*** Text Omitted and Filed Separately
Confidential Treatment Requested
Under 17 C.F.R §§ 200.80(b)(4)
and 240.24b-2

 

Exhibit 10.32

 

FOURTH AMENDMENT TO RESEARCH COLLABORATION AND LICENSE AGREEMENT DATED MAY 31,
1991

 

This Fourth Amendment (“Fourth Amendment”), entered into this 20th day of
August, 2003 (“Amendment Effective Date”), between Merck & Co., Inc. (“MERCK”)
and Vical Incorporated (“VICAL”), amends the Research Collaboration and License
Agreement between MERCK and VICAL dated May 31, 1991, as previously amended on
April 27, 1994, December 13, 1995, and November 3, 1997 (collectively the
“Agreement”).

 

RECITALS:

 

WHEREAS, pursuant to the Agreement, MERCK obtained an exclusive license under
VICAL PATENT RIGHTS and VICAL KNOW-HOW to develop, make, have made, use and sell
LICENSED PRODUCTS in the TERRITORY upon the terms and conditions set forth
therein; and

 

WHEREAS, INFLUENZA VACCINE is a LICENSED PRODUCT; and

 

WHEREAS, on April 27, 1995, MERCK exercised its option to pursuant to Section
8.3(c) of the Agreement to obtain an exclusive license under the VICAL PATENT
RIGHTS and VICAL KNOW-HOW for vaccines used for the prevention of herpes simplex
virus (hereinafter “HSV VACCINE”), making such a vaccine a LICENSED PRODUCT
under the Agreement; and

 

WHEREAS, in April 1994, MERCK exercised its option to pursuant to Section 8.3(c)
of the Agreement to obtain an exclusive license under the VICAL PATENT RIGHTS
and VICAL KNOW-HOW for vaccines for human papilloma virus; and

 

WHEREAS, on December 13, 1995, the parties amended the Agreement to define any
vaccine for the treatment, prevention, or prevention and treatment of clinical
diseases caused by or associated with human papilloma virus (“HPV VACCINE”) as a
LICENSED PRODUCT under the Agreement; and

 

WHEREAS, the parties wish to amend the Agreement to provide for the reversion of
rights to VICAL under the VICAL PATENT RIGHTS and VICAL KNOW-HOW for INFLUENZA
VACCINE, HPV VACCINE and HSV VACCINE; and

 

WHEREAS, VICAL and MERCK have held discussions regarding the exclusivity of the
license granted to MERCK in Article 3.1 of the Agreement as it applies to
TREATMENT VACCINES which the parties wish to address; and

 

WHEREAS, VICAL and MERCK have also held discussions regarding the determination
of royalty rates for TREATMENT VACCINES which are covered by VALID PATENT RIGHTS
pursuant to Article 8.4(b)(i)(A) of the Agreement which the parties wish to
address; and

 

WHEREAS, VICAL and MERCK have agreed that MERCK shall have an option to obtain a
license under the VICAL Patent Rights and VICAL Know-How to vaccines for the
prevention, treatment, and prevention and treatment of diseases and medical
conditions associated with certain oncological targets upon the same terms and
conditions as set forth in the Agreement for LICENSED PRODUCTS;

 

NOW, THEREFORE, in consideration of the premises and covenants set forth herein,
the parties hereto agree as follows:

 

1.                                       This Fourth Amendment shall be
effective as of the date set forth above (the “Amendment Effective Date”).

 

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2.                                       Reversion of Rights to VICAL.  As of
the Amendment Effective Date, the license granted to MERCK pursuant to Article
3.1 of the Agreement, and the rights and obligations of MERCK and VICAL arising
therefrom, other than the obligations provided under Articles 21.1, 21.2, 21.3
and Article 6 shall no longer apply to INFLUENZA VACCINE, HPV VACCINE and HSV
VACCINE, and INFLUENZA VACCINE, HPV VACCINE and HSV VACCINE shall no longer be
deemed to be LICENSED PRODUCTS under the Agreement.  Accordingly, the following
provisions of the Agreement shall be amended:

 

(a)                                  Article 1.3 “LICENSED PRODUCT”, shall be
amended by deleting “or INFLUENZA VACCINE” in the first and second lines
thereof, as more fully set forth in paragraph 8(b) below; and

 

(b)                                 Article 1.4 “COMBINATION PRODUCT” shall be
amended by deleting “or INFLUENZA VACCINE” from the third line thereof; and

 

(c)                                  Article 12.3 shall be amended by deleting
“and human INFLUENZA VACCINE” at the end of the second sentence thereof.

 

3.                                       No Obligation to Provide Data.  MERCK
shall have no obligation to provide any MERCK KNOW-HOW or any other materials,
data or other information to VICAL in connection with the reversion to VICAL of
MERCK’s rights to INFLUENZA VACCINE, HPV VACCINE and HSV VACCINE.

 

4.                                       Freedom to Operate – INFLUENZA
VACCINE.  In the event the making, having made, use, offer for sale, sale or
import by VICAL of INFLUENZA VACCINE utilizing the Technology (“DNA INFLUENZA
VACCINE”) would infringe during the term of this Agreement any claim of issued
patents claiming the composition of matter, methods of treatment or use of DNA
INFLUENZA VACCINES owned by MERCK or an AFFILIATE OF MERCK, MERCK hereby
covenants not to sue VICAL for such infringement, provided, however, that such
covenant not to sue shall not apply to methods of treatment or use of vaccines
utilizing the Technology that: (i) are discovered by MERCK or its AFFILIATES
after the Amendment Effective Date, or (ii) are or have been licensed by MERCK
or its AFFILIATES from third parties, either before or after the Amendment
Effective Date.

 

5.                                       Release of Claims Related to INFLUENZA
VACCINE, HPV VACCINE and HSV VACCINE.  VICAL, on behalf of itself, its agents,
AFFILIATES, employees, officers, directors, shareholders, attorneys, assigns,
licensees and other representatives each a “Releasing Party”), hereby releases
and forever discharges MERCK and MERCK’s agents, AFFILIATES, employees,
officers, directors, shareholders, attorneys, assigns, licensees and other
representatives (each a “Released Party”), from any and all actions, causes of
action, suits, charges, complaints, arbitrations, claims, judgments, demands,
obligations or liabilities, damages, rights, costs, loans, debts and expenses
(including attorneys’ fees and expenses), in law or equity, whether now known or
unknown, determined or determinable, by or to any Releasing Party arising out of
or in any way related to any acts or omissions by MERCK or the Released Parties
in the conduct of research and development related to INFLUENZA VACCINE, HPV
VACCINE and HSV VACCINE under the Agreement (each a “Released Claim”). Each
Releasing Party agrees that neither it, nor any other Releasing Party, nor any
other person acting by, through, or under, any Releasing Party, shall institute,
pursue, solicit, encourage or assist any action or actions, cause or causes of
action (in law or at equity), suits, arbitration proceedings or claims in any
court (including state, federal or foreign) or other tribunal or forum against
or adverse to any Released Party arising out of or in any way related to the
Released Claims.  Nothing herein shall release MERCK from its obligation to
perform the terms, conditions, and promises of all other provisions of this
Agreement.

 

6.                                       Exclusive License Relating to TREATMENT
VACCINES.  MERCK and VICAL hereby agree to amend Section 3.1 for the purpose of
clarifying that MERCK has exclusive rights, even as to

 

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VICAL, as it relates to TREATMENT VACCINES. Accordingly, the following
provisions of the Agreement shall be amended:

 

(a)                                  Article 3.1 is hereby amended to be
replaced in its entirety as follows:

 

VICAL grants to MERCK an exclusive license (even as to VICAL) under VICAL
KNOW-HOW and VICAL PATENT RIGHTS to develop, make, have made, use and sell
LICENSED PRODUCTS in the TERRITORY with the right to grant sublicenses to
AFFILIATES of MERCK and those persons or entities through whom MERCK, in the
normal course of its business collaborates in the manufacture and sale of its
products; provided however, that nothing in this Agreement shall prohibit VICAL
from utilizing the VICAL KNOW-HOW and/or VICAL PATENT RIGHTS, exclusive of MERCK
KNOW-HOW, to develop, make, have made, use and sell, either by itself or with
one or more third parties, products for the treatment of infectious diseases;
provided, further, notwithstanding the preceding proviso, that VICAL shall not
have any right to develop, make, have made, use, or sell, either by itself or
with one or more third parties, TREATMENT VACCINES.

 

7.                                       Royalty Rates for TREATMENT VACCINES. 
MERCK and VICAL hereby agree that Article 8.4(b)(i)(A) shall be amended to state
as follows:

 

                                                the sale of which is covered by
VALID PATENT RIGHTS in the country of sale, for the term of the relevant VALID
PATENT RIGHTS in the following amounts:

 

For annual cumulative NET SALES for all countries of the world outside the
United States (and its territories and possessions) the sale of which is covered
by VALID PATENT RIGHTS less than or equal to […***…]

 

[…***…] of NET SALES

 

 

 

For annual cumulative NET SALES greater than […***…] for all countries of the
world outside the United States (and its territories and possessions) the sale
of which is covered by VALID PATENT RIGHTS, for that portion of such NET SALES
greater that […***…]

 

[…***…] of NET SALES

 

 

8.                                       Amended Definitions Relating to CANCER
TARGETS.

 

(a)                                  The Agreement is amended by adding to
Article 1 new provisions as follows:

 

1.15                           CANCER INDICATION means an oncological disease or
diseases in humans, and/or diseases or medical conditions associated with such
an oncological disease in humans.

 

1.16                           CANCER TARGET means a TARGET against which a
host-mediated humoral or cellular immune response is intended to or would
prevent, treat, or prevent and treat a CANCER INDICATION.

 

1.17                           CANCER VACCINE means a preparation for
administration to humans: (i) which contains an antigenically-active component
or components that facilitate a host-mediated cellular and/or humoral immune
response for a CANCER TARGET; and (ii) which is intended to or would prevent,
treat, or prevent and treat one or more CANCER INDICATIONS; and (iii) the
manufacture and/or sale of which preparation would infringe the VICAL PATENT
RIGHTS or would utilize VICAL KNOW-HOW,

*Confidential Treatment Requested

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provided, however, that no CANCER VACCINE shall include components that encode
for the HLA-B7 complex or parts thereof.

 

1.18                           TARGET means (i) DNA and all post-transcriptional
material encoded by such DNA, including all naturally occurring or
disease-associated truncations, mutations, variants, fragments and
post-transcriptional modifications thereof (including but not limited to splice
variants and polysaccharides) and all material encoded by such
post-transcriptional material including but not limited to proteins; (ii) the
DNA encoding a polypeptide or protein, as identified by a sequence of amino
acids, and all post-translational variants thereof including but not limited to
glycosylation and phosphorylation modifications.

 

(b)           The following provisions of Article 1 are hereby amended, as
follows:

 

1.3                                 LICENSED PRODUCT means (i) a bulk or
finished AIDS VACCINE, or other vaccine for the prevention of human infectious
disease if licensed hereunder, which utilizes the Technology or technology which
is developed by VICAL during and as a result of the RESEARCH COLLABORATION
PROGRAM; and (ii) upon the exercise of an Option for a CANCER VACCINE, such bulk
or finished CANCER VACCINE for the prevention of CANCER INDICATIONS, provided,
however, that if any vaccine under (i) or (ii) above is also capable of being
used for treatment of the same human infectious disease or CANCER INDICATION,
then such therapeutic use of such vaccine shall also be considered a LICENSED
PRODUCT for purposes of the license being granted by VICAL to MERCK under this
Agreement; and TREATMENT VACCINES.

 

1.14                           TREATMENT VACCINES means a bulk or finished
vaccine for the treatment of (i) Human Immunodeficiency Virus (“HIV-1”) and/or
diseases caused by infection with HIV-1 in humans; (ii) Hepatitis  Virus (“HBV”)
and or diseases caused by infection with HBV in humans; and (iii) CANCER
VACCINES for the treatment (but not prevention or prevention and treatment) of
CANCER INDICATIONS.

 

9.                                       Option to Obtain Exclusive License for
CANCER TARGETS.

 

(a)                                  Option Grant.  VICAL hereby grants MERCK an
option (the “Option”) to obtain a license under the VICAL PATENT RIGHTS and
VICAL KNOW-HOW to make, have made, use, sell, offer to sell and import CANCER
VACCINES in the TERRITORY for up to three (3) CANCER TARGETS (“CANCER TARGET
LICENSE”).  Such CANCER TARGET LICENSE shall be exclusive (even as to VICAL) for
each CANCER TARGET so licensed, and shall be sublicenseable by MERCK pursuant to
the terms applicable to LICENSED PRODUCTS in Section 3.1 of the Agreement.

 

(b)                                 Option Period.  The period of the Option
shall commence on the Amendment Effective Date and shall expire on the […***…]
anniversary of the Amendment Effective Date (the “Option Period”).

 

(c)                                  Option Exercise.  (1)  MERCK shall notify
VICAL in writing during the Option Period of its desire to obtain a CANCER
VACCINE LICENSE for a particular CANCER TARGET, providing VICAL with a GenBank®
accession number for such CANCER TARGET or similar information which uniquely
identifies such CANCER TARGET.

 

(2) VICAL shall notify MERCK in writing within thirty (30) days after receiving
such written notice from MERCK whether VICAL shall grant such a CANCER TARGET
LICENSE to MERCK, provided, however, that VICAL shall grant to MERCK such a
CANCER TARGET LICENSE unless such CANCER TARGET has previously been licensed to
an entity that is not an AFFILIATE of VICAL.  In the event that an exclusive
license for such CANCER TARGET is not available to MERCK, VICAL shall notify

*Confidential Treatment Requested

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MERCK of the reasons why such an exclusive license is not available, consistent
with VICAL’s confidentiality obligations to third parties.

 

(3) The Option shall be deemed to have been exercised by MERCK upon written
notice from VICAL pursuant to paragraph (c)(2) that VICAL shall grant a CANCER
TARGET LICENSE for such CANCER TARGET, or upon written confirmation by MERCK to
VICAL of the expiration of the thirty (30) day period set forth in paragraph
(c)(2), whichever is earlier (the “Option Exercise”).  Upon the Option Exercise,
CANCER VACCINES for such CANCER TARGET shall be deemed to be LICENSED PRODUCTS
under the Agreement.

 

(d)                                 Payment upon Option Exercise.  Within thirty
(30) days after the Option Exercise for each CANCER TARGET, MERCK shall pay to
VICAL a CANCER TARGET LICENSE fee of […***…].

 

(e)                                  Milestones and Royalties for CANCER
VACCINES. CANCER VACCINES that are not TREATMENT VACCINES shall be eligible for
milestones set forth Schedule A of the Agreement and for royalties set forth in
Section 8.4(a) of the Agreement.  CANCER VACCINES that are TREATMENT VACCINES
shall be eligible for milestones set forth in Schedule E of the Agreement and
for royalties set forth in Section 8.4(b) of the Agreement, provided that for
purposes of CANCER VACCINES, the “Effective Date” under Schedule E shall mean
the date of Option Exercise for the CANCER TARGET for which such CANCER VACCINE
facilitates an immune response.

 

(f)                                    Diligence for CANCER VACCINES. 
Notwithstanding Section 13.1 of the Agreement, MERCK’s diligence obligations
regarding CANCER VACCINES shall be as set forth in this paragraph.  MERCK shall
use reasonable efforts, consistent with the usual practice followed by MERCK in
pursuing the commercialization and marketing of its other vaccine products of a
similar commercial value, at its own expense, to develop and commercialize a
CANCER VACCINE for each CANCER TARGET for which it has received a CANCER TARGET
LICENSE on a commercially reasonable basis in such countries in the Territory
where in MERCK’s opinion it is commercially viable to do so, provided, however,
that such obligations of MERCK with respect to any CANCER TARGET are expressly
conditioned upon the continuing absence of any adverse condition or event
relating to the safety or efficacy of a CANCER VACCINE for such CANCER TARGET,
and the obligation of MERCK to develop or market any CANCER VACCINE for such
CANCER TARGET shall be delayed or suspended so long as in MERCK’s opinion any
such condition or event exists.

 

(g)                                 Right of First Negotiation for CANCER
VACCINES during Option Period.  If VICAL desires during the Option Period to
grant a license to an entity to any third party other than MERCK for any CANCER
TARGET, and MERCK has not yet obtained a CANCER TARGET LICENSE for three (3)
CANCER TARGETS, VICAL shall so notify MERCK in writing, identifying the CANCER
TARGET with a GenBank® accession number or similar information which uniquely
identifies such CANCER TARGET. MERCK shall have sixty (60) days in which to
respond in writing to such notice indicating MERCK’s desire to obtain a CANCER
TARGET LICENSE for such CANCER TARGET. The Option for such CANCER TARGET LICENSE
will be deemed to be exercised upon receipt by VICAL of such written notice by
MERCK. If MERCK does not respond within such 60-day period, or if MERCK notifies
VICAL in writing that MERCK is not interested in obtaining such a CANCER TARGET
LICENSE, VICAL shall be free to proceed to pursue negotiation and grant of such
license to a third party without further obligation to offer such license to
MERCK.

 

10.                                 The parties have agreed upon a press release
relating to this Amendment, which is attached hereto as Attachment 1.

 

 

*Confidential Treatment Requested

 

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11.                                 Effect of Amendment.  In no event shall this
Fourth Amendment be interpreted as a termination of the Agreement.  This Fourth
Amendment shall not be interpreted as an amendment of any provisions of the
Agreement except as specifically set forth in this Fourth Amendment, and all
other terms and conditions of the Agreement shall remain unmodified and in full
force and effect except specifically amended by this Fourth Amendment.

 

12.                                 Defined Terms.  Unless otherwise provided in
this Fourth Amendment, all capitalized terms in this Fourth Amendment shall have
the meaning provided for in the Agreement.

 

13.                                 Survival. Items 4 and 5 of this Amendment
No. 4, as well as Sections 12.4 and 12.5 of the Agreement, and Articles 1, 6,
14, and 21 of the Agreement, shall survive termination of the Agreement.

 

14.                                 Counterparts.  This Amendment No. 4 may be
executed in two or more counterparts, each of which shall be deemed an original,
but all of which together shall constitute one and the same instrument.

 

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IN WITNESS WHEREOF the parties have executed this Agreement the day and year
first above written.

 

 

MERCK & CO., INC.

 

VICAL INCORPORATED

 

 

 

/s/ DR. ANTHONY FORD-HUTCHINSON

 

/s/ VIJAY B. SAMANT

 

 

 

BY:

Dr. Anthony Ford-Hutchinson

 

BY:

Vijay B. Samant

 

 

 

 

 

TITLE:

Executive Vice President

 

TITLE:

President and CEO

 

 

 

 

 

 

Worldwide Basic Research

 

 

 

 

 

 

 

 

DATE:

August 8, 2003

 

DATE: 

August 20, 2003

 

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Attachment 1

 

News Release

 

FOR IMMEDIATE RELEASE

 

August 21, 2003

 

 

Contacts:

 

Investors:

 

Media:

 

 

Alan R. Engbring

 

Janeen Hicks

 

 

Vical Incorporated

 

Atkins + Associates

 

 

(858) 646-1127

 

(858) 527-3486

 

 

VICAL GRANTS OPTIONS TO MERCK FOR CANCER TARGETS

 

SAN DIEGO—August 21, 2003—Vical Incorporated (Nasdaq:VICL) announced today that
Merck & Co., Inc. (NYSE:MRK) and Vical have amended their existing license
agreement.  Under the amended agreement, Merck has obtained an option license
for rights to use Vical’s patented non-viral gene delivery technology for three
cancer targets. Exercise of the option license for each oncology target would
result in an option license fee payment to Vical, and further development may
lead to milestone and royalty payments to Vical. In addition, Vical has expanded
its infectious disease portfolio by re-acquiring the rights to apply its core
vaccine technology for influenza, herpes simplex virus (HSV), and human
papilloma virus (HPV) previously licensed to Merck. Merck will retain rights to
use the technology for Human Immunodeficiency Virus (HIV), hepatitis C virus
(HCV) and hepatitis B virus (HBV).

 

“We are excited with Merck’s potential application of our technology in the
oncology field in addition to their ongoing efforts with infectious disease
vaccines,” said Vijay B. Samant, Vical’s President and Chief Executive Officer.
“Each of the reacquired targets offers us significant opportunities for
commercial development of vaccines leveraging our core technology. We are
particularly pleased to regain rights to develop a vaccine for influenza,
especially for the elderly, for whom improved effectiveness of vaccines is
needed.”

 

About Vical

 

Vical researches and develops biopharmaceutical products based on our patented
DNA delivery technologies for the prevention and treatment of serious or
life-threatening diseases. Potential applications of our DNA delivery technology
include DNA vaccines for infectious diseases or cancer, in which the expressed
protein is an immunogen; cancer immunotherapeutics, in which the expressed
protein is an immune system stimulant; and cardiovascular therapies, in which
the expressed protein is an angiogenic growth factor. We have retained all
rights to our internally developed product candidates. In addition, we
collaborate with major pharmaceutical companies and biotechnology companies that
give us access to complementary technologies or greater

 

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resources. These strategic partnerships provide us with mutually beneficial
opportunities to expand our product pipeline and serve significant unmet medical
needs.

 

This press release contains forward-looking statements subject to risks and
uncertainties that could cause actual results to differ materially from those
projected. Forward-looking statements include statements about potential
development of products using the company’s technology in the oncology field and
the possibility of payments to the company, the company’s focus, collaborative
partners, product candidates, and developmental status. Risks and uncertainties
include whether Merck will exercise an option with respect to any of the cancer
targets, if any option is exercised, whether the company will receive payments
upon Merck’s development of product candidates, whether the company will pursue
opportunities, on its own or with collaborative partners, to develop product
candidates for HSV, HPV or influenza, whether vaccines for cancer or infectious
diseases will be developed and approved, whether any product candidates will be
shown to be safe and efficacious in clinical trials, the timing of clinical
trials, whether Vical or its collaborative partners will seek or gain approval
to market any product candidates, the dependence of the company on its
collaborative partners, and additional risks set forth in the company’s filings
with the Securities and Exchange Commission. These forward-looking statements
represent the company’s judgment as of the date of this release. The company
disclaims, however, any intent or obligation to update these forward-looking
statements.

 

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