CREATIVE DEALMAKING:

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• CREATIVE DEALMAKING
• exceptional collaborations of 2005

BIOPARTNERING NORTH AMERICAFebruary 6,
2006James Hatton
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Sources of exceptional collaborations

• The Most Creative and Significant Deal at the
  Best of Biotech 2005 Awards
• Licensing Deal of the Year" at the Scrip Awards
  2005
• Burrill Co.'s quarterly publications for 2005
• The full text of all agreements linked at
  www.jameshatton.com/public

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Exceptional collaborations of 2005

• Anadys/Novartis
• Alkermes/Cephalon
• Avanir/Astrazeneca
• Coley/Pfizer
• New River/Shire
• Protein Design Labs/Roche

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Anadys/Novartis License and Co-Development
Agreement

• toll-like receptor 7 in phase I
• fields HCV and HBV options for infectious
  diseases
• license fee of 20M
• up to 550M in regulatory and commercial
  milestone payments

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ANDS/NVS (contd)

• 10M on successful IND submission (subsequently
  paid)
• development costs shared Novartis/Anadys 80.5 /
  19.5
• Anadys co-promotion option in the US

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ANDS/NVS interesting things about this
collaboration

• options on another Anadys compound and the field
  of infectious diseases
• TLR7 agonist option
• royalties
• co-promotion option
• termination

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ANDS/NVS Option on another Anadys compound and
the field of infectious disease

• when the option is exercised, the parties shall
  negotiate in good faith, and if they fail to
  agree
• for infectious diseases Novartis may obtain a
  license on fixed terms
• for another Anadys compound Anadys can go to
  third parties

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ANDS/NVS TLR7 agonist option

• both Anadys and Novartis brought TLR7 agonists to
  the collaboration
• either party can nominate for development of a
  TLR7 compound belonging to either party
• for an Anadys compound if the parties cannot
  agree on terms, Novartis may opt for a license on
  fixed terms for royalties and milestones

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ANDS/NVS TLR7 agonist option (contd)

• for a Novartis compound Anadys may opt to share
  in development costs
• the royalty to Anadys varies based on option
• no milestones are payable to Anadys
• Anadys receives no co-promotion rights

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ANDS/NVS royalties

• royalties increase with increasing levels of
  sales
• royalty reductions in countries where there is
  no patent for required third party licenses for
  competitive products
• Novartis can take a reduction in any country for
  no patent or for third party licenses, but not
  both

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ANDS/NVS co-promotion option

• if Anadys exercises its option, in the US
• commercialization costs shared Novartis/Anadys
  65 / 35
• product profit shared Novartis/Anadys 65 / 35
• Anadys does not share in costs above the budgeted
  amount
• ROW royalties of net sales

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ANDS/NVS termination

• on termination for Anadys default Novartis
  licenses and payment obligations survive
• on termination for Novartis default
• rights to the developed compounds (except
  Novartis-owned TLF7 agonists) will revert to
  Anadys
• Anadys gets only a right of first negotiation to
  Novartis collaboration intellectual property,
  regulatory submissions and data

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Alkermes/Cephalon License and Collaboration
Agreement

• once-monthly injection for the treatment of
  alcohol dependence
• United States only
• NDA submitted to FDA on March 31, 2005 granted
  priority review

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ALKS/CEPH financial terms

• license fee of 160M
• 110M on FDA approval
• up to an additional 220M in sales milestones
• Alkermes is responsible for development and
  registration costs for the initial indication

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ALKS/CEPH financial terms (contd)

• Alkermes is responsible for cumulative losses
  (including commercialization costs) up to 120M
  for 18 months after FDA approval of the product
• cumulative losses exceeding 120M will be borne
  by Cephalon
• thereafter, profit or loss will be shared equally

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ALKS/CEPH responsibilities

• Alkermes responsible for obtaining marketing
  approval and for manufacturing
• Cephalon has primary responsibility for marketing
  and sale
• Alkermes augments with a team of 30 treatment
  system specialists
• Alkermes has the option to field its own sales
  force at the time of the first sales force
  expansion, should one occur

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ALKS/CEPH interesting things about this
collaboration

• complete definition of commercialization costs
• the cost of third party licenses are generally
  shared expenses
• development, commercialization manufacturing
  decisions may go to arbitration
• Cephalon may terminate on 180 days notice
  ongoing trials may be ended if it is medically
  reasonable to do so

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Avanir/AstraZeneca Research, Development and
Commercialization Agreement

• Reverse Cholesterol Transport (RCT) enhancing
  compounds for cardiovascular disease
• pre-IND
• AstraZeneca assumes responsibility for
  development
• AstraZeneca to consider using Avanirs sales
  force in part

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AVN/AZN financial terms

• upfront payment of 10M
• regulatory and sales milestone payments totalling
  330M
• first milestone of 5M for acceptance of IND
  occurred Jan 06
• stepped royalties rising from single digit to low
  double digit rates, dependent on sales
• AstraZeneca pays for both product discovery and
  development costs

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AVN/AZN interesting things about this
collaboration

• AstraZeneca owns most collaboration IP and
  licenses it back to Avanir on a non-exclusive
  basis on termination
• AstraZenecas commercially reasonable efforts
  limited to one licensed product per major market
• opportunity to cure failure to make commercially
  reasonable efforts extends beyond 90 days

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AVN/AZN interesting things about this
collaboration (cont)

• royalty reductions generic competition
  compulsory licenses no valid claims and royalty
  stacking all to a floor
• license payments made to third parties (which
  reduce royalties under the stacking provisions)
  are determined in AstraZenecas sole opinion

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Coley/Pfizer Exclusive Global License and
Screening Agreements

• develop and commercialize Coleysphase II TLR9
  agonists for cancers
• license fee of 50M
• up to 455M in additional milestones, plus
  royalties
• 10M in Coleys stock on IPO
• Pfizer funds development, including planned Phase
  III trials

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COLY/PFE (contd)

• Coley develops for CTCL only
• additional tumor types also will be explored
• Pfizer also funds development of next-generation
  TLR9 agonists for cancers
• Coley option to co-promote for CTCL

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COLY/PFE interesting things about this
collaboration

• Pfizer IP
• milestone structure
• next generation TLR9s royalties and milestones
  already set out in license

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COLY/PFE Pfizer IP

• Pfizer grants Coley a royalty bearing,
  non-exclusive license of certain IP for use
  outside the field
• the IP must arise from the collaboration
• Pfizers patent claims must infringe an existing
  Coley patent claim

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COLY/PFE milestone structure

• based on regulatory events for both indication
  and treatment regimen
• Major Indications first line adjuvant
  therapy for named indications
• Intermediate Indications second line
  treatment for named indications
• Minor Indications all other cancers

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COLY/PFE other things of interest

• final judgement on a patent claim in one
  jurisdiction applied in all other jurisdictions
• Coley covenants not to sell any relevant IP
• on termination all Coley IP returned, Pfizer
  grants license and assigns trademark royalty
  free
• Co-indemnification - sharing of risk from
  losses except those arising from breach of
  covenant or warranty
• detailed exhibit on a transition plan

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New River/Shire Collaboration Agreement

• Phase III for ADHD and all other indications
• US
• New River responsible for clinical development
• New River may supply up to 25 of the sales
  effort
• ROW Shire to develop and commercialize
• New River responsible for manufacturing

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NRPH/SHIRE financial terms

• license fee of 50M
• 50M on acceptance of filing of the NDA
• up to 300M in milestones based on
  characteristics of the FDA approved product
  labelling
• 5M on commercial sale in specified European
  countries
• 100M sales milestones

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NRPH/SHIRE financial terms (contd)

• US sharing
• first two years New River/Shire 25 / 75
• thereafter New River/Shire 50 / 50
• ROW low double-digit royalty
• Shire may be entitled to refunds of amounts
  previously paid in the event of a delayed product
  approval

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NRPH/SHIRE interesting things about this
collaboration

• increasing refund to Shire as product approval is
  delayed past each of three dates - capped at
  50M
• development options for new compounds and other
  indications
• on termination for breach non-terminating party
  buys out breaching party a price to be determined
  by investment bankers

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NRPH/SHIRE development options for new
compounds, indications

• if New River proposes and Shire does not agree
  no development
• if Shire proposes and New River does not agree
  development at Shires expense
• New River can unilaterally develop a combination
  product
• non-developing party has a Phase III opt-in right

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NRPH/SHIRE other things to see

• calculation of Net Sales is reduced by cost of
  third party licenses necessary for
  commercialization
• Territory is the world diligence requirements
  are only in US and, after US approval, major EU
  countries
• extensive warranties by New River on IP
  development activities to date scope of
  disclosure
• exhibit summarizing supply terms

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Protein Design Labs/Roche Co-Development and
Commercialization Agreement

• worldwide agreement to co-develop and
  commercialize Zenapax (R) (daclizumab) for
  asthma
• based on recent positive phase II data
• license fee of 17.5M
• up to 187.5M in development and
  commercialization milestones

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PDL/Roche (contd)

• Roche and PDL will globally co-develop daclizumab
  in asthma and share development expenses
• US PDL retains right to co-promote Roche may
  co-promote
• ROW royalties on net sales

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PDL/Roche there is a lot of history here

• this collaboration dates from 1989, and was
  revised in 1999
• based on the 1999 agreement, Roche pursued
  transplantation as an indication, but had rights
  for all indications

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PDL/Roche in the 2003 amendment

• PDL reacquired rights for all indications other
  than transplant by paying 80M
• Roche can put the transplant rights to PDL, or
  PDL can cause the transplant rights to revert to
  PDL
• after a phase II trial for asthma, PDL/Roche
  entered into this 2004 Asthma Collaboration

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PDL/Roche interesting things about this
collaboration

• co-promotion rights are controlled by PDL, not
  Roche
• regulatory approvals, filings and data - are
  shared across territories and fields without a
  royalty
• termination

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PDL/Roche termination

• termination on a region by region basis
• all termination scenarios (with two
  exceptions)
• reversion of rights to PDL
• Roche technology to PDL
• regulatory approvals, filings and data to PDL
• trademarks to PDL

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PDL/Roche termination (contd)

• no royalties to Roche
• in the case of PDLs default, R may choose
  instead to continue license and be relieved of
  due diligence obligations

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PDL/Roche termination (contd)

• exceptions termination of co-promotion in US due
  to
• termination by Roche for breach of PDL Roche
  continues, PDL stops PDL can recover rights and
  pay Roche a royalty
• termination by Roche for for failure to meet
  sales targets? Roche stops PDL pays a royalty
  (a different royalty!) until rights for
  transplantation revert

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PDL/Roche other things worth seeing

• descriptions in exhibit of development expenses,
  marketing expenses,
• party abandoning joint patents enjoys immunity
  from suit enforcing the abandoned patents
• Roche indemnifies PDL for infringement except for
  methods/materials used in manufacturing not
  previously disclosed to Roche (license payments
  to third parties are shared)
• change of control language

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• For an electronic copy of todays presentation
  and the full text of all background licenses,
  please contact
• James Hatton Farris, Vaughan, Wills Murphy
  LLP jhatton_at_farris.com
• or visit
• www.jameshatton.com/public