*** 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”).


 


1

















 


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


3

















 


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


4

















 


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


 


5

















 


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.


 


6

















 


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

  



 


7

















 


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


 


8

















 


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.


 


9