Execution Copy – For Settlement Purposes Only

Exhibit 10.1

 

 

 

 

 

Via Electronic Mail

 

Scott Cormack

President & CEO

OncoGenex Technologies Inc.

#400 – 1001 West Broadway

Vancouver, BC V6H 4B1

 

Re:  Settlement Relating to Ionis Pharmaceuticals Inc. v. OncoGenex Technologies
Inc.

 

Dear Scott:

 

I am writing in connection with the lawsuit currently pending in the United
States District Court for the Southern District of California, San Diego
Division, styled as Ionis Pharmaceuticals Inc. v. OncoGenex Technologies Inc.,
Case No. 3:16-cv-00016-JAH-RBB (“the Lawsuit”).  This letter agreement (“Letter
Agreement”) memorializes the terms of the settlement of the Lawsuit reached
between Ionis Pharmaceuticals, Inc., formerly known as Isis Pharmaceuticals,
Inc. (“Ionis”) and OncoGenex Technologies, Inc. (“OncoGenex”). Please confirm
OncoGenex’s agreement to this Letter Agreement and the terms set forth below by
returning an executed copy of this Letter Agreement to me.

 

Unless defined in this Letter Agreement, capitalized terms below shall have the
same meaning as set forth in the Amended and Restated License Agreement dated
June 2, 2008, as amended, between Ionis and OncoGenex (“Amended and Restated
License Agreement”).  At times, Ionis and OncoGenex are referred to collectively
as “the Parties.”

 

The terms of the settlement are as follows:

 

1.  Effective Date.  This Letter Agreement shall become effective upon Ionis’
receipt of an executed copy of this Letter Agreement from OncoGenex.

 

2.  Upfront Cash Payment.  No later than August 1, 2016, OncoGenex shall pay
Ionis an upfront cash payment in the amount of $1.375 million.  Payment shall be
made pursuant to wire instructions that Ionis will provide to you under separate
cover on or before July 29, 2016.  

 

3.  Success-Based Payment.  In addition to any payments owed Ionis under the
Amended and Restated License Agreement and the Upfront Cash Payment referenced
in Section 2 above, until OncoGenex has paid Ionis an aggregate of $5.0 million
under this Section 3 (the “Success-Based Payment”), OncoGenex will pay Ionis:

 

 

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Execution Copy – For Settlement Purposes Only

Exhibit 10.1

 

a.

An additional royalty of 5% of the Net Sales of the Product (as defined in the
Amended and Restated License Agreement, including custirsen); and

 

 

b.

Fifty percent (50%) of any consideration it receives (other than royalties on
Net Sales for which OncoGenex has paid the 5% royalty to Ionis under Section
3(a) above) related to the sale, license, or any other commercial transaction
involving the Product, except (i) any payment received for the fair market value
portion of any sale of securities, including but not limited to equity
securities or quasi-equity securities, and (ii) payments received by OncoGenex
that are explicitly designated in the applicable agreement to fund future
out-of-pocket development expenses of the Product(s) by OncoGenex pursuant to a
written development plan where OncoGenex is expressly obligated under such
agreement to (A) spend such payments to fund such future development expenses of
products and (B) reimburse funds not used in conjunction with the written
development plan.

 

The payment under Section 3(b) is not in lieu of any Non-Royalty Revenue
payments due under the Amended and Restated License Agreement, provided,
however, that any payment under Section 3(b) will be subject to a cap such that
the payment to Ionis of its share of Non-Royalty Revenue, combined with its 50%
share of the consideration received by OncoGenex as referenced in Section 3(b)
towards the Success-Based Payment, shall not exceed 50% of the consideration
received by OncoGenex at any given time.  If this 50% cap is reached, the unpaid
balance due on the Success-Based Payment will remain subject to payment under
this Section 3.  For illustration purposes, assuming OncoGenex had not
previously made any payments towards the Success-Based Payment, if OncoGenex
were to receive a $10.0 million license fee in a commercial transaction
involving the Product prior to obtaining marketing approval for the Product,
Ionis would receive a $2.0 million payment as its 20% share of Non-Royalty
Revenue plus a $3.0 million payment towards the Success-Based Payment, and Ionis
would remain eligible to receive, from future consideration received by
OncoGenex, up to $2.0 million in Success-Based Payments under Section 3(a)
and/or Section 3(b).

 

For the sake of clarity, it is understood that once OncoGenex has made a payment
or payments totaling either (i) $5.0 million under either Section 3(a) or
Section 3(b) above or (ii) an aggregate of $5.0 million under both Sections 3(a)
and 3(b) above, the Success-Based Payment provision will be completely
satisfied.

 

For further clarity, it is understood that, following delivery to Ionis of a
notice of Discontinuance by an authorized officer of OncoGenex (i) any payments
accrued as of the date Ionis receives such notice will remain due and payable,
(ii) if the change of control described in Section 4a or 4b has occurred on or
before the date Ionis receives such notice, OncoGenex will remain obligated to
pay the Success-Based Payment under Section 4a when (and if) the applicable
payments are received by OncoGenex and/or the stockholders of OncoGenex at the
effective time of the change of control, and under Section 4b when (and if) a
total of $200M is received by OncoGenex and/or the current or former
stockholders of OncoGenex at the effective time of the change of control, and
(iii) no other payments shall be due to Ionis under this Section 3 or under
Section 4. The

 

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Execution Copy – For Settlement Purposes Only

Exhibit 10.1

Parties further acknowledge and agree that, following such delivery, the Amended
and Restated License Agreement shall be deemed terminated.

 

4.  Change of Control.  If there is a change in control involving OncoGenex and
the surviving entity expressly assumes in writing or by operation of law the
obligation to make the Success-Based Payment above, the Success-Based Payment
will not accelerate and will not become due upon the closing of such change of
control, provided, however, that if such change of control satisfies any of the
below conditions, any unpaid amount of Success-Based Payment will become
automatically due and payable as set forth below:

 

 

a.

If the change of control results in consideration of greater than or equal to
$200 million (without counting any contingent payments) payable upon closing of
such change of control, then any unpaid amount of the Success-Based Payment will
be due and payable when (and if) such payments are received by OncoGenex and/or
the stockholders of OncoGenex; or

 

b.   If the change of control results in consideration of less than $200 million
(without counting any contingent payments) payable upon closing of such change
of control, but includes contingent and non-contingent consideration that, when
counted together, are greater than or equal to $200 million, then OncoGenex (or
the surviving entity) will pay any unpaid amount of the Success-Based Payment
when (and if) a total of $200M is received by OncoGenex and/or the current or
former stockholders of OncoGenex.

 

If the surviving entity does not expressly assume in writing or by operation of
law the obligation to make the Success-Based Payment in Paragraph 3 above to
Ionis, then the Success-Based Payment will become due and payable to Ionis
immediately prior to the closing of such change of control.

 

5.  Advanced Reimbursement.  For purposes of the Amended and Restated License
Agreement between the Parties, consideration received for the reimbursement for
research and development activities will only count as such under clause (i) of
the definition of “Revenue” solely to the extent such consideration is a payment
received by OncoGenex that is explicitly designated in the applicable agreement
to fund future out-of-pocket development expenses of a Product(s) by OncoGenex
pursuant to a written development plan where OncoGenex is expressly obligated
under such agreement to (A) spend such payments to fund such future development
expenses of Products and (B) reimburse funds not used in conjunction with the
written development plan.

 

6.  One-time Royalties; Pre-Paid Royalties.  Non-Royalty Revenue shall include,
without limitation, one-time royalties and pre-paid royalties received by
OncoGenex with respect to a Product, which one-time and pre-paid royalties shall
be shared with Ionis in accordance with Section 6.5 of the Amended and Restated
License Agreement.

 

7.  Non-Royalty Revenue.  For purposes of the Amended and Restated License
Agreement, the references to “sublicensing agreement” in Section 6.5 of the
Amended and Restated

 

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Execution Copy – For Settlement Purposes Only

Exhibit 10.1

License Agreement shall mean any transaction whereby OncoGenex grants to the
applicable third party the right or freedom to develop or commercialize a
Product, whether by (sub)license, assignment, asset sale, covenant not to sue,
waiver or other immunity (but excluding (i) any distributor or wholesaler
agreement where the distributor or wholesaler purchases the Product from
OncoGenex at an arms’ length price (but does not pay OncoGenex any upfront
payments or additional consideration based on the sale of such Product, such as
royalty, milestone, profit share or other similar payments) and under which
royalties on Net Sales of Product would be due to Ionis, (ii) a supply agreement
where a commercial manufacturing organization agrees to supply a Product for
future use or sale by OncoGenex, and (iii) a change of control transaction by
merger, stock sale, exchange, consolidation, tender offer or other similar
transactions).

 

8.  Mutual Release.  Upon OncoGenex’s payment to Ionis of the Upfront Cash
Payment, Ionis and OncoGenex release and forever discharge each other and each
of the other’s parents, subsidiaries, employees, insurers, attorneys, and
predecessors from any and all claims, causes of action, damages, and
controversies that either of the Parties has asserted or could have asserted to
date arising out of or related to (i) the Lawsuit and the claims asserted
therein, (ii) any Revenue, Non-Royalty Revenue and other revenue received by
OncoGenex from Teva to date, and (iii) the Amended and Restated License
Agreement.  This Mutual Release provision does not and is not intended to
release or discharge any claim arising out of or related to a breach of this
Letter Agreement.  For purposes of this Mutual Release, OncoGenex represents and
warrants that it has received no Revenue, Non-Royalty Revenue or revenue (other
than the recognition of deferred collaboration revenue in the normal course of
business) since May 12, 2016.  

 

9.  Other Agreements Survive as to the Future.  Notwithstanding anything to the
contrary in the Mutual Release provision above or this Letter Agreement in
general, (i) all other terms of any of the Parties’ existing agreements, as
amended, including but not limited to the Amended and Restated License Agreement
(as amended by this Letter Agreement), that by their terms govern or otherwise
address ongoing or future conduct of the Parties or their ongoing or future
relationship, and (ii) any claims or rights arising out of or relating to any
future amounts, Revenue, Non-Royalty Revenue, revenue or interests not yet due
to or received by OncoGenex, will (A) survive the Mutual Release provision and
continue to apply, and, (B) along with the provisions of this Letter Agreement,
are not intended to be released or discharged.  The terms of this Letter
Agreement will control over the terms contained in any agreement, as amended,
between the Parties in the event of a conflict.

 

10.  Dismissal.  Upon OncoGenex’s timely payment of the Upfront Cash Payment to
Ionis, within three (3) business days thereafter the Parties shall submit a
Stipulation of Dismissal in the Lawsuit, which shall request the dismissal of
the Lawsuit and specify that each party shall bear its own fees and costs.  

 

11.  Disputes.  Any disputes arising out of or relating to this Letter Agreement
will be resolved under the existing arbitration provisions as reflected in
Section 13.15 of the  Amended and Restated License Agreement (notwithstanding
Section 13.15.6 thereof or the limitations in scope and applicability set forth
in Section 13.15.1(i) and/or (ii)), provided,

 

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Execution Copy – For Settlement Purposes Only

Exhibit 10.1

however, that prior to such arbitration, the Parties will first mediate such
dispute with Stew Cogan in Seattle, Washington.  If Stew Cogan is not available
at the time of the dispute, the Parties will attempt to agree on a single
mediator.  If the Parties cannot agree within twenty-one (21) days of a written
request to mediate, then JAMS will select a single mediator for such Parties and
such person will act in Mr. Cogan’s place for purposes of this ADR process.

 

12.  U.S. Dollars.  All amounts referenced herein are in U.S. Dollars.

 

13.  Amendment and Waiver.  No amendment of any provision of this Letter
Agreement shall be effective unless it is in writing and signed by each of the
Parties, and no waiver of any provision of this Letter Agreement nor consent to
any departure by any Party therefrom shall be effective unless it is in writing
and signed by each of the Parties, and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
it is given.

14.  Merger and Integration.  This Letter Agreement represents the full and
complete agreement between the Parties relating to the settlement of the
Lawsuit. Any representations, warranties, promises, or conditions, whether
written or oral, not specifically incorporated into this Letter Agreement
relative to the settlement of the Lawsuit shall not be binding upon the Parties.
All other discussions, representations, explanations, and negotiations, whether
oral or written, relating to the settlement of the Lawsuit have been and are
merged into this Letter Agreement if they were intended to have any binding
effect. This Letter Agreement is being made without reliance upon any statement
or representation by Party hereto, or any representative, agent or attorney of
any other Party hereto, which is not expressly contained herein.

15.  Mutual Drafting.  The Parties have participated jointly in the negotiation
and drafting of this Letter Agreement with the assistance of outside
counsel.  In the event an ambiguity or question of intent or interpretation
arises, this Letter Agreement shall be construed as if drafted jointly by the
Parties and no presumption or burden of proof shall arise favoring or
disfavoring any Party by virtue of the authorship of any of the provisions of
this Letter Agreement.  Any controversy concerning the construction of this
Letter Agreement should be decided neutrally and without regard to authorship.

16.   Authority.  The representative of the Parties executing this Letter
Agreement have been duly authorized by Oncogenex and Ionis, respectively, to
execute this Letter Agreement and no further consents, approvals, ratifications
or resolutions of any kind whatsoever are required in connection with the
execution hereof.

 

17.  Execution in Counterparts/Method of Delivery.  This Letter Agreement may be
executed in counterparts and all such counterparts when so executed shall
together constitute the final Letter Agreement as if the Parties had signed one
document.  Delivery of an executed signature page by facsimile or electronic
transmission shall be as effective as delivery of a manually executed
counterpart hereof.

Thank you.

 

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Execution Copy – For Settlement Purposes Only

Exhibit 10.1

 

 

/s/ Patrick O’Neil

Patrick O’Neil

SVP Legal and General Counsel

Ionis Pharmaceuticals, Inc.

 

 

 

Acknowledged and Agreed:

 

/s/ Scott Cormack

Scott Cormack 

President and Chief Executive Officer

OncoGenex Technologies Inc.