit in taking any action against any alleged infringer of Project Results, in the Field, the amounts of any such judgment and any costs recovered by NSV will be first applied to reimburse reasonable external costs and expenses (including external legal costs) incurred by NSV, Prana and SCHERING. The balance, if any, will be apportioned in accordance
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with the terms of the Sub-licence (if any) and then to Prana in accordance with this Agreement as if it were Commercialisation Proceeds.
10. Confidentiality
10.1 Confidentiality Obligations
(a) Each Party agrees that it will keep secret and confidential and not use or disclose to any other legal entity all Confidential Information made available by another Party other than as necessary for the purposes of this Agreement, save that NSV may disclose Confidential Information to third parties in confidence as reasonably necessary for the Commercialisation of the Project Results.
(b) The obligations imposed on a Party by this clause will not apply to Confidential Information which:
(i) prior to disclosure is in the public domain or in published literature or subsequent to disclosure to the Party becomes part of the public domain or is published other than as a result of an unauthorised act or failure to act by that Party;
(ii) is received by a Party from a third party without any obligation to hold in confidence and which has not been obtained by that third party directly or indirectly from any Party;
(iii) is independently developed by an employee or officer of the Party owing the obligation of confidentiality while having no knowledge of the other Party's Confidential Information; or
(iv) the Party claiming confidentiality has identified in writing as being released from the obligation of confidentiality.
(c) A combination of information will not be taken to be in the public domain merely because it contains information in the public domain.
(d) Confidential Information will not be taken to be in the public domain merely because it is embraced by a general disclosure in the public domain.
(e) The receiving Party has the onus of showing that any of the above exceptions apply.
(f) Each Party will ensure that:
(i) its respective employees who participate in the Project or acquire access to Confidential Information, will comply with the obligations of confidentiality as though parties to this Agreement; and
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(ii) any of the above mentioned employees who cease to be employed by the Party will continue to be bound by such obligations of confidentiality.
(g) The obligations of confidentiality imposed on a Party will survive termination of this Agreement.
10.2 Publications
(a) The Parties will use their best endeavours to ensure nothing is done which might prejudice the subsistence or Commercialisation of Confidential Information or Project Results. In particular, the Parties will not publish or disclose any such Confidential Information or Intellectual Property to any third person so as to preclude the grant of a patent in respect of the Project Results or cause the loss of Intellectual Property in any Confidential Information.
(b) Prior to any publication the Party wishing to publish material (the Requesting Party) must forward a request in writing to NSV and/or SCHERING seeking permission to publish the material.
(c) The Requesting Party may not publish results of the Project without the consent of SCHERING. If the Requesting Party requests in writing that SCHERING consent to a publication, SCHERING may not withhold that consent unless in its reasonable view the publication includes Confidential Information being part of Project Results and within the Field and the publication would adversely affect protection or Commercialisation of the Project Results within the Field. If the Requesting Party makes such a written request and receives no response from SCHERING within 90 days, SCHERING will be deemed to have consented to the proposed publication.
11. Settlement of Disputes and Arbitration
11.1 Dispute Resolution
(a) if a dispute arises between the Parties in connection with the Agreement, the Parties undertake in good faith to settle the dispute.
(b) Any dispute or difference arising between the Parties which cannot be resolved between them will be resolved in accordance with the following procedure:
(i) the Party claiming that a dispute exists will notify the other Party that a dispute exists and forthwith submit such dispute or difference to
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the Committee for resolution. The Committee shall decide under consultation of the KAMR.
(ii) if the Committee and the KAMR are unable to resolve the dispute or difference within a reasonable time, a meeting will be convened forthwith between senior representatives of the disputing Parties not being members of the Committee for resolution of the dispute or difference. If the dispute or difference concerns any matter being of material interest for SCHERING (e.g. such as rights to Background IP or Project Results, or publication issues) the senior representatives shall also confer with the SCHERING member(s) of the Steering Committee to resolve the dispute or difference.
(c) Each Party acknowledges that the compliance with these provisions is
a condition precedent to any entitlement to a claim, relief or
remedy, whether by way of proceedings in a court of competent
jurisdiction or by arbitration proceedings under this Agreement or
otherwise in respect of such dispute or difference. However this
will not preclude any Party from seeking urgent interlocutory relief
in a court of competent jurisdiction.
11.2 Arbitration
If any dispute or difference arises between the Parties to this Agreement
which cannot be resolved between them in accordance with clause 11.1, and
which does not impinge upon a question of law or call for the
rectification of this Agreement, such dispute will forthwith be referred
for determination at Melbourne, by an arbitrator agreed on by the Parties
to the dispute or difference. If such Parties are unable to agree upon an
arbitrator the matter will be dealt with in accordance with the laws
relating to expedited commercial arbitration for the time being in force
in Victoria.
11.3 SCHERING as intended Third Party Beneficiary
Reference is hereby made to the RCA between SCHERING and NSV. The Parties
recognise that as a result of the above-referenced agreement SCHERING has
a material interest in the performance of this Agreement by the Parties
hereto. Accordingly, to the extent that this Agreement grants to NSV any
right, remedy or claim under or by reason of this Agreement, SCHERING may
also enforce any such right, remedy or claim against Prana on its own
behalf. Where this Agreement refers to a provision of the RCA under which
SCHERING has a right, remedy or claim against Prana, SCHERING may enforce
that right, remedy or claim directly against Prana under this Agreement.
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12. Termination and Breach
12.1 Breach by Prana
(a) If Prana breaches or fails to perform any material term of this Agreement, and the breach is capable of remedy by performance or otherwise, NSV may serve on Prana a notice requiring it to remedy that breach. Prana must, at its cost, use its best endeavours and take all reasonable steps to remedy the breach within 90 days of receipt of the notice.
(b) Subject to NSV's rights under clause 3(a) Prana's inability or failure to carry out or complete the Project due to the loss of the services of key personnel (whether by way of resignation, dismissal, loss of tenure or otherwise) is considered to be a breach that is capable of remedy for the purposes of this clause 12.
(c) If Prana has not remedied the breach to NSV's reasonable satisfaction within 90 days of receipt of the notice, NSV may, in addition to any other rights it may have under this Agreement, take one or more of the following steps:
(i) require Prana to continue to make available to NSV (by way of licence, mutually agreed assignment, or otherwise), as necessary to enable NSV to fulfill its obligations to SCHERING, all of Prana's interest in any Project Results and any associated Background IP on terms to be agreed in good faith having regard to the nature of the material breach, the nature of the Intellectual Property, the nature of NSV's obligations to SCHERING and any other relevant factors;
(ii) if NSV enforces its right under paragraph (i) to have the Project Results and Background IP continue to be made available, require Prana to continue to comply with its obligations under clause 9 of this Agreement in relation to that Project Results and Background IP and not do anything in relation to that Project Results and Background IP which may prejudice NSV's ongoing rights in that Project Results and Background IP;
(iii) terminate Prana's participation in the Project;
(iv) require Prana to assist, at Prana's cost, NSV to find a suitable substitute to conduct any or all of Prana's outstanding role in the Project;
(v) require Prana to fully indemnify NSV in respect of all liabilities and expenses incurred by any of them in respect of Prana's default
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under this Agreement, including the costs associated with finding a suitable substitute under paragraph (iv) above; and
(vi) terminate this Agreement in respect of Prana or in respect of all Parties without prejudice to the rights granted under clauses 7 and 8.
(d) If NSV terminates this Agreement under this clause then the following provisions shall apply to any funds still held by NSV as agent for Prana:
(i) Prana hereby authorises and directs NSV to transfer the funds
as agent for Prana to another project or new project(s) (the
new project projects) as determined by NSV;
(ii) the participating institutes in respect of the new project or
projects may include Prana;
(iii) funds so transferred shall become 'Earmarked Funds' for the
new project or projects; and
(iv) upon NSV determining to transfer funds to a project or new
projects under this clause, NSV shall cease holding the
transferred funds as agent (and, to the extent that those
funds were also being held as agent on trust, on trust) for
Prana and commence holding them as agent (and, to the extent
that those funds will also be held as agent on trust, on
trust) for the participating institutes in respect of the new
project or projects.
12.2 Termination for unsatisfactory progress
The KAMR will regularly review the progress of the Project with the
Project Leaders and if the KAMR considers the Project is not progressing
to its reasonable satisfaction, NSV may terminate this Agreement by 6
months prim written notice to the Institute(s). If NSV terminates this
Agreement under this clause then NSV will have no further obligation to
provide funds after the effective date of termination and the provisions
of Section 12.1(d) shall apply to any funds still held by NSV.
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12.3. Termination of RCA with SCHERING
If in case of termination or expiry of the RCA the Project under this Agreement is not completed, the Project may be continued until finished under this Agreement and the RCA will still apply; provided however that the funding provided in the Project budget will not be raised after termination or expiry of the RCA.
12.4. Termination for insolvency etc.
Unless the Parties agree otherwise, this Agreement will terminate if NSV:
Project Agreement
Neurosciences Victoria Ltd and Prana Biotechnology Ltd
(a) stops or suspends or threatens to stop or suspend payment of all or a class of its debts;
(b) is insolvent within the meaning of section 95A of the Corporations Act;
(c) must be presumed by a court to be insolvent by reason of section 459C(2) of the Corporations Act;
(d) fails to comply with a statutory demand (within the meaning of section 459F(1) of the Corporations Act);
(e) has an administrator appointed over all or any of its assets or undertaking or any step preliminary to the appointment of an administrator is taken;
(f) has a controller within the meaning of section 9 of the Corporations Act or similar officer appointed to all or any of its assets or undertaking; or
(g) has an application or order made, proceedings commenced, a resolution passed or proposed in a notice of meeting, an application to a court made or other steps taken against or in respect of it (other than frivolous or vexatious applications, proceedings, notices or steps or voluntary applications or proceedings for the purposes of reconstruction) but specifically excluding voluntary applications related to bankruptcy or insolvency for its winding up, deregistration or dissolution or for it to enter an arrangement, compromise or composition with or assignment for the benefit of its creditors, a class of them or any of them.
12.5 Breach by NSV
(a) If NSV breaches or fails to perform any material term of this Agreement, and the breach is capable of remedy by performance or otherwise, Prana may serve on NSV a notice requiring it to remedy that breach.
(b) NSV must, at its cost, use its best endeavours and take all reasonable steps to remedy the breach within 90 days of receipt of the notice.
(b) If NSV has not remedied the breach to Prana's reasonable satisfaction within 90 days of receipt of the notice, Prana may, in addition to any other rights it may have under this Agreement, take one or more of the following steps:
(i) require NSV to cease representing that it is an agent for Prana in relation to the Project;
(ii) require NSV to pay all monies held in the Project Account and any Commercial Proceeds to Prana in the proportions applicable under clause 8.3;
Project Agreement
Neurosciences Victoria Ltd and Prana Biotechnology Ltd
(iii) require NSV to assign or co-operate in procuring the assignment to Prana of the benefit of any arrangements NSV has with SCHERING; and
(iv) require NSV to fully indemnify Prana in respect of all liabilities and expenses incurred by it in respect of NSV's default under this Agreement, including the costs associated with the assignment referred to in paragraph (iii) above.
(d) In case of Section 12.5 (c) Prana agrees to SCHERING having the right, at its option, to replace NSV as a contract partner to this Agreement to the extent that all indemnification obligations of NSV towards Prana, which are borne prior to such substitution by SCHERING will remain with NSV. All indemnification obligations of SCHERING towards Prana, which are borne after such substitution of NSV, will remain with SCHERING.
12.6 Termination report
(a) In all cases of termination of this Agreement under this clause 12, Prana will compose a termination report containing all Project Results created up to the date of termination of this Agreement, clause 5.6 shall apply to the termination report accordingly. The termination report shall be signed by the Project Leader of Prana and the Head of Prana as well as countersigned by the KAMR. The termination report shall be promptly submitted to the Steering Committee which shall be considered as notification of relevant Project Results under clause 7.2 (e) giving NSV and SCHERING the right to evaluate their interest in the Project Results and, if the case may be, to exercise their options, in accordance with the provisions of clauses 7.2 and 8.
(b) If NSV has notified Prana in accordance with clause 7.2 that NSV and SCHERING do not want to exercise their rights of first refusal, Prana shall will be free to continue the Project at its own expense; provided however that Prana will not raise funding from a third party for a period of 12 months after SCHERING has declined its option. Prana will notify NSV and SCHERING before they solicit third party funding after the 12 months period in order to give NSV and SCHERING the opportunity to reintegrate the Project into the Project portfolio under the RCA and to provide the funding under the RCA. NSV and SCHERING shall have 30 days to decide whether the Project shall be reintegrated into the portfolio and the funding requested by Prana. NSV shall notify Prana in writing upon the decision. The Parties hereby acknowledge that Prana will have the opportunity to demonstrate any added value created in the Project during the 12 months
Project Agreement
Neurosciences Victoria Ltd and Prana Biotechnology Ltd
period and to re-negotiate the commercial terms which would apply to reintegration of the Project, to reflect the added value that Prana has created during the 12 months period.
13. Termination without prejudice
Termination or expiry of this Agreement for any reason, does not affect:
(a) any rights and obligations of the Parties which have accrued prior to such termination or expiry; and
(b) any rights and obligations of the Party which by their nature survive termination including without limitation rights and obligations under clauses 10 and 14.2.
14. General Warranties and Indemnities
14.1 IP representations and warranties
Prana represents and warrants that:
(a) it is the owner of, or is otherwise entitled to provide, the
Background IP which it makes available under this Agreement; and
(b) it has adequate arrangements in place with its employees, agents and
sub-contractors to enable it to grant the licences to its Project
Results under this Agreement.
(c) to the best of its knowledge as at the Commencement Date any
Commercialisation of its Background IP and Project Results as
permitted under this Agreement does not (and, unless it notifies NSV
in writing to the contrary during the term of this Agreement, will
not) infringe the rights of any third party.
14.2 Indemnities in relation to the Project
Each Party will indemnify (Indemnifying Party) each other Party and the
officers, employees and any scientists engaged by it (Those Indemnified)
against all claims, liability, loss, damage, costs and expanses (including
but not limited to legal costs on a solicitor and own client basis) which
may be incurred by Those Indemnified arising out of or in connection with:
(a) any personal injury suffered by or the death of Those Indemnified or
any loss or damage to property, real or personal, of an Those
Indemnified caused by any negligent act or omission of the
Indemnifying Party or
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Project Agreement
Neurosciences Victoria Ltd and Prana Biotechnology Ltd
officers, employees and any scientists engaged by it in the course of carrying out the Project;
(b) any claims, actions or proceedings by any third party against Those Indemnified for any personal injury suffered by or the death of that third party, or any loss or damage to property, real or personal, of that third party caused by any negligent act of omission of the Indemnifying Party or officers, employees and any scientists engaged by it in the course of carrying out the Project; and
(c) any breach of any representation or warranty provided by the Indemnifying Party under this Agreement.
15. Assignment and Sub-Contracting
Prana may not assign or transfer any of its rights or obligations under this Agreement, nor sub-contract a substantial part of its obligations under the Project, without the prior written consent of NSV such consent not to be unreasonably withheld. NSV may not assign or transfer any of its rights or obligations under this Agreement without the prior written consent of Prana such consent not to be unreasonably withheld.
16. Force majeure
(a) Where a Party is unable, wholly or in part, by reason of force majeure, to carry out any obligation under this Agreement, and that Party:
(i) gives each other Party prompt notice of that force majeure including reasonable particulars, and, in so far as known, the probable extent to which it will be unable to perform or be delayed in performing that obligation; and
(ii) uses all possible diligence to remove that force majeure as quickly as possible,
that obligation is suspended so far as it is affected by force majeure during the continuance of that force majeure and that Party will be allowed a reasonable extension of time to perform its obligations.
(b) If, after 30 days, the force majeure has not ceased, the Parties will meet in good faith to discuss the situation and endeavour to achieve a mutually satisfactory resolution to the problem.
(c) The requirement that any force majeure must be removed with all possible diligence does not require the settlement of strikes, lockouts or other labour
Project Agreement
Neurosciences Victoria Ltd and Prana Biotechnology Ltd
disputes or claims or demands by any government on terms contrary to the wishes of the Party affected,
In this clause, force majeure means an act of God, strike, lockout or other interference with work, war (declared or undeclared), blockade, disturbance, lightning, fire, earthquake, storm, flood, explosion, governmental or quasi governmental restraint, expropriation, prohibition, intervention, direction or embargo, unavailability or delay in availability of equipment or transport, inability or delay in obtaining governmental or quasi governmental approvals, consents, permits, licenses, authorities or allocations, and any other cause, whether of the kind specifically enumerated above or otherwise which is not reasonably within the control of the Party affected.
17. Clause severance
Any provision of this Agreement that is held void by a court of competent jurisdiction or is voidable by a Party or is or becomes at that time unlawful or unenforceable will, to the extent to which it is void or voidable or is unlawful or unenforceable, be deemed to be excised from and not form part of this Agreement, without affecting the validity or enforceability of the remaining provisions to the fullest extent permitted by law or in equity.
18. Waiver
A waiver by a Party of any rights arising from a breach or non-observance by any other Party of a term of this Agreement will not be taken to operate in any way as a waiver of any rights arising from any subsequent continuation of that breach or non-observance, or any further or other breach or non-observance of the same or any other term.
19. Governing law
(a) This Agreement will be governed by and construed in accordance with the law for the time being in force in Victoria.
(b) With respect to any legal action or proceedings which may be brought in relation to this Agreement or any transaction contemplated by this Agreement, each Party irrevocably submits to the non-exclusive jurisdiction of courts exercising jurisdiction in Victoria.
Project Agreement
Neurosciences Victoria Ltd and Prana Biotechnology Ltd
20. Notices
(a) Any notice, request, consent or other communication in connection with this Agreement must be in writing and:
(i) left at the address of the addressee;
(ii) sent by prepaid-ordinary post (airmail if posted to or from a place outside Australia) to the address of the addressee;
(iii) sent by facsimile to the facsimile number of the addressee; or
(iv) if the addressee has given written notice of another address or facsimile number, sent to that address or facsimile number.
(b) The address and facsimile number of each Party is as specified in Schedule 3.
(c) A notice, request, consent or other communication takes effect from the time it is received unless a later time is specified in it.
(d) A notification of change of address will not take effect until each other Party notifies the Party changing its address that the notice of change of address has been received.
(e) A letter or facsimile is taken to be received;
(i) for a posted letter, on the third (seventh, if posted to or from a place outside Australia) day after posting; and
(ii) for a facsimile, on production of a transmission report by the machine from which the facsimile was sent which indicates that the facsimile was sent in its entirety to the facsimile number of the recipient. However, if transmission is completed after 5.00pm on a business day or is sent on a day that is not a business day, the message is taken to have been received at 8.00am on the next business day.
21. Entire Agreement
This Agreement and the Agency Agreement between NSV and Prana contain the entire agreement between the Parties with respect to their subject matter and supersede all prior agreements and understandings between the Parties in connection with it. In case that the Agency Agreement contradicts any provision contained in this Agreement, the provisions of this Agreement shall prevail.
Project Agreement
Neurosciences Victoria Ltd and Prana Biotechnology Ltd
22. Amendments
No agreement or understanding varying or extending this Agreement will be legally binding unless it is in writing signed by all Parties.
23. Further assurances
Each Party agrees to do all things and execute all deeds, instruments, transfers or other documents as may be necessary or desirable to give full effect to the provisions of this Agreement and the transactions contemplated by it.
24. Counterparts
This Agreement may be executed in any number of counterparts. All counterparts together will be taken to constitute one instrument.
Project Agreement
Neurosciences Victoria Ltd and Prana Biotechnology Ltd
Schedule 1
Financial Terms
This is a Financial Category 2 (3) Project (Appendix 7.5 of the Research Collaboration Agreement)
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Payments Category 2 Category 3
(Validated Drug Target) (Set of Lead Compounds |2-3|)
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Down-Payment $AUD 300,000 $AUD 400,000
New Leads from High none none
Thoughput Screening
IND (or equivalent) $AUD 500,000 $AUD 750,000
Commencement of Phase III $AUD 1,500,000 $AUD 1,750,000
Study
First Market Approval in each US $AUD 1,500,000 US $AUD 2,000,000
of US, EU or JAP EURO $AUD 750,000 EURO $AUD 1,000,000
JAP $AUD 750,000 JAP $AUD 1,000,000
Royalties 1-2% 3.5%
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Project Synopsis
Name of Research Project: AB clearance mechanisms
Appendix 2.2c of the Research Collaboration Agreement
NSV-PROJECT CODE: v
PROJECT TEAM: ROBERTO CAPPAI (PROJECT LEADER/MELBOURNE):
r.cappai@unimelb.edu.au
WITH: THOMAS DYRKS: Thomas.Dyrks@schering.de
CONTACT PERSON AT SAG: DR. THOMAS DYRKS
START OF PROJECT: AT SIGNATURE OF NSV/SAG RESEARCH CONTRACT
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RESOURCES (FOR THE FIRST RESEARCH YEAR):
NSV: TOTAL NUMBER OF FTE s=4: POST DOCs 3 AND TAs 2
SAG: Involvement of FTEs not planned within the first 2 years collaboration period
Project Agreement
Neurosciences Victoria Ltd and Prana Biotechnology Ltd
RATIONALE: To identify molecules which bind to and clear AB from the brain as a means of lowering Ab levels in the brain.
THE ACCUMULATION OF THE AMYLOID B (AB) PEPTIDE IS A CENTRAL PROCESS IN ALZHEIMER'S DISEASE (AD). IT IS CLEAR THAT AGING IS THE MAJOR RISK FACTOR FOR DEVELOPING AD AND THIS LEADS TO THE ACCUMULATION OF AB. THE MOST LIKELY CAUSE OF SPORADIC AD IS A DEFECT IN THE CLEARANCE OF AB FROM THE BRAIN. WHILST CONSIDERABLE INFORMATION IS AVAILABLE ON THE SYNTHESIS OF AB, THE MECHANISMS OF AB CLEARANCE HAVE NOT BEEN EXTENSIVELY STUDIED AND THEREFORE REMAIN POORLY UNDERSTOOD. AB TURNOVER COULD INVOLVE; 1) THE TRANSPORT OF AB OUT OF THE BRAIN VIA THE BLOOD. WHILE THIS PROCESS MAY NOT INVOLVE A PROTEASE IT COULD REQUIRE AB BINDING PROTEINS TO TRANSPORT AB TO THE VASCULAR SYSTEM; 2) CATABOLISM OF AB BY EXTRACELLULAR PROTEASES; 3). DEGRADATION BY A PHAGOCYTIC CELL FOLLOWING AB UPTAKE UNTO THE CELL VIA RECEPTOR-MEDIATED ENDOCYTOSIS. THE PEPTIDE MAY BIND DIRECTLY TO THE PHAGOCYTIC CELL OR VIA BINDING PROTEINS THAT TRANSPORT OR TARGET AB TO PHAGOCYTIC CELLS SUCH AS MICROGLIA; 4) THE ACCUMULATION OF AB BY MOLECULES THAT BIND TO AB AND PREVENT ITS CLEARANCE. THEREFORE THE IDENTIFICATION OF THE PROTEASE(S) AND-OR BINDING PROTEIN(S) IS IMPORTANT FOR UNDERSTANDING AB CLEARANCE AND WOULD REPRESENT TARGETS FOR MODULATING AB DEGRADATION.
A NUMBER OF PUTATIVE AB-CLEARANCE MOLECULES HAVE BEEN IDENTIFIED WHICH CAN BIND TO OR DEGRADE AB. BINDING/ TRANSPORT MOLECULES INCLUDE APOE, a2-MACROGLOBULIN (a2M) AND LDI/ RECEPTOR RELATED PROTEIN (LRP). THE APOE PROTEINS ARE A CLEAR RISK-FACTOR FOR LATE-ONSET AD. PERSONS CARRYING THE APOE4 ALLELE HAVE AN INCREASING RISK OF DEVELOPING AD WITH AN EARLIER AGE OF ONSET. APOE2 ALLELE CARRIERS HAVE THE LOWEST RISK. THE BASIS FOR THIS IS NOT FULLY UNDERSTOOD BUT MAY RELATE TO DIFFERENCES IN BINDING BETWEEN AB AND THE APOE ISOFORMS. HOWEVER THE MULTIFUNCTIONAL NATURE OF APOE ALLOWS DIFFERENT MODES OF ACTION. INTERESTINGLY APP TRANSGENIC MICE IN AN APOE KNOCKOUT BACKGROUND HAVE A LOWER AMYLOID BURDEN AND DO NOT DEVELOP PLAQUES. THIS SUGGESTS APOE EXPRESSION LEADS TO AB DEPOSITION. LRP, AS A MAJOR NEURONAL RECEPTOR FOR BOTH APOE AND a2M, IS POTENTIALLY A KEY MODULATOR IN THE CLEARANCE OF APOE/AB AND a2M/AB COMPLEXES.
TWO AB DEGRADING ENZYMES HAVE BEEN RECENTLY IDENTIFIED: NEPRILYSIN AND INSULIN DEGRADING ENZYME (IDE). NEPRILYSIN WAS ASSOCIATED WITH AB-CLEARANCE USING AN IN VIVO ASSAY WHICH MEASURED THE CATABOLISM OF RADIOLABELLED AB42 INJECTED INTO THE RAT HIPPOCAMPUS. PURIFIED NEPRILYSIN CATABOLISED AB42 IN A SIMILAR MANNER TO THE IN VIVO ACTIVITY. WHILE THE ADDITION OF A NEPRILYSIN INHIBITOR TO THE RAT HIPPOCAMPUS INCREASED THE AB42 BURDEN IN THE BRAINS.
IDE IS A NEUTRAL METALLOENDOPEPTIDASE IDENTIFIED AS AN AB DEGRADING ACTIVITY IN THE SUPERNATANT OF THE MICROGLIA CELL LINE BV-2. WHILE IDE IS LOCALISED INTRACELLULARLY IN THE CYTOSOL AND IN PEROXISOMES IT CAN ALSO BE RELEASED FROM INTACT CELLS OR REMAIN CELL SURFACE ATTACHED ALLOWING IT TO DEGRADE EXTRACELLULAR AB. GENETIC ANALYSIS SHOWED THAT A REGION ENCOMPASSING IDE ON CHROMOSOME 10 DISPLAYS LINKAGE IN LATE-ONSET AD FAMILIES.
TO PROPERLY UNDERSTAND THE MECHANISM OF AB CLEARANCE WE NEED TO IDENTIFY THAT FULL COHORT OF MOLECULES WHICH BIND AND CATABOLISE AB AND THE CELL TYPES INVOLVED. THIS WILL PROVIDE BETTER INSIGHTS INTO WHY THESE PROCESSES BECOME INEFFECTIVE IN CLEARING AB FROM AN AD BRAIN.
Project Agreement
Neurosciences Victoria Ltd and Prana Biotechnology Ltd
SECONDARY INDICATION: ALL CLINICAL FORMS AMYLOIDOSIS (SECONDARY/SYSTEMIC)
IT IS CLEAR THAT OTHER GROUPS HAVE PROJECTS TARGETING AB POLYMERISATION AND CLEARANCE (FOR DETAILS SEE TABLE BELOW). WE PRESUME COMPETITION FROM RESEARCHERS STUDYING IDE, NEPRILYSIN AND THE APOE/a2M/LRP PATHWAY. UNTIL NOW NO COMPOUND IS IN CLINICAL PHASE THAT SPECIFICALLY INDUCE AB CLEARANCE.
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Drug Originator Mechanism of Action Phase
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PBT1 Prana Biotechnology Chelating agents Phase-II
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NC 531 Neurochem Beta-amyloid Phase-I
polymerisation inhibitors
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PPI 368 Praecis Pharmaceuticals Beta-amyloid Preclinical
polymerisation inhibitors
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SKF 74652 GlaxoSmithKline Beta-amyloid Preclinical
polymerisation inhibitors
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PTI 00703 Nonindustrial source, Beta-amyloid Preclinical
ProteoTech polymerisation inhibitors
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Putrescine-D-YiAbeta11 Nonindustrial source Beta-amyloid Preclinical
polymerisation inhibitors
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Research programme: beta-amyloid Elan Corporation Beta-amyloid Preclinical
fibrillogenesis inhibitors polymerisation inhibitors
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Research programme: beta amyloid Nonindustrial sources Beta-amyloid Preclinical
decoy peptides - Massachusetts polymerisation inhibitors
Institute of Technology
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Research programme: amyloid Axonyx/Serono Beta-sheet breakers Preclinical
inhibiting peptides
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DP b99 D-Pharm Chelating agents Preclinical
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Insulysin gene therapy Nonindustrial source Protease stimulants Preclinical
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Desferri-nordanoxamine Aventis Pharma Chelating agents Unknown-Stage
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PROPRIETARY POSITION:
No patent filed or in preparation.
THE EXPERIMENTAL PLAN TO IDENTIFY PROTEINS THAT BIND TO AB AND THEREFORE POSSIBLY CLEAR AB AND-OR DEGRADE AB. CANDIDATE PROTEINS WILL BE TESTED IN BIOCHEMICAL AND CELL BASED ASSAYS TO VERIFY THEIR ROLE IN AB DEGRADATION OR CLEARANCE, BEFORE BEING TESTED IN RODENT MODELS.
Project Agreement
Neurosciences Victoria Ltd and Prana Biotechnology Ltd
I ASSAYS TO IDENTIFY AB-BINDING PROTEINS
THREE DIFFERENT EXPERIMENTAL APPROACHES WILL BE USED TO ISOLATE AB BINDING PROTEINS.
1. TWO-HYBRID SCREEN
THE YEAST TWO-HYBRID ASSAY WILL BE USED TO ISOLATE AB BINDING PROTEINS.
THE STRATEGY INVOLVES USING HUMAN AB AS THE TARGET. SINCE AB40 AND AB42 MAY BEHAVE BE CATABOLISED DIFFERENTLY WE WILL USE BOTH AB40 AND AB42 FOR THE SCREENING.
TARGET CONSTRUCTS: HUMAN AB42, HUMAN AB40.
CONTROL CONSTRUCTS: SCRAMBLED HUMAN AB42; APP 18-57 (REPRESENTS A REGION FROM THE APP ECTODOMAIN OF SIMILAR LENGTH, BUT UNRELATED SEQUENCE).
THE FOUR CONSTRUCTS WILL BE SCREENED AGAINST A HUMAN ADULT BRAIN CDNA LIBRARY. THE PREFERENCE IS TO MATE THE BAIT CELLS WITH A PRETRANSFORMED LIBRARY AS THIS ALLOWS GREATER TRANSFECTION EFFICIENCIES. POSITIVE BINDING CLONES WILL BE IDENTIFIED BY GROWTH ON SELECTABLE MEDIA AND A COLORIMETRIC ASSAY OF THE B-GALACTOSIDASE REPORTER GENE.
DEPENDING ON THE RESULTS OF THIS INITIAL SCREEN, AN ALTERNATIVE TWO-HYBRID SCREENING APPROACH WOULD USE THE CYTOTRAP TWO-HYBRID SYSTEM (STRATAGENE). THIS SYSTEM IS BASED ON CYTOPLASMIC INTERACTIONS AND THEREFORE DOES NOT REQUIRE THE AB-BINDING PROTEIN COMPLEX TO TRAFFICK TO THE NUCLEUS TO ACTIVATE THE REPORTER GENE. THIS WOULD MAXIMISE THE LIKELIHOOD OF OBTAINING POSITIVE HITS.
PUTATIVE AB40 OR AB42 BINDING CLONES WILL BE SEQUENCED AND COMPARED TO THE CLONES OBTAINED AGAINST SCRAMBLED AB AND APP18-57 TO IDENTIFY FALSE-POSITIVES SEQUENCES WILL BE SEARCHED AGAINST THE SEQUENCE DATABASE TO IDENTIFY WHICH PROTEIN CLASS THEY BELONG TO (IE. PROTEASES). VERIFICATION OF THE CLONES (SEE BELOW).
2. ISOLATION OF AB-COMPLEXES FROM HUMAN BRAIN (AD VS. CONTROL).
AS STATED IN THE INTRODUCTION, AB IS CLEARED EFFICIENTLY IN YOUNG BRAINS BUT ACCUMULATES IN AGED BRAINS AND IN PARTICULAR AD SUBJECTS. WE AIM TO ISOLATE AB-PROTEIN COMPLEXES AND COMPARE THE PROFILE FROM YOUNG, AGED NORMAL AND AD SUBJECTS TO IDENTIFY PROTEINS WHICH EITHER PROMOTE OR INHIBIT AB-CLEARANCE. SINCE AB CAN EXIST AS EITHER A SOLUBLE OR INSOLUBLE SPECIES TWO APPROACHES WILL BE USED: (1) IMMUNOPRECIPITATION (AP) OF SOLUBLE AB-COMPLEXES. (II) PURIFICATION OF AMYLOID PLAQUES. THE ISOLATED AB-COMPLEXES ARE THEN ANALYSED BY 2D-ELECTROPHORESIS.
IMMUNOPRECIPITATION OF AB-COMPLEXES WILL BE PERFORMED ON SOLUBLE AB FROM YOUNG, AGED-NORMAL AND AD BRAINS. BRAIN REGIONS TO BE ANALYSED ARE PUTAMEN, THALAMUS, INFERIOR TEMPORAL CORTEX AND HIPPOCAMPUS. THE BRAIN TISSUE WILL BE HOMOGENISED IN PBS (+ PROTEASE INHIBITORS) AND CENTRIFUGED AT 100,000G, 30MIN. THE SUPERNATANT FRACTION CONTAINS PBS SOLUBLE AB AND THE PELLET INSOLUBLE AB. THE SOLUBLE FRACTION WILL BE INCUBATED WITH ANTI-AB ANTIBODIES WHICH RECOGNISE N-TERMINAL, CENTRAL AND C-TERMINAL EPITOPES (WO2, 1E8, 2G10, 2G11). CONTROLS ARE NO PRIMARY ANTIBODY AND UN-RELATED ANTIBODIES (ANTI-C-MYC AND ANTI-FLAG). THE IP MATERIAL WILL BE ANALYSED BY 2D-GEL ELECTROPHORESES AND PROTEIN SPOTS SEQUENCED. VERIFICATION OF THE PROTEINS (SEE BELOW). CONDITIONS WILL BE VARIED TO INCREASE THE STRINGENCY OF THE INTERACTION BY USING HIGHER SALT CONCENTRATIONS AND DETERGENTS.
AMYLOID PLAQUES WILL BE PURIFIED AS AMYLOID CORES USING THE METHODS OF ROHER AND KUO (METHODS ENZYMOLOGY, 1999). THIS YIELDS A PELLET RICH IN COMPACT CORES OF AMYLOID. THIS MATERIAL PERMITS THE ANALYSIS OF MOLECULES THAT PROMOTE AB AGGREGATION OR INHIBIT ITS CLEARANCE. THE AMYLOID COMPLEXES WILL BE SOLUBILISED IN SDS-PAGE SAMPLE BUFFER AND
Project Agreement
Neurosciences Victoria Ltd and Prana Biotechnology Ltd
ANALYSED BY 2D-ELECTROPHORESES AND PROTEIN SPOTS SEQUENCED. VERIFICATION OF THE PROTEINS (SEE BELOW).
THIS STUDY ALLOWS THE PROFILE OF AB-BINDING PROTEINS FROM AN AD BRAIN TO BE COMPARED WITH AGED NORMAL AND YOUNG CONTROLS.
3. AB-AFFINITY CHROMATOGRAPHY ON BRAIN CELL LYSATES OR CELL LINES WHICH CONTAIN AB DEGRADING ACTIVITY.
HUMAN AB42 AND AB40 WILL BE COUPLED TO A SOLID SUPPORT SUCH AS AFFIGEL OR THE PEPTIDE SYNTHESIS RESIN. CONTROL PEPTIDES ARE SCRAMBLED AB42 AND APP18-47. THE PEPTIDES WILL BE USED TO AFFINITY PURIFY AB BINDING PROTEINS FROM BRAIN CELL HOMOGENATES OR CELL CULTURE SUPERNATANTS. BRAIN TISSUE WILL BE AD, AGED-NORMAL CONTROL AND YOUNG CONTROL FROM THE REGIONS LISTED ABOVE. RODENT BRAIN TISSUE WILL ALSO BE TESTED AS AN ALTERNATIVE SOURCE. THE CELL LINES TO BE TESTED ARE BV-2 AND CHO AS THEY CONTAIN HIGH LEVELS OF AB-DEGRADING ACTIVITY. CHO ARE CURRENTLY AVAILABLE IN OUR LABORATORY. WE SHALL ALSO TEST SY5Y AS A CONTROL AS THEY HAVE LOW LEVELS OF AB-DEGRADING ACTIVITY.
THE BRAIN HOMOGENATES OR CULTURE SUPERNATANTS WILL BE PASSED OVER THE AB AFFINITY COLUMN AND EXTENSIVELY WASHED TO REMOVE NON-SPECIFICALLY BOUND PROTEINS. THE WASH BUFFER CONDITIONS WILL BE ADJUSTED IN RELATION TO SALT CONCENTRATION, PH AND DETERGENT CONTENT TO ALTER THE BINDING STRINGENCY. BOUND PROTEINS ARE ELUTED AND ANALYSED BY EITHER 2D-ELECTROPHORESIS AND PROTEIN SPOTS SEQUENCED. VERIFICATION OF THE PROTEINS (SEE BELOW).
4. VERIFICATION OF BINDING PROTEINS.
THE ABOVE THREE APPROACHES WILL YIELD CANDIDATE AB-BINDING PROTEINS. VALIDATION OF THEIR ROLE IN AB CLEARANCE WILL BE TESTED AS FOLLOWS:
> IN VITRO PULL DOWN ASSAY: BINDING OF HUMAN AB42, HUMAN AB40, SCRAMBLED AB OR APP18-47 PEPTIDES TO GST-BINDING PROTEIN FUSION PROTEIN. CONTROLS ARE GST ALONE AND GST-UNRELATED PROTEIN.
OR, BINDING OF AB42 OR AB40 PEPTIDES TO FLAG-TAGGED CANDIDATE PROTEIN EXPRESSED IN VITRO (TNT-SYSTEM). IP WITH FLAG ANTIBODY AND DETECT BOUND AB BY WESTERN WITH ANTI-AB ANTIBODIES. ALSO UN-TAGGED CANDIDATE PROTEIN (35 S-LABELLED IN TNT SYSTEM) PLUS AB PEPTIDES. IP WITH ANTI-AB ANTIBODIES AND DETECT BY SDS-PAGE/ FLUOROGRAPHY.
> BINDING WITH THE BIACORE USING RECOMBINANT CANDIDATE PROTEIN PASSED OVER A BIACORE CHIP COUPLED WITH EITHER AB42, AB40, SCRAMBLED AB OR APP18-47.
> IF CANIDATE MOLECULES IS A PROTEASE, INCUBATE (35)S-BIOSYNTHETICALLY LABELLED AB WITH RECOMBINANT CANDIDATE AND MEASURE DEGRADATION OF AB BY SDS-PAGE/FLUOROGRAPHY.
> CELL CULTURE (AS PART OF (II) BELOW). OVEREXPRESS CANDIDATE MOLECULE IN CELL LINE BV-2 OR CHO AND ADDED (35)S-BIOSYNTHETICALLY LABELLED AB TO MEDIUM AND MEASURE AB DEGRADATION BY SDS-PAGE/FLUOROGRAPHY.
OR DOWN-REGULATE CANDIDATE MOLECULE EXPRESSION WITH ANTISENSE AND MEASURE DEGRADATION OF (35)S-BIOSYNTHETICALLY LABELLED AB ADDED TO MEDIUM BY SDS-PAGE/FLUOROGRAPHY.
OR CO-EXPRESS BOTH CANDIDATE PROTEIN AND APP IN BV-2 OR CHO CELLS AND MEASURE AB LEVELS IN SUPERNATANT BY ELISA OR WESTERN BLOT.
OR CO-EXPRESS BOTH CANDIDATE PROTEIN (FLAG TAGGED) AND APP IN BV-2 OR CHO CELLS AND IP WITH FLAG AND DETECT BOUND AB BY WESTERN BLOTTING.
Project Agreement
Neurosciences Victoria Ltd and Prana Biotechnology Ltd
OR CO-EXPRESS BOTH CANDIDATE PROTEIN (UNTAGGED) AND APP IN BV-2 OR CHO CELLS AND IP WITH ANTI-AB AND DETECT BOUND CANDIDATE PROTEIN BY WESTERN BLOTTING
II CELL CULTURE MODEL FOR CLEARANCE
CELL CULTURE MODELS WILL BE ESTABLISHED TO STUDY THE MECHANISMS OF AB CLEARANCE AND TEST THE CANDIDATE AB-CLEARANCE MOLECULES IDENTIFIED ABOVE. BOTH CELL LINES AND MIXED PRIMARY NEURONAL CULTURES WILL BE ESTABLISHED. BV-2 CELLS, IS A MOUSE MICROGLIAL CELL LINE WITH HIGH LEVELS OF AB DEGRADING ACTIVITY, WILL BE USED AS THE CELL LINE. CANDIDATE MOLECULES IDENTIFIED FROM THE AB-BINDING PROTEIN STUDIES WILL BE OVEREXPRESSED OR DOWN-REGULATED (ANTISENSE, POSSIBLY SUPPORTED BY THE ENABLING TECHNOLOGY FACILITY AT SCHERING) IN BV-2 CELLS. RADIOLABELLED AB (EITHER 35 S-BIOSYNTHETICALLY LABELLED AB OR 125 I-LABELED) WILL BE ADDED TO THE CULTURES AND AB LEVELS MEASURED BY SDS-PAGE/FLUOROGRAPHY.
AN ALTERNATIVE CELLULAR SYSTEM IS PRIMARY MIXED NEURONAL/GLIAL CULTURES. WE HAVE ESTABLISHED THESE CULTURES IN THE LABORATORY. THE PRIMARY CULTURES WILL BE USED FOR DOWN-REGULATION STUDIES USING RADIOLABELLED AB (EITHER 35 S-BIOSYNTHETICALLY LABELLED AB OR 125 I-LABELED) IN CONJUNCTION WITH SDS-PAGE/FLUOROGRAPHY. A MORE VERSATILE SYSTEM WOULD INVOLVE ESTABLISHING THE PRIMARY CULTURES FROM APP-TRANSGENIC MICE (HSIAO TG2576 OR OUR OWN CT100-LINES AND APP-LINES). THE ADVANTAGE OF THIS SYSTEM IS THE PRODUCTION OF AN ENDOGENOUS SOURCE OF HUMAN AB. THIS ALLOWS THE "PHYSIOLOGICAL" EXPRESSION OF HUMAN AB AND PERMITS THE DETECTION AND QUANTITATION OF AB BY ELISA AND WESTERN BLOTTING.
III TRANSGENIC MICE/IN VIVO APPROACH
THE IN VIVO RELEVANCE OF THE AB CLEARANCE MOLECULES WILL BE TESTED IN TRANSGENIC MICE CROSSED WITH APP-PSI OR APP TRANSGENIC MICE. THESE MICE ARE AVAILABLE IN THE GROUP. IF INHIBITORS FOR THE DEGRADING ENZYMES ALREADY EXIST, THEN PROOF OF CONCEPT CAN BE ACHIEVED BY PHARMACOLOGICAL INHIBITION OF AB DEGRADATION AS MEASURED BY INCREASED BRAIN AB LEVELS BY ELISA. ALTERNATIVELY, WE WOULD INJECT AB-AMYLOID +/- CANDIDATE MOLECULE +/- CANDIDATE MOLECULE INHIBITOR INTO RODENT BRAIN. THE LEVEL OF AMYLOID IN THE BRAIN WILL BE MEASURED BY THIOFLAVIN-S STAINING OR IMMUNOHISTOCHEMICALLY.
ALTERNATIVELY, AN EXPRESSION KNOCK-DOWN APPROACH WOULD BE USED WITH ANTI-SENSE TO THE CANDIDATE PROTEIN. AMYLOID AND AB LEVELS IN THE BRAIN WILL BE MEASURED BY ELISA AND IMMUNOHISTOCHEMICALLY. BOTH YOUNG AND AGED MICE (PRE AND POST-AMYLOID PLAQUE STAGE) WILL BE TESTED TO DETERMINE IF THE EFFECT IS ALSO ON EXISTING PLAQUES.
WORKING-PLAN OVERVIEW
I ASSAYS TO IDENTIFY AB-BINDING PROTEINS (1-12 MONTH)
o TWO-HYBRID SCREEN WITH HUMAN AB AS THE BAIT.
o IMMUNOPRECIPITATION OF AB-COMPLEXES FROM HUMAN BRAIN (AD VS CONTROL).
o AB-AFFINITY CHROMATOGRAPHY ON BRAIN CELL LYSATES.
II CELL CULTURE MODEL FOR CLEARANCE (1-12 MONTH)
III IN VITRO VERIFICATION OF AB BINDING/DEGRADATION (12-24 MONTH)
o OVER/CO EXPRESS IN RELEVANT IN VITRO SYSTEMS WITH/WITHOUT A TAG AND FOLLOWED BY IMMUNOPRECIPITATION.
o USE OF THE CELL CULTURE MODEL ESTABLISHED UNDER II
IV IN VIVO VALIDATION (12-36 MONTH)
Project Agreement
Neurosciences Victoria Ltd and Prana Biotechnology Ltd
KO-APPROACH MAY START AS SOON AS RELEVANT CANDIDATE IS IDENTIFIED (E.G. NEW/INTERESTING PROTEASE)
MILESTONES:
1. IDENTIFICATION OF AB-BINDING PROTEINS ON 2-D GELS USING THE AB-IMMUN0PRECIPITATION OR THE AB-AFFINITY PURIFICATION APPROACH OR POSITIVE CLONES FROM THE TWO-HYBRID SCREEN (6 MONTH)
2. VERIFIED CLONE (AB-BINDING PARTNER) FROM THE TWO-HYBRID SCREEN APPROACH OR DETECTION OF AB BINDING PROTEIN FROM AB-COMPLEXES OR BY AB-AFFINITY CHROMATOGRAPHY (12 MONTH)
3. MOLECULAR IDENTIFICATION AND VERIFICATION (IN VITRO) ON BINDING PARTNER AFTER 18 MONTH
4. IN VITRO VERIFICATION THAT BINDING PROTEIN IS INVOLVED IN AB DEGRADATION
(24 MONTH)
5. IN VIVO VERIFICATION THAT BINDING PROTEIN IS INVOLVED IN AB DEGRADATION
(36 MONTH)
PROJECT FEASIBILITY:
This feasibility of this project is enhanced by the expertise of the group and its access to appropriate disease tissue. The three pronged approach for isolating AB ligands avoids relying on only one methodology.
CRITICAL ISSUES: CONFIRMING THAT PROPOSED AB BINDING PROTEINS ARE PHYSIOLOGICALLY/PATHOLOGICALLY RELEVANT.
NO-GO CRITERIA:
NO IDENTIFIED AND VERIFIED (IN VITRO) BINDING PARTNER AFTER 18 MONTH
IN VITRO VERIFICATION THAT THE BINDING PROTEIN IS NOT INVOLVED IN AB DEGRADATION (24 MONTH)
PROJECT STATUS: (TO BE FILLED OUT BY SAG)
Concept research with focus on target identification and validation. The target is a molecule involved in AB degradation.
DEFINITION OF PROJECT STATUS / PROJECT CRITERIA(S) NECESSARY FOR EXERCISING THE NEGOTIATION RIGHT:
1 The target should be validated: (see Milestone No. 4/no-go criteria) In vitro verification that the binding protein is involved in AB degradation after 24 month.
2 The target should be suitable for HTS
3 The patent situation should allow HTS and drug development
If 1 and 3 are fulfilled we should exercise the Option: HTS, Hit to lead, BO proposal (For details see "Project Criteria(s) necessary for exercising the Option")
Project Agreement
Neurosciences Victoria Ltd and Prana Biotechnology Ltd
Schedule 2
Project Management Committee
Project Management Committee for Project described in Appendix 2.2c of the RCA and entitled AB clearance mechanisms
Institute Representative: Professor Edward Byrne
Project Leader Institute: Dr Roberto Cappai
Project Leader SCHERING: Dr Thomas Dyrks
Project Agreement
Neurosciences Victoria Ltd and Prana Biotechnology Ltd
Schedule 3
Addresses for Service of Notices
Prana Biotechnology (ACN 080 699 065)
Attention: Chief Operating Officer
Fax No.: +61 3 9690 8587
Address: Suite 2, 1233 High Street, Armadale, Victoria, 3143, Australia
Neurosciences Victoria Ltd
Attention: Chief Executive Officer
Fax No.: +61 3 83443832
Address: The Gatehouse, 2 Park Drive, Parkville, Victoria, Australia, 3052.
Project Agreement
Neurosciences Victoria Ltd and Prana Biotechnology Ltd
Schedule 4
Budget, Shares of Project Results and Proceeds of Commercialisation
Item 1: Budget (clause 6(a))
With respect to this Project, NSV is providing AUD$600,000 per annum to Prana Biotechnology. Total funds are shown for the anticipated 24-month period of this Project.
Research Funds The University of Melbourne $1,080,000 Prana Proportion $ 120,000(10%) Total $1,200,000 |
Item 2: Parties' ownership share of Project Results (clause 7.2)
Prana 100% SCHERING 0% Total 100% |
Item 3: Parties' entitlement to Commercialisation Proceeds (clauses 8.3 & 8.4)
Prana 87.5% NSV 12.5% Total 100% |
Item 4: Restrictions on NSV's right to Commercialise Background IP (clause
7.1)
Rights to commercialise Background IP are non-exclusive
Project Agreement
Neurosciences Victoria Ltd and Prana Biotechnology Ltd
Executed in Melbourne, Victoria, Australia
Signatories to this Project Agreement:
Mr Geoffrey Kempler Executive Chairman,
Prana Biotechnology Limited
Date 11/03/2003
/s/ Geoffrey Kempler
------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
A/Prof William Hart Acting Chief Executive Officer,
Neurosciences Victoria Limited
Date 11/03/2003
/s/ William Hart
------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Professor Edward Byrne Deputy Chair
Neurosciences Victoria Limited
Date 3/03/2003
/s/ Edward Byrne
------------------------------------
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|
EXHIBIT 4.20
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement"), dated as of July 1, 2004, between Prana Biotechnology Limited, an Australian corporation (the "Company") with its principal offices at Suite 2, 1233 High Street, Armadale, Victoria, Australia, and Jonas Alsenas (the "Executive"), residing at Two Top Gallant Road, Stamford, CT 06902.
WHEREAS, the Company desires to employ the Executive, and the Executive desires to be employed by the Company, upon the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
1. Employment. The Company hereby employs the Executive, and the Executive agrees to accept such employment, upon the terms and conditions herein set forth.
2. Employment Period. The term of employment hereunder shall commence on the date hereof, July 1, 2004, and continue until termination as provided herein (the "Employment Period").
3. Position and Duties. The Executive hereby agrees to serve as Chief Executive Officer of the Company and shall have the duties, responsibilities and authority as more fully set forth on Attachment A attached hereto. In such capacity the Executive shall report to the Board of Directors of the Company and shall serve on the Board of Directors. The Executive shall devote his best efforts and his full business time and attention to the performance of services to the Company in accordance with the terms hereof and as may reasonably be requested by the Company. The Executive may not engage in other work activities without prior written approval of the Board of Directors.
4. Compensation and Other Terms of Employment.
(a) Base Compensation. In consideration of the performance of his duties for the Company, for the period beginning July 1, 2004 through and including the termination of this Agreement as provided herein, the Executive's base compensation will be no less than US$200,000 per year (the "Base Salary") payable in accordance with the Company's regular payroll practices (e.g., timing of payments and standard employee deductions, such as income and employment tax withholdings). The foregoing salary may be increased, but not decreased, at the discretion of the Board of Directors.
(b) Bonus Compensation. The Company will pay Executive an annual bonus in the amount of US$100,000 for the first year of the Employment Period. The Executive's annual bonus for the following years will be based upon the Executive's success in satisfying pre-established performance targets to be mutually agreed upon by the Executive and the Board of Directors, but under no circumstances will be less
than US$100,000 for each subsequent year of the Employment Period. The bonus for the first year of the Employment Period will be paid upon completion of the Executive's first 15 months of employment, and subsequent bonuses will be paid following completion of each subsequent year of the Employment Period in accordance with the Company's regular practices. Upon termination of this Agreement pursuant to the Executive's death or disability pursuant to Section 5(e) below, the Company shall pay a pro-rata bonus pursuant to Section 5(e).
(c) Within thirty days of the Annual General Meeting (timing yet to be determined but expected to be between September and November 2004), and subject to shareholder approval of an appropriate resolution, the Company shall grant the Executive an option to purchase 380,000 ADR's at the price of $5.00 per ADR. Such options will vest over a period of four years, with 25% vesting at the end of each year from the beginning of the four-year period. The options will expire at the end of eight years from the initial date of the grant.
(d) It is intended that the Executive should have no disincentive to his spending additional days each year in Australia. Accordingly, the Base Salary and bonus will be adjusted each year (by agreement between the Executive and the Board of Directors) to compensate the Executive for differences in Australian and United States tax rates in the event that this difference has penalized the Executive for spending significant time in Australia.
(e) Business Expenses. Upon presentation of vouchers and similar receipts, the Executive shall be entitled to receive reimbursement in accordance with the policies and procedures of the Company maintained from time to time for all reasonable business expenses actually incurred in the performance of his duties for the Company.
(f) Vacation. The Executive shall be entitled to twenty (20) days of vacation during each calendar year of the Employment Period. Any vacation days that the Executive does not use in a calendar year will automatically be carried over for use in the following year to a maximum carry of two years. Any vacation days that the Executive has not used at the termination of the Employment Period will be paid to the Executive at his Base Salary rate in effect at the time of termination.
(g) Benefits. The Executive shall be entitled to participate in such employment benefits, including but not limited to a Section 401(k) retirement plan, health, dental, life insurance, and short and long term disability plans as are established by the Company and as in effect from time to time applicable to executives of the Company.
5. Termination and Consequences.
(a) The Executive's Right to Terminate. Notwithstanding any other provision of this Agreement to the contrary, the Executive may terminate this Agreement: (i) at any time during the Employment Period for Good Reason (as defined in Section 5(f)
below), on at least thirty (30) days' prior written notice; or (ii) without Good Reason on at least ninety (90) days' prior written notice to the Company.
(b) The Company's Right to Terminate. Notwithstanding any other provision of this Agreement to the contrary, the Company may terminate this Agreement: (i) at any time during the Employment Period, with Cause (as defined in Section 5(g) below); or (ii) without Cause, on at least ninety (90) days' prior written notice to the Executive.
(c) Consequences of Termination Without Cause or for Good Reason. If the Company terminates this Agreement without Cause, or if the Executive terminates this Agreement with Good Reason, the Company shall (i) pay the Executive a lump sum of $300,000 within twenty (20) days of the termination date; (ii) pay the Executive all unreimbursed business expenses and accrued, unused vacation days; and (iii) accelerate the vesting of any unvested options to purchase ADR's and permit Executive to exercise such options during the remainder of the exercise period for such options.
(d) Consequences of Termination With Cause or Without Good Reason. If the Company terminates this Agreement with Cause or the Executive terminates this Agreement Without Good Reason, then (i) Executive's Base Salary shall be discontinued upon the termination of the Employment Period; (ii) Bonus Compensation shall be pro-rated only if termination with Cause occurs in the first year; and (iii) the Company shall pay the Executive all unreimbursed business expenses and accrued, unused vacation days; and (iv) Executive shall not be permitted to exercise any unvested options to purchase ADR's.
(e) Consequences of Termination for Death or Disability. If the Executive dies during the term of this Agreement, then the Agreement shall terminate, except that the Company shall pay to Executive's estate all accrued Base Salary, pro-rata Bonus Compensation and unreimbursed business expenses and accrued, unused vacation days that the Executive would otherwise have been entitled to receive. Executive's estate shall also be permitted to exercise Executive's vested options for ADR's. If the Executive is unable to perform his functions because of Disability and the Agreement is terminated for that reason, the Executive shall be entitled to receive the same amount that the Company would be obligated to pay if the Executive had died during the term of this Agreement less the amounts of payment under any disability policy maintained by the Company.
(f) Definition of Good Reason. "Good Reason" means (i) a material reduction of the Executive's duties and responsibilities from those in effect immediately prior to the reduction or change, (ii) a requirement that the Executive relocate his primary office more than 25 miles from Stamford, Connecticut, or (iii) material breach by the Company of any provision of this Agreement after receipt of ten (10) days written notice thereof from the Executive and failure by the Company to cure the breach within thirty (30) days thereafter.
(g) Definition of Cause. "Cause" means the Executive's (i) conviction of a
felony, (ii) commission of acts of fraud, misappropriation, embezzlement, or
theft, or (iii) willful or repeated failure to follow specific directives of the
Board of Directors to act or refrain from acting, which directives are
consistent with the Executive's position as Chief Executive Officer of the
Company. Before the Company can terminate the Executive for Cause under clause
(g)(iii) of this Section 5(g), the Company must give the Executive written
notice setting forth the Company's dissatisfaction with the Executive and the
reasons therefor, and give the Executive thirty (30) days to cure the
circumstances supporting the for Cause determination.
(h) Definition of Disability. "Disability" means the inability of the Executive to perform the Executive's duties of employment to the Company pursuant to the terms of this Agreement, because of physical or mental disability where such disability shall have existed for a period of more than sixty (60) consecutive days or an aggregate of ninety (90) days in any 365 day period. The existence of a Disability means that the Executive's mental and/or physical condition substantially interferes with the Executive's performance of his substantive duties for the Company as specified in this Agreement. The fact of whether or not a Disability exists hereunder shall be determined by a professionally qualified medical expert selected by the Company and the Executive.
(i) Non-disparagement. In the event that Executive terminates this Agreement with or without Good Reason, or that the Company terminates this Agreement with or without Cause, the Company and the Executive agree that they will not disparage each other in any way.
6. Records and Confidential Data.
(a) Acknowledgement. The Executive acknowledges that in connection with the performance of his duties during the term of his employment the Company will make available to the Executive, or the Executive will have access to, certain Confidential Information (as defined below) of the Company. The Executive acknowledges and agrees that any and all Confidential Information learned or obtained by the Executive during the course of his employment by the Company or otherwise whether developed by the Executive alone or in conjunction with others or otherwise, shall be and is the property of the Company and its affiliates.
(b) Confidentiality Obligations. During the term of his employment and thereafter Executive shall keep all Confidential Information confidential and will not use such Confidential Information other than in connection with the Executive's discharge of his duties hereunder, and will be safeguarded by the Executive from unauthorized disclosure. This covenant is not intended to, and does not limit in any way Executive's duties and obligations to the Company under statutory and common law not to disclose or make personal use of the Confidential Information or trade secrets.
(c) Return of Confidential Information. Following the Executive's termination of employment, as soon as possible after the Company's written request, the Executive will return to the Company all written Confidential Information which has been provided
to the Executive and the Executive will destroy all copies of any analyses, compilations, studies or other documents prepared by the Executive or for the Executive's use containing or reflecting any Confidential Information.
(d) Definition. For the purposes of this Agreement, "Confidential Information" shall mean all confidential and proprietary information of the Company, and its affiliates, including, without limitation, the Company's scientific information, marketing strategies, pricing policies or characteristics, customers and customer information, product or product specifications, designs, software systems, leasing costs, cost of equipment, customer lists, business or business prospects, plans, proposals, codes, marketing studies, research, reports, investigations, or other information of similar character. For purposes of this Agreement, the Confidential Information shall not include and the Executive's obligations under this Section 6 shall not extend to (i) information which is generally available to the public, (ii) information obtained by the Executive from third persons, other than Executives of the Company, the Company and the Company's affiliates, not under agreement to maintain the confidentiality of the same and (iii) information which is required to be disclosed by law or legal process and (iv) information known to Executive prior to commencement of his employment with the Company, as evidenced by written documentation.
7. Arbitration. In the event that there shall be a dispute between the parties arising out of or relating to this Agreement, or the breach thereof, the parties agree that such dispute shall be resolved by final and binding arbitration in New York, New York, administered by the American Arbitration Association (the "AAA"), in accordance with the AAA's Commercial Arbitration Rules, to which shall be added the provisions of the Federal Rules of Civil Procedure relating to the production of evidence, and the parties agree that the arbitrators may impose sanctions in their discretion to enforce compliance with discovery and other obligations. Such arbitration shall be presided over by a single arbitrator. If Executive, on the one hand, and employer, on the other hand, do not agree on the arbitrator within fifteen (15) days after a party requests arbitration, the arbitrator shall be selected by employer and Executive from a list of five (5) potential arbitrators provided by the AAA. Such list shall be provided within ten (10) days of the request of any party for arbitration. The party requesting arbitration shall delete one name from the list. The other party shall delete one name from the list. This process shall then be repeated in the same order, and the last remaining person on the list shall be the arbitrator. This selection process shall take place within the two (2) business days following both parties' receipt of the list of five (5) potential arbitrators. The arbitrator's decision shall be final and binding upon the parties, and may be entered and enforced in any court of competent jurisdiction by either of the parties. Unless otherwise ordered by the arbitrator pursuant to this Agreement, the arbitrator's fees and expenses shall be shared equally by the parties. If any arbitration is brought by the Executive for payments due hereunder, the arbitrator may award the Executive reasonable attorneys' fees and other costs incurred in that action or proceeding, in addition to any other relief to which the Executive may be entitled. If any other proceeding is brought by one party against the other in connection with or relating in any manner to this Agreement, or to enforce an arbitration award, each party will be responsible for its own costs and attorneys' fees.
8. Miscellaneous Provisions.
(a) Notices. All notices, offers or other communications required or permitted to be given pursuant to this Agreement shall be in writing and shall be considered as properly given or made (i) if delivered personally; (ii) after the expiration of thirty (30) days from the date upon which such notice was mailed from within the United States or Australia by certified mail, return receipt requested, postage prepaid; or (iii) upon receipt by prepaid telegram, facsimile transmission or electronic mail transmission (with written confirmation of receipt for each kind of transmission). All notices given or made pursuant hereto shall be so given or made to the Executive at the address contained in the Company's personnel records and to the Company at its headquarters, addressed to the attention of the Chair of the Board of Directors.
(b) The Executive's Representations and Warranties. The Executive hereby represents and warrants that he is not a party to any agreement, contract or understanding that would in any way restrict or prohibit him from undertaking or performing any of his obligations under this Agreement.
(c) Amendments. Except as set forth in Section 4 above, this Agreement shall not be changed or amended unless in writing and signed by both the Executive and the Company.
(d) Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York applicable to contracts executed in and to be performed entirely within that jurisdiction.
(e) Counterparts. This Agreement may be executed in counterparts, each of which shall be an original, but all of which shall constitute one and the same instrument.
IN WITNESS WHEREOF, this Agreement has been executed as of the date and year first above written.
PRANA BIOTECHNOLOGY LIMITED
By: /s/Geoffrey Kempler
--------------------
Name:
Title:
|
THE EXECUTIVE:
/s/Jonas Alsenas ---------------- Jonas Alsenas |
ATTACHMENT A
DESCRIPTION OF DUTIES
The Executive shall have the responsibilities and functions generally associated with the position of Chief Executive Officer, including but not limited to:
o Develop and implement a business plan approved by the Board of Directors to provide a clear and rational basis for the ongoing prioritisation of the Company's activities and resource allocation, updated as required.
o Establish KPI's to measure the performance of the Company.
o Develop, in conjunction with the Board of Directors, KPI's for the measurement of the Executive's performance.
o Develop and expand the management team of the Company.
o Demonstrate strong commerciality in dealing with the Company's assets.
o Direct and manage relationships with major pharmaceutical companies, government regulatory agencies, investors and others.
o Work to continually improve the capitalisation and ensure the ongoing funding of the Company.
o Develop the Company's United States office in Stamford, Connecticut, which the Company agrees to maintain during the Employment Period and for which the Company shall provide adequate funding and resources.
o Work sufficient time in Australia to fulfill responsibilities on an ongoing basis.
o Comply with current or future Company policies.
EXHIBIT 4.21
Execution Version
SETTLEMENT AGREEMENT
This Settlement Agreement (this "Agreement") is entered into effective as of July 28, 2004 ("Effective Date"), by and among P.N. Gerolymatos S.A., a corporation organized under the laws of Greece ("PNG"), Panayotis N. Gerolymatos of Kryoneri Attikis, Greece ("Mr. Gerolymatos"), Prana Biotechnology Limited, a corporation organized under the laws of Australia ("Prana"), The General Hospital Corporation, a not-for-profit corporation organized under the laws of Massachusetts, U.S.A. and doing business as Massachusetts General Hospital ("MGH"), Ashley I. Bush of Massachusetts, U.S.A. ("Dr. Bush"), Rudolph E. Tanzi of Massachusetts, U.S.A. ("Dr. Tanzi"), and Robert Cherny of Victoria, Australia ("Dr. Cherny") (each individually a "Party"; collectively, the "Parties").
WITNESSETH
1. WHEREAS, Prana, MGH, and Drs. Bush, Tanzi, and Cherny filed suit against PNG and Mr. Gerolymatos in the United States District Court for the District of Columbia (Civil Action No. 1:01CV02052 TPJ) seeking to correct the inventorship of U.S. Patent Nos. 6,001,852 and 5,994,323.
2. WHEREAS, PNG filed several counterclaims in such suit and thereafter filed suit against Prana in the Multi-Judge Court of First Instance in Athens, Greece (No. 1678-1/1).
3. WHEREAS, PNG has opposed European Patent No. 0613560 in the name of the University of Melbourne, which is assigned to Prana, and Australian Patent Application Nos. 29981/99 (752236) and 65484/98 (748768) in the name of MGH, which are licensed by Prana.
4. WHEREAS, Prana has opposed Australian Patent Application No. 36324/97 (720643) in the name of PNG.
5. WHEREAS, the Parties desire to settle finally the disputes among them by entering into this Agreement, and to further the terms of such settlement, PNG and Prana have entered into a Patent Assignment and Settlement Agreement of even date herewith in the form set forth in Exhibit A (the "Patent Assignment Agreement"), a Patent Rights Security Agreement, of even date herewith in the form set forth in Exhibit B (the "Security Agreement"), and a Derivatives Agreement, of even date herewith in the form set forth in Exhibit C ("the Derivatives Agreement") (collectively, the "Transaction Documents"). Capitalized terms used but not otherwise defined herein shall have the same meanings as in the Patent Assignment Agreement.
NOW THEREFORE
In view of the foregoing premises and the mutual covenants set forth herein, the Parties hereto agree as follows:
Execution Version
1. CONFIDENTIALITY
1.1 Confidential Information. Confidential Information (as hereinafter
defined) disclosed by a Party (the "disclosing Party") to another Party (the
"receiving Party") shall not be used by the receiving Party except in connection
with the activities contemplated by this Agreement, shall be maintained in
confidence by the receiving Party (except to the extent reasonably necessary for
(a) regulatory approval of products developed by either Party or its Affiliates
or for the filing, prosecution and maintenance of the Assigned Patent Rights by
Prana or the PNG Assumed Patent Rights or PNG Patent Rights by PNG, or (b)
exercise by Prana of its rights under Section 2.6 of the Patent Assignment
Agreement), and shall not otherwise be disclosed by the receiving Party to any
other person, firm, or agency, governmental or private, without the prior
written consent of the disclosing Party, except to the extent that the
Confidential Information (as determined by competent documentation):
(i) was known or used by the receiving Party prior to its date of disclosure to the receiving Party; or
(ii) either before or after the date of the disclosure to the receiving Party is lawfully disclosed to the receiving Party by sources other than the disclosing Party rightfully in possession of the Confidential Information; or
(iii) either before or after the date of the disclosure to the receiving Party becomes published or generally known to the public (including information known to the public through the sale of products in the ordinary course of business) through no fault or omission on the part of the receiving Party or its sublicensees; or
(iv) is independently developed by or for the receiving Party without reference to or reliance upon the Confidential Information.
Notwithstanding anything set forth herein to the contrary, this Section 1 shall not prohibit the receiving Party from disclosing Confidential Information of the disclosing Party(ies) that is required to be disclosed by the receiving Party to comply with applicable laws, governmental regulations or securities exchange rules and regulations, or to defend or prosecute arbitration or litigation with respect to this Agreement and the other Transaction Documents, provided that the receiving Party provides prior written notice of such disclosure to the disclosing Party(ies), and takes reasonable and lawful actions to avoid and/or minimize the degree of such disclosure, including reasonably seeking confidential treatment with respect to or a protective order covering the information disclosed. Each Party agrees that the content of any announcements, press releases or other formal public statements concerning the transactions contemplated by this Agreement and the Transaction Documents will be determined by mutual agreement and consent of all the Parties, such agreement and consent not to be unreasonably withheld or delayed. No such approval will be necessary to the extent disclosure may be required by applicable laws, governmental regulations or securities exchange rules and regulations. In addition, Prana and PNG may disclose the general terms of this Agreement and the Transaction Documents and financial transactions thereunder, including payments and share issuances, and financial reports
Execution Version
thereof, to bankers, analysts and investors and other financial advisors. Prana may disclose the existence of and terms of this Agreement and the other Transaction Documents to third parties in connection with the grant of rights associated with the Assigned Patent Rights and as required to comply with third party agreements.
1.2 Employee and Advisor Obligations. The receiving Party agrees that it shall provide Confidential Information received from the disclosing Party only to its respective employees, consultants and advisors, and to the employees, consultants and advisors of such Party's Affiliates, who have a need to know and have an obligation to treat such information and materials as confidential under terms no less restrictive than those set forth herein.
1.3 Term. All obligations of confidentiality imposed under this Section 1 shall expire upon expiration or termination of all payment obligations of the Parties under the Patent Assignment Agreement and Derivatives Agreement; provided that with respect to any Confidential Information identified as a trade secret at the time of disclosure, the obligations of confidentiality imposed under this Section 1 shall expire when such Confidential Information no longer qualifies as a trade secret.
1.4 Definitions. For purposes of this Agreement,
(a) "Affiliate" means any corporation, company, partnership, joint venture and/or firm that controls, is controlled by, or is under common control with a Party. For purposes of this Section 1.4, "control" shall mean (a) in the case of corporate entities, direct or indirect ownership of at least fifty percent (50%) of the stock or shares having the right to vote for the election of directors, and (b) in the case of non-corporate entities, direct or indirect ownership of at least fifty percent (50%) of the equity interest with the power to direct the management and policies of such non-corporate entities. The Parties acknowledge that in the case of certain entities organized under the laws of certain countries outside the United States, the maximum percentage ownership permitted by law for a foreign investor may be less than fifty percent (50%), and that in such case such lower percentage shall be substituted in the preceding sentence, provided that such foreign investor has the power to direct the management and policies of such entity.
(b) "Confidential Information" means (a) any and all materials, data or information, including without limitation, any and all concepts, documentation, reports, data, specifications, computer software, source code, object code, flow charts, databases, inventions, information, know-how, show-how and trade secrets, whether or not patentable or copyrightable, that is (i) disclosed by the disclosing Party and (ii) if written, is marked "CONFIDENTIAL" or with other legend indicating it is confidential or proprietary in nature and, if orally or visually disclosed, the disclosing party has identified the information as confidential at the time it was disclosed and has delivered written notice to the receiving party within thirty (30) days of such disclosure confirming that the disclosing party considers such information to be confidential and subject to this Agreement; (b) the terms and conditions of this Agreement, the Patent Assignment Agreement, and the Derivatives Agreement; and (c) the terms and conditions of the Security Agreement, except to the extent such terms and conditions are required to be disclosed, as reasonably determined by PNG, to permit recordation of a form of security
Execution Version
agreement and financing statements, sufficient to perfect the granting of a security interest in the United States Patent and Trademark Office, the patent offices any applicable country, or the offices of any other applicable government entity in any applicable country.
2. DISPUTE RESOLUTION
2.1 Dismissal. The Parties agree to end all legal proceedings among them worldwide, including but not limited to litigations and patent oppositions regarding CQ and PQ and any related intellectual property rights (collectively, the "Litigation"). On the Effective Date, the Parties shall execute, and shall file within fourteen (14) days after the Effective Date, stipulations of dismissal in such litigations and patent oppositions in the forms set forth in Exhibits D, E, F, and G.
2.2 Release. Each of Prana, MGH, and Drs. Bush, Tanzi, and Cherny hereby releases and forever discharges PNG and Mr. Gerolymatos, and any of their past and present officers, directors, trustees, employees, subsidiaries, predecessors, successors, parents, assigns, agents, attorneys, heirs, and representatives from any and all claims and/or counterclaims that (i) were brought or could have been brought in the Litigation or (ii) relate in any manner to the claims and/or counterclaims in the Litigation or to the inventorship of the Assigned Patent Rights and PNG Patent Rights. Each of PNG and Mr. Gerolymatos hereby releases and forever discharges Prana, MGH, and Drs. Bush, Tanzi, and Cherny and any of their past and present officers, directors, trustees, employees, subsidiaries, predecessors, successors, parents, assigns, agents, attorneys, heirs, and representatives from any and all claims and/or counterclaims that (i) were brought or could have been brought in the Litigation or (ii) relate in any manner to the claims and/or counterclaims in the Litigation or to the inventorship of the Assigned Patent Rights and PNG Patent Rights. The Parties agree that the foregoing releases shall not prohibit or in any way limit any Party's ability to enforce the obligations created by this Agreement or the other Transaction Documents.
2.3 Inventorship. Within thirty (30) days after the Effective Date, Prana shall elect a neutral third party patent attorney on behalf of the Parties (choice of attorney subject to reasonable approval by PNG) to evaluate inventorship of the inventions of the Assigned Patent Rights covering or relating to CQ. If, in the opinion of the third party patent attorney inventorship correction is necessary, Prana, with cooperation from the other Parties, shall correct such inventorship on the relevant patent records, patents and patent applications. Each Party shall cooperate with the other Parties and the third party patent attorney and provide reasonable assistance and information to the other Parties and the third party patent attorney in connection with such inventorship evaluation and correction. The cost of the third party inventorship evaluation shall be shared equally by Prana and PNG. The outcome of any inventorship evaluation pursuant to this Section shall not affect the applicability or enforceability of any of the terms of this Agreement or the Patent Assignment Agreement or Prana's ownership of the Assigned Patent Rights or PNG's ownership of the PNG Patent Rights or MGH's rights pursuant to the License Agreement between MGH and Prana dated January 1,2001 and any amendments thereto.
Execution Version
2.4 Arbitration. With respect to any dispute, controversy or claim arising out of or relating to this Agreement or the other Transaction Documents or the subject matters thereof, or the breach, termination or invalidity thereof, the Parties shall first enter into good-faith negotiations to resolve such dispute, controversy or claim at a meeting or meetings by one representative of each Party, who shall initially be the Chairman of Prana for Prana; Avraam Manouach for PNG and Mr. Gerolymatos; the Director of Corporate Sponsored Research and Licensing of MGH for MGH, Dr. Bush and Dr. Tanzi; and Dr. Cherny for himself; provided, that with the exception of an alleged Material Obligation Failure, in the event of any other dispute, controversy or claim as to the breach of this Agreement or the other Transaction Documents, prior to initiating such negotiations, the non-breaching Party shall provide the alleged breaching Party with written notice of such alleged breach, and the alleged breaching Party shall be given the opportunity to cure such alleged breach within thirty (30) days thereafter. Any participation in or initiation of such negotiations shall not be deemed to be an admission of liability, and no statement made, provided in or related to such negotiations shall be construed as a statement against interest or otherwise disclosed or used in any proceeding involving any of the Parties. Any such dispute, controversy or claim that is not fully resolved pursuant to the foregoing process after a negotiation period of thirty (30) days (unless such period is extended in writing by the Parties involved in such dispute, controversy or claim) shall be finally settled by binding arbitration conducted in the English language in New York, New York under the commercial arbitration rules of the American Arbitration Association (the "MA"). The M A shall appoint a panel of three arbitrators within thirty (30) days after the initiation of the arbitration, one arbitrator to be designated by one Party or Parties, one arbitrator to be designated by the adverse Party or Parties and the third arbitrator to be designated by the first two arbitrators. Disputes about arbitration procedure shall be resolved by the arbitrators or failing agreement, by the AAA in New York, New York. The arbitrators shall be authorized to grant interim relief, including to prevent the destruction of goods or documents involved in the dispute, protect trade secrets and provide for security for a prospective monetary award. Specifically, but without limitation, under no circumstances shall the arbitrator be authorized to award punitive or multiple damages. Any purported award of punitive or multiple of damages or of other damages not permitted under Section 3.9 hereof or Section 11.12 of the Patent Assignment Agreement shall be beyond the arbitrators' authority and shall be void and unenforceable. The arbitrators shall have the authority to grant specific performance and other forms of equitable relief as described in Section 3.2, and all costs of the arbitration, including reasonable attorneys' fees of any prevailing party, shall be borne by the losing party. Judgment upon the award so rendered may be entered in any court having jurisdiction or application may be made to such court for judicial acceptance of any award and an order of enforcement, as the case may be. The award of the arbitrators is the sole and exclusive remedy of the Parties.
2.5 Agreements. Each of the Parties acknowledges and agrees that it or he has read the terms and conditions of this Agreement and the other Transaction Documents.
3. GENERAL PROVISIONS
3.1 Term. Except as provided in Section 1.3, the term of this Agreement continues indefinitely.
Execution Version
3.2 Equitable Relief. Each Party acknowledges that a breach by it of the provisions of this Agreement cannot reasonably or adequately be compensated in damages in an action at law; and that a breach by such Party of any of the provisions contained in this Agreement shall cause the other Party irreparable injury and damage. By reason thereof, each Party acknowledges and agrees that the other Party shall be entitled in such cases in addition to, and not in lieu of, any other remedies it may have under this Agreement or otherwise, under the dispute resolution provisions of Section 2.4 to preliminary and permanent injunctive relief and any other available equitable relief to prevent or curtail any breach of this Agreement by the other Party or specifically to enforce the performance of the other Party under this Agreement without the necessity of posting any bond or other security; provided, however, that no specification in this Agreement of a specific legal or equitable remedy shall be construed as a waiver or prohibition against the pursuing of other legal or equitable remedies in the event of such a breach.
3.3 Choice of Law. This Agreement will be governed by and construed in accordance with the laws of New York and the United States.
3.4 Entire Agreement; Amendments. This Agreement constitutes the entire agreement among the Parties with respect to the subject matter hereof except as provided in the Patent Assignment Agreement and the other Transaction Documents, and supersedes all previous arrangements with respect to the subject matter hereof, whether written or oral, including, without limitation, the Base Term Sheet, dated April 7, 2004, among PNG, Prana, and MGH and the Derivatives Term Sheet, dated April 7, 2004, between PNG and Prana. Any amendment or modification to this Agreement shall be made in writing signed by all Parties.
3.5 Headings. The captions or headings of the Sections or other subdivisions hereof are inserted only as a matter of convenience or for reference and shall have no effect on the meaning of the provisions hereof.
3.6 No Implied Waivers; Rights Cumulative. No failure on the part of a Party to exercise, and no delay in exercising, any right, power, remedy or privilege under this Agreement, or provided by statute or at law or in equity or otherwise, shall impair, prejudice or constitute a waiver of any such right, power, remedy or privilege or be construed as a waiver of any breach of this Agreement or as an acquiescence therein, nor shall any single or partial exercise of any such right, power, remedy or privilege preclude any other or further exercise thereof or the exercise of any other right, power, remedy or privilege.
3.7 Severability. If any provision hereof should be held invalid, illegal or unenforceable in any respect in any jurisdiction, then, to the fullest extent permitted by law, (a) all other provisions hereof shall remain in full force and effect in such jurisdiction and shall be liberally construed in order to carry out the intentions of the Parties as nearly as may be possible and (b) such invalidity, illegality or unenforceability shall not affect the validity, legality or enforceability of such provision in any other jurisdiction.
3.8 Execution in Counterparts. This Agreement may be executed in counterparts, each of which counterparts, when so executed and delivered, shall be deemed to be an original, and all of which counterparts, taken together, shall constitute one and the same instrument.
Execution Version
3.9 No Consequential Damages. UNLESS RESULTING FROM A PARTY'S WILLFUL
MISCONDUCT OR FROM A PARTY'S BREACH OF SECTION 1 ("CONFIDENTIALITY"), NO PARTY
WILL BE LIABLE FOR SPECIAL, INCIDENTAL, CONSEQUENTIAL, EXEMPLARY, PUNITIVE,
MULTIPLE OR OTHER INDIRECT DAMAGES ARISING OUT OF THIS AGREEMENT OR THE EXERCISE
OF ITS RIGHTS HEREUNDER, OR FOR LOSS OF PROFITS, LOSS OF DATA OR LOSS OF USE
DAMAGES ARISING FROM OR RELATING TO ANY BREACH OF THIS AGREEMENT WHETHER BASED
UPON WARRANTY, CONTRACT, TORT, STRICT LIABILITY OR OTHERWISE, REGARDLESS OF ANY
NOTICE OF SUCH DAMAGES.
3.10 Further Assurances. At any time and from time to time after the date hereof, at a Party's request and sole expense, the other Party promptly shall execute and deliver, and shall cause its Affiliates and employees, to execute and deliver, such instruments, and take such other reasonable action, as the requesting Party may reasonably request more effectively to carry out the purpose and intent of this Agreement.
SIGNATURE PAGE FOLLOWS
Execution Version
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by their duly authorized representatives:
PRANA BIOTECHNOLOGY LIMITED THE GENERAL HOSPITAL CORPORATION
By: /s/ Geoffrey Kempler By: /s/ Frances Toneguzzo
----------------------------- -------------------------------------
Name: Geoffrey Kempler Name: Frances Toneguzzo
--------------------------- -----------------------------------
Title: Executive Chairman Title: Director Corporate
-------------------------- Sponsored Research and
Licensing
Date: July 28, 2004 ----------------------------------
Date: July 28, 2004
P.N. GEROLYMATOS S.A. Panayotis N. Gerolymatos
By: /s/ Panayotis N. Gerolymatos /s/ Panayotis N. Gerolymatos
----------------------------- ----------------------------------------
Name: P. Gerolymatos Date: July 28, 2004
---------------------------
Title: President & Managing
Director
-------------------------
Date: July 28, 2004
Ashley I. Bush Robert Cherny
/s/ Ashley I. Bush /s/ Robert Cherny
-------------------------------- ----------------------------------------
Date: July 28, 2004 Date: July 28, 2004
Rudolph E. Tanzi
/s/ Rudolph E. Tanzi
--------------------------------
Date: July 28, 2004
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[Signature Page to Settlement Agreement]
Execution Version
EXHIBIT A
Patent Assignment Agreement
Execution Version
EXHIBIT B
Patent Rights Security Agreement
Execution Version
EXHIBIT C
Derivatives Agreement
Execution Version
EXHIBIT D
UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
-------------------------------------)
PRANA BIOTECHNOLOGY, LTD., )
THE GENERAL HOSPITAL CORPORATION, )
ASHLEY I. BUSH, ROBERT CHERNY, and )
RUDOLPH E. TANZI, )
)
Plaintiffs, ) Civil Action No. 1:01CVO2052 TPJ
)
v. )
)
P.N. GEROLYMATOS S.A., and )
PANAYOTIS N. GEROLYMATOS, )
)
Defendants. )
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-------------------------------------)
STIPULATION OF DISMISSAL
Plaintiffs Prana Biotechnology, Ltd., The General Hospital Corporation, Ashley I. Bush, Robert Cherny, and Rudolph E. Tanzi and Defendants P.N. Gerolymatos S.A. and Panayotis N. Gerolymatos agree and stipulate that their claims against each other in this action, including all counterclaims, shall be and hereby are dismissed with prejudice. Each party shall bear its own costs and attorneys' fees.
Execution Version
PRANA BIOTECHNOLOGY, LTD., THE
GENERAL HOSPITAL CORPORATION,
P.N. GEROLYMATOS S.A. and ASHLEY I. BUSH, ROBERT CHERNY, and
PANAYOTIS N. GEROLYMATOS RUDOLPH E. TANZI
By their attorneys, By their attorneys,
__________________________________ __________________________________
Blaney Harper William G. McElwain (Bar#397553)
Max Bachrach Hale and Dorr LLP
Jones Day 1455 Pennsylvania Avenue, NW
51 Louisiana Avenue, NW Washington, DC 20004
Washington, DC 20001-2113 (202) 942-8400
(202)879-3939
William F. Lee
Emily R. Whelan
Hale and Dorr LLP
60 State Street
Boston, MA 02109
(617) 526-6000
Dated: July 28, 2004
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IT IS SO ORDERED
Dated:_______________________ ______________________________________
Honorable Thomas Penfield Jackson
United States District Judge
|
Execution Version
EXHIBIT E
Form for dismissal of Greek lawsuit
BEFORE THE MULTI-MEMBER FIRST INSTANCE
COURT OF ATHENS
RESIGNATION FROM THE LAWSUIT DEED AND FROM THE RIGHT
OF
1. PN GEROLYMATOS S.A., with registered premises 13 Asklipiou Street, Kryoneri, Attika, duly represented; and
2. PANAYOTIS GEROLYMATOS, resident of 13 Asklipiou Street, Kryoneri, Attika, duly represented
(as Plaintiffs),
AGAINST
PRANA BIOTECHNOLOGY LIMITED, a corporation organized under the laws
of Australia, duly represented
(as Defendant),
Plaintiffs have filed before the Multi-member First Instance Court of Athens, on 9.12.2001 a law suit (General Registry No. 352/2002 and law suit No. 42/2002) against the Defendant, which was to be tried originally on 13.3.2003 and after postponement is to be tried on 30.9.2004.
Execution Version
With this present stipulation of dismissal, Plaintiffs declare explicitly and unequivocally that they resign from the aforementioned lawsuit and from all their rights therefrom.
THEREFORE,
WE HEREBY RESIGN
from the law suit deed of 9.12.2001 (General Registration No. 352/2002 and law suit No. 42/2002), against the Defendant, PRANA BIOTECHNOLOGY LIMITED, and from all the rights that arise therefrom.
Athens,........28 July 2004
Execution Version
EXHIBIT F
Form for dismissal of European patent opposition
REGISTERED
European Patent Office
D-80298 Munchen
Tyskland
PrR/LeH/126117 28 July 2004
European Patent No. 613560
Appeal Case No. T 0264/04-338
On behalf on our client we hereby withdraw Appeal Case No. T 0264/04-338 filed against the decision taken in the Opposition against EP 613 560 B1.
Yours sincerely,
Internationalt Patent-Bureau A/S
Jens Rotne
(Professional representative)
Encl.: EPO FORM 1037
Execution Version
EXHIBIT F continued
EPO Form 1037
[LETTERHEAD OF INTERNATIONALT PATENT-BUREAU A/S]
EPA/EPO/OEB Form 1037.1 03.99
Eingangsbestatigung fur Einsender
Acknowledgement of receipt for sender
Accuse de reseption expediteur
Bestatigung uber den Acknowledgement of Accuse de reception a
Eingang nachgereichter receipt for subsequently l'Office europeen des
Unterlagen fur Patentan- filed items relating to brevets de pieces produites
meldungen/Patente beim patent applications/patents posterieurement au depot
Europaischen Patentamt at the European Patent d'une demande de brevet/
Office a la delivrance d'un brevet
europeen
Datum und Ort des Eingangs sind Date and place of receipt are La date et le lieu de reception
aus der Perforation dieser shown by the perforation appearing sont indiques par la perforation
Eingangsbestatigung ersichtlich on this receipt du present accuse de reception
(M + Datum = Einreichungsort Munchen; (M + date = Munich as place of receipt; (M + date = pieces recues a Munich;
H + Datum = Einreichungsort Den Haag; H + date = The Hague as place of receipt; H + date = pieces recues a La Haye;
Datum + B = Einreichungsort Berlin) date + B = Berlin as place of receipt) date + B = pieces recues a Berlin)
Eingereichte Unterlagen Items filed Pieces envoyees
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Anmeldungs- (und Direktions-*) Nr./Patent Nr. Ihr Zeichen ggfs. Art und Datum der Unterlagen**
Application (and Directorate*) No./Patent No. Your reference Nature and date of items (optional)**
N(degree) de la demande (et de la direction*)
/n(degree) du brevet Votre reference Nature et date des pieces (facultatif)**
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1 IPB/1
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2
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3
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* falls bereits bekannt * if already known * si deja connu
** Der Eingang der angegebenen ** The receipt of the items indicated ** La reception des pieces indiquees
Unterlagen wird bestatigt. is confirmed. est confirmee.
Enthalt diese Spalte keine If this does not contain any entries, Faute de mention dans cette
Eintragungen, so wird lediglich it is only confirmed that an item colonne, le present accuse de
bestatigt, dab eine Sendung zu dem has been received for the reception se rapporte a une piece
angegebenen Aktenzeichen eingegangen indicated file. quelconque envoyee sous la
ist. reference indiquee.
|
[LETTERHEAD OF INTERNATIONALT PATENT-BUREAU A/S]
EPA/EPO/OEB Form 1037.2 03.99
Kopie fur EPA
Copy fro EPO
Copie OEB
Bestatigung uber den Acknowledgement of Accuse de reception a
Eingang nachgereichter receipt for subsequently l'Office europeen des
Unterlagen fur Patentan- filed items relating to brevets de pieces produites
meldungen/Patente beim patent applications/patents posterieurement au depot
Europaischen Patentamt at the European Patent d'une demande de brevet/
Office a la delivrance d'un brevet
europeen
Datum und Ort des Eingangs sind Date and place of receipt are La date et le lieu de reception
aus der Perforation dieser shown by the perforation appearing sont indiques par la perforation
Eingangsbestatigung ersichtlich on this receipt du present accuse de reception
(M + Datum = Einreichungsort Munchen; (M + date = Munich as place of receipt; (M + date = pieces recues a Munich;
H + Datum = Einreichungsort Den Haag; H + date = The Hague as place of receipt; H + date = pieces recues a La Haye;
Datum + B = Einreichungsort Berlin) date + B = Berlin as place of receipt) date + B = pieces recues a Berlin)
Eingereichte Unterlagen Items filed Pieces envoyees
------------------------------------------------------------------------------------------------------------------------------
Anmeldungs- (und Direktions-*) Nr./Patent Nr. Ihr Zeichen ggfs. Art und Datum der Unterlagen**
Application (and Directorate*) No./Patent No. Your reference Nature and date of items (optional)**
N(degree) de la demande (et de la direction*)
/n(degree) du brevet Votre reference Nature et date des pieces (facultatif)**
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1 IPB/1
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2
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3
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4
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5
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9
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* falls bereits bekannt * if already known * si deja connu
** Der Eingang der angegebenen ** The receipt of the items indicated ** La reception des pieces indiquees
Unterlagen wird bestatigt. is confirmed. est confirmee.
Enthalt diese Spalte keine If this does not contain any entries, Faute de mention dans cette
Eintragungen, so wird lediglich it is only confirmed that an item colonne, le present accuse de
bestatigt, dab eine Sendung zu dem has been received for the reception se rapporte a une piece
angegebenen Aktenzeichen eingegangen indicated file. quelconque envoyee sous la
ist. reference indiquee.
|
[LETTERHEAD OF INTERNATIONALT PATENT-BUREAU A/S]
EPA/EPO/OEB Form 1037.3 03.99
Zum Verbleib beim Einsender
For retention by sender
Copie expediteur
Bestatigung uber den Acknowledgement of Accuse de reception a
Eingang nachgereichter receipt for subsequently L'Office europeen des
Unterlagen fur Patentan- filed items relating to brevets de pieces produites
meldungen/Patente beim patent applications/patents posterieurement au depot
Europaischen Patentamt at the European Patent d'une demande de brevet/
Office a la delivrance d'un brevet
europeen
Datum und Ort des Eingangs sind Date and place of receipt are La date et le lieu de reception
aus der Perforation dieser shown by the perforation appearing sont indiques par la perforation
Eingangsbestatigung ersichtlich on this receipt du present accuse de reception
(M + Datum = Einreichungsort Munchen; (M + date = Munich as place of receipt; (M + date = pieces recues a Munich;
H + Datum = Einreichungsort Den Haag; H + date = The Hague as place of receipt; H + date = pieces recues a La Haye;
Datum + B = Einreichungsort Berlin) date + B = Berlin as place of receipt) date + B = pieces recues a Berlin)
Eingereichte Unterlagen Items filed Pieces envoyees
------------------------------------------------------------------------------------------------------------------------------
Anmeldungs- (und Direktions-*) Nr./Patent Nr. Ihr Zeichen ggfs. Art und Datum der Unterlagen**
Application (and Directorate*) No./Patent No. Your reference Nature and date of items (optional)**
N(degree) de la demande (et de la direction*)
/n(degree) du brevet Votre reference Nature et date des pieces (facultatif)**
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1 IPB/1
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2
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3
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4
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5
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6
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7
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10
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* falls bereits bekannt * if already known * si deja connu
** Der Eingang der angegebenen ** The receipt of the items indicated ** La reception des pieces indiquees
Unterlagen wird bestatigt. is confirmed. est confirmee.
Enthalt diese Spalte keine If this does not contain any entries, Faute de mention dans cette
Eintragungen, so wird lediglich it is only confirmed that an item colonne, le present accuse de
bestatigt, dab eine Sendung zu dem has been received for the reception se rapporte a une piece
angegebenen Aktenzeichen eingegangen indicated file. quelconque envoyee sous la
ist. reference indiquee.
|
Mitteilung vom 8. November 1990
uber die Einfuhrung der
Formblatter 1038 und 1037
(ABI. EPA 1991, 64)
A. EPA/EPO/OEB Form 1038
1. Die nach Einreichung der europaischen Patentanmeldung einzureichenden
Schriftstucke sind, soweit es sich nicht um Anlagen handelt, vom
Verfahrensbeteiligten oder seinem zugelassenen Vertreter zu unterzeichnen (Regel
36 (3). 61a EPU). Dokumente, wie z. B. der Prioritatsbeleg oder dessen
Ubersetzung, mussen deshalb mit einem gesonderten Begleitschreiben oder
zumindest einem Vermerk auf dem Dokument selbst, dab es an das Europaische
Patentamt gerichtet ist, jeweils mit der ordnungsgemaben Unterschrift einer zum
Handeln vor dem EPA berechtigten Person (vgl. Art. 133 EPU) eingereicht werden.
Dies gilt beispielsweise auch, wenn der Vertreter eine Erfindernennung
nachreicht, die von einem Anmelder unterzeichnet worden ist, der weder Wohnsitz
noch Sitz in einem Vertragsstaat hat (s. Richtlinien fur die Prufung A-IX, 3.1).
2. ...
3. Mit Hilfe des neuen Formblatts 1038 konnen Unterlagen zu jeweils einer europaischen Patentanmeldung/einem europaischen Patent nachgereicht werden. Da das Original von Form 1038 das Begleitschreiben fur nachgereichte Unterlagen darstellt und deshalb Aktenbestandteil wird, ist es nicht moglich, mit diesem Vordruck Unterlagen zu mehreren Akten nachzureichen. Fur jede Akte mub ein gesondertes Formblatt benutzt werden.
4. Form 1038 ist als Vierfach-Sak konzipiert. Damit erfullt es sowohl die Funktion eines Begleitschreibens als auch die einer Eingangsbestatigung. Drei Exemplare sollen beim Amt eingereicht werden. Das Original gelangt zur Akte, das zweite Exemplar verbleibt bei der Sammlung der Annahmestelle des EPA, und das dritte Exemplar geht mit einer Eingangsbestatigung versehen an den Einreicher zuruck. Das vierte Exemplar verbleibt von vornherein als Zwischenkopie beim Einreicher.
B. EPA/EPO/OEB Form 1037
1. Nach wie vor moglich bleibt die gleichzeitige Nachreichung von Unterlagen (allerdings ohne Begleitschreiben und ohne Unterschriftsmoglichkeit) zu mehreren Anmeldungsakten mit Hilfe des Form 1037. Form 1037 dient ausschlieiblich als Eingangsbestatigung. Seine Verwendung ist wie bisher besonders dann zu empfehlen, wenn Schriftstucke nachgereicht werden, die bereits selbst die erforderliche Unterschrift tragen (z. B. Erwiderungen auf Bescheide und Mitteilungen, Abbuchungsauftrage usw.).
2. Wegen der Benutzung des Formblatts 1037 wird auf die entsprechende Veroffentlichung in ABI. EPA 1985, 289 verwiesen. ...
Notice dated 8 November 1990
concerning the introduction of
Forms 1038 and 1037
(OJ EPO 1991, 64)
A. EPA/EPO/OEB Form 1038
1. Documents, other than annexes, to be filed after filing of the European patent application must be signed by the party concerned or his authorised representative (Rules 36(3) and 61a EPC). Those such as the priority document or translation thereof must consequently be filed with a separate covering letter, or at least a note on the document itself addressing it to the European Patent Office, in each case duly signed by a person authorised to act before the EPO (cf. Article 133 EPC). This also applies if, for example, a representative subsequently files the designation of the inventor signed by an applicant having neither residence nor principal place of business in a Contracting State (see Guidelines for Examination A-IX, 3.1).
2. ...
3. With this new Form 1038 items relating to one European patent application or to one European patent can be subsequently filed. As the top copy of Form 1038 represents the covering letter for such items and thus becomes part of the file it cannot be used for subsequent filing of documents relating to more than one file. Separate forms must be used.
4. Form 1038 is in four copies, three of which are to be sent to the Office. This allows the form to serve as both a covering letter and acknowledgement of receipt. The top copy goes into the file, the second copy is retained by the EPO's Receiving Section and the third is returned to the sender stamped with an acknowledgement of receipt. In the meantime the sender retains the fourth copy.
B. EPA/EPO/OEB Form 1037
1.It still remains possible by using Form 1037 (but without accompanying letter and without signature) to file subsequently items at the same time that relate to several applications. Form 1037 is only an acknowledgement. Its use continues to be particularly recommended for subsequent filing of documents already bearing the required signature (e.g. replies to communications, debit orders, etc.).
2. Please refer to the Notice on this subject published in OJ EPO 1985, 289. ...
Communique en date du
8 novembre 1990, concernant I'introduction
des formulaires 1038 et 1037
(JO OEB 1991, 64)
A. EPA/EPO/OEB Form 1038
1. A L'exclusion des pieces annexes, les documents posterieurs au depot de la demande de brevet europeen doivent etre signes par l'interesse ou son mandataire agree (regles 36(3) et 61 bis CBE). Il y a lieu de joindre aux documents produits, par exemple le document de priorite ou sa traduction. une lettre d'accompagnement separee signalant qu'ils sont adresses a l'OEB, ou tout au moins d'en faire mention par ecrit a meme ces documents; cette lettre ou cette mention doit etre dument signee par une personne habilitee a agir devant l'OEB (cf. art. 133 CBE). Ceci vaut par exemple egalement pour le depot ulterieur, par le mandataire, de la designation de l'inventeur lorsque celle-ci porte la signature d'un demandeur qui n'a ni domicile ni siege sur le territoire de L'un des Etats contractants (cf. Directives relatives a l'examen, A-IX, 3.1).
2. ...
3. Ce nouveau formulaire 1038 peut etre utilise pour produire, posterieurement au depot, des pieces afferentes a une seule demande de brevet europeen ou a un seul brevet europeen. Vu que l'original du formulaire 1038 constitue la lettre d'accompagnement relative a des pieces produites posterieurement au depot et qu'il est donc verse au dossier, il n'est pas possible d'utiliser cet imprime pour produire, posterieurement au depot, des pieces concernant plusieurs dossiers differents. Un formulaire separe doit etre utilise pour chaque dossier.
4. Le formulaire 1038 comporte quatre feuilles, remplissant ainsi a la fois la fonction d'une lettre d'accompagnement et celle d'un accuse de reception. Trois doivent etre envoyees a l'Office: l'original est verse au dossier; le deuxieme exemplaire est conserve au bureau de reception de l'OEB et le troisieme est renvoye a l'expediteur, accompagne d'un accuse de reception. Le quatrieme exemplaire est conserve des le depart comme double par l'expediteur.
B. EPA/EPO/OEB Form 1037
1. Il reste possible de produire en un seul envoi, posterieurement au depot, des pieces concernant plusieurs dossiers, en se servant du formulaire 1037 (toutefois sans lettre d'accompagnement ni possibilite de signature), formulaire qui sert exclusivement d'accuse de reception. Comme par le passe, son utilisation est particulierement indiquee en cas d'envoi, posterieurement au depot, de pieces qui portent deja elles-memes la signature requise (par exemple reponses a des avis ou des notifications, ordres de debit, etc.).
2. S'agissant de l'utilisation du formulaire 1037, priere de se reporter au communique publie au JO OEB 1985, 289. ...
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EXHIBITS G-1, G-2 and G-3
Forms for dismissal of Australian patent oppositions
The Commissioner of Patents
28 July 2004
Madam
IN THE MATTER OF Australian Patent No. 752236 (29981/99)
in the name of The General Hospital Corporation
and opposition thereto by
P.N. Gerolymatos S.A.
Pursuant to Regulation 5.15 of the Patent Regulations 1991, the opponent hereby withdraws its opposition to this application.
A copy of this letter was served this day on the applicant's attorneys.
Yours faithfully
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EXHIBITS G-1, G-2 and G-3 continued
The Commissioner of Patents
28 July 2004
Madam
IN THE MATTER OF Australian Patent No. 720643 (36324/97)
in the name of P. N. GEROLYMATOS S.A.
and opposition thereto by
PRANA BIOTECHNOLOGY LTD
Our Ref: VS:SDT:GF36365:GM29764
Pursuant to Regulation 5.15 of the Patent Regulations 1991, the opponent hereby withdraws its opposition to this application.
A copy of this letter was served this day on the applicant's attorneys.
Yours faithfully
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EXHIBITS G-1, G-2 and G-3 continued
The Commissioner of Patents
28 July 2004
Madam
IN THE MATTER OF Australian Patent No. 748768 (65484/98)
in the name of The General Hospital Corporation
and opposition thereto by
P.N. Gerolymatos S.A.
Pursuant to Regulation 5.15 of the Patent Regulations 1991, the opponent hereby withdraws its opposition to this application.
A copy of this letter was served this day on the applicant's attorneys.
Yours faithfully
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PATENT ASSIGNMENT AND SETTLEMENT AGREEMENT
This Patent Assignment and Settlement Agreement (this "Agreement") is entered into effective as of July 28, 2004 ("Effective Date"), by and between P.N. Gerolymatos S.A., a corporation organized under the laws of Greece ("PNG") and Prana Biotechnology Limited, a corporation organized under the laws of Australia ("Prana").
WITNESSETH
WHEREAS, Prana obtained a license under certain patent rights from MGH (as hereinafter defined) covering certain pharmaceutical compositions and uses of CQ (as hereinafter defined) to treat and prevent specified diseases;
WHEREAS, PNG is the patentee of certain patents covering certain pharmaceutical compositions and uses of CQ and PQ (as hereinafter defined) to treat and prevent specified diseases:
WHEREAS, Prana, MGH and certain individuals, filed suit in the United States against PNG and Panayotis N. Gerolymatos to correct inventorship under certain of such patents;
WHEREAS, PNG filed several counterclaims in response to such suit, and thereafter filed suit against Prana in Greece;
WHEREAS, PNG and Prana are also engaged in certain patent oppositions with respect to one another's patents; and
WHEREAS, PNG, Prana and MGH desire to and have agreed to settle finally their disputes as contemplated herein and in the Settlement Agreement (as hereinafter defined) and effect the related assignment of certain patent rights as contemplated herein;
NOW, THEREFORE:
in view of the foregoing premises and the mutual covenants set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which is acknowledged by each party, the parties hereto agree as follows:
1. DEFINITIONS
1.1 Affiliate means any corporation, company, partnership, joint venture and/or firm that controls, is controlled by, or is under common control with a Party. For purposes of this Section 1.1, "control" shall mean (a) in the case of corporate entities, direct or indirect ownership of at least fifty percent (50%) of the stock or shares having the right to vote for the election of directors, and (b) in the case of non-corporate entities, direct or indirect ownership of at least fifty percent (50%) of the equity interest with the power to direct the management and policies of such non-corporate entities. The Parties acknowledge that in the case of certain entities organized under the laws of certain countries outside the United States, the maximum percentage ownership permitted by law for a foreign investor may be less than fifty percent (50%), and that
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in such case such lower percentage shall be substituted in the preceding sentence, provided that such foreign investor has the power to direct the management and policies of such entity.
1.2 Assigned Patent Rights means all Patent Rights owned by PNG as of the Effective Date with claims covering CQ or PQ that are filed or subsisting in the Prana Territory, as are set forth on Schedule 1.2 and as supplemented in accordance with the terms of Section 2.2.
1.3 Clioquinol or CQ means 5-Chloro-7-iodo-8-quinolinol.
1.4 CO Milestone Payment means a payment from one or more third parties in the form of a milestone payment associated specifically with the development of a Product containing CQ.
1.5 Derivatives Agreement means the Derivatives Agreement, of even date herewith, between PNG and Prana.
1.6 First Commercial Sale means, for each Product or Other Licensed Product, the first commercial sale in the ordinary course in a country as part of a nationwide introduction by a Party or its Affiliates, sublicensees or distributors. Sales for test marketing, clinical trial purposes or compassionate or similar use shall not be considered to constitute a First Commercial Sale.
1.7 FDA means the United States Food and Drug Administration, or a successor agency thereto.
1.8 Lundbeck means H. Lundbeck A/S .
1.9 Lundbeck Agreement means the License Agreement between PNG and Lundbeck dated July 26, 1999, as amended by Addendum I, dated April 14, 2000 ("Addendum I"); Addendum II, dated February 18, 2001 ("Addendum II"); Addendum III, dated July 19, 2002 ("Addendum III"), and an additional undated Addendum signed following the Base Term Sheet between the Parties, dated April 7, 2004 ("Addendum IV"), and any successor amendments or any successor agreements thereto to the extent affecting the rights in this Agreement.
1.10 Lundbeck Territories means those territories, if any, to which Lundbeck exercises its option to obtain an exclusive license to market CQ and/or PQ pursuant to the Lundbeck Agreement.
1.11 MGH means The General Hospital Corporation, a Massachusetts not-for-profit corporation doing business as Massachusetts General Hospital.
1.12 Material Obligation Failure means (a) the failure of Prana within eight (8) years of the Effective Date to begin a new Phase 11 Clinical Study (excluding any such studies performed before the Effective Date) for approval by a Regulatory Authority of CQ, PQ, or any Derivative (as defined in the Derivatives Agreement) or (b) the failure of Prana to make any royalty or milestone payments as provided in Article 3 hereof that are not disputed in good faith and to cure such failure within the cure period set forth in Section 2.4.
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1.13 Net Sales means, with respect to a Product or an Other Product, the amount received by a Party, its Affiliates and/or its licensees, sublicensees or distributors on sales or other dispositions of such products to third parties in arm's length transactions, less the following deductions, all determined in accordance with United States generally accepted accounting principles (US GAAP) consistently applied:
(a) trade, cash and/or quantity discounts actually allowed and taken directly with respect to such sales, as reflected in the amount invoiced;
(b) tariffs, duties, excises, sales taxes or other taxes imposed upon and paid directly by such Party with respect to the production, sale, delivery or use of such Product or such Other Product, as applicable, (excluding national, state or local taxes based on income), as reflected in the amount invoiced;
(c) amounts repaid or credited by reason of rejections, defects, recalls or returns or because of chargebacks, refunds, rebates or retroactive price reductions; and
(d) freight, insurance and other transportation charges incurred in shipping such Product or such Other Product to third parties, as reflected in the amount invoiced.
1.14 Option Territories means those territories that are not Lundbeck Territories, Prana Territories and PNG Territories.
1.15 Other Product(s) means any product containing either CQ or PQ, that, or the use of which, is covered by the claims of the PNG Patent Rights.
1.16 Party means PNG or Prana; Parties means PNG and Prana.
1.17 Patent Right means any patent or patent application and all substitutions, renewals, divisionals, continuations, continuations-in-part (with respect to the Assigned Patent Rights to the extent any such continuation-in-part was filed as of the Effective Date), resulting patents, reissues, reexaminations, extensions, and refilings thereof and rights to sue for infringement thereof, past and present.
1.18 Permitted Transferee means Michel Xilinas.
1.19 Phanquinone or PQ means 4,7-Phenanthroline-5,6-dione.
1.20 PNG Patent Rights means all Patent Rights owned by PNG as of the Effective Date with claims covering CQ or PQ that are filed or subsisting in the Lundbeck Territories, Option Territories and PNG Territories (but excluding the Prana Territories), as are set forth on Schedule 1.20. PNG Patent Rights include any and all PNG Assumed Patent Rights pursuant to Section 6.2.
1.21 PNG Territories means Greece, Cyprus, Turkey, Israel, Hong Kong, Singapore, South Korea, and any and all territories not chosen by Prana pursuant to Section 2.2.
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1.22 PO Milestone Payment means a payment from one or more third parties in the form of a milestone payment associated specifically with the development of a Product containing PQ.
1.23 Phase 11 Clinical Study means a study of a Product containing either CQ or PQ in patients to determine initial efficacy and dosing regimen.
1.24 Phase III Clinical Study means a clinical study in larger targeted patient populations, the protocol for which is designed to ascertain efficacy and safety of a Product containing either CQ or PQ for the purpose of preparing and submitting an application for marketing approval to the competent Regulatory Authorities in the applicable jurisdiction.
1.25 Prana Territories means the United States of America, Japan and Taiwan, and any and all territories chosen by Prana pursuant to Section 2.2.
1.26 Product(s) means any product containing either CQ or PQ that, or the use of which, is covered by the claims of the Assigned Patent Rights.
1.27 Regulatory Authority means any federal, national, multinational, state, provincial or local regulatory agency, department, bureau or other governmental entity with authority over the testing, manufacture, use, storage, import, promotion, marketing and sale of therapeutic product in a country, including the FDA.
1.28 Security Agreement means the Patent Rights Security Agreement, dated of even date herewith, between PNG and Prana.
1.29 Settlement Agreement means the Settlement Agreement, dated of even date herewith, among PNG, Prana, MGH, and individuals named therein.
2. ASSIGNMENT; REVERSION OF RIGHTS
2.1 Assignment. Subject to Sections 2.4 and 2.5 below, upon receipt by PNG
of the U.S. $150,000 described in Section 3.1 and the Shares described in
Section 3.2(a), PNG shall sell, transfer and assign the Assigned Patent Rights
to Prana. Thereupon, PNG shall execute and deliver to Prana a sufficient number
of original copies of the patent assignment in the form attached hereto as
Exhibit A, or such other form as required by the authorities of the applicable
country, which forms Prana shall have the right to file as necessary to perfect
such assignment.
2.2 Prana Territories Expansion. In the event Lundbeck does not elect to exercise its option to obtain a license to market one or more Other Products in any country within the Option Territories pursuant to Section 3 of Addendum I and Addendum II of the Lundbeck Agreement, PNG shall notify Prana in writing of such rejection within thirty (30) days. Prana shall have the right to elect to include such territories in the Prana Territories by notifying PNG in writing of its election within sixty (60) days. If Prana does not provide notice to PNG within such 60-day period, Prana shall be deemed to have rejected such election and such territories shall be a part of the PNG Territories. If Prana does provide such notice within such 60-day period, such territories shall be deemed to be part of the Prana Territories and PNG shall execute a patent assignment in the form attached hereto as Exhibit A (or such other form as required by the
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applicable authorities) with respect to all Assigned Patent Rights in such territories no later than thirty (30) days after receipt of notice from Prana. Schedule 2.2(a) lists all Patent Rights in the Lundbeck Territories as of the Effective Date (to be updated pursuant hereto), and Schedule 2.2(b) lists all Patent Rights in the Option Territories as of the Effective Date (to be updated pursuant hereto).
2.3 PNG Further Assurances. At any time and from time to time after the date hereof, at Prana's request and sole expense, PNG promptly shall execute and deliver, and shall cause its Affiliates and employees, to execute and deliver, such instruments of sale, transfer, conveyance, assignment and confirmation, and take such other reasonable action, as Prana may reasonably request to more effectively transfer, convey and assign to Prana, and to confirm Prana's title to, all of the Assigned Patent Rights and to carry out the purpose and intent of this Agreement, including, without limitation, upon any expansion of the Prana Territory pursuant to the terms hereof.
2.4 Reversion Right.
(a) The Assigned Patent Rights are subject to a reversion right as provided in this Section 2.4 (the "Reversion Right").
(b) Prana agrees that, subject to the terms of this subsection (b),
upon the occurrence of a Material Obligation Failure hereunder that
remains uncured for thirty (30) days following written notice of such
failure, (i) subject to the Third Party Rights (as defined in Section 2.6)
and Section 2.4(d), the ownership rights in the Assigned Patent Rights
shall revert back to PNG, and (ii) effective as of the end of such thirty
(30)-day period, Prana does hereby, sell, transfer and assign to PNG such
Assigned Patent Rights, which thereafter shall be PNG Patent Rights. If
Prana disputes whether a Material Obligation Failure has occurred, it
shall institute the dispute resolution procedures set forth in Section 10
prior to the end of such thirty (30)-day cure period, and any reversions
of the Assigned Patent Rights shall be suspended pending completion of
such dispute resolution procedure; provided that the institution of such
procedures shall not in any manner extend the time period of curing any
Material Obligation Failure. Effective upon the written certification by
Prana that Prana has within the eight (8) year period after the Effective
Date begun a new Phase II Clinical Study (excluding any such studies
performed before the Effective Date) for approval by a Regulatory
Authority of CQ, PQ, or any Derivative, the Reversion Right with respect
to a Material Obligation Failure described in Section l.l2(a) will
terminate; provided that Prana will provide PNG with such additional proof
with respect of the contents of the foregoing certification as PNG may
reasonably request and any dispute as to whether Prana's beginning of such
new Phase II Clinical Study as provided above shall be resolved in
accordance with the terms of Section 10, and termination of the Reversion
Right shall be suspended pending completion of such dispute resolution
procedure.
(c) Notwithstanding anything contained herein to the contrary, in the event a Material Obligation Failure occurs due to the failure of Prana to make payments pursuant to Article 3 hereof, the reversion of Assigned Patent Rights to PNG hereunder shall occur only with respect to Assigned Patent Rights (irrespective of inventorship) in those
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territories in which the events triggering Prana's payment obligations under such Article 3 arise and in which Prana's failure to make such payments results in a Material Obligation Failure, and Prana shall retain its ownership rights, subject to the Reversion Right and the Security Interest (as defined herein), in and to the Assigned Patent Rights in all of the remaining countries of the Prana Territory in which Prana has complied with its payment obligations pursuant to Article 3 hereof.
(d) Upon reversion of any Assigned Patent Rights in accordance with
Section 2.4(b), all outstanding licenses out (and related sublicenses)
will survive and be assigned by Prana to PNG, subject to the prior written
consent of PNG and the affected licensees (and related sublicensees).
(e) Upon the reversion of an Assigned Patent Right to PNG pursuant hereto, such Patent Right shall no longer be deemed an Assigned Patent Right for purposes of this Agreement.
2.5 Security Agreement. The Assigned Patent Rights are subject to the security interest in the Assigned Patent Rights granted to PNG pursuant to the Security Agreement (the "Security Interest"). In no event shall the Reversion Right or Security Interest limit Prana's ability to license the Assigned Patent Rights to a third party in accordance with Section 2.6 below.
2.6 Grant of Rights.
(a) Transfer Restrictions. During the term of this Agreement, Prana may transfer, sell, assign, encumber, pledge, mortgage, license, sublicense, grant rights to prosecute and enforce and covenants not to sue and otherwise grant rights in and to and otherwise encumber in any way or nature the Assigned Patent Rights (collectively, the "Third Party Rights"), subject to the Reversion Right, Security Interest and the obligations of this Agreement; provided, that
(i) in the event of the sale by Prana of any of the Assigned Patent Rights or all or substantially all of Prana's assets (including the Assigned Patent Rights) or ownership interest of Prana, or merger of Prana, the assignee of the Assigned Patent Rights assumes in writing the obligations of Prana under this Agreement; and
(ii) in the event of the mortgage, pledge or grant of a security interest in any of the Assigned Patent Rights by Prana, the mortgagee, pledgee or secured party provide to PNG written acknowledgement of the priority of the Reversion Right and Security Interest; and
(iii) in the event of the license of any of the Assigned Patent Rights, Prana shall (A) provide in the license agreements that the Assigned Patent Rights are subject to the Reversion Right granted in Section 2.4 and the Security Interest granted in the Security Agreement and the licenses shall survive in accordance with the terms of Section
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2.4(d); and (B) grant such licenses limited to the Prana
Territories and subject to the terms of this Agreement.
(b) Third Party Rights. Except as otherwise may occur pursuant to
Section 2.4(d), the exercise by PNG of its rights under this Agreement and
the Security Agreement will not terminate or otherwise restrict Third
Party Rights, and PNG shall take the Assigned Patent Rights subject to any
and all Third Party Rights.
(c) Review of Agreements. PNG shall have the right to review any third party agreement entered into by Prana granting rights with respect to the Assigned Patent Rights (whether such agreement transfers, sells, assigns, encumbers, pledges, mortgages, licenses, sublicenses, grants rights to prosecute or enforce and covenants not to sue) prior to Prana signing such an agreement, subject to written obligations of confidentiality and non-use that are consistent with those contained in this Agreement. The final decision on the agreement's terms and conditions (in accordance with the foregoing), timing and the third party remains solely at Prana's discretion. Upon execution of each agreement or any amendment thereto, Prana shall provide PNG with a copy of such executed agreement and any amendment thereto.
(d) Right to Cure. Each holder of a Third Party Right has the right, but not the obligation, to perform the obligations of Prana under this Agreement to avoid a Material Obligation Failure. PNG agrees to accept the performance by holders of Third Party Rights of Prana obligations under this Agreement in the place of Prana.
(e) Licenses for No Consideration. Notwithstanding anything herein to the contrary, Prana shall not enter into any agreements to license or sublicense for no consideration, without the prior written consent of PNG, except if such license or sublicense is for the sole purpose of research and development of Products.
2.7 Prana Further Assurances. At any time and from time to time after the date hereof, at PNG's request and sole expense, Prana promptly shall execute and deliver, and shall cause its Affiliates and employees, to execute and deliver, such instruments of sale, transfer, conveyance, assignment and confirmation, and take such other reasonable action, as PNG may reasonably request to more effectively transfer, convey and assign to PNG, and to confirm PNG's title to, any of the Assigned Patent Rights following reversion of such Assigned Patent Rights to PNG pursuant to the Reversion Right, and to carry out the purpose and intent of this Agreement.
3. FINANCIAL PROVISIONS
3.1 Up-front Payments. Prana shall pay to PNG the amount of U.S. $150,000 within fourteen (14) days after the Effective Date.
3.2 Equity Issuance.
(a) Prana shall issue within fourteen (14) days after the Effective Date one million three hundred fifty thousand (1,350,000) shares of Prana ordinary shares (the "Shares") in accordance with the terms of this Agreement.
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(b) Prana represents and warrants that the Shares and additional ordinary shares issued under this Agreement (the "Additional Shares") have been duly authorized and, when issued to PNG in consideration of the terms and conditions of this Agreement, will be validly issued, fully paid and non-assessable.
(c) PNG agrees that, without the prior written consent of Prana, PNG will not, directly or indirectly, sell, assign, transfer, give, donate or otherwise dispose of, or pledge, deposit or otherwise encumber, in any manner, the Shares or Additional Shares, for a period of one (1) year from the date of the issuance of such shares to PNG (the "Lock-Up Period"); provided that, notwithstanding the foregoing, PNG (or any Permitted Transferee pursuant hereto) may transfer such shares to a Permitted Transferee so long as prior to any such transfer, such Permitted Transferee shall execute an agreement pursuant to which such Permitted Transferee shall agree to receive and hold such shares subject to the provisions of this Section 3.2(c).
(d) Prana covenants and agrees that Prana shall (i) instruct its share registry to issue the Shares within twenty-four (24) hours after receipt of such instruction given by Prana to the share registry in accordance with the issuance period set forth in Section 3.2(a) and the Additional Shares within twenty-four (24) hours after receipt of such instruction given by Prana to the share registry in accordance with the issuance period set forth in Section 3.4(f), and (ii) apply to the Australian Stock Exchange for the quotation of the Shares and Additional Shares within twenty-four (24) hours after the expiration of the Lock-Up Period. Prana will instruct its share registry to furnish statements to PNG periodically as to PNG's ownership of such Shares and such Additional Shares from and after the Effective Date and until all the Shares and Additional Shares have been sold by PNG.
3.3 Milestone Payments.
(a) CQ. In the event that Prana receives CQ Milestone Payments, Prana shall pay to PNG:
(i) the amount of US$1,750,000, either in cash or in shares of ordinary shares of Prana, on completion of the final clinical study report of the first successful Phase III Clinical Study for a Product containing CQ;
(ii) the amount of US$7,000,000, either in cash or shares of ordinary shares of Prana, on the first approval of a Product containing CQ by the FDA allowing marketing in the U.S.; and
(iii) ten percent (10%) of CQ Milestone Payments (not associated with completion of Phase III Clinical Study, as set forth in subsection (a)(i), and regulatory approval or approval for marketing as set forth in subsection (a)(ii)) received by Prana in excess of US$13,000,000. If, at the first approval for marketing a Product containing CQ in the US, the total amount of payments to PNG
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made under this subsection (a)(iii) is less than US$3,000,000, then Prana shall pay PNG the balance so that the payment due under this subsection (a)(iii) is equal to US$3,000,000 in addition to any other payment due under subsection (a)(ii) at that time.
(b) PQ. In the event that Prana receives PQ Milestone Payments, Prana shall pay to PNG:
(i) the amount of US$875,000, either in cash or in ordinary shares of Prana, on completion of the final clinical study report of the first successful Phase III Clinical Study for a Product containing PQ;
(ii) the amount of US$3,500,000, either in cash or ordinary shares of Prana, on the first approval of a Product containing PQ by the FDA allowing marketing in the US.; and
(iii) five percent (5%) of PQ Milestone Payments (not
associated with completion of the Phase III Clinical
Study as set forth in subsection (b)(i) and regulatory
approval or approval for marketing as set forth in
subsection (b)(ii)) received by Prana in excess of
US$13,000,000. If, at the first approval for marketing a
Product containing PQ in the US, the total amount of
payments to PNG made under this subsection (b)(iii) is
less than US$1,500,000, then Prana shall pay PNG the
balance so that the payment due under this subsection
(b)(iii) equals US$l,500,000 in addition to any other
payment due under subsection (b)(ii) at that time.
(c) Procedure. The election of cash payments or ordinary shares of Prana under this Section 3.3 shall be made by Prana in its sole discretion. The number of ordinary shares of Prana, if elected to be issued, shall be based on the 30-day average ASX market closing price of Prana's ordinary shares prior to the date such CQ Milestone Payment or PQ Milestone Payment, as applicable, is payable. Ordinary shares of Prana issued pursuant to this Section 3.3 shall be issued pursuant to the terms of Section 3.2 hereof.
3.4 Royalty Payments.
(a) PNG.
(i) In the event that Lundbeck receives income either from sales or royalties associated with the sale of Other Products in any of the Lundbeck Territories, PNG shall cause Lundbeck to pay to PNG the amounts as stipulated in the Lundbeck Agreement as of July 19, 2002. PNG shall then pay to Prana two percent (2%) of all income PNG receives from net sales and royalties associated with such marketing of Other Products in the Lundbeck Territories.
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(ii) PNG shall pay to Prana a royalty of six percent (6%) on Net Sales of Other Products which are sold in the PNG Territories up to an aggregate US$20,000,000 in Net Sales in a given calendar year and a royalty of fifteen percent (15%) of Net Sales of Other Products which are sold in the PNG Territories for the portion of Net Sales in excess of US$20,000,000 in a given calendar year.
(b) Prana. (i) Prana shall pay to PNG a royalty of three percent
(3%) on Net Sales of Products which are sold in the Prana Territories.
(ii) Prana shall also pay royalties to Lundbeck as provided by the
"Licensor" obligations stated in provision 1 of Addendum III of the
Lundbeck Agreement as of July 19, 2002.
(c) Length of Royalty Payments. The royalties payable under subsections (a) and (b)(i) shall be paid on a country-by-country basis on each Product or Other Product, as applicable, from the First Commercial Sale until the expiration of all Assigned Patent Rights and/or PNG Patent Rights that cover such Product or Other Product, as applicable, in such country.
(d) Royalties Payable Only Once. The obligation to pay royalties pursuant to this Section 3.4 is imposed only once with respect to the same unit of a Product or Other Product, as applicable; provided that the foregoing shall not limit Prana's obligation to pay royalties to both PNG and Lundbeck as required by subsection (b) above. Except as specifically provided in this Agreement, it is understood and agreed that there shall be no deductions from the royalties payable under this Agreement.
(e) Sales to Affiliates and Sublicensees. Sales of Products or Other Products, as applicable, between a Party and its Affiliates, licensees, sublicensees or distributors, or among such Affiliates, licensees, sublicensees and distributors for resale to third parties shall not be subject to royalties under this Section 3.4 (except to the extent such exclusion is inconsistent with the royalty obligations to be paid by Prana to Lundbeck as provided in the Section 3.4(b)(ii)), but in such cases the royalties shall be calculated on the Net Sales by such Affiliates, licensees, sublicensees or distributors to a third party.
(f) Reports and Accounting.
(i) Reports; Royalty & Milestone Payments. Each Party paying
royalties and/or making milestone payments pursuant to
Section 3.3 to the other (the "Royalty Paying Party")
shall deliver to the other Party (the "Royalty Receiving
Party"), within sixty (60) days after the end of each
calendar quarter with respect to royalties or within
thirty (30) days after receipt of CQ Milestone Payment
or PQ Milestone Payment pursuant to Section 3.3, as
applicable, reasonably detailed written accountings of
Net Sales of the Products, Other Products or milestone
payments, as applicable, that are subject to payments
due to the Royalty Receiving Party for such calendar
quarter or reasonably detailed written description of
the facts and circumstances related to any milestone
payment;
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provided that Prana shall also provide PNG such
accountings with respect to amounts payable to Lundbeck
pursuant to subsection (b)(ii) above to the extent such
disclosures to PNG are not otherwise prohibited in
writing by Lundbeck. Such royalty reports shall indicate
gross sales on a country-by-country and
product-by-product basis, the deductions from gross
sales used in calculating Net Sales and the resulting
calculation of royalties. When the Royalty Paying Party
delivers such accountings to the Royalty Receiving
Party, the Royalty Paying Party shall also deliver all
royalty payments due under this Section 3.4 and
milestone payments due under Section 3.3, as applicable,
to the Royalty Receiving Party for the relevant period.
With respect to sales of the Products or Other Products,
as applicable, invoiced in United States Dollars, the
sales and royalties payable shall be expressed in United
States Dollars. With respect to sales of the Products or
Other Products, as applicable, invoiced in a currency
other than United States Dollars, the sales and
royalties payable shall be expressed in their United
States Dollar equivalent, calculated using the
applicable conversion rates for buying United States
dollars published by The Wall Street Journal (NY
edition) on the last business day of the calendar
quarter to which the royalty report relates. Milestones
Prana elects to pay in cash shall be paid in United
States dollars; and the amount of any milestones Prana
elects to pay in ordinary shares of Prana (the total
number of which shares shall be calculated pursuant to
Section 3.3(c)) shall expressed in their Australian
Dollar equivalent, calculated using the applicable
conversion rates for buying Australian dollars published
by The Wall Street Journal (NY edition) on the last
business day of the calendar quarter to which the
milestone report relates.
(ii) Audits. The Royalty Paying Party shall keep, and shall require its Affiliates, licensees, sublicensees and distributors to keep, complete and accurate records of the latest three (3) years of sales to which royalties attach and activities to which milestone payments attach. For the sole purpose of verifying royalties or milestone payments payable to the Royalty Receiving Party, the Royalty Receiving Party shall have the right annually at its own expense (except as provided herein) to retain an independent certified public accountant selected by the Royalty Receiving Party and reasonably acceptable to the Royalty Paying Party, to review such records in the location(s) where such records are maintained by the Royalty Paying Party, its Affiliates, licensees, sublicensees or distributors, upon reasonable notice and during regular business hours and under obligations of confidence. Results of such review shall be made available to both Parties. If the review reflects an underpayment of royalties or milestone payments to the Royalty
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Receiving Party, such underpayment shall be promptly remitted to the Royalty Receiving Party, together with interest calculated in the manner provided in Section 3.6, and the Parties shall share equally the reasonable cost of the review. If the underpayment is equal to or greater than five percent (5%) of the royalty and/or milestone amount that was otherwise due, the Royalty Paying Party shall promptly remit the underpayment with applicable interest to the Royalty Receiving Party and pay all of the costs of such review. If the review reflects an overpayment of royalties or milestone payments to the Royalty Receiving Party, the amount of such overpayment is creditable against future royalties or milestone payments, as applicable, owed by the Royalty Paying Party, to the extent applicable.
3.5 Independence of Payments. As provided in the Settlement Agreement, the payment obligations in this Article 3 are independent of, and shall be made notwithstanding the outcome of, any inventorship evaluation conducted pursuant to such Settlement Agreement.
3.6 Late Payments. A Party shall pay interest to the other Party on the aggregate amount of any payments that are not paid on or before the date such payments are due under this Agreement at a rate of twelve percent (12%) per annum.
3.7 Blocked Payments. In the event that, by reason of applicable laws or regulations in any country, it becomes impossible or illegal for a paying Party or its Affiliates, licensees, sublicensees or distributors, to transfer, or have transferred on its behalf, royalties or other payments to the receiving Party, such royalties or other payments shall be deposited in local currency in the relevant country to the credit of such receiving Party in a recognized banking institution designated by such receiving Party or, if none is designated by such receiving Party within a period of thirty (30)days, in a recognized banking institution selected by the paying Party or its Affiliates, licensees, sublicensees or distributors, as the case may be, and identified in a notice in writing given to such receiving Party.
3.8 Taxes. Each Party shall be responsible for its own taxes levied on such Party by tax authorities within any applicable territory, including all sales, use, value added, withholding tax respecting such Party's income or other taxes payable with respect of amounts due by the other Party to such Party. Any such taxes which a paying Party is required to pay or withhold on behalf of the receiving Party shall be deducted from the amount of payment due, and the paying Party shall furnish the receiving Party with reasonable evidence of such payment or amount withheld, in electronic or written form, as soon as practicable after such payment is made or such amount is withheld.
4. LUNDBECK
4.1 Lundbeck Amendment. The Parties acknowledge that PNG has entered into Addendum IV with Lundbeck, a copy of which is attached hereto as Exhibit B.
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4.2 Lundbeck Agreement. During the term of this Agreement, PNG shall not enter into an amendment, supplement or other modification to the Lundbeck Agreement that in any manner affects Prana's rights or obligations as provided in this Agreement without the prior written consent of Prana.
4.3 Lundbeck Option. PNG agrees that as of the Effective Date, and at any time prior to the exercise by Lundbeck of its option to obtain a license to market one or more Other Products in certain territories under the Lundbeck Agreement (the "Lundbeck Option"), Prana and Lundbeck can directly negotiate a deal resulting in Lundbeck not exercising the Lundbeck Option in all or part of the Option Territories as stipulated in the Lundbeck Agreement, subject to the terms of the Lundbeck Agreement.
4.4 Reporting; Development.
(a) Reporting. Prana or its designee will provide PNG and Lundbeck with status reports regarding the progress, if any, toward development of the Products within forty-five (45) days after each June 30 and December 31 during the Term (as defined below). Such reports will provide a written summary of any development progress during the past reporting period. In addition, Prana or its designee will report to PNG and Lundbeck without delay any results with respect to the Products deemed significant by Prana, and any marketing registrations obtained by Prana or its agents, collaborators or designee. Prana has no obligation to inform PNG or Lundbeck of the existence, development or status of any product other than the Products.
(b) Development. For purposes of the research and development of Products, PNG hereby provides Prana and its licensees, sublicensees, agents, collaborators and designees a covenant not to sue on the PNG Patent Rights which would otherwise prevent Prana and/or its licensees, sublicensees, agents, collaborators and designees from researching and/or developing Products in the PNG Territories, Option Territories and/or the Lundbeck Territories.
4.5 Other Products. PNG agrees that no restrictions shall be placed by means of the Lundbeck Agreement on Prana's ability to develop any other product regardless of whether that product may be viewed as having the ability to directly or indirectly compete with a CQ product or PQ product in the Prana Territory.
5. NON-COMPETITION
For a term of ten (10) years from the Effective Date, PNG will not directly, or indirectly through another on its behalf, research, develop, and/or commercialize alternative treatments for neurodegenerative diseases that might compete in the Prana Territories with the Products developed by Prana either alone, in any partnership or through any alliance, deal or agreement.
6. INTELLECTUAL PROPERTY
6.1 Unauthorized Activities. PNG agrees to act in the PNG Territories, to the extent allowable under applicable law, to prevent parallel or unauthorized importation, manufacture, use or commercialization of the Other Products in the Prana Territory. Prana agrees to act in the
Execution Version
Prana Territories, to the extent allowable under applicable law, to prevent parallel or unauthorized importation, manufacture, use or commercialization of the Products in the PNG Territories.
6.2 Prosecution and Maintenance of Assigned Patent Rights. Prana shall have the exclusive right and option to file and prosecute all patent applications and to maintain all patents comprising the Assigned Patent Rights, at Prana's sole expense. If Prana elects not to file and prosecute any such patent applications or maintain any such patents, it shall give PNG advance written notice to this effect reasonably sufficient to avoid any loss or forfeiture of such patent applications or patents and thereafter PNG may, upon written notice to Prana, file and prosecute such patent applications and maintain such patents in PNG's name, all at PNG's expense, and furthermore, such patent applications and patents (the "PNG Assumed Patent Rights") shall no longer be deemed Assigned Patent Rights for purposes of this Agreement or subject to the terms of this Agreement. Prana agrees to, and does hereby, sell, transfer and assign the PNG Assumed Patent Rights to PNG.
6.3 Enforcement of Assigned Patent Rights. Prana shall have the exclusive right and option to enforce, at Prana's sole expense, the Assigned Patent Rights and to retain all damages and recoveries associated therewith in the Prana Territories.
6.4 Cooperation. PNG agrees to reasonably cooperate with Prana, at Prana's sole expense, in the prosecution, maintenance and enforcement of the Assigned Patent Rights in the Prana Territories. Prana agrees to reasonably cooperate with PNG, at PNG's sole expense, in the prosecution, maintenance and enforcement of the PNG Assumed Patent Rights in the PNG Territories, including without limitation, by executing an assignment of such PNG Assumed Patent Rights in a form substantially similar to that attached hereto as Exhibit A (or such other form as required by the applicable authorities), without reference to a reversionary right or security interest, for recordation purposes.
6.5 Notifications. Each Party will promptly notify the other in writing of any apparent infringement, misappropriation or other wrongful exploitation of either the Assigned Patent Rights or the PNG Patent Rights that comes to the attention of such Party. Furthermore, each Party will promptly notify the other Party with respect to the actions of such Party relating to any patent term extensions of Patent Rights.
7. WARRANTIES AND DISCLAIMERS
7.1 Representations of Authority. PNG and Prana each represents and warrants to the others that as of the Effective Date it has full right, power and authority to enter into this Agreement and to perform its respective obligations under this Agreement.
7.2 Consents. PNG and Prana each represents and warrants that all necessary consents, approvals and authorizations of all government authorities and other persons and entities required to be obtained by such Party in connection with execution, delivery and performance of this Agreement have been and shall be obtained.
7.3 No Conflict. PNG and Prana each represents and warrants that the execution and delivery of this Agreement and the performance of such Party's obligations (a) do not conflict
Execution Version
with or violate any requirement of applicable laws or regulations, and (b) do not and will not conflict with, violate or breach or constitute a default or require any consent under, any contractual obligations of such Party, except to the extent waived in a written consent prior to the Effective Date.
7.4 No Encumbrances. PNG represents and warrants that, to the best of its knowledge, (a) PNG, as of the Effective Date and as of the date of assignment of the Assigned Patent Rights pursuant to Section 2.1 and Section 2.2, has and will have the right to assign, and is no way encumbered in assigning, the patent rights listed on Schedule 1.2 (and as updated pursuant to Section 2.2), and (b) as of the Effective Date and the date of assignment of the Assigned Patent Rights pursuant to Section 2.1 and Section 2.2, such patent rights are and will be free and clear of any security interest or mortgage.
7.5 Lundbeck Agreement. PNG represents and warrants that a true, correct and complete copy of the Lundbeck Agreement, including all amendments thereto, is set forth in Exhibit C, and the Lundbeck Agreement is in full force and effect.
7.6 No Warranties. EXCEPT AS OTHERWISE EXPRESSLY SET FORTH HEREIN OR IN THE SECURITY AGREEMENT, THE PARTIES MAKE NO REPRESENTATIONS AND EXTEND NO WARRANTIES OF ANY KIND, EITHER EXPRESS OR IMPLIED, INCLUDING, WITHOUT LIMITATION, ALL IMPLIED WARRANTIES OF TITLE, NON-INFRINGEMENT, MERCHANTABILITYAND FITNESS FOR A PARTICULAR PURPOSE.
8. CONFIDENTIALITY
The terms of this Agreement are subject to the confidentiality obligations set forth in Section 1 of the Settlement Agreement.
9. TERM AND TERMINATION
9.1 Term. This Agreement is effective as of the Effective Date, and
remains in effect until the expiration of all payment obligations set forth in
Section 3, except as set forth in Section 9.2 (the "Term").
9.2 Termination. This Agreement terminates with respect to Assigned Patent Rights that have reverted to PNG and are no longer deemed Assigned Patent Rights, as provided in Section 2.4. Except as described in this Section 9.2, there is no right to terminate this Agreement.
9.3 Survival. Upon expiration or termination of this Agreement for any
reason, nothing in this Agreement shall be construed to release either Party
from any obligations that matured prior to the Effective Date or expiration or
termination; and the following provisions shall expressly survive any such
expiration or termination: 2.1 (except in the event of a termination under
Section 9.2); 3 (to the extent payment obligations remain outstanding);
3.4(f)(ii), 4.4(b) (with respect to activities of Prana performed prior to
expiration or termination hereof), 7.6, 8,9, 10, and 11 (excluding Section
11.4).
Execution Version
10. ARBITRATION.
Any dispute, controversy or claim arising out of or relating to this Agreement shall be resolved pursuant to the terms of Section 2.4 of the Settlement Agreement.
11. GENERAL PROVISIONS
11.1 Remedies. The Parties agree and acknowledge that, effective as of the
Effective Date, except as set forth in Section 2.4 and in the Security
Agreement, the assignment of the Assigned Patent Rights pursuant to this
Agreement is final and irrevocable and shall in no way be modified, altered or
subject to any limitation, notwithstanding any alleged breach by Prana of any
provision hereunder, any alleged breach or default of any other obligation owed
to PNG, or termination of all or any portion of this Agreement for any reason.
PNG agrees and understands that PNG's sole and exclusive remedies with respect
to (a) the occurrence of a Material Obligation Failure as defined by Section
1.12(a) is the Reversion Right and the rights available under the Security
Interest as set forth in the Security Agreement and the right to receive the
costs, including reasonable legal fees, incurred by PNG in enforcing its rights,
(b) the occurrence of a Material Obligation Failure as defined by Section
1.12(b) is the Reversion Right and the rights available under the Security
Interest as set forth in the Security Agreement, the right to receive the
royalty or milestone payments (the failure of which caused the Material
Obligation Failure), interest on such payments, and the costs, including
reasonable legal fees, incurred by PNG in enforcing its rights, and (c) failure
to prosecute the Assigned Patent Rights are the rights of PNG described in
Section 6.2.
11.2 Equitable Relief. Except as set forth in Section 11.1, each Party acknowledges that a breach by it of the provisions of this Agreement cannot reasonably or adequately be compensated in damages in an action at law; and that a breach by such Party of any of the provisions contained in this Agreement shall cause the other Party irreparable injury and damage. By reason thereof, each Party acknowledges and agrees that the other Party shall be entitled in such cases in addition to, and not in lieu of, any other remedies it may have under this Agreement or otherwise, under the dispute resolution provisions set forth in Section 10 to preliminary and permanent injunctive relief and any other available equitable relief to prevent or curtail any breach of this Agreement by the other Party or specifically to enforce the performance of the other Party under this Agreement without the necessity of posting any bond or other security; provided, however, that no specification in this Agreement of a specific legal or equitable remedy shall be construed as a waiver or prohibition against the pursuing of other legal or equitable remedies in the event of such a breach.
11.3 Choice of Law. This Agreement will be governed by and construed in accordance with the laws of New York and the United States.
11.4 Assignment. No Party may assign this Agreement in whole or in part without the consent of the other, except if such assignment occurs in connection with the merger, sale or transfer of all or substantially all of the business and assets of a Party. Notwithstanding the foregoing, any Party may assign its rights (but not its obligations) pursuant to this Agreement in whole or in part to an Affiliate of such Party. Any attempted assignment in violation of this section shall be null and void.
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11.5 Entire Agreement; Amendments. This Agreement constitutes the entire agreement among the Parties with respect to the subject matter hereof, and supersedes all previous arrangements with respect to the subject matter hereof, whether written or oral, including, without limitation, the Base Term Sheet, dated April 7, 2004, among the Parties. Any amendment or modification to this Agreement shall be made in writing signed by all Parties.
11.6 Notices.
Notices to Prana shall be addressed to:
Prana Biotechnology Limited
Level 2, 369 Royal Parade
Parkville 3052, Victoria, Australia
Attention: Chairman
Facsimile No.: (61) 3 9349 0377
with a copy to:
Prana Biotechnology Limited
Level 2, 369 Royal Parade
Parkville 3052, Victoria, Australia
Attention: Vice President, Intellectual Property
Facsimile No: (61) 3 9349 0377
Notices to PNG shall be addressed to:
P.N. Gerolymatos S.A.
13, Askliplou str.
145 68 Kryoneri Athens, Greece
Attention: Avraam Manouach
Facsimile No.: (+30 - 210) 81 61 956
with a copy to:
Jones Day
222 East 41st Street
New York, New York 10021 USA
Attention: Adriane M. Antler, Esq., Ph.D.
Facsimile No: (212) 755-7306
Any Party may change its address by giving notice to the other Party in the manner herein provided. Any notice required or provided for by the terms of this Agreement shall be in writing and shall be (a) sent by registered or certified mail, return receipt requested, postage prepaid, (b) sent via a reputable overnight courier service, or (c) sent by facsimile transmission and confirmed by regular mail, in each case properly addressed in accordance with the paragraph above. The effective date of notice shall be the actual date of receipt by the Party receiving the same.
Execution Version
11.7 Independent Contractors. It is understood and agreed that the relationship between the Parties hereunder is that of independent contractors and that nothing in this Agreement shall be construed as authorization for Prana or PNG to act as agent for the others.
11.8 Headings. The captions or headings of the Sections or other subdivisions hereof are inserted only as a matter of convenience or for reference and shall have no effect on the meaning of the provisions hereof.
11.9 No Implied Waivers: Rights Cumulative. No failure on the part of a Party to exercise, and no delay in exercising, any right, power, remedy or privilege under this Agreement, or provided by statute or at law or in equity or otherwise, shall impair, prejudice or constitute a waiver of any such right, power, remedy or privilege or be construed as a waiver of any breach of this Agreement or as an acquiescence therein, nor shall any single or partial exercise of any such right, power, remedy or privilege preclude any other or further exercise thereof or the exercise of any other right, power, remedy or privilege.
11.10 Severability. If any provision hereof should be held invalid, illegal or unenforceable in any respect in any jurisdiction, then, to the fullest extent permitted by law, (a) all other provisions hereof shall remain in full force and effect in such jurisdiction and shall be liberally construed in order to carry out the intentions of the Parties as nearly as may be possible and (b) such invalidity, illegality or unenforceability shall not affect the validity, legality or enforceability of such provision in any other jurisdiction.
11.11 Execution in Counterparts. This Agreement may be executed in counterparts, each of which counterparts, when so executed and delivered, shall be deemed to be an original, and all of which counterparts, taken together, shall constitute one and the same instrument.
11.12 No Consequential Damages. UNLESS RESULTING FROM A PARTY'S WILLFUL
MISCONDUCT OR FROM A PARTY'S BREACH OF SECTION 8 ("CONFIDENTIALITY") HEREOF,
NEITHER PARTY WILL BE LIABLE FOR SPECIAL, INCIDENTAL, CONSEQUENTIAL, EXEMPLARY,
PUNITIVE, MULTIPLE OR OTHER INDIRECT DAMAGES ARISING OUT OF THIS AGREEMENT OR
THE EXERCISE OF ITS RIGHTS HEREUNDER, OR FOR LOSS OF PROFITS, LOSS OF DATA OR
LOSS OF USE DAMAGES ARISING FROM OR RELATING TO ANY BREACH OF THIS AGREEMENT
WHETHER BASED UPON WARRANTY, CONTRACT, TORT, STRICT LIABILITY OR OTHERWISE,
REGARDLESS OF ANY NOTICE OF SUCH DAMAGES.
11.13 Further Assurances. At any time and from time to time after the date hereof, at a Party's request and sole expense, the other Party promptly shall execute and deliver, and shall cause its Affiliates and employees, to execute and deliver, such instruments, and take such other reasonable action, as the requesting Party may reasonably request more effectively to carry out the purpose and intent of this Agreement.
[Signature Page Follows]
Execution Version
IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed by their duly authorized representatives:
P.N. GEROLYMATOS S.A. PRANA BIOTECHNOLOGY LIMITED
By: /s/ P. Gerolymatos By: /s/ Geoffrey Kempler
--------------------------------- --------------------------------
Name: P. Gerolymatos Name: Geoffrey Kempler
------------------------------- ------------------------------
Title: President & Managing Director Title: Executive Chairman
------------------------------ -----------------------------
Date: July 28, 2004 Date: July 28, 2004
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[Signature Page to Patent Assignment and Settlement Agreement]
Execution Version
Schedule 1.2
Assigned Patent Rights
--------------------------------------------------------------------------------
Country Application No. Patent No.
--------------------------------------------------------------------------------
Japan 1998-509541
--------------------------------------------------------------------------------
Japan 2000-507371
--------------------------------------------------------------------------------
USA 09/485,909 6,670,369
--------------------------------------------------------------------------------
Japan 2000-592001
--------------------------------------------------------------------------------
USA 10/098,922
--------------------------------------------------------------------------------
USA 09/023,544 6,001,852
--------------------------------------------------------------------------------
USA 09/023,543 5,980,914
--------------------------------------------------------------------------------
USA 09/023,542 5,994,323
--------------------------------------------------------------------------------
USA 10/717,182
--------------------------------------------------------------------------------
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Execution Version
Schedule 1.20
PNG Patent Rights (PNG Territories, Option Territories and Lundbeck Territories)
Title: Use of the chelating agent clioquinol for the manufacture of the pharmaceutical composition for the treatment of Alzheimer's disease
--------------------------------------------------------------------------------
Country Application No. Patent No.
--------------------------------------------------------------------------------
Austria AT E 205086 T
--------------------------------------------------------------------------------
Belgium BE 959888 T
--------------------------------------------------------------------------------
Switzerland/Liechtenstein CH 959888 T
--------------------------------------------------------------------------------
Germany DE 69706566 T
--------------------------------------------------------------------------------
Denmark DK 959888 T
--------------------------------------------------------------------------------
Spain ES 2192319 T
--------------------------------------------------------------------------------
Finland FI 959888 T
--------------------------------------------------------------------------------
France FR 959888 T
--------------------------------------------------------------------------------
United Kingdom GB 959888 T
--------------------------------------------------------------------------------
Greece GR 959888 T
--------------------------------------------------------------------------------
Ireland IE 959888 T
--------------------------------------------------------------------------------
Italy IT 959888 T
--------------------------------------------------------------------------------
Luxembourg LU 959888 T
--------------------------------------------------------------------------------
Monaco MC 959888 T
--------------------------------------------------------------------------------
Netherlands NL 959888 T
--------------------------------------------------------------------------------
Portugal PT 959888 T
--------------------------------------------------------------------------------
Sweden SE 959888 T
--------------------------------------------------------------------------------
Romania RO 959888
--------------------------------------------------------------------------------
Slovenia SI 959888
--------------------------------------------------------------------------------
Czech republic PV 1999-484 CZ 29244
--------------------------------------------------------------------------------
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--------------------------------------------------------------------------------
Country Application No. Patent No.
--------------------------------------------------------------------------------
Czech republic PV 2003-499
--------------------------------------------------------------------------------
Hungary P9903906
--------------------------------------------------------------------------------
Iceland 4972 IS 1907
--------------------------------------------------------------------------------
Norway 19990595
--------------------------------------------------------------------------------
Poland P33 1822
--------------------------------------------------------------------------------
Russia 99105213 RU 2193406
--------------------------------------------------------------------------------
Turkey 1999/00293
--------------------------------------------------------------------------------
Singapore 63876 SG 63876
--------------------------------------------------------------------------------
Israel 128416
--------------------------------------------------------------------------------
Australia 36324/97 AU 720643
--------------------------------------------------------------------------------
Brazil PI97 11194-5
--------------------------------------------------------------------------------
Canada 2,264,097
--------------------------------------------------------------------------------
China 97197919.7 CN ZL 97197919.7
--------------------------------------------------------------------------------
Mexico 991466 208764
--------------------------------------------------------------------------------
New Zealand 334124 NZ 334134
--------------------------------------------------------------------------------
South Korea 7001196/99
--------------------------------------------------------------------------------
Slovak Republic PVO 179-99 SK 283117
--------------------------------------------------------------------------------
Hong Kong 00101601.9
--------------------------------------------------------------------------------
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Title: Use of Phanquinone for the treatment of Alzheimer's disease
--------------------------------------------------------------------------------
Country Application No. Patent No.
--------------------------------------------------------------------------------
Austria AT E 217191 T
--------------------------------------------------------------------------------
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--------------------------------------------------------------------------------
Country Application No. Patent No.
--------------------------------------------------------------------------------
Belgium BE 1007040 T
--------------------------------------------------------------------------------
Switzerland/Liechtenstein CH 1007040 T
--------------------------------------------------------------------------------
Cyprus CY 1007040 T
--------------------------------------------------------------------------------
Germany DE 69805305 T
--------------------------------------------------------------------------------
Denmark DK 1007040 T
--------------------------------------------------------------------------------
Spain ES 2177024 T
--------------------------------------------------------------------------------
Finland FI 1007040 T
--------------------------------------------------------------------------------
France FR 1007040 T
--------------------------------------------------------------------------------
United Kingdom GB 1007040 T
--------------------------------------------------------------------------------
Greece GR 1007040 T
--------------------------------------------------------------------------------
Ireland IE 1007040 T
--------------------------------------------------------------------------------
Italy IT 1007040 T
--------------------------------------------------------------------------------
Luxembourg LU 1007040 T
--------------------------------------------------------------------------------
Monaco MC 1007040 T
--------------------------------------------------------------------------------
Netherlands NL 1007040 T
--------------------------------------------------------------------------------
Portugal PT 1007040 T
--------------------------------------------------------------------------------
Sweden SE 1007040 T
--------------------------------------------------------------------------------
Albania AL 1007040
--------------------------------------------------------------------------------
Lithuania LT 1007040
--------------------------------------------------------------------------------
Latvia LV 1007040
--------------------------------------------------------------------------------
FYROM MK 1007040
--------------------------------------------------------------------------------
Romania RO 1007040
--------------------------------------------------------------------------------
Slovenia SI 1007040
--------------------------------------------------------------------------------
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Country Application No. Patent No.
--------------------------------------------------------------------------------
Australia 81241/92 AU741782
--------------------------------------------------------------------------------
Hong Kong 01100873.1
--------------------------------------------------------------------------------
Israel 134236
--------------------------------------------------------------------------------
South Korea 2000-7001576
--------------------------------------------------------------------------------
Singapore 2000 00483-8 SG 70572
--------------------------------------------------------------------------------
Turkey 2000/455 TR 2000 00455 B
--------------------------------------------------------------------------------
Bulgaria 107179
--------------------------------------------------------------------------------
Brazil PI 9814945
--------------------------------------------------------------------------------
Canada 2,301,706
--------------------------------------------------------------------------------
China 98808292.6
--------------------------------------------------------------------------------
Czech Republic 2000-507371
--------------------------------------------------------------------------------
Eurasia 200000242 EA 002526
--------------------------------------------------------------------------------
Hungary P0004334
--------------------------------------------------------------------------------
Iceland 5356
--------------------------------------------------------------------------------
Mexico 1459
--------------------------------------------------------------------------------
Norway 200000771
--------------------------------------------------------------------------------
New Zealand 502565 NZ 502565
--------------------------------------------------------------------------------
Poland P338673
--------------------------------------------------------------------------------
Slovak republic 2062000
--------------------------------------------------------------------------------
Ukrania 20000031381 UA 59412
--------------------------------------------------------------------------------
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Title: Use of Phanquinone for the treatment or prevention of memory impairment
Execution Version
--------------------------------------------------------------------------------
Country Application No. Patent No.
--------------------------------------------------------------------------------
Argentina P 000100046
--------------------------------------------------------------------------------
Chile 0028-2000
--------------------------------------------------------------------------------
Hong Kong 0212678.3
--------------------------------------------------------------------------------
Israel 143903
--------------------------------------------------------------------------------
South Korea 10-2001-7008578
--------------------------------------------------------------------------------
Singapore 200103772-0 SG 81714
--------------------------------------------------------------------------------
Turkey 2001 01892 TR 2001 01892B
--------------------------------------------------------------------------------
EPC 00900025.8
--------------------------------------------------------------------------------
Brazil PI 0008241-4
--------------------------------------------------------------------------------
Canada 2358487
--------------------------------------------------------------------------------
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Execution Version
Schedule 2.2(a)
Patent Rights in Lundbeck Territories as of the Effective Date
--------------------------------------------------------------------------------
Country Application No. Patent No.
--------------------------------------------------------------------------------
None-no countries in
Lundbeck Territories as of the
Effective Date
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Execution Version
Schedule 2.2(b)
Patent Rights in Option Territories as of the Effective Date
Title: Use of the chelating agent clioquinol for the manufacture of the pharmaceutical composition for the treatment of Alzheimer's disease.
--------------------------------------------------------------------------------
Country Application No. Patent No.
--------------------------------------------------------------------------------
Austria AT E 205086 T
--------------------------------------------------------------------------------
Belgium BE 959888 T
--------------------------------------------------------------------------------
Switzerland/Liechtenstein CH 959888 T
--------------------------------------------------------------------------------
Germany DE 69706566 T
--------------------------------------------------------------------------------
Denmark DK 959888 T
--------------------------------------------------------------------------------
Spain ES 2192319 T
--------------------------------------------------------------------------------
Finland FI 959888 T
--------------------------------------------------------------------------------
France FR 959888 T
--------------------------------------------------------------------------------
United Kingdom GB 959888 T
--------------------------------------------------------------------------------
Ireland IE 959888 T
--------------------------------------------------------------------------------
Italy IT 959888 T
--------------------------------------------------------------------------------
Luxembourg LU 959888 T
--------------------------------------------------------------------------------
Monaco MC 959888 T
--------------------------------------------------------------------------------
Netherlands NL 959888 T
--------------------------------------------------------------------------------
Portugal PT 959888 T
--------------------------------------------------------------------------------
Sweden SE 959888 T
--------------------------------------------------------------------------------
Romania RO 959888
--------------------------------------------------------------------------------
Slovenia SI 959888
--------------------------------------------------------------------------------
Czech republic PV 1999-484 CZ 29244
--------------------------------------------------------------------------------
Czech republic PV 2003-499
--------------------------------------------------------------------------------
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--------------------------------------------------------------------------------
Country Application No. Patent No.
--------------------------------------------------------------------------------
Hungary P9903906
--------------------------------------------------------------------------------
Iceland 4972 IS 1907
--------------------------------------------------------------------------------
Norway 19990595
--------------------------------------------------------------------------------
Poland P331822
--------------------------------------------------------------------------------
Russia 99105213 RU 2193406
--------------------------------------------------------------------------------
Australia 36324/97 AU 720643
--------------------------------------------------------------------------------
Brazil PI9711194-5
--------------------------------------------------------------------------------
Canada 2,264,097
--------------------------------------------------------------------------------
China 97197919.7 CN ZL 97197919.7
--------------------------------------------------------------------------------
Mexico 991466 208764
--------------------------------------------------------------------------------
New Zealand 334124 NZ 334134
--------------------------------------------------------------------------------
Slovak Republic PVO179-99 SK 283117
--------------------------------------------------------------------------------
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Title: Use of Phanquinone for the treatment of Alzheimer's disease
--------------------------------------------------------------------------------
Country Application No. Patent No.
--------------------------------------------------------------------------------
Austria AT E 217191 T
--------------------------------------------------------------------------------
Belgium BE 1007040 T
--------------------------------------------------------------------------------
Switzerland/Liechtenstein CH 1007040 T
--------------------------------------------------------------------------------
Germany DE 69805305 T
--------------------------------------------------------------------------------
Denmark DK 1007040 T
--------------------------------------------------------------------------------
Spain ES 2177024 T
--------------------------------------------------------------------------------
Finland FI 1007040 T
--------------------------------------------------------------------------------
France FR 1007040 T
--------------------------------------------------------------------------------
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Country Application No. Patent No.
--------------------------------------------------------------------------------
United Kingdom GB 1007040 T
--------------------------------------------------------------------------------
Ireland IE 1007040 T
--------------------------------------------------------------------------------
Italy IT 1007040 T
--------------------------------------------------------------------------------
Luxembourg LU 1007040 T
--------------------------------------------------------------------------------
Monaco MC 1007040 T
--------------------------------------------------------------------------------
Netherlands NL 1007040 T
--------------------------------------------------------------------------------
Portugal PT 1007040 T
--------------------------------------------------------------------------------
Sweden SE 1007040 T
--------------------------------------------------------------------------------
Albania AL 1007040
--------------------------------------------------------------------------------
Lithuania LT 1007040
--------------------------------------------------------------------------------
Latvia LV 1007040
--------------------------------------------------------------------------------
FYROM MK 1007040
--------------------------------------------------------------------------------
Romania RO 1007040
--------------------------------------------------------------------------------
Slovenia SI 1007040
--------------------------------------------------------------------------------
Australia 81241/92 AU741782
--------------------------------------------------------------------------------
Bulgaria 107179
--------------------------------------------------------------------------------
Brazil PI 9814945
--------------------------------------------------------------------------------
Canada 2,301,706
--------------------------------------------------------------------------------
China 98808292.6
--------------------------------------------------------------------------------
Czech Republic 2000-507371
--------------------------------------------------------------------------------
Eurasia 200000242 EA 002526
--------------------------------------------------------------------------------
Hungary P0004334
--------------------------------------------------------------------------------
Iceland 5356
--------------------------------------------------------------------------------
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Country Application No. Patent No.
--------------------------------------------------------------------------------
Mexico 1459
--------------------------------------------------------------------------------
Norway 200000771
--------------------------------------------------------------------------------
New Zealand 502565 NZ 502565
--------------------------------------------------------------------------------
Poland P338673
--------------------------------------------------------------------------------
Slovak republic 2062000
--------------------------------------------------------------------------------
Ukrania 20000031381 UA 59412
--------------------------------------------------------------------------------
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Title: Use of Phanquinone for the treatment or prevention of memory impairment
--------------------------------------------------------------------------------
Country Application No. Patent No.
--------------------------------------------------------------------------------
Argentina P 000100046
--------------------------------------------------------------------------------
Chile 0028-2000
--------------------------------------------------------------------------------
EPC (for countries within
Option Territories) 00900025.8
--------------------------------------------------------------------------------
Brazil PI 0008241-4
--------------------------------------------------------------------------------
Canada 2358487
--------------------------------------------------------------------------------
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EXHIBIT A
PATENT ASSIGNMENT
For ten dollars ($10.00) and other good and valuable consideration, the receipt of which is hereby acknowledged, P.N. GEROLYMATOS S.A. ("ASSIGNOR"), hereby sells, assigns, transfers, and sets over its entire right, title, and interest in and to the Assigned Patent Rights (as set forth below), and all patents issuing therefrom and including all divisionals, renewals, substitutions, continuations, continuations-in-part filed as of the date hereof, reissues, reexaminations, extensions, refilings, any patent or reissues of any patent of said Assigned Patent Rights and rights to sue for infringement thereof, past and present to Prana Biotechnology Limited ("ASSIGNEE") and its successors and assigns; provided that such assignment is, and remains, subject to a security interest and certain rights of reversion granted by ASSIGNEE in favor of ASSIGNOR, the applicable provisions of which rights of reversion are described on Exhibit A attached hereto.
Assigned Patent Rights: See Schedule 1 attached hereto.
At any time and from time to time after the date hereof, at ASSIGNEE'S request and expense, ASSIGNOR promptly shall execute and deliver, and shall cause its Affiliates and employees to execute and deliver, such instruments of sale, transfer, conveyance, assignment and confirmation, and take such other action as ASSIGNEE may reasonably request to more effectively transfer, convey and assign to ASSIGNEE, and to confirm ASSIGNEE'S title to, all of the Assigned Patent Rights.
IN WITNESS WHEREOF, ASSIGNOR has hereunto set its hand and seal on the date below.
P.N. GEROLYMATOS S.A.
[NOTARY]
Execution Version
Exhibit A to Patent Assignment from P.N. Gerolymatos S.A. to Prana Biotechnology Limited
The following is a description of the security interest and reversion rights with respect to the Assigned Patent Rights. The description shall not in any way be deemed a modification of the actual rights granted under the Patent Assignment Agreement or the Security Agreement (each as defined herein). If there is any conflict between the description below and the terms of the Patent Assignment Agreement or the Security Agreement, the terms of the Patent Assignment Agreement and Security Agreement shall govern.
Defined Terms
Clioquinol or CQ means 5-Chloro-7-iodo-8-quinolinol.
Derivative means those metal protein attenuating compounds other than CQ or PQ that are claimed in a list of patent applications agreed upon by PNG and Prana.
Effective Date means July 28, 2004.
FDA means the United States Food and Drug Administration, or a successor agency thereto.
Material Obligation Failure means (a) the failure of Prana within eight (8) years of the Effective Date to begin a new Phase 11 Clinical Study (excluding any such studies performed before the Effective Date) for approval by a Regulatory Authority of CQ, PQ, or any Derivative or (b) the failure of Prana to make any royalty or milestone payments as provided in the Patent Assignment Agreement that are not disputed in good faith and to cure such failure within the cure period set forth in Section 2.4.
Patent Assignment Agreement means the Patent Assignment and Settlement Agreement, dated as of July 28, 2004, by and between P.N. Gerolymatos S.A. ("PNG") and Prana Biotechnology Limited ("Prana").
Phanquinone or PQ means 4,7-Phenanthroline-5,6-dione.
Product means any product containing either CQ or PQ, that, or the use of which, is covered by the claims of the Assigned Patent Rights.
Phase I1 Clinical Study means a study of a Product containing either CQ or PQ in patients to determine initial efficacy and dosing regimen.
Regulatory Authority means any federal, national, multinational, state, provincial or local regulatory agency, department, bureau or other governmental entity with authority over the testing, manufacture, use, storage, import, promotion, marketing and sale of therapeutic product in a country, including the FDA.
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Security Agreement means the Patent Rights Security Agreement, dated as of July 28, 2004, between Prana and PNG.
Section 2.4 of the Patent Assignment Agreement: Reversion Right.
(a) The Assigned Patent Rights are subject to a reversion right as provided in this Section 2.4 (the "Reversion Right").
(b) Prana agrees that, subject to the terms of this subsection (b), upon the occurrence of a Material Obligation Failure hereunder that remains uncured for thirty (30) days following written notice of such failure, (i) subject to the Third Party Rights (as defined in Section 2.6) and Section 2.4(d), the ownership rights in the Assigned Patent Rights shall revert back to PNG, and (ii) effective as of the end of such thirty (30)-day period, Prana does hereby, sell, transfer and assign to PNG such Assigned Patent Rights, which thereafter shall be PNG Patent Rights. If Prana disputes whether a Material Obligation Failure has occurred, it shall institute the dispute resolution procedures set forth in the Patent Assignment Agreement prior to the end of such thirty (30)-day cure period, and any reversions of the Assigned Patent Rights shall be suspended pending completion of such dispute resolution procedure; provided that the institution of such procedures shall not in any manner extend the time period of curing any Material Obligation Failure. Effective upon the written certification by Prana that Prana has within the eight (8) year period after the Effective Date begun a new Phase 11 Clinical Study (excluding any such studies performed before the Effective Date) for approval by a Regulatory Authority of CQ, PQ, or any Derivative, the Reversion Right with respect to a Material Obligation Failure described in subsection (a) of the Material Obligation Failure definition will terminate; provided that Prana will provide PNG with such additional proof with respect of the contents of the foregoing certification as PNG may reasonably request and any dispute as to whether Prana's beginning of such new Phase 11 Clinical Study as provided above shall be resolved in accordance with the dispute resolution provisions of the Patent Assignment Agreement, and termination of the Reversion Right shall be suspended pending completion of such dispute resolution procedure.
(c) Notwithstanding anything contained herein to the contrary, in the event a Material Obligation Failure occurs due to the failure of Prana to make payments pursuant to the Patent Assignment Agreement, the reversion of Assigned Patent Rights to PNG hereunder shall occur only with respect to Assigned Patent Rights (irrespective of inventorship) in those territories in which the events triggering Prana's payment obligations under the Patent Assignment Agreement arise and in which Prana's failure to make such payments results in a Material Obligation Failure, and Prana shall retain its ownership rights, subject to the Reversion Right and the Security Interest (as defined herein), in and to the Assigned Patent Rights in all of the remaining countries of the Prana Territory in which Prana has complied with its payment obligations pursuant to the Patent Assignment Agreement.
(d) Upon reversion of any Assigned Patent Rights in accordance with
Section 2.4(b), all outstanding licenses (and related sublicenses) will
survive and be assigned by Prana to
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PNG, subject to the prior written consent of PNG and the affected licensees (and related sublicensees).
(e) Upon the reversion of an Assigned Patent Right to PNG pursuant hereto, such Patent Right shall no longer be deemed an Assigned Patent Right for purposes of this Agreement.
Section 2.5 of the Patent Assignment Agreement: Security Agreement. The Assigned Patent Rights are subject to the security interest in the Assigned Patent Rights granted to PNG pursuant to the Security Agreement (the "Security Interest"). In no event shall the Reversion Right or Security Interest limit Prana's ability to license the Assigned Patent Rights to a third party in accordance with Section 2.6 below.
Section 2.6 of the Patent Assignment Agreement: Grant of Rights.
(a) Transfer Restrictions. During the term of this Agreement, Prana may transfer, sell, assign, encumber, pledge, mortgage, license, sublicense, grant rights to prosecute and enforce and covenants not to sue and otherwise grant rights in and to and otherwise encumber in any way or nature the Assigned Patent Rights (collectively, the "Third Party Rights"), subject to the Reversion Right, Security Interest and the obligations of this Agreement; provided, that
(i) in the event of the sale by Prana of any of the Assigned Patent Rights or all or substantially all of Prana assets (including the Assigned Patent Rights) or ownership interest of Prana, or merger of Prana, the assignee of the Assigned Patent Rights assumes in writing the obligations of Prana under this Agreement; and
(ii) in the event of the mortgage, pledge or grant of a security interest in any of the Assigned Patent Rights by Prana, the mortgagee, pledgee or secured party provide to PNG written acknowledgement of the priority of the Reversion Right and Security Interest; and
(iii) in the event of the license of any of the Assigned Patent
Rights, Prana shall (A) provide in the license agreements that the
Assigned Patent Rights are subject to the Reversion Right granted in
Section 2.4 and the Security Interest granted in the Security
Agreement and the licenses shall survive in accordance with the
terms of Section 2.4(d); and (B) grant such licenses limited to the
Prana Territories and subject to the terms of this Agreement.
(b) Third Party Rights. Except as otherwise may occur pursuant to Section 2.4(d), the exercise by PNG of its rights under the Patent Assignment Agreement and the Security Agreement will not terminate or otherwise restrict Third Party Rights, and PNG shall take the Assigned Patent Rights subject to any and all Third Party Rights.
(c) Review of Agreements. PNG shall have the right to review any third party agreement entered into by Prana granting rights with respect to the Assigned Patent Rights (whether such agreement transfers, sells, assigns, encumbers, pledges, mortgages,
Execution Version
licenses, sublicenses, grants rights to prosecute or enforce and covenants not to sue) prior to Prana signing such an agreement, subject to written obligations of confidentiality and non-use that are consistent with those contained in the Patent Assignment Agreement. The final decision on the agreement's terms and conditions (in accordance with the foregoing), timing and the third party remains solely at Prana's discretion. Upon execution of each agreement or any amendment thereto, Prana shall provide PNG with a copy of such executed agreement and any amendment thereto.
(d) Right to Cure. Each holder of a Third Party Right has the right, but not the obligation, to perform the obligations of Prana under this Agreement to avoid a Material Obligation Failure. PNG agrees to accept the performance by holders of Third Party Rights of Prana obligations under this Agreement in the place of Prana.
(e) Licenses for No Consideration. Notwithstanding anything herein to the contrary, Prana shall not enter into any agreements to license or sublicense for no consideration, without the prior written consent of PNG, except if such license or sublicense is for the sole purpose of research and development of Products.
Section 1 of the Security Agreement: Grant of Security Interest.
a. As collateral security for the prompt and complete payment, performance and observance of all of the Obligations (defined below), Prana hereby grants to PNG a security interest in all of Prana's right, title and interest, whether now owned or existing or hereafter created or acquired in, to and under all of the following (collectively, the "Collateral"): the Assigned Patent Rights.
b. In furtherance of and without limiting the generality of foregoing, if new patent rights are added to the Assigned Patent Rights because of the addition of new territories in accordance with the Patent Assignment Agreement, the provisions of the Security Agreement shall automatically apply with respect to such new Assigned Patent Rights, and Prana hereby grants to the Secured Party a security interest in all of Prana's right, title and interest in, to and under such new Assigned Patent Rights, which shall be deemed to be part of the Collateral. PNG acknowledges that Prana's rights in the Collateral are subject to the terms of third party agreements entered into by Prana prior to the Effective Date with respect to the Assigned Patent Rights.
c. For purposes of this Agreement, "Obligation(s)" means the obligations of Prana (i) within eight (8) years of the Effective Date to begin a new Phase II Clinical Study (excluding any such studies begun before the Effective Date) for approval by a Regulatory Authority of CQ, PQ, or any Derivative and (ii) to make royalty or milestone payments as provided in the Patent Assignment Agreement that are not disputed in good faith. The parties hereto further agree that the Obligations secured hereby shall also include Prana's obligations to PNG under any arbitral award or a judgment of any court granted to PNG in respect of Prana's breach of any of the foregoing Obligations, subject to the limitations set forth in the Patent Assignment Agreement.
d. Notwithstanding the terms of Section l(a) or any other provision of the Security Agreement, Prana shall not be limited in any manner in its ability to grant rights to third parties
Execution Version
under the Assigned Patent Rights pursuant to Section 2.6 of the Patent
Assignment Agreement. All rights of the Secured Party under Sections l(a) and
(b) shall be subject to the Third Party Rights as provided in Section 2.4 of the
Patent Assignment Agreement.
e. Effective upon the written certification by Prana that Prana has within
the eight (8) year period after the Effective Date begun a new Phase II Clinical
Study (excluding any such studies performed before the Effective Date) for
approval by a Regulatory Authority of CQ, PQ, or any Derivative, the Obligations
described in Section l(c)(i) will terminate in accordance with the terms of
Section 2.4(b) of the Patent Assignment Agreement and no longer constitute an
Obligation hereunder.
Execution Version
Schedule 1
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Country Application No. Patent No.
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Japan 1998-509541
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Japan 2000-507371
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USA 09/485,909 6,670,369
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Japan 2000-592001
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USA 10/098,922
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USA 09/023,544 6,001,852
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USA 09/023,543 5,980,914
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USA 09/023,542 5,994,323
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USA 10/717,182
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Execution Version
EXHIBIT B
Addendum IV
ADDENDUM
Pursuant to the Patent License Agreement entered into between P.N. Gerolymatos S.A. (referred to as "Licensor") and H. Lundbeck A/S (referred to as "Lundbeck") dated 26th July 1999, as amended by Addendum I, dated April 14, 2000 ("Addendum I"), Addendum II, dated February 18, 2002 ("Addendum II"), and Addendum III, dated July 19, 2002 ("Addendum II") (collectively, the "Patent License Agreement"), it is hereby irrevocably and unreservedly confirmed, that Lundbeck agrees to the exclusion of the Territory of the United States of America from the Territory of Lundbeck as the Territory of a license agreement concerning marketing of pharmaceutical products containing Clioquinol or Phanquinone.
It is further understood and explicitly agreed that the exclusion of the USA from the Territory shall be considered made on the basis of the option granted to Licensor according to Article 3.3.1 of the Addendum I and Article 3.4.1 of Addendum I1 to the Patent License Agreement and all other terms and arrangements stipulated in the aforementioned Patent License Agreement and relevant Addenda, including indicatively payment of royalties etc., will remain unaltered except as provided below.
The Parties hereby agree that references to "Licensor" in Sections 2 and 3.1 of Addendum I and Sections 2 and 3.2 of Addendum I1 shall be construed to mean "Licensor or Prana Biotechnology Limited ("Prana") or the designee of Prana" solely with respect to the USA, Japan, and Taiwan. With respect to countries outside the USA, Japan, and Taiwan, Licensor shall remain obligated under the terms of Sections 2 and 3.1 of Addendum I and Sections 2 and 3.2 of Addendum 11, except as otherwise agreed in writing by Prana and Licensor, in which case Lundbeck shall accept performance by Prana of such agreed obligations as the designee of Licensor. Except as provided here, the Parties agree that the term "Licensor" in the Patent License Agreement shall not include Prana.
H. LUNDBECK A/S
By: /s/ STIG LOKKE PEDERSEN
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Name: STIG LOKKE PEDERSEN
Title: EVP
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P.N. GEROLYMATOS S.A.
By: /s/ P.N. GEROLYMATOS
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Name: P.N. GEROLYMATOS
Title: President
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Execution Version
EXHIBIT C
Lundbeck Agreement
PATENT LICENSE AGREEMENT
Between
P.N. Gerolymatos S.A.
13 Askliplou Street
14568 Kryoneri Attika
Greece
(hereinafter referred to as "Licensor")
and
H. Lundbeck A/S
Ottiliavej 9
DK-2500 Copenhagen-Valby
Denmark
(hereinafter referred to as "Lundbeck")
PREAMBLE:
WHEREAS Licensor is the owner of certain know how and other relevant intellectual property rights as well as patent applications in various European and other countries covering the use of the chemical compounds Clioquinol and Phanquinone and possesses the right to license the rights granted herein with regard to these compounds, both compounds anticipated to be active within indications of Alzheimer's Disease, Parkinson's Disease and other indications;
WHEREAS, Lundbeck wishes to obtain from Licensor for global exploitation certain rights relating to Clioquinol, Phanquinone and Licensed Patents, Know-how generated and other intellectual property rights possessed;
WHEREAS, Lundbeck intends to undertake the investigations and, possibly the further development and the subsequent possible marketing of Clioquinol and/or Phanquinone;
WHEREAS, The Parties prior to entering into this Agreement have signed a Letter of Intent dated 26 April 1999;
NOW THEREFORE and in consideration of the mutual covenants contained herein, the Parties hereto have agreed to enter into this Agreement upon the following terms and conditions:
1. DEFINITIONS
1.1 "Affiliate" shall mean corporations in which a Party, now or during the term of this Agreement, on a permanent basis owns or controls fifty one per cent (51%) or more of the voting stock. "Affiliate" shall also mean any holding company owning or controlling fifty one percent (51%) or more of the voting stock of any Party.
1.2 "Agreed Quality Standards" shall mean the at any time applicable. Good Clinical Practice guidelines as adopted by the ICH and/or any local health authority become competent with respect to a clinical activity to be carried out. The "Agreed Quality Standard" shall include, but not be limited to, the GCP criteria for protocol writing, selection of contract research organisations, trial facility requirements, enrolment of subjects in clinical trials, completion of case record forms and recording, storing and reporting of results and events.
1.3 "Clioquinol" shall mean 5-Chloro-7-iodo-8-quinolinol.
1.4 "Date of Execution" shall mean the date of signature to this Agreement by the Party last to sign.
1.5 "DKK" shall mean the official currency of Denmark, the Danish Kroner.
1.6 "Information" shall mean any information, technology (including electronic soft- and hardware), registration data, marketing data (including customer files), marketing material and medicinal data related to Licensed Products that are put at a Party's disposal by the other Party and/or communicated by one Party to the other, orally, in writing or otherwise made available, as a result of the existence of this Agreement.
1.7 "Know-How" shall mean with respect to either Patty, collectively, all proprietary information, confidential Information, methods, products, ideas, processes, technologies, inventions, data, information and all intellectual property rights connected therewith, whether or not patentable and whether oral, written or stored in any computer format, owned, controlled or licensed to
either Party, now or during the term of this Agreement, to the extent
related to the research, development, manufacture, use or sale of Licensed
Products in the Territory.
1.8 "Licensed Patents" shall mean any and all present or future patents and
patent applications in the Territory or covering any part of the Territory
including but not limited to process patents, use patents and/or
formulation patents containing one or more claims covering Clioquinol
and/or Phanquinone and/or its/their formulations or use as a medicinal
product for any indication in whole or in part which are or become owned
by Licensor. Licensed Patents include the issued patents and patent
applications listed in Annex 1. forming an integral part of this
agreement, as well as any and all extensions, divisions, continuations,
continuations-in-part, re-examinations and reissues thereof and
supplementary protection certificates thereof in the Territory or covering
any part of the Territory. Licensed Patents as per Date of Execution have
been listed in Annex 1 hereto.
1.9 "Licensed Products" shall mean formulations containing Clioquinol and/or
Phanquinone.
1.10 "Licensor Technology" shall mean Licensed Patents, reference is made to
Article 1.8 above, and Know How, reference is made to Article 1.7 above,
generated by Licensor.
1.11 "Marketing Year" shall mean calendar year periods except for the first
Marketing Year. The first Marketing Year shall commence after Registration
in the first country in the Territory and on the first day of the month in
which Lundbeck makes its first commercial sale of Licensed Product (that
is, invoices its first sale of a Licensed Product to an independent third
party) in the Territory until December 31st of that year. Subsequent
Marketing Years shall be the applicable calendar years. The date on which
the first Marketing Year so commences shall be immediately confirmed by
Lundbeck to Licensor in writing. "Half of Marketing Year" shall mean six
(6) calendar month periods within the same Marketing Year. The first Half
of Marketing Year shall commence on January 1st of each calendar year and
end on June 30th of that calendar year. The second Half of Marketing Year
shall commence on July 1st of each calendar year and end on December 31st
of that calendar year.
1.12 "Net Sales" shall mean gross sales of Licensed Products to a hospital,
wholesaler or pharmacist in the Territory less (1) the total of ordinary
and customary trade discounts earned and actually taken or granted, (2)
any statutory or contractual rebates paid to any governmental or any other
public authority, agency or entity (3) cash and quantity discounts
allowed, (4) allowances and adjustments actually credited or paid to
customers for spoiled, damaged. outdated and/or returned Licensed Product,
(5) freight, insurance, transportation costs and handling charges included
by the seller in its invoices to independent third parties, (6) excise,
sales, and value added taxes included by the seller in its invoices to
independent third parties, and (7) customs duties and other compulsory
payments made by the seller to national, provincial and local government
authorities.
1.13 "Party" or "Parties" shall mean one or both of the companies listed on the
first page executing this Agreement.
1.14 "Phanquinone" shall mean 4,7-Phenanthroline-5,6-dione.
1.15 "Phase I trial" shall mean controlled clinical trials in healthy
volunteers as carried out by Lundbeck, investigating safety, tolerability
and kinetic properties of Licensed Products.
1.16 "Phase II trial" shall mean controlled clinical trials in patients as
carried out by Lundbeck investigating indication, proof of concept
(efficacy), toxicity and recommended dosages of Licensed Products.
1.17 "Phase 111 trial" shall mean controlled clinical trials in patients as
carried out by Lundbeck investigating the clinical properties of Licensed
Products, including side effects.
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1.18 "Registration" shall mean all written governmental approvals including any
price and/or reimbursement approval required for the legal marketing of
Licensed products in any country in the Territory (e.g., approval by the
United Kingdom Medicines Control Agency or by other equivalent government
or supranational agencies in the Territory that regulates, licenses or
otherwise approves the import, manufacture, promotion and/or sale of
pharmaceutical products in that country).
1.19 "Territory" shall mean any country world-wide with the exception of
Cyprus, Greece, Turkey, Israel, Hong Kong, Singapore and South Korea.
1.20 "Trademark(s)" shall mean any and all trademarks for use in conjunction
with Licensed Products in any part of the Territory excluding any
trademark comprising the name of either Party generally used by such Party
to identify itself (a "House-Mark").
1.21 "Valid Claim" shall mean any claim of a patent application or of an issued
and non-expired patent including but not limited to future patents and/or
patent applications within the Licensed Patents covering or including a
Licensed Product, which has not been finally held unenforceable,
non-patentable, or invalid by a court or governmental agency of competent
jurisdiction, unappealed or unappealable within the time allowed for
appeal, nor has been admitted by the holder of the patent to be
unenforceable, non-patentable, or invalid through reissue, disclaimer, or
otherwise.
1.22 When any term defined in this Agreement in singular or plural is used in
this Agreement in plural or singular, respectively, this shall be deemed a
reference to the defined term unless the context explicitly otherwise
indicates.
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2. GRANT OF LICENSED RIGHTS
2.1 Subject to the terms and conditions of this Agreement, Licensor hereby grants to Lundbeck and Lundbeck hereby accepts the exclusive license, including the unlimited right to grant sublicenses to any Affiliate and to third parties, under the Licensor Technology to exploit same commercially in any respect whatsoever, including but not limited to the right to develop, make, offer for sale, import, export, formulate, package, use, sell, market, promote, distribute and have sold Licensed Products for any indication in the Territory in accordance with this Agreement. A sublicense includes but is not limited to co-marketing and co-promotion arrangements. Lundbeck undertakes to inform Licensor without undue delay about sublicenses granted by Lundbeck and Affiliates.
2.2 In the event that Licensor wishes to obtain patent protection for and/or commercialize any compound which in Licensor's view may be active within indication of Alzheimer's Disease and/or Parkinson's Disease or the like, Licensor shall give written notice to Lundbeck specifying in reasonable detail any bona fide offer, if any, made by a third party for rights to such compound. For sixty (60) days after receipt of such notice, Lundbeck shall have the right of first refusal to the patent and/or commercialisation rights concerning such compound. If this right is not exercised by Lundbeck, then Licensor shall have the right to pursue the patenting and/or commercialization of such compound alone or in co-operation with any third party. If this right is exercised by Lundbeck, then the Parties shall negotiate in good faith a license agreement concerning the commercialization of such compound.
3. DEVELOPMENT
3.1 Lundbeck and/or its designated sublicensee, reference is made to Article 2.1, will at its own discretion decide to carry out development studies and will, if so, prepare the relevant
documentation for applications for carrying out clinical trials as well as the relevant documentation for applications for Registration with the health authorities in those parts of the Territory where Lundbeck wishes to pursue rights granted hereunder. Lundbeck shall apply for Registration of Licensed Products in its own name and shall remain the sole holder of the Registration in the Territory unless rights to the Registration are assigned or sublicensed, reference is made to Article 2.1. All costs and/or expenses arising or incurred in connection with preparation and filing of the application for Registration in the Territory, including costs and/or expenses related to Phase I, II and III trials, shall be borne by Lundbeck.
3.2 Lundbeck shall always be responsible for all decisions on the further investigations concerning the development of Licensed Products. Development activities shall take place in accordance with Agreed Quality Standards. Lundbeck may at its own discretion decide to cease any and/or all development activities. However, Lundbeck shall decide no later than three years after the Date of Execution whether or not Lundbeck wishes to initiate a Phase I trial regarding Phanquinone.
3.3 Lundbeck shall report to and consult with Licensor as to results and progress with regard to Phanquinone. Specifically, Lundbeck shall, within the first year as of the Date of Execution, show that development work is in progress. Furthermore, Lundbeck shall, within the second year after the Date of Execution, show what results, if any, have been generated by such development work. No later than three (3) years after the Date of Execution, Lundbeck shall decide, and without delay inform so Licensor, whether or not Lundbeck will initiate a Phase I trial regarding Phanquinone. For such reporting and consultation each Party shall designate a focal person for contacts between the Parties. Such reporting and consultation shall be free of charge and each Party shall bear its own expenditures in this connection. Reporting and consultation shall take place two (2) to four (4) times each year.
3.4 Neither Licensor nor Lundbeck warrants that Registration of License Products will be obtained in the Territory.
4. KNOW-HOW AND INFORMATION
4.1. Information and Know-How, both original and copy, supplied for any reason by a Party to the other Party are the property of the supplying Party in whatever share information and Know-How may appear.
5. MARKETING
5.1 Lundbeck agrees to use its best reasonable efforts to commercialise Licensed Products in the parts of the Territory where Lundbeck reasonably deems it appropriate to market such Licensed Products and will keep Licensor continuously informed with respect to such commercialisation. If Lundbeck explicitly decides not to apply for Registration of a specific Licensed Product in a country within the Territory, Lundbeck shall in good faith negotiate with Licensor a sublicense agreement on fair market terms covering the country in question. If the Parties are unable to agree on a sublicensing agreement, Licensor shall have the right of first refusal in the event that Lundbeck reaches a bona fide understanding with a third party on terms which are significantly different from the terms discussed by the Parties.
5.2 Lundbeck shall pay for all costs related to its marketing and sale of Licensed Products in the Territory and shall source all Licensed Products itself.
6. MILESTONE PAYMENTS
6.1 Lundbeck will pay to Licensor the following amounts in accordance with the following schedule:
(a) Within seven (7) days after the Date of Execution, the sum of nine hundred and eighty eight thousand EUR (EUR 988,000) will be paid by Lundbeck to Licensor.
(b) Within seven (7) days from the date of the start of the first Phase I trial, the sum of four million nine hundred and thirty nine thousand EUR (EUR 4,939,000) will be paid by Lundbeck to Licensor. Such Phase I trial shall be sponsored by Lundbeck, reference is made to Article 3.1, and shall be deemed to have started on the date of the administering of the first dose to the first trial object. The Parties acknowledge that Lundbeck shall decide at its own discretion whether to start any Phase I trial, reference is made to Article 3.2.
(c) Within seven (7) days of the date of successful completion of the first Phase II trial or start of the first Phase 111 trial, whichever comes later, the sum of nine million eight hundred and seventy eight thousand EUR (EUR 9,878,000). Such Phase I1 trial shall be deemed to have been completed successfully if Lundbeck declares the trial to have been successful and decides to initiate a Phase 111 trial, whichever comes later, regarding the same Licensed Product. Such Phase 111 trial shall be sponsored by Lundbeck, reference is made to Article 3.1, and shall be deemed to have started on the date of the administering of the first dose to the first trial object.
6.2 Lundbeck shall only be liable to pay the amounts identified in Article 6.1 once, i.e. that Lundbeck's accumulated obligation under Article 6.1 can under no circumstances whatsoever exceed payment of fifteen million eight hundred and five thousand EUR (EUR 15,805,000), notwithstanding the number of Licensed Products for which research and development activities, including Phase I, II and III trials, have been initiated and/or completed.
6.3 All payments to be made under Article 6.1 above shall be made to a bank account as identified by Licensor, reference is made to Annex 2 hereto.
6.4 Any and all payments made under this Article 6 except payment made under Article 6.1 (a) shall be repaid by Licensor to Lundbeck if Licensor has not obtained any issued patent containing one or more claims covering a composition containing Phanquinone and/or Clioquinol or use of Phanquinone or Clioquinol or such a composition within three (3) years from the Date of Execution.
Prior to the Date of Execution, Licensor shall have provided Lundbeck with written and signed declarations from Mr P. Gerolymatos and Mr Mikis Xilinas to the effect that Mr Colin Louis Masters, Mr Ashley Ian Bush, Mr Konrad Traugott Beyreuther, Mr Xudong Huang, Mr Craig S. Atwood and Mr Rudolph E. Tanzi are not and cannot be considered as co-inventors of Phanquinone or patents and/or patent applications covering Phanquinone, processing of Phanquinone and/or use of Phanquinone. Such declarations shall be included as Annex 3 hereto.
7. ROYALTIES
7.1 Each Marketing Year, Lundbeck shall pay a royalty to Licensor for the licenses granted hereunder in accordance with the provisions of Article 7.3 hereof. Such royally shall be
- four percent (4%) of Net Sales up to one hundred million EUR (EUR 100,000,000.00),
- five percent (5%) of Net Sales between one hundred million EUR (EUR 100,000,000.00) and two hundred million EUR (EUR200,000,000.00) and
- six percent (6%) of Net Sales above two hundred million EUR (EUR 200,000,000.00)
of Licensed Products sold by Lundbeck and/or its Affiliates and/or its sublicensees and distributors. Royalties shall be paid only for the term of Licensed Patents covering the indications of the Licensed Products in question and only to the extent such Licensed Patents are enforceable, reference is made to Article 7.6.
Royalties for each Marketing Year, as provided hereunder, shall be paid by Lundbeck to Licensor in two installments at the end of each Half of Marketing Year as provided in Article 7.3 hereof.
7.2 Net Sales are to be calculated in local currencies for each of the countries in the Territory and shall be converted into DKK based on the average of the exchange rates of the first and the last Copenhagen banking day of the applicable marketing quarter. The exchange rate to be used is the purchase exchange rate for currency conversion as published by Den Danske Bank. If Den Danske Bank has no such exchange rate, the conversion shall be made at the average rate as calculated above for such remittances by such other first class international bankers. Prior to being paid to Licensor, royalty amounts shall be converted from DKK into EUR, using exchange rates for conversion from DKK to EUR on the last banking day of the applicable marketing quarter as quoted by Den Danske Bank.
7.3 Lundbeck shall within ninety (90) days from the last day of each Half of Marketing Year pay to Licensor the royalties due for that Half of Marketing Year and provide Licensor with a statement (the "Royalty Report") showing the total Net Safes effected hereunder by Lundbeck, its Affiliates and/or its sublicensees and distributors during the preceding Half of Marketing Year in the Territory and all Net Sales shall be segmented in each such report according to sales on a country-by-country basis.
7.4 Royalty payments due to Licensor hereunder shall be made in EUR by wire transfer to a bank account as identified by Licensor, reference is made to Annex 2 hereto. Bank fees charged by Lundbeck's bank will be borne by Lundbeck; bank fees charged by Licensor's bank will be borne by the Licensor. If DKK or any other currency relevant for this Agreement is changed to e.g. EUR the amounts shall be transformed to such new currency, applying the official rate of exchange as per date of transformation.
7.5 All taxes assessed or imposed against or required to be withheld from all payments due to Licensor shall be deducted from amounts payable hereunder and shall be paid to appropriate fiscal or tax authorities by Lundbeck on behalf of Licensor. Tax receipts received by Lundbeck evidencing payment of such taxes shall be forwarded to Licensor.
7.6 The royalty rate pursuant to Article 7.1 will be paid on Net Sales in the Territory on a country by country basis for the term of enforceable Licensed Patents covering the indications of the Licensed Products in question. If such Licensed Patents have expired in a specific country, no Royalties shall be payable for net sales obtained in this country. If such Licensed Patents have not been granted in a specific country, no Royalties shall be payable for Net Sales obtained in this country. Royalties shall only be payable on Net Sales obtained for indications covered by a Licensed Patent covering the Licensed Products in question.
7.7 Lundbeck shall keep for a period of four (4) Marketing Years following the year to which such records relate, full, true and accurate books of accounts and other records containing all information and data which may be necessary to ascertain and verify the royalties payable to Licensor hereunder.
7.8 Licensor shall have the right to have such pertinent books and records of Lundbeck inspected and examined biannually for the purpose of determining the accuracy of payments made hereunder in respect of a royally report which is not more than four (4) years old. Such inspection and examination shall be conducted by an independent, certified public accountant
selected by Licensor and to whom Lundbeck shall have no reasonable objection. Such accountant shall not disclose to Licensor any information except for information necessary to verify the accuracy of the reports and payments made pursuant to this Agreement. Results of such review shall be made available to both Parties. If the review effects an underpayment, Lundbeck shall promptly remit to Licensor any amounts due. If the underpayment is equal to or greater than five (5) percent of the payments made by Lundbeck to Licensor for such period under review, Lundbeck shall pay all costs of such review and audit. If the underpayment due represents less than five (5) percent of the payments made by Lundbeck, Licensor shall pay all costs of such review and audit.
7.9 Licensor is entitled to charge interest on arrears for delayed payments amounting to three (3) percent p.a. above the discount rate applied by the Danish National Bank at the due date, provided that Licensor prior to the due date has supplied all information necessary for effecting the transfer of the funds (accurate address of the relevant bank, accurate bank account, etc.)
7.10 Royalties paid under this Article 7 are non-refundable and non-creditable.
8. MARKETING RIGHTS OF LICENSOR
8.1 Licensor shall be entitled to exploit Licensor Technology commercially in countries and territories outside the Territory. This right includes but is not limited to the right to formulate, manufacture, package, use, sell, market, promote and distribute such registered Licensed Product. Licensor shall not grant sub-licenses unless Lundbeck consents in writing. Such consent shall not be unreasonably withheld.
8.2 Licensor shall be responsible for obtaining any written governmental approvals including any price and/or reimbursement approval required for the marketing of products within countries and territories outside the Territory. All costs and/or expenses incurred in connection with preparation and filing of applications for written governmental approvals as well as maintenance of such approvals shall be borne by Licensor. Licensor shall be allowed to base his applications on data or registration files prepared by Lundbeck, and Lundbeck shall use its best efforts to assist Licensor, upon request, in connection with the filing of regulatory applications. Licensor shall reimburse Lundbeck for any reasonably documented expenditures connection therewith.
8.3 Products marketed in accordance with Article 8.1 shall be marketed under trade marks registered and maintained by Licensor. Licensor shall not actively market such products in the Territory, and Lundbeck shall not actively market Licensed Products outside the Territory. On Licensor's request the Parties shall discuss the possibility of using the same trade mark registered and maintained by Lundbeck in said countries and territories.
8.4 On Licensor's request, Lundbeck shall deliver supplies of compounds covered by Licensed Patents to Licensor provided that Lundbeck and/or its Affiliates are marketing products containing such compounds in the Territory. Delivery of supplies shall take place in accordance with the following terms and conditions:
(a) Before delivery takes place, the Parties shall negotiate in good faith and agree upon reasonable specifications regarding the formulation of the compound or compounds in question and other quality standards. Lundbeck warrants that deliveries will comply with such specifications and standards.
(b) Licensor shall inform Lundbeck in writing of Licensor's needs for the following eight (8) calendar quarters ("Licensor's Order Forecasts"). Licensor's Order Forecasts shall be binding on Licensor in the range of eighty (80) to one hundred and ten (110) percent for the period covered by such forecasts.
(c) Lundbeck shall use its best reasonable efforts to deliver according
to Licensor's orders subject to a delivery time of at least three
(3) months calculated from dispatch of order and shall promptly give
Licensor notice in case of delay or in case that Lundbeck is unable
to deliver the quantities ordered by Licensor. Lundbeck shall use
its reasonable best efforts to ensure that deliveries comply with
Licensor's orders with regard to delivery time and quantities, but
does not warrant that Lundbeck is able to deliver within the above
mentioned delivery time nor that the quantities ordered will be
delivered. Delivery of supplies shall take place CIP (Incoterms
1990) Athens or elsewhere outside the Territory as instructed by
Licensor.
(d) The price to be paid by Licensor for supplies from Lundbeck shall be
calculated as, Lundbeck's internal Cost IV Price plus ten per cent
(10%) hereof provided that such supply price adequately reflects
Lundbeck's relevant overheads and ensures that Lundbeck receives a
reasonable profit. Lundbeck's internal Cost IV Price shall be
defined as the sum of the costs of (a) the direct variable costs,
i.e. active substance, excipients, packing material, wages and
salaries, (b) allocated semi-variable costs, i.e. wages and salaries
to supervisors, laboratory technicians and service personnel, other
personnel costs, repair and maintenance of machinery, stock material
used internally, stationary and acquisitions, (c) allocated fixed
costs, i.e. salary to Director of Production, staff, head of
departments, supervisors and laboratory technicians, other personnel
costs and depreciation and (d) allocated facilities costs, i.e. rent
and energy. Lundbeck shall be entitled to amend this definition from
time to time if Lundbeck demonstrates that the aforementioned
definition of Lundbeck's relevant overheads have deviated by more
than plus/minus five per cent (5%).
(e) Licensor shall notify Lundbeck in writing of any obvious defects within four (4) weeks of receipt of deliveries. Obvious defects shall include without limitation defects reasonably discoverable on visual examination of representative samples of a consignment. Licensor shall notify Lundbeck in writing of any non-obvious defects within four (4) weeks of discovery. Licensor shall not be obliged to perform any chemical analysis of deliveries. Lundbeck shall be entitled to visit and inspect the premises of Licensor used for storing, manufacturing, distribution etc.
(f) If deliveries do not comply with agreed upon specifications or standards, Licensor may instruct Lundbeck to refund the purchase price or require Lundbeck to replace the consignment.
(g) Lundbeck shall invoice Licensor in DKK upon delivery of each consignment at the prices specified in Article 8.4 (d) above. If DKK is changed to e.g. EUR the amounts shall be transformed to such new currency, applying the official rate of exchange as per date of transformation.
(h) All payments to be made under Article 8.4 (g) above shall be made to a bank account as identified by Licensor, reference is made to Annex 2 hereto.
(i) If Lundbeck due to a change of Lundbeck's production strategy wishes to cease production of supplies to Licensor wholly or partially, Lundbeck shall seek to secure supplies for Licensor from one or more third parties and/or Affiliates unless Licensor is willing to manufacture the quantities in question wholly or partially. The terms of such production shall be discussed in good faith between the Parties. If supplies from third parties and/or Affiliates of Lundbeck are provided to Licensor by Lundbeck, the supply price to be paid by Licensor shall amount to the supply price demanded by the third party or the Affiliate plus ten per cent (10%), such ten per cent (10%) to be paid to Lundbeck by Licensor.
9. PUBLICATION
9.1 If Lincensor contemplates, during the period from date of execution until the date the first Registration has been obtained, to make any publication or public presentation whatsoever concerning the use of Licensed Products, it shall send any manuscript for publication or abstract for public presentation to Lundbeck for comments at least three (3) months prior to submission for publication or presentation. If Lundbeck fails to respond to such request for two (2) months after receipt, then Lundbeck shall be deemed not to have any comments. Comments made within two (2) months after receipt by Lundbeck shall be included by Licensor in the final publication or presentation, respectively. Lundbeck may require the modification or deletion of parts of the manuscript of the abstract which in its opinion might jeopardize any industrial or commercial exploitation by Lundbeck of any of the Licensed Products. In addition Lundbeck may delay the publication or presentation for up to thirty-six (36) months, if the contents of such publication or presentation could in the opinion of Lundbeck jeopardize any possible intellectual property rights of/or licensed to Lundbeck or Lundbeck's commercial interests.
9.2 After the date of the first Registration Licensor shall not make any publication or public presentation of the results, data or knowledge that it has developed fully or partly pertinent to Licensed Products, unless Lundbeck's prior written approval, which should not be unreasonably withheld, has been obtained or unless such publication or presentation only contains information, already published or presented pursuant to Article 9.1.
9.3 Any publication or presentation shall mention the contribution of the respective Parties to the publication or presentation, respectively.
9.4 All publications or public presentations and public announcements made by Licensor and/or by Lundbeck and/or its/their Affiliates and/or its/their sublicensees concerning the Licensed Products shall specify that Licensed Products have been licensed to Lundbeck by Licensor.
10. CONFIDENTIALITY
10.1 Information and/or Know-How supplied by one Party (the "Supplying Party")
to the other Party (the "Receiving Party") as a result of this Agreement,
shall, regardless of whether or not it has been marked "Confidential" or
has been marked with a similar wording of the same meaning, be held in
confidence by the Receiving Party until 31 December 2010 or ten (10) years
after expiration or termination of this Agreement, whichever period is the
longer.
10.2 This confidentiality obligation should not be considered violated, if and
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to the extent that Information or Know-How:
(a) was at the time of disclosure publicly known or available;
(b) has, after disclosure to the Receiving Party, become publicly known or available through publication or otherwise, except by breach of this Agreement by the Receiving Party;
(c) was in the possession of the Receiving Party at the time of disclosure by the Supplying Party and was not acquired, directly or indirectly, from the Supplying Party;
(d) was received by the Receiving Party from a third party, provided, however, that such Information was not obtained by the said third party directly or indirectly, from the Supplying Party; or
(e) was disclosed by the Receiving Party due to regulatory or governmental or legal requirements or due to a court order.
10.3 If the Receiving Party asserts that its obligation of confidentiality
under this Article does not apply because of an exception to that
obligation, the Receiving Party shall have the burden of proving the
exception it asserts.
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11. PATENT PROSECUTIONAND PATENT INFRINGEMENT
11.1 Licensor undertakes to execute national and/or international patent
applications for Licensed Products insofar as such applications have not
already been executed and filed by Licensor, reference is made to Annex 1
hereto, and insofar as Lundbeck wishes to file such applications.
Licensor shall be the applicant in all patent applications, but the
preparation and drafting of such applications shall be done by Lundbeck.
Lundbeck shall decide at its own discretion the scope and content of such
applications, the claims to be included in such applications and which
countries shall be covered by such applications. However, whenever legally
possible, Lundbeck undertakes to include countries and territories outside
the Territory in international applications.
Licensor shall assist and cooperate with Lundbeck in connection with the
preparation and drafting of the patent applications in accordance with
Lundbeck's requests. Furthermore, on receipt of final patent applications,
Licensor shall sign the applications and other necessary documents and
return the applications and other necessary documents to Lundbeck for
filing within five (5) office days from receipt of the applications. In
circumstances where Lundbeck considers such a time limit to be
insufficient, and so notifies the Licensor, Licensor shall sign the
applications and other necessary documents and return the applications and
other necessary documents to Lundbeck for filing within forty-eight (48)
hours from receipt of the applications.
Any and all costs and expenses incurred after the Date of Execution in
connection with the preparation, drafting, filing and maintenance of
Licensed Patents in the Territory shall be borne by Lundbeck with the
exception of:
(a) costs incurred by Licensor in connection with Licensor's assistance
to and co-operation with Lundbeck concerning the preparation and
drafting of patent applications as well as costs incurred by
Licensor in connection with Licensor's signing and dispatch of
patent applications, it being understood that all fees payable to
patent authorities shall be paid by Lundbeck;
(b) all costs and expenses incurred in connection with the preparation
drafting, filing and maintenance of international patent
applications covering countries and territories outside the
Territory insofar as such costs and expenses relate to such
countries and territories. Prior to the filing of international
patent applications covering countries and territories outside the
Territory, the Parties undertake to negotiate in good faith how
Licensor's contribution to such costs and expenses shall be
calculated. If no agreement is reached, Lundbeck shall be entitled
to exclude countries and territories outside the Territory from the
application in question.
When filed Lundbeck takes over the continued prosecution and maintenance
of the applications and Licensed Patents obtained, in Licensor's name and
on Licensor's behalf, but on Lundbeck's account, in said countries and in
those parts of the Territory in which, in Lundbeck's opinion, is
reasonable to conduct such prosecution and maintenance and provided that
such prosecution and maintenance, in Lundbeck's opinion, is commercially
reasonable. Licensor shall no later than seven (7) days after the Date of
Execution and continuously thereafter make available to Lundbeck all such
documents and information as is reasonably requested by Lundbeck for the
said prosecution and maintenance of the Licensed Patents. Lundbeck shall
in its reasonable opinion decide how to so prosecute and maintain the
Licensed Patents, but Lundbeck will first consult with Licensor in cases
deemed important by Lundbeck. Neither Licensor nor Lundbeck
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warrants or represents that a Licensed Patent can be so maintained and
prosecuted that it will represent an enforceable patent covering the
indications of the Licensed Product in question. Lundbeck shall keep
Licensor informed on the status of the License Patents. If Lundbeck no
longer has interest in a patent or patent application which is part of the
Licensed Patents, Lundbeck shall notify Licensor immediately, which shall
have the right to continue to maintain the patent or application at its
expense. Any such patent or patent application shall no longer be licensed
under this Agreement.
11.2 Each Party shall notify the other Party promptly in writing of any
infringement of Licensed Patents in the Territory which becomes known to
such Party.
11.3 In order for Lundbeck to pursue infringements of the Licensed Patent in
the Territory, Licensor will supply Lundbeck with the necessary power of
attorney and will support Lundbeck in the prosecution of infringement.
Possible reimbursements from third parties resulting from the prosecution
of infringements will be due to Lundbeck. Should Lundbeck and Licensor
agree to carry on litigation together, possible reimbursements from third
parties resulting from the prosecution of infringements will be divided
between the contractual parties in proportion to the financial share in
the prosecution. If Lundbeck decides not to prosecute an infringement due
to Lundbeck estimating the chances for success being too low, Lundbeck
will inform Licensor accordingly in order for Licensor to decide whether
or not Licensor will prosecute the infringement on its own.
11.4 If Lundbeck or its Affiliates obtain one or more licenses under a patent
not licensed hereunder and agree to pay a royalty to a third party in
order to make, use or sell Licensed Product in the Territory or parts
thereof (whether as a condition of settlement of any infringement action,
or by court order or for any other reason) the obtaining of such license
must be reasonably approved by the Licensor unless required by court
order. The royalty payable to such third party shall be deducted from the
royalty payable to Licensor hereunder. However, Licensor's contribution to
the payment of royalty to the aforementioned third party shall under no
circumstances exceed an amount equaling 1/4 of Lundbeck's milestone
payments under Article 6.1. Deduction from the royalty payable to Licensor
hereunder shall be effected regardless of whether the Royalty paid to any
third party is the result of a condition of settlement of an infringement
action or a court order or takes place for any other reason.
In no case shall the current royalty payable to Licensor be less than 50%
of the royally otherwise due unless Licensed Patents have been deemed by
[ILLEGIBLE] court decision not to represent an enforceable patent covering
the indications of the Licensed Product in question in which case the
Licensed Patents shall be considered void for the country in question.
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12. LIABILITY AND INDEMNIFICATION
12.1 A Party shall be liable to the other for any direct damage caused or
contributed to by any action or inaction provided that such action or
inaction was the result of gross negligence.
12.2 Neither Party including their respective directors, officers and employees
shall he held liable for any incidental, indirect or consequential
damages, including, but not limited to the loss of opportunity, loss of
the use of any data or information supplied hereunder, loss of revenue or
profit in connection with or arising out of this Agreement, the services
performed by either Party hereunder or the existence, furnishing,
functioning, or the other Parts use of any information, documentation or
services provided pursuant to this Agreement, even if the Party causing
the damage has been advised of the possibility of such damages, unless the
damage suffered is due to gross negligence or willful misconduct.
12.3 Notwithstanding the foregoing, Lundbeck agrees to indemnify, defend and
hold Licensor and each of its officers, directors, employees, agents and
consultants (and their respective heirs and
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assignees) (each a "Licensor Indemnitee") harmless against all costs,
claims, suits, expenses (including reasonable attorneys' fees) and damages
arising from any negligence of Lundbeck or any Third Party for whom
Lundbeck is responsible in the manufacturing, distribution, promotion,
marketing and/or selling of Licensed Products in the Territory, provided
that the Licensor lndemnitee gives reasonable notice to Lundbeck of any
such claims or action, tenders the defence of such claim or action to
Lundbeck and assists Lundbeck at Lundbeck's expense in defending such
claim or action and does not compromise or settle such claim or action
without Lundbeck's prior written consent.
12.4 Notwithstanding the foregoing, Licensor agrees to indemnify, defend and
hold Lundbeck and each of its officers, directors, employees, agents and
consultants (and their respective heirs and assignees) (each a "Lundbeck
Indemnitee") harmless against all costs, claims, suits, expenses
(including reasonable attorneys' fees) and damages in countries and
territories outside the Territory arising from any negligence of Licensor,
or any third party for whom Licensor is responsible in the manufacturing,
distribution, promotion, marketing and/or selling of products containing
Licensed Products in countries and territories outside the Territory,
provided that the Lundbeck Indemnitee gives reasonable notice to Licensor
of any such claims or action, tenders the defence of such claim or action
to Licensor and assists Licensor at Licensor's expense in defending such
claim or action and does not compromise or settle such claim or action
without Licensor's prior written consent.
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13. TERM AND TERMINATION
13.1 The term of this Agreement shall be for a period beginning with Date of
Execution. Unless sooner terminated pursuant to Articles 13.2, 13.3, 14.1
or 17.5, the term of this Agreement shall end at such time as Lundbeck
shall have no further obligation to make payments to Licensor on Net Sales
of Licensed Products. Upon such termination, Lundbeck shall have a
perpetual royalty-free license to such Licensor Know-How which is not or
no longer covered by a Valid Claim.
13.2 Lundbeck may at any time terminate this Agreement for any reason,
effective upon three (3) months' prior written notice.
13.3 Except as provided in Article 14, Licensor may only terminate this
Agreement, effective upon three (3) months' prior written notice, if
Lundbeck ceases all research and development activities regarding the
Licensed Products. Upon receipt of notice inaccordance with this Article
13.3, Lundbeck shall be entitled to re-start the relevant research and
development activities within thirty (30) days; if activities are
re-started within thirty (30) days the notice shall not be effective.
13.4 In the event of termination in accordance with the Article neither Party
shall compensate the other for the consequence of termination.
13.5 If the Agreement is terminated by Lundbeck pursuant to this Article all
rights and acquired Know-how will be transferred immediately to Licensor
royalty-free.
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14. TERMINATION FOR CAUSE
14.1 A Party shall have the right to terminate this Agreement, if the other
Party fails to remedy any material breach within ninety (90) calendar days
of receipt by it of a written notice specifying the breach and requiring
it to be remedied. For the purposes of this sub-article, a breach shall be
considered capable of remedy if the Party in breach can comply with the
provisions in question in all respects other than as to the time of
performance.
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14.2. Termination under this Article 14 shall be without prejudice to either Party claiming damages to the extent warranted by applicable law.
15. RIGHTS AND PROCEDURE OF TERMINATION
15.1 Upon the effective date of termination with reference to Article 13.2 and
Article 13.3 Lundbeck shall return to Licensor Licensor Technology and
Information, original or copy, made available hereunder, and contemporary
with such return Licensor shall return Lundbeck all Lundbeck Know-How and
Information, original or copy, made available hereunder including
registration files and related material provided under Article 8.2.
15.2 If the Agreement is terminated pursuant to Article 13.3, Licensor shall
receive a royalty-free and non-exclusive license to Know-How generated by
Lundbeck in the course of Lundbeck's research and development activities.
However, such license shall be limited to Know-How which is needed by
Licensor in order for Licensor to continue the development activities
which have been seized by Lundbeck. Licensor shall not exploit the
Know-How in question for any other purpose.
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16. PUBLIC ANNOUNCEMENTS
16.1 Each Party agrees that, except as may be required by law, it shall not
disclose the substance or details of this Agreement without the prior
written consent of the other Party. In cases in which disclosure is
proposed or required by law, the disclosing Party, prior to such
disclosure, will notify the non-disclosing Party of the contents of the
proposed disclosure and discuss such contents. The non-disclosing Party
shall have the right to make reasonable changes to the disclosure to
protect its interests. The disclosing Party shall not unreasonably refuse
to include such changes in its disclosure if legally proper.
16.2 All publications or public presentations and public announcements made by
Licensor and/or Lundbeck and/or its/their Affiliates and/or its/their
sublicensees concerning the Licensed Products shall specify that Licensed
Products have been licensed to Lundbeck by Licensor.
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17. REPRESENTATIONS, WARRANTIES AND DUE DILIGENCE
17.1 Licensor represents and warrants to Lundbeck that:
(a) as of the Date of Execution Licensor possesses the exclusive right for the worldwide commercial exploitation of, title and interest in Licensed Patents and to the best of Licensor's knowledge the same are free of any liens, encumbrances, restrictions, licenses and other legal or equitable claims of any kind or nature;
(b) Licensor has the right to grant the licenses hereunder to Lundbeck;
(c) no license or sublicense of Licensor Technology whatsoever has been granted;
(d) as of the Date of Execution there are to the best of Licensor's
knowledge no valid third party rights, licenses or patents, other
than the license granted to Lundbeck hereunder, which are necessary
for Lundbeck's use and enjoyment of the license granted to Lundbeck
according to Article 2.
17.2 Notwithstanding Article 17.1 (d), the Parties are aware of the existence
of European Patent EP 613 560 B1 and Patent Application WO 98/40071.
Lundbeck shall at its sole discretion decide whether or not to enter into
license agreements with relevant parties considering this Patent and
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Patent Application, respectively. If Lundbeck decides to enter into such
agreement, any and all costs related to such agreements shall be born by
Lundbeck. If Lundbeck decides not to enter into such License Agreements
and if relevant parties initiate infringement proceedings, Lundbeck and
Licensor shall each pay fifty per cent (50%) of all costs related to such
proceedings including compensation to such parties. However, Licensor's
contribution to the payment of such costs shall under no circumstances
exceed 1/4 of Lundbeck's milestone payments under Article 6.1. Licensor's
contribution shall be set off against Lundbeck's milestone payments under
Article 6.1. If Licensor's contribution exceeds 1/4 of any milestone
payment under Article 6.1, payment of the part of the contribution
exceeding 1/4 of the milestone payment shall be postponed until a set off
against the next milestone payment may be effected. If Lundbeck decides
not to enter into the aforementioned License Agreements and if the
aforementioned relevant parties initiate infringement proceedings, the
parties shall, furthermore, share equally any and all costs related to
subsequent license agreements with such parties, including but not limited
to milestone payments and Royalties. However, Licensor's contribution to
the payment of such costs shall under no circumstances exceed 1/4 of
Lundbeck's milestone payments under Article 6.1.
17.3 Lundbeck represents and warrants to Licensor that:
(a) Lundbeck is acknowledged by the authorities in parts of the
Territory as an approved manufacturer and marketer of drugs, and is
as such under the inspection of the competent authorities in such
countries; and
(b) Lundbeck has the right and power to enter into and perform its
obligations under this Agreement.
17.4 The Parties hereto agree that here shall be no claims for indemnification
and/or warranty against Licensor out of this Agreement except those claims
identified in this Agreement.
17.5 Lundbeck shall be entitled within two (2) months from the Date of
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Execution to commence due diligence investigations concerning:
(a) any and all Information, Know-How and Licensed Patents;
(b) all material agreements relating to the Licensed Products, Information, Know-How and Licensed Patents between Licensor and third parties, including but not limited to agreements between Licensor and/or Mr P. Gerolymatos and Mr Mikis Xilinas.
Such due diligence investigations shall be completed no later than within three (3) months after the commencement of the investigations. Licensor shall make the necessary personnel and facilities available to Lundbeck on receipt of a twenty-four (24) hour written notice. Each Party shall bear its own costs in connection with such due diligence investigations.
Notwithstanding the provisions of Article 13, Lundbeck shall be entitled to terminate this Agreement with immediate effect if Lundbeck's due diligence investigations, in the opinion of Lundbeck, indicate that the commercial potential of the Licensed Product is unsatisfactory.
18. FORCE MAJEURE
18.1 Neither Party shall be liable to the other for any delay or failure in
performing any of its obligations hereunder or for any loss or liability
which the other incurs as a result thereof provided:
(a) the delay or failure is caused by circumstances beyond its
reasonable control; and
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(b) the non-performing Party gives prompt written notice of the reason for the delay or failure; and
(c) the non-performing Party uses its best reasonable efforts to overcome the cause of such delay or failure and notifies the other Party in writing of the nature of these efforts;
and in such case (but not otherwise) the non-performing Party shall be entitled to a reasonable extension of time for the performance of its obligations.
19. ASSIGNABILITY
19.1 Licensor shall not be allowed to assign, transfer and/or subcontract its
obligations under this Agreement, unless specifically agreed upon in
writing by Lundbeck in advance, but shall be allowed to assign its rights
to one (1) Affiliate. Lundbeck may assign and/or, transfer its rights
and/or obligations under this Agreement (1) to a company affiliated with
Lundbeck subject to Lundbeck having obtained Licensor's prior written
approval which shall not be unreasonably withheld, or (ii) to a third
party acquiring lines of activities from Lundbeck in general, which third
party shall in all respects substitute Lundbeck as a party to this
Agreement. Lundbeck may freely sublicense any right licensed hereunder;
reference is made to Article 2.1.
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20. LAW AND JURISDICTION
20.1 This Agreement and the invalidity thereof shall be governed by and
construed in accordance with the laws of Denmark.
20.2 In the event of any controversy or claim arising out of/or in relation to
any provision of this agreement or the breach or invalidity thereof, the
Parties shall try to settle the problem amicably between themselves.
Should they fail to agree, any such controversy or claim shall be settled
by arbitration in accordance with the current rules of conciliation and
arbitration of the International Chamber of Commerce. The place of
arbitration shall be London. The arbitral tribunal shall consist of three
members, one member being appointed by each of the Parties and the
chairman being appointed by the two members chosen by the Parties. If a
party has not appointed an arbitrator to the tribunal within thirty (30)
days after receiving notice of commencement of arbitration or if the two
members fail to choose a chairman within fourteen (14) days after their
appointment, the President of the International Chamber of Commerce shall
upon the request of either of the Parties appoint the member or members
required to complete the tribunal. The decision of the tribunal shall be
by majority vote and, if requested by either party, the tribunal shall
issue a written opinion. Costs shall be borne as determined by the
arbitrators. The arbitration proceeding shall be conducted in the English
language.
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21. MISCELLANEOUS
21.1 The Annexes to this Agreement shall form an integral part of the Agreement
and shall be regarded as incorporated into the Agreement in every respect.
In case of inconsistency between the terms and conditions of the said
Annexes and this Agreement the latter shall prevail to the extent of such
inconsistency but no further.
21.2 All communications between the Parties and all notices made hereunder
shall be made in the English language.
21.3 Failure of either Party to Insist upon a strict performance of any of the
provisions of this Agreement or to enforce its rights under this Agreement
at any time for any period shall not be
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construed as a waiver of such rights. The headings in this Agreement are
inserted for convenience only and do not affect the interpretation or
construction of this Agreement.
21.4 This Agreement shall supersede all previous agreements and arrangements,
written or oral, between the Patties on the subject matter hereof.
21.5 Lundbeck and Licensor agree that they are "Independent Contracts". Neither
Licensor nor any of its employees shall be employees of Lundbeck or vice
versa it being understood and agreed that Licensor, and Lundbeck are each
an independent contractor for all purposes and at all times. Nothing
contained in this Agreement shall be construed as making the Parties joint
venturers or as granting to either Party the authority to bind or contract
any obligations in the name of or on the account of the other Party or to
make any representations, guarantees or warranties on behalf of the other
Party.
21.6 This Agreement is the sole agreement with respect to the subject matter
hereof and supersedes all other agreements and understandings between the
Parties with respect to same.
21.7 Whenever possible, each provision of this Agreement will be interpreted in
such a manner as to be effective and valid under applicable law, but if
any provision is [ILLEGIBLE] to be prohibited by or invalid under
applicable law, such provision will be ineffective [ILLEGIBLE] to the
extent of such prohibition or invalidity, without invalidating the
remainder of this Agreement and the Parties shall promptly negotiate in
good faith a replacement provision to carry out the intention of the
invalid, illegal or unenforceable provision to the fullest extent
permitted by law.
21.8 All terms and provisions of this Agreement shall bind and inure to the
benefit of the parties hereto, and upon their respective successors and
assignees.
21.9 Both Parties represent and warrant that each of them has the [ILLEGIBLE]
authority to perform its respective obligations provided hereunder and
that the person [ILLEGIBLE] this Agreement has the authority to bind the
respective Party by its sole signature.
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This Agreement has been made in duplicate and is signed by the duly authorised representative of each Party hereto.
Copenhagen, 26th July 1999 Athens 26th July 1999
For H. Lundbeck A/S: For Licensor:
/s/ ERIK SPRUNK-JANSEN /s/ P.N. GEROLYMATOS
------------------------------- -------------------------------
Name: ERIK SPRUNK-JANSEN Name: P.N. GEROLYMATOS
Title: PRESIDENT Title: PRESIDENT
[SEAL]
|
Annex 1: Licensed Patents as per Date of Execution.
Annex 2: Identification of Licensor's Bank Account.
Annex 3: Declarations by Mr P. Gerolymatas and Mr Mikis Xilinas.
ANNEX 1
ANNEX:
===========================================================================================================================
Serial Filing Priority Application 1.P.-B
No. date date TITLE State No. ref.: Status
---------------------------------------------------------------------------------------------------------------------------
1 8 Aug 1997 13 Aug 1996 Use of the chelating agent PCT PCT/IB97/- 24945 National
clioquinol for the manufac- 00983 phase
ture of a pharmaceutical ---------------------------------------------
composition for the treat- EPC*) 97932969.5 26022 Pending
ment of Alzheimer's disease ---------------------------------------------
CZ PV 484-99 26023 Pending
---------------------------------------------
HU NA 26024 Pending
---------------------------------------------
IS 4972 26025 Pending
---------------------------------------------
NO 19990595 26026 Pending
---------------------------------------------
PL P 331822 26027 Pending
---------------------------------------------
RU 99105213 26028 Pending
---------------------------------------------
TR 1999/00293 26029 Pending
---------------------------------------------
SG 9900538-1 26030 Pending
---------------------------------------------
IL 128416 26031 Pending
---------------------------------------------
AU 36324/97 26032 Pending
---------------------------------------------
BR NA 26033 Pending
---------------------------------------------
CA 2,264,097 26034 Pending
---------------------------------------------
CN NA 26035 Pending
---------------------------------------------
JP 509541/1998 26036 Pending
---------------------------------------------------------------------------------------------------------------------------
|
ANNEX (continued)
===========================================================================================================================
Serial Filing Priority Application 1.P.-B
No. date date TITLE State No. ref.: Status
---------------------------------------------------------------------------------------------------------------------------
MX 99 1466 26037 Pending
---------------------------------------------
NZ 334124 26038 Pending
---------------------------------------------
KR 7001196/99 26039 Pending
---------------------------------------------
SK PV 0179/99 26046 Pending
---------------------------------------------------------------------------------------------------------------
13 Feb 1998 13 Aug 1996 Clioquinol for the treat- US O9/023,544 25766 Notice of
ment of Alzheimer's disease allowance
issued
---------------------------------------------------------------------------------------------------------------------------
2 23 Dec 1998 31 Dec 1997 Pharmaceutical composition PCT PCT/098/- 25875 Pending
comprising clioquinol and 02115
vitamin B12
13 Feb 1998 31 Dec 1997 US O9/O23,542 25768 Pending
---------------------------------------------------------------------------------------------------------------------------
3 13 Feb 1998 - Clioquinol for the treat- US 09/023,543 25767 Notice of
ment of Parkinson's allowance
disease issued
---------------------------------------------------------------------------------------------------------------------------
4 17 Jul 1998 21 Aug 1997 Use of phanquinone for the PCT PCT/IB98/- 25380 Pending
treatment of Alzheimer's 01095
31 Aug 1997 disease
---------------------------------------------------------------------------------------------------------------------------
5 7 Jan 1999 - Use of phanquinone for the GR OR 9901- 25519 Pending
treatment of memory impair- 00005
ment
---------------------------------------------------------------------------------------------------------------------------
|
*) Designated states: AT, BE, CH/LI, DB, DK, ES, FI, FR, GB, GR, IE, IT, LU, MC, NL, PT, SE; extensions: SI, RO
NA Not available
In accordance with the Letter of Intent and Article 1.8 of the Agreement, Licensed Patents as per Date of Execution also include
1) European patent application No. 94913779,8, publication No. 713 392.
Title: Use of clioquinol for treating Helicobacter, including H.Pylori, infections and related diseases.
2) Greek patent application No. 970100507.
Title: Pharmaceutical composition comprising clioquinol and vitamin B12.
as well as all extensions, divisions, continuations, continuations-in-part, reexaminations and reissues thereof and supplementary protection certificates thereof of all Licensed Patents, including but not limited to all international continuations of Greek patent application GR 9901-00005 (mentioned as Serial No.5 above).
ADDENDUM
As provided in article 6.3 of the Patent License Agreement, the Parties agree that Licensor's bank account(s) will be provided latest till 15/9/1999 and will be the subject matter of Annex No2 to be attached and made an integral part of the a.m Patent License Agreement.
For H. Lundbeck A/S For Licensor /s/ ERIK SPRUNK-JANSEN /s/ P.N. GEROLYMATOS Name: ERIK SPRUNK-JANSEN Name: P.N. GEROLYMATOS Title: President Title: President |
Annex 3
[LETTERHEAD OF TAKIS GEROLYMATOS]
Lundbeck
9 Ottiliavej DK-2500 Valby
Copenhagen
Denmark
Kryoneri 16 July 1999
|
For the kind attention of Mr Erik Sprunk-Jansen
In accordance with Article 6.4 of the Patent License Agreement between P.N. Gerolymatos S.A. and H. Lundbeck A/S, I the undersigned, P.N. Gerolymatos, declare that to the best of my knowledge Colin Louis Masters, Mr Ashley Ian Bush, Mr Konrad Traugott Beyreuth, Mr Xudong Huang, Mr Craig S. Atwood and Mr Rudolph E. Tanzi are not and cannot be considered as co-inventors of Phanquinone or patents and/or patent applications covering Phanquinone, processing of Phanquinone and/or use of Phanquinone.
Kindest regards,
/s/ P.N. Gerolymatos P.N. Gerolymatos |
19 July, 1999
To: Stig Lokke Pedersen
Senior Vice President
Corporate Affairs
Lundbeck A/S
9 Ottiliavej
DK-25 Valby, Denmark
Dr. Michael Xilinas
Dexiriadis Law Office
284 Archbishop Makarios III Avenue
Fortune Court
3105 Limasol, Cyprus
Dear Stig,
In accordance with the Article ___ of the Patent License Agreement between P.N. Gerolymatos S.A. and H. Lundbeck A/S, I, the undersigned Michael Xilinas, MD, DSc, DPH, declare that in the best of my knowledge Colin Louis Masters, Ashley Ian Bush, Konrad Traugont Bayreuther, Xudang Huang, Craig S. Alwood and Rudolph E. Tanzi are not and cannot be considered as co-inventors of phanquinone or patents and/or patent applications covering phanquinone, ___________ of phanquinone and/or use of phanquinone.
Kind regards,
/s/ Michael Xilinas Michael Xilinas |
cc. Prof. C. Calavros, Mr. D. Georgopoulos
ADDENDUM I
TO
PATENT LICENSE AGREEMENT
by and between
P.N. Gerolymatos S.A.
13 Asklipiou Street
14568 Kryoneri Attika
Greece
(hereinafter referred to as "Licensor")
and
H.Lundbeck A/S
Ottiliavej 9
DK-2500 Copenhagen-Valby
Denmark
(hereinafter referred to as "Lundbeck")
Dated 26 July 1999
This Addendum forms an integral part of the Patent License Agreement of 26 July 1999 between P.N. Gerolymatos S.A. and H. Lundbeck A/S (the "Patent License Agreement") and is to be deemed as fully incorporated within it.
1. AMENDMENTS OF THE PATENT LICENSE AGREEMENT
1.1 The Parties agree that Article 1.8 of the Patent License Agreement shall be amended as follows:
"1.8 "Licensed Patents" shall mean any and all present or future patents and patent applications in the Territory or covering any part of the Territory including but not limited to process patents, use patents and/or formulation patents containing one or more claims covering Phanquinone and/or its formulations or use as a medicinal product for any indication in whole or in part which are or become owned by Licensor. Licensed Patents include, without limitation, the issued patents and patent applications listed in Annex A, forming an integral part of this Agreement as well as any and all extensions, divisions, continuations, continuations-in-part, re-examinations and reissues thereof and supplementary protection certificates thereof in the Territory or covering any part of the Territory. Licensed Patents as per Date of Execution have been listed in Annex A hereto."
1.2 The Parties agree that Article 1.9 of the Patent License Agreement shall be amended as follows:
"1.9 "Licensed Products" shall mean formulations containing Phanquinone."
1.3 The Parties agree that Annex 1 of the Patent License Agreement shall be replaced by Annex A hereto.
1.4 The Parties agree that the following Article 2.3 shall be added to the Patent License Agreement:
"2.3 Trademark(s) shall be chosen by, registered to and owned by Lundbeck."
2. DEVELOPMENT OF CLIOQUINOL
2.1 Licensor and/or its designated sub-licensees will at its own discretion decide to carry out development studies of Clioquinol and will, if so, prepare the relevant documentation for applications for carrying out clinical trials as well as the relevant documentation for applications for registration with the health authorities in those parts of the world where Licensor is to market pharmaceutical products containing Clioquinol. Licensor shall apply for registration of pharmaceutical products containing Clioquinol in its own name and shall remain the sole holder of the registrations. All costs and/or expenses arising or incurred in connection with preparation and filing of the applications for registration including costs and/or expenses related to Phase I, II and III trials shall be borne by Licensor. For the purposes of this Addendum, "registration" shall mean all written governmental approvals including any price and/or reimbursement approval required for the legal marketing of pharmaceutical products containing Clioquinol in any country in the world.
2.2 Licensor shall report to Lundbeck as to results and progress with regard to Licensor's development of Clioquinol. Specifically, Licensor shall every six (6) month during the term of the Patent License Agreement submit to Lundbeck a written summary stating the results, findings and conclusions reached by Licensor concerning development of Clioquinol in the past six (6)
months. Such summaries shall include, without limitation, information as to whether or not Licensor expects to file any application for registration in any country worldwide and, if so, the content of such application and information on when and where such application may be filed. In addition, Licensor shall report all significant results and/or events to Lundbeck without delay.
2.3 Licensor does not warrant that registration of pharmaceutical products containing Clioquinol will be obtained in any country.
2.4 Any and all costs and expenses arising or incurred in connection with the preparation, drafting, filing and maintenance of patents covering Clioquinol shall be borne by Licensor.
3. MARKETING OF CLIOQUINOL
3.1 When the first registration of a pharmaceutical product containing Clioquinol covering the indication of Alzheimer's Disease, Parkinson's Disease or other indications within the CNS area is obtained by Licensor, Licensor shall immediately notify Lundbeck in writing (the "the Registration Notification"). Furthermore, Licensor shall, on request from Lundbeck, provide Lundbeck with all necessary information concerning such registration (the "the Registration Information").
3.2 For ninety (90) days after receipt of the Registration Notification or receipt of the Registration Information, which ever comes later, Lundbeck shall have the option to enter into a license agreement with Licensor which shall grant Lundbeck exclusive marketing rights to any and all pharmaceutical products containing Clioquinol and registered to Licensor ("the Lundbeck Option").
3.3 If the Lundbeck Option is exercised by Lundbeck, the license agreement concerning marketing of pharmaceutical products containing Clioquinol shall reflect, mutatis mutandis, the provisions of the Patent License Agreement. However, the Parties agree that the license agreement concerning marketing of pharmaceutical products containing Clioquinol shall include separate provisions concerning territory, royalties and minimum sales.
3.3.1 The territory of the license agreement concerning marketing of pharmaceutical products containing Clioquinol shall be defined as any country worldwide with the exception of Cyprus, Greece, Turkey, Israel, Hong Kong, Singapore, South Korea, Japan and Taiwan. However, Licensor shall have the option to exclude the United States of America from the definition of the territory. If this option is exercised Licensor shall be obligated to pay a royalty to Lundbeck of Net Sales in the United States of America. Such royalty shall be four per cent (4%) of Net sales up to one hundred million EUR (EUR 100,000,000.00), five per cent (5%) of Net sales up between one hundred million EUR (EUR 100,000,000.00) and two hundred million EUR (EUR 200,000,000.00), and 6 per cent of Net sales up above two hundred million EUR (EUR 200,000,000.00).
3.3.2 The royalties payable by Lundbeck to Licensor under the licence agreement concerning marketing of pharmaceutical products containing Clioquinol shall be calculated as follows:
- nineteen per cent (19%) of Net sales up to fifty million EUR (EUR 50,000,000.00),
- twenty per cent (20%) of Net sales between fifty million EUR (EUR 50,000,000.00) and one hundred million EUR (EUR 100,000,000.00), and
- twenty one per cent (21%) of Net sales above one hundred million EUR (EUR 100,000,000.00).
3.3.3 The license agreement concerning marketing of pharmaceutical products containing Clioquinol shall include provisions which require Lundbeck to guarantee minimum combined annual sales in Denmark, France, Germany, Sweden and the UK in the amount of fifty million EUR (EUR 50,000,000.00) in the fifth calendar year after a registration covering Denmark, France, Germany, Sweden and the UK has been obtained by Licensor. Failure to achieve such minimum sales shall entitle Licensor to terminate the license agreement with six (6) months' written notice.
3.4 If the Lundbeck Option is not exercised by Lundbeck, the Parties shall
enter into a royalty agreement concerning payments of royalty from
Licensor to Lundbeck. Such agreement shall include provisions which shall
require Licensor to pay Lundbeck a royalty of four per cent (4%) of Net
Sales up to one hundred million EUR (EUR 100,000,000.00), five per cent
(5%) of Net sales up between one hundred million EUR (EUR 100,000,000.00)
and two hundred million EUR (EUR 200,000,000.00), and 6 per cent of Net
sales up above two hundred million EUR (EUR 200,000,000.00) by Licensor,
its Affiliates or sub-licensees of pharmaceutical products containing
Clioquinol; provided, however, that such Net Sales are obtained in the
territory excluding the United States of America. On Net Sales obtained in
the United States of America and in countries outside the territory,
Licensor shall be required to pay Lundbeck a royalty of two per cent (2%)
of Net Sales. For the purposes of this Article 3.4, "territory" shall have
the meaning set out in Article 1.19 of the Patent License Agreement.
4. MISCELLANEOUS
4.1 In this Addendum the terms "Affiliates", "Clioquinol", "Licensor", "Lundbeck", "Parties" and "Phase I, II and III Trials" shall be construed in accordance with Article 1 of the Patent License Agreement.
4.2 In this Addendum the term "Net Sales" shall be gross sales of
pharmaceutical products containing Clioquinol to a hospital, wholesaler or
pharmacist less (1) the total of ordinary and customary trade discounts
earned and actually taken or granted, (2) any statutory or contractual
rebates paid to any governmental or any other public authority, agency or
entity, (3) cash and quantity discounts allowed, (4) allowances and
adjustments actually credited or paid to customers for spoiled, damaged,
outdated and/or returned pharmaceutical products containing Clioquinol,
(5) freight, insurance, transportation costs and handling charges included
by the seller in its invoices to independent third parties, (6) excise,
sales, and value added taxes included by the seller in its invoices to
independent third parties, and (7) customs duties and other compulsory
payments made by the seller to national, provincial and local government
authorities.
IN WITNESS HEREOF the Parties have caused this Addendum to be executed by their duly authorized representatives.
Athens, Copenhagen,
For P.N. Gerolymatos S.A.: for H. Lundbeck A/S:
/s/ Alberto Manouach /s/ Stig Lokke Pedersen
----------------------------- -----------------------------
Name: Alberto Manouach Name: Stig Lokke Pedersen
Title: Executive Vice President Title: Senior Vice President
International Division
|
/s/ P.N. Gerolymatos /s/ Erik Sprunk-Jansen
----------------------------- -----------------------------
Name: P.N. Gerolymatos Name: Erik Sprunk-Jansen
Title: President Title: President
-5-
|
Annex A |
Patents relating to Phanquinone
------------------------------------------------------------------------------------------------------------------------------
Filing Date Priority Date Title State Application Status
No.
------------------------------------------------------------------------------------------------------------------------------
17 July 1998 21 Aug 1997 Use of phanquinone for the PCT PCT/IB98/01 Has entered
31 Dec 1997 treatment of Alzheimer's 095 national phase
Disease
------------------------------------------------------------------------------------------------------------------------------
EPC1 NA Pending
------------------------------------------------------------------------------------------------------------------------------
AU 81241/98 Pending
------------------------------------------------------------------------------------------------------------------------------
BG NA Pending
------------------------------------------------------------------------------------------------------------------------------
BR NA Pending
------------------------------------------------------------------------------------------------------------------------------
CA NA Pending
------------------------------------------------------------------------------------------------------------------------------
CN NA Pending
------------------------------------------------------------------------------------------------------------------------------
CZ PV2000611 Pending
------------------------------------------------------------------------------------------------------------------------------
EA NA Pending
------------------------------------------------------------------------------------------------------------------------------
HK NA Pending
------------------------------------------------------------------------------------------------------------------------------
HU NA Pending
------------------------------------------------------------------------------------------------------------------------------
IL 134263 Pending
------------------------------------------------------------------------------------------------------------------------------
IS 5366 Pending
------------------------------------------------------------------------------------------------------------------------------
JP NA Pending
------------------------------------------------------------------------------------------------------------------------------
KR 20007001576 Pending
------------------------------------------------------------------------------------------------------------------------------
MX 001459 Pending
------------------------------------------------------------------------------------------------------------------------------
NO 20000771 Pending
------------------------------------------------------------------------------------------------------------------------------
NZ 502565 Pending
------------------------------------------------------------------------------------------------------------------------------
PL P338673 Pending
------------------------------------------------------------------------------------------------------------------------------
SG 2000004838 Pending
------------------------------------------------------------------------------------------------------------------------------
SK PV02062000 Pending
------------------------------------------------------------------------------------------------------------------------------
TR NA Pending
------------------------------------------------------------------------------------------------------------------------------
UA NA Pending
------------------------------------------------------------------------------------------------------------------------------
US NA Pending
------------------------------------------------------------------------------------------------------------------------------
7 Jan 1999 Use of phanquinone for the GR GR 9901- Abandoned
treatment of memory 00005
impairment
------------------------------------------------------------------------------------------------------------------------------
6 Jan 2000 7 Jan 1999 PCT PCT/IB00/00 Pending
011
------------------------------------------------------------------------------------------------------------------------------
6 Jan 2000 7 Jan 1999 AR P 00 0100046 Pending
------------------------------------------------------------------------------------------------------------------------------
6 Jan 2000 7 Jan 1999 CL 00282000 Pending
------------------------------------------------------------------------------------------------------------------------------
|
1) Designates states: AT, BE, CH/LI, CY, DE, DK, ES, FI, FR, GB, GR, IE, IT, LU, MC, NL, PT, SE, extension states: SI, LT, LV, AL, RO, MK
/s/ Alberto Manouach /s/ Stig Lokke Pedersen Alberto Manouach Stig Lokke Pedersen Executive Vice President Senior Vice President International Division /s/ P.N. Gerolymatos /s/ Erik Sprunk-Jansen P.N. Gerolymatos Erik Sprunk-Jansen President President |
ADDENDUM II
To Agreement dated July 26, 1999
by and between
P.N. GEROLYMATOS S.A.
13 Asklipiou Street
14568 Kryoneri Attika
Greece
(hereinafter referred to as "Licensor")
and
H. Lundbeck A/S
Ottiliavej 9
DK-2500 Copenhagen-Valby
Denmark
(hereinafter referred to as "Lundbeck")
WHEREAS the Parties have entered into an agreement dated July 26, 1999 and an Addendum I dated April 14, 2000 (collectively the "Agreement");
WHEREAS the Agreement contains provisions regarding development and commercialisation of compounds containing Clioquinol and separate provisions regarding development and commercialisation of compounds containing Phanquinone; and
WHEREAS the Parties have agreed that development and commercialisation of compounds containing Phanquinone shall be governed by terms similar to the terms governing development and commercialisation of compounds containing Clioquinol;
NOW, THEREFORE, the Parties have entered into this Addendum upon the following terms and conditions:
1. Definitions
1.1 The terms "Affiliate", "Clioquinol", "Net Sales", "Parties", "Party", "Patent License Agreement", "Phanquinone" and "Registration" shall have the meaning set forth in Article 1 and the preamble of the Agreement.
2. Development of Phanquinone
2.1 Article 5.1-5.4 of the Agreement shall with respect to Phanquinone be replaced by the provisions in Article 2.2-2.5 hereof.
2.2 Licensor and/or its designated sub-licensees will at its own discretion decide to carry out development studies of Phanquinone and will, if so, prepare the relevant documentation for applications for carrying out clinical trials as well as the relevant documentation for applications for Registration with the health authorities in those parts of the world where Licensor is to market pharmaceutical products containing Phanquinone. Licensor shall apply for Registration of pharmaceutical products containing Phanquinone in its own name and shall remain the sole holder of the Registrations. All costs and/or expenses arising or incurred in connection with preparation and filing of the applications for Registration including costs and/or expenses related to phase I, II and III trials shall be borne by Licensor.
2.3 Licensor shall report to Lundbeck as to results and progress with regard to Licensor's development of Phanquinone. Specifically, Licensor shall every six (6) months submit to Lundbeck a written summary stating the results, findings and conclusions reached by Licensor concerning development of Phanquinone in the past six (6) months. The first such summary shall be sent to Lundbeck no later than 1 May 2002. Such summaries shall include, without limitation, information as to whether or not Licensor expects to file any application for Registration in any country worldwide and, if so, the content of such application and information on when and where such application may be filed. In addition, Licensor shall report all significant results and/or events to Lundbeck without delay.
2.4 Licensor does not warrant that Registration of pharmaceutical products containing Phanquinone will be obtained in any country.
2.5 Any and all costs and expenses arising or incurred in connection with the preparation, drafting, filing and maintenance of patents covering Phanquinone shall be borne by Licensor.
3. Marketing of Phanquinone
3.1 Article 6.1-6.4 of the Agreement shall with respect to Phanquinone be replaced by the provisions in Article 3.2-3.5 hereof.
3.2 When the first Registration of a pharmaceutical product containing Phanquinone covering the indication of Alzheimer's Disease, Parkinson's Disease or other indications within the CNS area is obtained by Licensor, Licensor shall immediately notify Lundbeck in writing (the "Registration Notification"). Furthermore, Licensor shall, on request from Lundbeck, provide Lundbeck with all necessary information concerning such Registration (the "Registration Information").
3.3 For ninety (90) days after receipt of the Registration Notification or receipt of the Registration Information, which ever comes later, Lundbeck shall have the option to enter into a license agreement with Licensor which shall grant Lundbeck exclusive marketing rights to any and all pharmaceutical products containing Phanquinone and registered to Licensor ("the Lundbeck Option").
3.4 If the Lundbeck Option is exercised by Lundbeck, the license agreement concerning marketing of pharmaceutical products containing Phanquinone shall reflect, mutatis mutandis, the
provisions of the Patent License Agreement. However, the Parties agree that the license agreement concerning marketing of pharmaceutical products containing Phanquinone shall include separate provisions concerning territory, royalties and minimum sales.
3.4.1 The territory of the license agreement concerning marketing of pharmaceutical products containing Phanquinone shall be defined as any country worldwide with the exception of Cyprus, Greece, Turkey, Israel, Hong Kong, Singapore, South Korea, Japan and Taiwan. However, Licensor shall have the option to exclude the United States of America from the definition of the territory. If this option is exercised Licensor shall be obligated to pay a royalty to Lundbeck of Net Sales in the United States of America. Such royalty shall be four per cent (4%) of Net Sales up to one hundred million EUR (EUR 100,000,000.00), five per cent (5%) of Net Sales between one hundred million EUR (EUR 100,000,000.00) and two hundred million EUR (EUR 200,000,000.00), and 6 per cent of Net Sales above two hundred million EUR (EUR 200,000,000.00).
3.4.2 The royalties payable by Lundbeck to Licensor under the licence agreement concerning marketing of pharmaceutical products containing Phanquinone shall be calculated as follows:
- nineteen per cent (1ing%) of Net Sales up to fifty million EUR (EUR 50,000,000.00),
- twenty per cent (20%) of Net Sales between fifty million EUR (EUR 50,000,000.00) and one hundred million EUR (EUR 100,000,000.00), and
- twenty one per cent (21%) of Net Sales above one hundred million EUR (EUR 100,000,000.00).
3.4.3 The license agreement concerning marketing of pharmaceutical
products containing Phanquinone shall include provisions which
require Lundbeck to guarantee minimum combined annual sales in
Denmark, France, Germany, Sweden and the UK in the amount of fifty
million EUR (EUR 50,000,000.00) in the fifth calendar year after a
Registration covering Denmark, France, Germany, Sweden and the UK
has been obtained by Licensor. Failure to achieve such minimum sales
shall entitle Licensor to terminate the license agreement with six
(6) months' written notice.
3.5 If the Lundbeck Option is not exercised by Lundbeck, the Parties shall
enter into a royalty agreement concerning payments of royalty from
Licensor to Lundbeck. Such agreement shall include provisions which shall
require Licensor to pay Lundbeck a royalty of four per cent (4%) of Net
Sales up to one hundred million EUR (EUR 100,000,000.00), five per cent
(5%) of Net Sales between one hundred million EUR (EUR 100,000,000.00)
and two hundred million EUR (EUR 200,000,000.00), and 6 per cent of Net
Sales above two hundred million EUR (EUR 200,000,000.00) by Licensor, its
Affiliates or sub-licensees of pharmaceutical products containing
Phanquinone; provided, however, that such Net Sales are obtained in the
territory excluding the United States of America. On Net Sales obtained in
the United States of America and in countries outside the territory,
Licensor shall be required to pay Lundbeck a royalty of two per cent (2%
of Net Sales. For the purposes of this Article 3.5, "territory" shall mean
any country worldwide with the exception of Cyprus, Greece, Turkey,
Israel, Hong Kong, Singapore and South Korea.
4. Effective Date and Governing Law
4.1 This Addendum shall take effect on the date of the last signature on this Agreement. The Addendum shall be governed by and construed in accordance with the laws of Denmark.
IN WITNESS HEREOF the Parties have caused this Addendum to be executed by their duly authorized representatives.
Athens, February 18, 2002 Copenhagen, For P.N. Gerolymatos S.A.: for H. Lundbeck A/S: /s/ P.N. Gerolymatos /s/ Eric Sprunk-Jansen ----------------------------- ----------------------------- Name: P.N. GEROLYMATOS Name: ERIC SPRUNK-JANSEN Title: President Title: PRESIDENT |
ADDENDUM III
To
Patent License Agreement dated July 26, 1999 and to subsequent Addenda I and II thereto
By and Between
P.N. GEROLYMATOS S.A.
13 Asklipiou Street
145 68 Kryoneri Attika
Greece
(hereinafter referred to as "Licensor")
and
H. LUNDBECK A/S
Ottiliavej 9
DK-2500 Copenhagen-Valby
Denmark
(hereinafter referred to as "Lundbeck")
Dated July 19, 2002
Whereas the Parties have entered into an Agreement dated July 26, 1999 and, Addendum I dated April 14, 2000 and an Addendum II dated February 18, 2002 (collectively the "Agreement");
This Addendum forms an integral part of the Patent License Agreement of July 26, 1999 between P.N. Gerolymatos S.A. and H. Lundbeck A/S (the "Patent License Agreement") and is to be deemed as fully incorporated within it.
Now, the Parties have entered into this Addendum III upon the following terms and conditions:
1. AMENDMENTS OF THE PATENT LICENSE AGREEMENT AND ADDENDA I AND II.
With respect to Article 3 "Marketing of Clioquinol" of Addendum I and Article 3 "Marketing of Phanquinone" of Addendum II and with specific reference to the case in which Licensor shall be obliged to pay royalties to Lundbeck as provided therein as per Article 3.3.1 and 3.4 of Addendum I and Article 3.4.1 and 3.5 of Addendum II respectively, the Parties hereby agree that the percentages of royalties which Licensor shall be obliged to pay to Lundbeck are reduced by 50%.
2. EFFECTIVE DATE AND GOVERNING LAW
This Addendum shall take effect on the date of July 19, 2002. The Addendum shall be governed by and construed in accordance with the laws of Denmark.
IN WITNESS WHEREOF the Parties have caused this Addendum to be executed by their duly authorized representatives.
Athens, July 19, 2002 Copenhagen, July 19, 2002
For P.N. Gerolymatos S.A.: for H. Lundbeck A/S:
/s/ Erik Sprunk-Jansen
----------------------------- -----------------------------
Name: P.N. Gerolymatos Name: Erik Sprunk-Jansen
Title: President Title: President
|
ADDENDUM
Pursuant to the Patent License Agreement entered into between P.N. Gerolymatos S.A. (referred to as "Licensor") and H. Lundbeck A/S (referred to as "Lundbeck") dated 26th July 1999, as amended by Addendum I, dated April 14, 2000 ("Addendum I"), Addendum II, dated February 18, 2002 ("Addendum II"), and Addendum III, dated July 19, 2002 ("Addendum III") (collectively the "Patent License Agreement"), it is hereby irrevocably and unreservedly confirmed, that Lundbeck agrees to the exclusion of the Territory of the United States of America from the Territory of Lundbeck as the Territory of a license agreement concerning marketing of pharmaceutical products containing Clioquinol or Phanquinone.
It is further understood and explicitly agreed that the exclusion of the USA from the Territory shall be considered made on the basis of the option granted to Licensor according to Article 3.3.1 of the Addendum I and Article 3.4.1 of Addendum II to the Patent License Agreement and all other terms and arrangements stipulated in the aforementioned Patent License Agreement and relevant Addenda, including indicatively payment of royalties etc., will remain unaltered except as provided below.
The Parties hereby agree that references to "Licensor" in Sections 2 and 3.1 of Addendum I and Sections 2 and 3.2 of Addendum II shall be construed to mean "Licensor or Prana Biotechnology Limited ("Prana") or the designee of Prana" solely with respect to the USA, Japan, and Taiwan. With respect to countries outside the USA, Japan, and Taiwan, Licensor shall remain obligated under Sections 2 and 3.1 of Addendum I and Sections 2 and 3.2 of Addendum II, except as otherwise agreed in writing by Prana and Licensor, in which case Lundbeck shall accept performance by Prana of such agreed obligations as the designee of Licensor. Except as provided here, the Parties agree that the term "Licensor" in the Patent License Agreement shall not include Prana.
H. LUNDBECK A/S
By: /s/ Stig Lokke Pedersen -------------------------------------------------- Name: STIG LOKKE PEDERSEN Title: EVP |
P.N. GEROLYMATOS S.A.
By: /s/ P.N. Gerolymatos -------------------------------------------------- Name: P.N. GEROLYMATOS Title: President |
Execution Version
PATENT RIGHTS SECURITY AGREEMENT
THIS PATENT RIGHTS SECURITY AGREEMENT (this "Agreement") dated as of July 28, 2004 is made by PRANA BIOTECHNOLOGY LIMITED, a corporation organized under the laws of Australia ("Prana"), in favor of P.N. GEROLYMATOS S.A., a corporation organized under the laws of Greece (the "Secured Party").
RECITALS
WHEREAS, the parties hereto and Panayotis N. Gerolymatos, The General Hospital Corporation, Ashley I. Bush, Rudolph Tanzi and Robert Cherney have entered into that certain Settlement Agreement, of even date herewith.
WHEREAS, further to such settlement, the parties hereto have entered into that certain Patent Assignment and Settlement Agreement dated as of even date herewith (the "Patent Assignment Agreement") whereby the Secured Party sold, transferred and assigned the Assigned Patent Rights (as defined in the Patent Assignment Agreement) to Prana. In connection with such transfer, Prana is hereby granting to the Secured Party a first priority security interest in and continuing lien on the Assigned Patent Rights and the other Collateral (as defined below) to secure Obligations (as defined below) of Prana under the Patent Assignment Agreement. Capitalized terms used but not otherwise defied herein shall have the same meanings as in the Patent Assignment Agreement.
NOW, THEREFORE, for good and valuable consideration, receipt of which is hereby acknowledged and intending to be legally bound, as collateral security for the prompt and complete payment and performance when due of Obligations, Prana hereby represents, warrants, covenants and agrees as follows:
1. Grant of Security Interest.
a. As collateral security for the prompt and complete payment, performance and observance of all of the Obligations, Prana hereby grants to the Secured Party a security interest in all of Prana's right, title and interest, whether now owned or existing or hereafter created or acquired in, to and under all of the following (collectively, the "Collateral"): the Assigned Patent Rights set forth on Exhibit A attached hereto, as amended from time to time.
b. In furtherance of and without limiting the generality of foregoing, if new Patent Rights are added to the Assigned Patent Rights because of the addition of new territories in accordance with Section 2.2 of the Patent Assignment Agreement, the provisions of this Agreement shall automatically apply with respect to such new Assigned Patent Rights, and Prana hereby grants to the Secured Party a security interest in all of Prana's right, title and interest in, to and under such new Assigned Patent Rights, which shall be deemed to be part of the Collateral. The Secured Party acknowledges that Prana's rights in the Collateral are subject to the terms of third party agreements entered into by Prana prior to the Effective Date with respect to the Assigned Patent Rights.
c. For purposes of this Agreement, "Obligation(s)" means the obligations of Prana (i) within eight (8) years of the Effective Date to begin a new Phase II Clinical Study (excluding any such studies begun before the Effective Date) for approval by a Regulatory Authority of CQ, PQ, or any
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Derivative (as defined in the Derivative Agreement) and (ii) to make royalty or milestone payments as provided in Article 3 of the Patent Assignment Agreement that are not disputed in good faith. The parties hereto further agree that the Obligations secured hereby shall also include Prana's obligations to the Secured Party under any arbitral award or a judgment of any court granted to the Secured Party in respect of Prana's breach of any of the foregoing Obligations, subject to the limitations set forth in Section 11.1 of the Patent Assignment Agreement.
d. Notwithstanding the terms of Section 1(a) or any other provision
of this Agreement, Prana shall not be limited in any manner in its ability to
grant rights to third parties under the Assigned Patent Rights pursuant to
Section 2.6 of the Patent Assignment Agreement. All rights of the Secured Party
under Sections 1(a) and (b) shall be subject to the Third Party Rights as
provided in Section 2.4 of the Patent Assignment Agreement.
e. Effective upon the written certification by Prana that Prana has within the eight (8) year period after the Effective Date begun a new Phase II Clinical Study (excluding any such studies performed before the Effective Date) for approval by a Regulatory Authority of CQ, PQ, or any Derivative, the Obligations described in Section l(c)(i) will terminate in accordance with the terms of Section 2.4(b) of the Patent Assignment Agreement and no longer constitute an Obligation hereunder.
f. The grant of the Security Interest is not effective until assignment of the Assigned Patent Rights pursuant to the Patent Assignment Agreement.
2. Authorization and Request. Prana hereby authorizes the Secured Party to file one or more financing or continuation statements, and amendments thereto, including, without limitation, one or more financing statements under the Uniform Commercial Code, as in effect from time to time in any relevant jurisdiction, indicating that such financing statements cover all Collateral or any part thereof. A photocopy or other reproduction of this Agreement or any financing statement covering the Collateral or any part thereof shall be sufficient as a financing statement where permitted by law. Prana authorizes and requests the applicable authorities in the Prana Territories to record this Agreement. Prana hereby authorizes and consents to the Secured Party filing, at the expense of Prana, a copy this Agreement with the United States Patent and Trademark Office (the "PTO").In addition, Prana hereby agrees that it shall so record this Agreement in the Prana Territories and provide to the Secured Party written evidence of such recordation. If Prana fails to do so within ninety (90) days after the execution hereof, PNG shall have the right to so record this Agreement at Prana's expense.
3. Covenants and Warranties. Prana represents, warrants, covenants and agrees as follows:
a. Performance of this Agreement does not conflict with or result in a breach of any other written agreement to which Prana is bound, except for such conflicts or breaches that would not result in a material impairment of the ability of Prana to perform its obligations hereunder or to grant the security interest provided for hereunder, a material impairment of the rights of or remedies available to the Secured Party hereunder, or a material adverse effect on the Collateral or the security interest in favor of the Secured Party in the Collateral or the priority thereof.
b. During the term of this Agreement, Prana will not transfer, sell, assign, encumber, mortgage, license, sublicense, grant rights to prosecute and enforce and covenants not to sue
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and otherwise grant rights in and to and otherwise encumber in any kind or
nature any interest in the Collateral except as otherwise permitted under
Section 2.6 of the Patent Assignment Agreement.
C. This Agreement creates, in favor of the Secured Party, a valid and perfected security interest in the Collateral in the Prana Territories, securing the performance of the Obligations upon making the appropriate filings with the appropriate authorities with respect to the Collateral. Such security interest is of a first priority.
4. Further Assurances. On a continuing basis and from time to time, as additional Assigned Patent Rights become subject to this Agreement as a result of the addition of additional territories in accordance with Section 2.2 of the Patent Assignment Agreement, at the Secured Party's request, Prana will, subject to any prior licenses, encumbrances and restrictions and Third Party Rights, make, execute, acknowledge and deliver, and file and record in the proper filing and recording places in the Prana Territories, all such instruments, including appropriate financing and continuation statements and collateral agreements and filings with the PTO and other applicable authorities, and take all such action as may reasonably be deemed necessary or advisable, or as reasonably requested by the Secured Party, to perfect the Secured Party's security interest in the Collateral, or for assuring and confirming to the Secured Party the grant or perfection or priority of a security interest in the Collateral. Prana will furnish to the Secured Party from time to time statements and schedules further identifying and describing the Collateral and such other reports in connection with such Collateral as the Secured Party may reasonably request, all in reasonable detail.
5. Events of Default. The parties confirm and acknowledge that this
Agreement is subject to the provisions of Section 10 of the Patent Assignment
Agreement regarding binding arbitration. An Event of Default under this
Agreement shall mean that both of the following events have occurred: (i) the
failure to perform or observe any of the Obligations, which failure remains
uncured for thirty (30) days following written notice of such failure, and (ii)
if Prana disputes whether a failure to perform or observe any of the Obligations
has occurred and institutes a dispute resolution procedure in accordance with
Section 10 of the Patent Assignment Agreement prior to the end of the foregoing
thirty (30)-day period, the completion of any dispute resolution procedure
pursuant to such Section 10 with a determination by the arbitrators that such a
failure has occurred; provided that the institution of such procedures shall not
in any manner extend the foregoing thirty (30)-day cure period.
6. Remedies. Upon the occurrence of an Event of Default, subject to the provisions of Section 1(d) of this Agreement, the Secured Party shall have all rights and remedies available to it under applicable law, including under the Uniform Commercial Code as in effect from time to time in the State of New York. Notwithstanding anything contained herein to the contrary, in the event an Event of Default occurs due to the failure of Prana to make payments pursuant to Article 3 of the Patent Assignment Agreement, the remedies available to the Secured Party hereunder shall occur only with respect to the Collateral in those territories in which the events triggering Prana's payment obligations under such Article 3 arise and in which Prana's failure to make such payments results in an Event of Default. This Agreement terminates upon the satisfaction and payment in full of the Obligations.
7. Expenses. In the event of an occurrence of an Event of Default, Prana agrees to pay, on demand, all of the Secured Party's out-of-pocket expenses (including reasonable attorneys' fees and disbursements) incurred in connection with the enforcement of this Agreement and the rights and remedies in connection herewith including, without limitation, all reasonable attorneys' fees and disbursements, and all reasonable costs incurred by Secured Party in connection with the enforcement of
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any such rights or remedies in connection with any proceeding commenced by or against Prana under Title 11 of the U.S. Code or any similar law in any other country.
8. Cumulative Remedies: No Deficiency. Subject to the provisions of Sections 5 and 6 of this Agreement, Prana hereby acknowledges and affirms that the rights and remedies with respect to the Collateral, whether established hereby or by the Patent Assignment Agreement or by any other agreements or by law, shall be cumulative and may be exercised singularly or concurrently, provided, however, upon the Secured Party's exercise of its remedies under either Section 6 of this Agreement or Section 2.4 of the Patent Assignment Agreement, any further claims or recourse against Prana, including, without limitation, any deficiency claim, with respect to any Obligations as to which such remedies have been exercised shall be subject to the limitations set forth in Section 11.1 of the Patent Assignment Agreement.
9. Amendments. This Agreement may be amended only by a written instrument signed by both parties hereto.
10. Counterparts. This Agreement may be executed in any number of counterparts, all of which taken together shall constitute one agreement, and any of the parties hereto may execute this Agreement by signing any such counterpart. This Agreement shall be effective when it has been executed by Prana and the Secured Party.
11. Choice Of Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, INCLUDING, WITHOUT LIMITATION, SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW. SUBJECT TO THE PROVISIONS OF SECTION 5 OF THIS AGREEMENT REGARDING BINDING ARBITRATION, THE PARTIES AGREE THAT THE SECURED PARTY MAY BRING AN ACTION TO ENFORCE ANY ARBITRATION AWARD IN THE NEW YORK STATE COURTS AND THE UNITED STATES FEDERAL COURTS LOCATED IN THE SOUTHERN DISTRICT OF NEW YORK, AND THE PARTIES HERETO HEREBY CONSENT TO THE NON-EXCLUSIVE PERSONAL JURISDICTION AND VENUE OF THE COURTS.
12. Conflict. To the extent of any conflict between the provisions of this Agreement and the provisions of the Patent Assignment Agreement, the provisions of the Patent Assignment Agreement shall govern and control.
13. Confidentiality. The confidentiality obligations set forth in Section 1 of the Settlement Agreement are incorporated herein in their entirety.
[Signature Page Follows]
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IN WITNESS WHEREOF, the parties have caused the Agreement to be duly executed as of the date written above.
PRANA BIOTECHNOLOGY LIMITED
By: /s/ Geoffrey Kempler -------------------------------- Name: Geoffrey Kempler Title: Executive Chairman Date: July 28, 2004 |
P.N. GEROLYMATOS S.A.
By: /s/ P. Gerolymatos -------------------------------- Name: P. Gerolymatos Title: President & Managing Director Date: July 28, 2004 |
[Signature Page to Patent Rights Security Agreement]
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Exhibit "A"
attached to that certain
Patent Rights Security Agreement dated July 28, 2004.
Assigned Patent Rights
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Country Application No. Patent No.
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Japan 1998-509541
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Japan 2000-507371
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USA 09/485,909 6,670,369
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Japan 2000-592001
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USA 10/098,922
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USA 09/023,544 6,001,852
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USA 09/023,543 5,980,914
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USA 09/023,542 5,994,323
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USA 10/7 17,182
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|
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DERIVATIVES AGREEMENT
This Derivatives Agreement (this "Agreement") is entered into effective as of July 28, 2004 ("Effective Date"), by and among P.N. Gerolymatos S.A., a corporation organized under the laws of Greece ("PNG") and Prana Biotechnology Limited, a corporation organized under the laws of Australia ("Prana").
WITNESSETH
WHEREAS, Prana obtained a license under certain patents from MGH covering certain pharmaceutical compositions and uses of CQ (as hereinafter defined) to treat and prevent specified diseases;
WHEREAS, PNG is the patentee of certain patents covering certain pharmaceutical compositions and uses of CQ and PQ (as hereinafter defined) to treat and prevent specified diseases;
WHEREAS, Prana, MGH and certain individuals, filed suit in the United States against PNG and Panayotis N. Gerolymatos to correct inventorship under certain of such patents;
WHEREAS, PNG filed several counterclaims in response to such suit, and thereafter filed suit against Prana in Greece;
WHEREAS, PNG and Prana are also engaged in certain patent oppositions with respect to each other's patents;
WHEREAS, PNG and Prana desire to and have agreed to settle finally their disputes as contemplated in the Patent Assignment and Settlement Agreement, of even date herewith, entered into by the parties hereto (the "Patent Assignment Agreement"); and
WHEREAS, PNG and Prana desire to enter into this Agreement to provide PNG with additional compensation with respect to the Patent Assignment Agreement.
NOW, THEREFORE:
in view of the foregoing premises and the mutual covenants set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which is acknowledged by each party, the parties hereto agree as follows.
1. DEFINITIONS
1.1 Affiliate means any corporation, company, partnership, joint venture and/or firm that controls, is controlled by, or is under common control with a Party. For purposes of this Section 1.1,"control" shall mean (a) in the case of corporate entities, direct or indirect ownership of at least fifty percent (50%) of the stock or shares having the right to vote for the election of directors, and (b) in the case of non-corporate entities, direct or indirect ownership of at least fifty percent (50%) of the equity interest with the power to direct the management and policies of
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such non-corporate entities. The Parties acknowledge that in the case of certain entities organized under the laws of certain countries outside the United States, the maximum percentage ownership permitted by law for a foreign investor may be less than fifty percent (50%), and that in such case such lower percentage shall be substituted in the preceding sentence, provided that such foreign investor has the power to direct the management and policies of such entity.
1.2 Clioquinol or CQ means 5-Chloro-7-iodo-8-quinolinol.
1.3 Derivative means the metal protein attenuating compounds other than CQ or PQ that are claimed in the patent applications listed in Schedule 1.4. Schedule 1.4 will be updated from time to time by the Parties to include any future patent applications filed within eight (8) years after the Effective Date that claim additional metal protein attenuating compounds invented by Prana directed to related chemical structural derivatives of CQ or PQ for the treatment of Alzheimer's Disease and Parkinson's Disease.
1.4 Derivative Milestone Payment means a payment from one or more third parties in the form of a milestone payment (including any up-front or cash-down payment) associated specifically with the development of a Derivative.
1.5 Income means (a) royalties and other income received by Prana from licensees and sublicensees as a result of such licensees' and sublicensees' sale of Derivatives; and (b) income (net income prior to taxes) earned by Prana from the sale of Derivatives by Prana.
1.6 Party means PNG or Prana; Parties means PNG and Prana.
1.7 Patent Right means any patent or patent application and all substitutions, renewals, divisionals, continuations, continuations-in-part (with respect to the applications set forth on Schedule 1.4 to the extent any such continuation-in-part was filed within eight (8) years after the Effective Date) resulting patents, reissues, reexaminations, extensions, and refilings thereof.
1.8 Phanquinone or means 4,7-Phenanthroline-5,6-dione.
2. DERIVATIVES
2.1 No Obligation. Prana is not obligated to research, develop, manufacture, commercialize or otherwise invest in any compound or any derivatives of CQ or PQ, including the Derivatives.
2.2 Right to Review. PNG shall have the right to review any third party agreement entered into by Prana granting a license of rights to Derivatives prior to Prana signing such an agreement, subject to written obligations of confidentiality and non-use that are consistent with those contained in this Agreement. The final decision on the license terms and conditions (in accordance with the foregoing), timing and the licensee remains solely at Prana's discretion. Upon execution of each license agreement or any amendment thereto, Prana shall provide PNG with a copy of such executed agreement and any amendment thereto.
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3. FINANCIAL PROVISIONS
3.1 Milestone Payments.
(a) In the event that Prana receives Derivative Milestone Payments, Prana shall pay to PNG two percent (2%) of Derivative Milestone Payments received by Prana.
(b) Milestone Payments Payable Only Once. For purposes of clarity, the milestone obligations pursuant to this Section 3.1 are not to duplicate the milestone obligations of the Patent Assignment Agreement, and, in all cases, the maximum milestone obligations associated with the development of Derivatives is two percent (2%).
3.2 Royalty Payments.
(a) Prana. Prana shall pay to PNG a royalty of two percent (2%) on all Income.
(b) Length of Royalty Payments. The royalties payable under subsection (a) shall be paid until the expiration of all Patent Rights listed on Schedule 1.4 (as updated pursuant hereto) that cover such Derivative.
(c) Royalties Payable Only Once. The obligation to pay royalties pursuant to this subsection (c) is imposed only once with respect to the same unit of a Derivative. Except as specifically provided in this Agreement, it is understood and agreed that there shall be no deductions from the royalties payable under this Agreement. For purposes of clarity, the royalty obligations pursuant to this Section 3.2 are not to duplicate the royalty obligations of the Patent Assignment Agreement, and, in all cases, the maximum royalty obligations associated with the development of Derivatives is two percent (2%).
(d) Reports and Accounting.
(i) Reports: Royalty Payments. Prana shall deliver to PNG,
within sixty (60) days after the end of each calendar
quarter with respect to royalties payable pursuant to
Section 3.2 or within thirty (30) days after receipt of
Derivative Milestone Payments pursuant to Section 3.1,
as applicable, reasonably detailed written accountings
of Income of the Derivatives or milestone payments, as
applicable, that are subject to payments due to PNG for
such calendar quarter or reasonably detailed written
description of the facts and circumstances related to
any milestone payment. Such royalty reports shall
indicate gross Income and the resulting calculation of
royalties. When Prana delivers such accountings to PNG,
Prana shall also deliver all royalty payments due under
Section 3.2 and milestone payments due under Section
3.1, as applicable, to PNG for the relevant period. With
respect to sales of Derivatives invoiced in United
States Dollars, the sales and royalties payable shall be
expressed in United States Dollars. With respect to
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Income of the Derivatives invoiced in a currency other than United States Dollars, the royalties payable shall be expressed in their United States Dollar equivalent, calculated using the applicable conversion rates for buying United States dollars published by The Wall Street Journal (NY edition) on the last business day of the calendar quarter to which the royalty report relates. Prana shall pay milestone payments in United States dollars.
(ii) Audits. Prana shall keep complete and accurate records of the latest three (3) years of Income to which royalties attach and activities to which milestone payments attach. For the sole purpose of verifying royalties or milestone payments payable to PNG, PNG shall have the right annually at its own expense (except as provided herein) to retain an independent certified public accountant selected by PNG and reasonably acceptable to Prana, to review such records in the location(s) where such records are maintained by Prana, upon reasonable notice and during regular business hours and under obligations of confidence. Results of such review shall be made available to both Parties. If the review reflects an underpayment of royalties or milestone payments to PNG, such underpayment shall be promptly remitted to PNG, together with interest calculated in the manner provided in Section 3.3, and the Parties shall share equally the reasonable cost of the review. If the underpayment is equal to or greater than five percent (5%) of the royalty and/or milestone amount that was otherwise due, Prana shall promptly remit the underpayment with applicable interest to PNG and pay all of the costs of such review. If the review reflects an overpayment of royalties or milestone payments to PNG, the amount of such overpayment is creditable against future royalties or milestone payments, as applicable, owed by Prana, to the extent applicable.
3.3 Late Payments. Prana shall pay interest to PNG on the aggregate amount of any payments that are not paid on or before the date such payments are due under this Agreement at a rate of twelve percent (12%) per annum.
3.4 Blocked Payments. In the event that, by reason of applicable laws or
regulations in any country, it becomes impossible or illegal for Prana to
transfer, or have transferred on its behalf, royalties or other payments to PNG,
such royalties or other payments shall be deposited in local currency in the
relevant country to the credit of PNG in a recognized banking institution
designated by PNG or, if none is designated by PNG within a period of thirty
(30) days, in a recognized banking institution selected by Prana as the case may
be, and identified in a notice in writing given to such other Party.
3.5 Taxes. Prana shall be responsible for its own taxes levied on Prana by tax authorities within any applicable territory, including all sales, use, value added, withholding tax respecting Prana's income or other taxes payable with respect of amounts due by Prana to PNG.
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Any such taxes which Prana is required to pay or withhold on behalf of PNG shall be deducted from the amount of payment due, and Prana shall furnish PNG with reasonable evidence of such payment or amount withheld, in electronic or written form, as soon as practicable after such payment is made or such amount is withheld.
4. NON-COMPETITION
For a term of eight (8) years from the Effective Date, PNG will not directly, or indirectly through another on its behalf, research, develop, and/or commercialize alternative treatments for Alzheimer's disease and/or Parkinson's disease that might compete with any Derivative developed by Prana either alone, in any partnership or through any alliance, deal or agreement; provided that the foregoing prohibition shall not apply to PNG's commercialization or marketing of any such alternative treatments in the PNG Territories.
5. NO WARRANTIES.
PRANA MAKES NO REPRESENTATIONS AND EXTENDS NO WARRANTIES OF ANY KIND, EITHER EXPRESS OR IMPLIED, HEREUNDER, INCLUDING, WITHOUT LIMITATION, ALL IMPLIED WARRANTIES OF TITLE, NON-INFRINGEMENT, MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE
6. TERM.
This Agreement shall become effective as of the Effective Date and remain in effect until the expiration of all payment obligations set forth in Section 3 (the "Term"). The terms of Sections 3.1 and 3.2 (to the extent payment obligations remain outstanding), 3.2(d)(ii), 3.4, 3.5, 5, 6 and 7 (excluding 7.3) survive termination of this Agreement.
7. GENERAL PROVISIONS
7.1 Arbitration: Equitable Relief. The Parties agree to resolve all disputes under this Agreement in accordance with the arbitration provisions set forth in Section 2.4 of the Settlement Agreement, of even date herewith, entered into by the Parties, The General Hospital Corporation and certain individuals (the "Settlement Agreement"). Each Party acknowledges that a breach by it of the provisions of this Agreement cannot reasonably or adequately be compensated in damages in an action at law; and that a breach by such Party of any of the provisions contained in this Agreement shall cause the other Party irreparable injury and damage. By reason thereof, each Party acknowledges and agrees that the other Party shall be entitled in such cases in addition to, and not in lieu of, any other remedies it may have under this Agreement or otherwise, under the dispute resolution provisions set forth in Section 2.4 of the Settlement Agreement to preliminary and permanent injunctive relief and any other available equitable relief to prevent or curtail any breach of this Agreement by the other Party or specifically to enforce the performance of the other Party under this Agreement without the necessity of posting any bond or other security; provided, however, that no specification in this Agreement of a specific legal or equitable remedy shall be construed as a waiver or prohibition against the pursuing of other legal or equitable remedies in the event of such a breach.
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7.2 Choice of Law. This Agreement will be governed by and construed in accordance with the laws of New York and the United States.
7.3 Assignment. No Party may assign this Agreement in whole or in part without the consent of the other, except if such assignment occurs in connection with the merger, sale or transfer of all or substantially all of the business and assets of a Party. Notwithstanding the foregoing, any Party may assign its rights (but not its obligations) pursuant to this Agreement in whole or in part to an Affiliate of such Party. Any attempted assignment in violation of this section shall be null and void.
7.4 Entire Agreement; Amendments. This Agreement constitutes the entire agreement among the Parties with respect to the subject matter hereof, and supersedes all previous arrangements with respect to the subject matter hereof, whether written or oral, including, without limitation, the Derivatives Term Sheet, dated April 7, 2004, between the Parties. Any amendment or modification to this Agreement shall be made in writing signed by all Parties.
7.5 Notices.
Notices to Prana shall be addressed to:
Prana Biotechnology Limited
Level 2, 369 Royal Parade
Parkville 3052, Victoria, Australia
Attention: Chairman
Facsimile No.: (61) 3 9349 0377
with a copy to:
Prana Biotechnology Limited
Level 2, 369 Royal Parade
Parkville 3052, Victoria, Australia
Attention: Vice President, Intellectual Property
Facsimile No: (61) 3 9349 0377
Notices to PNG shall be addressed to:
P.N. Gerolymatos S.A.
13, Askliplou str.
145 68 Kryoneri Athens, Greece
Attention: Avraam Manouach
Facsimile No.: (+30 - 210) 81 61 956
with a copy to:
Jones Day
222 East 41st Street
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New York, New York 10021 USA
Attention: Adriane M. Antler, Esq., Ph.D.
Facsimile No: (212) 755-7306
Any Party may change its address by giving notice to the other Party in the manner herein provided. Any notice required or provided for by the terms of this Agreement shall be in writing and shall be (a) sent by registered or certified mail, return receipt requested, postage prepaid, (b) sent via a reputable overnight courier service, or (c) sent by facsimile transmission and confirmed by regular mail, in each case properly addressed in accordance with the paragraph above. The effective date of notice shall be the actual date of receipt by the Party receiving the same.
7.6 Independent Contractors. It is understood and agreed that the relationship between the Parties hereunder is that of independent contractors and that nothing in this Agreement shall be construed as authorization for Prana or PNG to act as agent for the others.
7.7 Headings. The captions or headings of the Sections or other subdivisions hereof are inserted only as a matter of convenience or for reference and shall have no effect on the meaning of the provisions hereof.
7.8 No Implied Waivers; Rights Cumulative. No failure on the part of a Party to exercise, and no delay in exercising, any right, power, remedy or privilege under this Agreement, or provided by statute or at law or in equity or otherwise, shall impair, prejudice or constitute a waiver of any such right, power, remedy or privilege or be construed as a waiver of any breach of this Agreement or as an acquiescence therein, nor shall any single or partial exercise of any such right, power, remedy or privilege preclude any other or further exercise thereof or the exercise of any other right, power, remedy or privilege.
7.9 Severability. If any provision hereof should be held invalid, illegal or unenforceable in any respect in any jurisdiction, then, to the fullest extent permitted by law, (a) all other provisions hereof shall remain in full force and effect in such jurisdiction and shall be liberally construed in order to carry out the intentions of the Parties as nearly as may be possible and (b) such invalidity, illegality or unenforceability shall not affect the validity, legality or enforceability of such provision in any other jurisdiction.
7.10 Execution in Counterparts. This Agreement may be executed in counterparts, each of which counterparts, when so executed and delivered, shall be deemed to be an original, and all of which counterparts, taken together, shall constitute one and the same instrument.
7.11 No Consequential Damages. UNLESS RESULTING FROM A PARTY'S WILLFUL
MISCONDUCT OR FROM A PARTY'S BREACH OF SECTION 7.12 ("CONFIDENTIALITY"), NEITHER
PARTY WILL BE LIABLE FOR SPECIAL, INCIDENTAL, CONSEQUENTIAL, EXEMPLARY,
PUNITIVE, MULTIPLE OR OTHER INDIRECT DAMAGES ARISING OUT OF THIS AGREEMENT OR
THE EXERCISE OF ITS RIGHTS HEREUNDER, OR FOR LOSS OF PROFITS, LOSS OF DATA OR
LOSS OF USE DAMAGES ARISING FROM OR RELATING TO ANY BREACH OF THIS
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AGREEMENT WHETHER BASED UPON WARRANTY, CONTRACT, TORT, STRICT LIABILITY OR OTHERWISE, REGARDLESS OF ANY NOTICE OF SUCH DAMAGES.
7.12 Confidentiality. The confidentiality obligations set forth in Section 1 of the Settlement Agreement are incorporated herein in their entirety.
[Signature Page Follows]
Execution Version
IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed by their duly authorized representatives:
P.N. GEROLYMATOS S.A. PRANA BIOTECHNOLOGY LIMITED
By: /s/ P. Gerolymatos By: /s/ Geoffrey Kempler
--------------------------------- --------------------------------
Name: P. Gerolymatos Name: Geoffrey Kempler
------------------------------- ------------------------------
Title: President & Managing Director Title: Executive Chairman
------------------------------ -----------------------------
Date: July 28, 2004 Date: July 28, 2004
|
[Signature Page to Derivatives Agreement]
Execution Version
Schedule 1.4
Derivative Patent Applications
1. Title: "8-Hydroxyquinoline Derivatives" International Patent Application No. PCT/AUO3/00914 International Filing Date: 16 July 2003
2. Title: "Neurologically-Active Compounds" International Patent Application No. PCT/AUO3/01303 International Filing Date: 3 October 2003.
3. Title: "Compound V" Australian Provisional Patent Application No. 2003905462 Filing Date: 7 October 2003
4. Title: "Compound VI" Australian Provisional Patent Application No. 2003905936 Filing Date: 7 October 2003
Exhibit 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in Registration Statement No. 333-116232 of Prana Biotechnology Limited on Form F-3 of our report dated September 13, 2004 except for Notes 11(f), 17 and 25 as to which the date is 24 September, 2004, appearing in this Annual Report on Form 20-F of Prana Biotechnology Limited for the year ended June 30, 2004.
/s/ Deloitte Touche Tohmatsu DELOITTE TOUCHE TOHMATSU Melbourne, Victoria, Australia September 24, 2004 |
Exhibit 31.1
CERTIFICATION PURSUANT TO
SECTION 302(a) OF THE SARBANES-OXLEY ACT OF 2002
I, Jonas V. Alsenas, certify that:
1. I have reviewed this annual report on Form 20-F of Prana Biotechnology Limited;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) [Paragraph omitted pursuant to SEC Release Nos. 33-8238 and 34-47986]
(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent function):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: September 24, 2004 /s/ Jonas V. Alsenas* ----------------------- Jonas V. Alsenas Chief Executive Officer |
* The originally executed copy of this Certification will be maintained at the Registrant's offices and will be made available for inspection upon request.
Exhibit 31.2
CERTIFICATION PURSUANT TO
SECTION 302(a) OF THE SARBANES-OXLEY ACT OF 2002
I, Richard Revelins, certify that:
1. I have reviewed this annual report on Form 20-F of Prana Biotechnology Limited;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) [Paragraph omitted pursuant to SEC Release Nos. 33-8238 and 34-47986]
(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent function):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: September 24, 2004 /s/ Richard Revelins* ------------------------- Richard Revelins Chief Financial Officer |
* The originally executed copy of this Certification will be maintained at the Registrant's offices and will be made available for inspection upon request.
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Prana Biotechnology Limited (the "Company") on Form 20-F for the period ending June 30, 2004, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Jonas V. Alsenas, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.
/s/ Jonas V. Alsenas* ------------------------ Jonas V. Alsenas Chief Executive Officer September 24, 2004 |
* The originally executed copy of this Certification will be maintained at the Company's offices and will be made available for inspection upon request.
Exhibit 32.2
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Prana Biotechnology Limited (the "Company") on Form 20-F for the period ending June 30, 2004, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Richard Revelins, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.
/s/ Richard Revelins* ------------------------ Richard Revelins Chief Financial Officer September 24, 2004 |
* The originally executed copy of this Certification will be maintained at the Company's offices and will be made available for inspection upon request.