Exhibit
10.303


 


 


SECOND
AMENDMENT TO THE EXCLUSIVE LICENSE AGREEMENT


DATED JANUARY 31, 1995


between


THE REGENTS OF THE UNIVERSITY OF CALIFORNIA


and


CYGNUS, INC.


for


DEVICE FOR IONTOPHORETIC NON-INVASIVE SAMPLING


OR DELIVERY OF SUBSTANCES


 


UC Agreement Control
Number 1995-04-0565


UC Case No. 1987-162


 


 


                This second
amendment, (“Second Amendment”) is effective this 19th day of September, 2002
(“Effective Date”), by and between The Regents of the University of California,
a California corporation, having its administrative offices at 1111 Franklin
Street, 12th Floor, Oakland, California 94607-5200 (“The Regents”), and Cygnus,
Inc., a Delaware corporation having its principal place of business at 400
Penobscot Drive, Redwood City, California 94063, formerly known as Cygnus
Therapeutic Systems, a California corporation (“Licensee”).


 


BACKGROUND


 


A.                                   The Regents and Licensee entered into an
Exclusive License Agreement with an effective date of January 31, 1995, UC
Control No. 1995-04-0565 (“Agreement”) and this Agreement was amended to extend
the diligence deadline for filing an application for regulatory approval for
the Licensed Product in an Amendment with an effective date of April 23, 1998,
UC control No. 1995-04-0565B (“First Amendment”).


 


B.                                     The Licensed Product that Licensee is
selling presently comprises two separate components:  a GlucoWatchâ Biographer or its functional equivalent
(hereafter referred to as the “GlucoWatchâ
Biographer”) and a GlucoWatchâ AutoSensor or its functional equivalent
(hereafter referred to as the “GlucoWatchâ
AutoSensor”), wherein GlucoWatchâ is a registered trademark of
Licensee.  Each of these two components
shall 


 


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                                                be deemed to be a Licensed Product
whether sold separately or in combination with each other.


C.                                     Licensee has entered into an expanded
Sales, Marketing and Distribution Agreement with Sankyo Pharma, Inc., dated
July 8, 2002, wherein Sankyo Pharma has the exclusive right to sell, market,
and distribute the Licensed Product in the United States until April 1, 2014,
and Sankyo Pharma, Inc., is thus Licensee’s U.S. Marketing Partner as
“Marketing Partner” is defined in Paragraph 1.7 of the Agreement; provided,
however, that if Sankyo Pharma exercises its right to manufacture under the
Anticipatory Breach section of the Sales, Marketing and Distribution Agreement,
then Sankyo Pharma, Inc., will be considered a Sublicensee and not a Marketing
Partner.


 


D.                                    The Regents and Licensee mutually desire
to further amend the Agreement in accordance with the terms set forth below;


 


NOW, THEREFORE, the parties agree to the following:


 


1.                   DEFINITIONS


 


A.            All definitions and paragraph
numbers referred to in this Second Amendment have the same meaning as in the
Agreement, unless modified herein.


 


B.            Paragraph 1.2 of the Agreement entitled Licensed Product
is deleted in its entirety and replaced with the following:


 


1.2           “Licensed
Product(s)” means any Product, including, without limitation, a Product for use
or used in practicing a Licensed Method and any Product made by practicing a
Licensed Method, the manufacture, use, sale, or import of which in or into a
particular country, would infringe, but for a license, a Valid Claim in the
country where such manufacture, use, sale, or import occurs.  Without limiting the generality of the foregoing,
any Product (including any Combination Product) containing or using a Licensed
Product shall be deemed a Licensed Product in its entirety.


 


C.                Paragraph 1.3 of
the Agreement entitled Licensed Method is deleted in its entirety and replaced
with the following:


 


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1.3       “Licensed Method” means
any process, art or method that is claimed in a Valid Claim, or the use of
which would infringe, but for a license, a Valid Claim in the country where
such practice occurs.


 


D.            Paragraph 1.4 of the Agreement entitled
Net Sales is deleted in its entirety and replaced with the following:


 


1.4           “Net Sales” means the total of the
gross amount invoiced or otherwise charged (whether consisting of cash or any
other forms of consideration) for the Final Sale of Licensed Products or
Licensed Method by Licensee, any Affiliate or Sublicensee to Customers, less
the following deductions (to the extent included in and not already deducted
from the gross amount invoiced or otherwise charged) to the extent actual and
customary:  cash, trade or quantity
discounts actually granted to Customers; sales, use, tariff, import/export
duties or other excise taxes imposed on particular sales (excepting value added
taxes or income taxes); transportation charges, including insurance to the extent
actually paid by the Customer; and allowances or credits to customers because
of rejections or returns.  Where
Licensee, any Affiliate, or Sublicensee is the Customer, then Net Sales shall
be based on the gross amount normally invoiced or otherwise charged to other
Customers in an arms length transaction for such Licensed Product or Licensed
Method.  For the avoidance of doubt, if
Licensee, any Affiliate, or Sublicensee supplies (directly or indirectly) a
Product that constitutes a Licensed Product to any Affiliate or Sublicensee,
and such Affiliate or Sublicensee includes such Product in another Product
(including a Combination Product), then Net Sales shall be based on the total
gross amount invoiced or otherwise charged for such other Product in its entirety.


 


For a Combination
Product, however, Net Sales shall be calculated as:


 


                                                A/(A+B) x [Net Sales, calculated without
regard to this formula, of the Combination Product],


 


                Where:


 


 


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(i)            “A” is the total of the separately
listed sale price(s) of each Licensed Product contained within or used in the
Combination Product if sold separately; and


 


(ii)           “B” is the total of the separately
listed sale price(s) of each Combination Product Component contained within or
used in the Combination Product when sold separately;


 


provided, however, that
in no event shall Net Sales for a Combination Product be less than *** of Net
Sales, calculated without regard to this formula, of the Licensed Product that
is the Combination Product.  Notwithstanding
the foregoing, if the Combination Product Component is an *** then Net Sales
for such Combination Product will not be less than *** of Net Sales, calculated
without regard to this formula, of the Licensed Product that is the Combination
Product. The parties agree that reduction of the royalty rate as provided for
in Paragraph 5.3 will not be available with respect to a Combination Product.


 


Notwithstanding the foregoing, Licensed Products used
solely in clinical trials and a reasonable quantity of Licensed Products used as
marketing samples to develop or promote the Licensed Products shall not be
included as sold under this definition of Net Sales, provided no consideration
(whether in cash or other consideration) is provided therefor.


 


E.             New Paragraph 1.9
is added:


 


1.9           “Combination
Product” means a combined Product that contains or uses a Licensed Product and
at least one other Product or process (a “Combination Product Component”),
where (i) such Combination Product Component is not a Licensed Product, (ii) if
such Combination Product Component were removed from such combined Product, the
manufacture, use, sale, or import of the resulting Product in or into a
particular 


 












*** Certain information on this page has been omitted and filed
separately with the Commission.  Confidential
treatment has been requested with respect to the omitted portions.


 


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country would infringe, but for a license, the same Valid Claim in the
country where such manufacture, use, sale, or import occurs as such combined
Product, (iii) such Combination Product Component and such Licensed Product are
sold separately from such combined Product by Licensee, any Affiliate or
Sublicensee, (iv) such Combination Product Component does not function together
with a Licensed Product so as to achieve the purpose for which such Licensed
Product is sold, and (v) the market price of such combined Product is higher
than the market price for such Licensed Product (if sold separately) as a
result of such combined Product containing or using such Combination Product
Component.


F.             New Paragraph 1.10
is added:


 


1.10         “Final Sale” means
any sale, transfer, lease, exchange or other disposition or provision of a
Licensed Product and/or a Licensed Method to a Customer.  A Final Sale shall be deemed to have
occurred upon the earliest to occur of the following (as applicable):  (a) the transfer of title to such Licensed
Product and/or Licensed Method to a Customer, (b) the shipment of such Licensed
Product to a Customer, (c) the provision of an invoice for such Licensed Product
or Licensed Method to a Customer, or (d) payment by the Customer for Licensed
Products or Licensed Method.


 


G.            New Paragraph 1.11
is added:


 


1.11         “Customer” means any
individual or entity that receives Licensed Products or Licensed Methods,
provided however, that Licensee, any Affiliate, or Sublicensee shall be deemed
a Customer only if it receives Licensed Products or Licensed Methods for its
own end-use and not for resale.


 


H.            New Paragraph 1.12
is added:


 


1.12         “Product” means any
kit, article of manufacture, composition of matter, material, compound,
component, or product.


 


I.              New Paragraph 1.13
is added:


 


1.13         “Valid Claim” means
any claim of (a) an issued, unexpired patent within the Regents’ Patent Rights,
but excluding any claim that has been (i) withdrawn, cancelled, disclaimed or
waived, or (ii) held invalid or unenforceable by a court of competent 


 


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jurisdiction in a decision that can no longer be appealed; or (b) a
pending patent application within the Regents’ Patent Rights, which claim has
not been abandoned or finally rejected by the United States Patent and
Trademark Office (USPTO), or any analogous foreign administrative entity, in a
decision that can no longer be appealed or otherwise challenged.


 


2.                                       SUBLICENSEES


 


A.            New Paragraph 3.4 is added:


 


3.4(a)      If The Regents (as represented by the
actual knowledge of The Regents’ Office of Technology Transfer licensing
professional responsible for administration of this case) or a third party
discovers and notifies the licensing professional that Licensed Products or
Licensed Methods covered by Regents’ Patent Rights for which Licensee was
granted an exclusive license are useful for sampling analyte(s) other than
glucose or administering therapeutic agent(s) and such  Licensed Products or Licensed Methods have
not been developed or are not currently under development by Licensee, then The
Regents, as represented by the Office of Technology Transfer, may give written
notice to the Licensee of the third party’s interest in developing Licensed Product
and Licensed Method for such purpose.


 


3.4(b)      Licensee shall have ninety (90) days to
give The Regents written notice stating whether Licensee elects to develop
Licensed Products or Licensed Methods for such other analyte(s) or agent(s).


 


3.4(c)      If Licensee elects to develop and
commercialize the proposed Licensed Products or Licensed Methods for such other
analyte(s) or agent(s), then Licensee shall negotiate with The Regents
reasonable milestones for the development of such other analyte(s) or agent(s)
to be added to Paragraph 6.4 of the Agreement, and submit a Progress Report
every six (6) months to The Regents outlining the Licensee’s development and
commercialization efforts for such other analyte(s) or agent(s).


 


3.4(d)      If Licensee elects not to develop and
commercialize the proposed Licensed Products or Licensed Methods for such
analyte(s) or agent(s), then Licensee shall notify 


 


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The Regents in writing of
this election, and The Regents may seek a third party(ies) to develop and
commercialize the proposed Licensed Products or Licensed Methods for the other
analyte(s) or agent(s).  If The Regents
is successful in finding such third party, it shall refer such third party to
Licensee.  If the third party requests
in writing a sublicense under this Agreement, then the Licensee shall report in
writing the request to The Regents within thirty (30) days from the date of
such written request.  If the request
results in a sublicense, then Licensee shall report it in writing to The
Regents pursuant to Paragraph 3.2 of the Agreement.


 


3.4(e)      If the Licensee refuses to grant a
sublicense to such third party, then within thirty (30) days after such
refusal, which shall be in writing, the Licensee shall submit to The Regents a
written report specifying the license terms proposed by the third party and a
written justification for the Licensee’s refusal to grant the proposed
sublicense.  This justification may be
based on financial terms as well as the competitive position of the third party
in relationship to Licensee.  The
parties agree that the Licensee is under no obligation to grant a sublicense to
a third party that would result in the Licensee receiving an earned royalty of
less than two and one half percent (2.5%) of Net Sales from such third
party.  If however, The Regents, at its
sole reasonable discretion, determines that the terms proposed by the third
party are reasonable under the circumstances, then The Regents shall have the
right to grant to the third party a license to make, have made, use, sell,
offer for sale and import Licensed Products and practice Licensed Method for
other analyte(s) or agent(s) on terms no less favorable to The Regents than the
terms last proposed to Licensee by the third party providing royalty rates are
at least equal to those paid by Licensee.


 


3.4(f)       For avoidance of
doubt, The Regents’ right to grant a license under Paragraph 3.4(e) shall not
extend to any product, material, or method developed independently by Licensee
which is not covered by Regents’ Patent Rights.


 


3.4(g)      Notwithstanding
the letter dated August 25, 2000, by The Regents, the Agreement has not been
terminated for any analyte(s) or agent(s). 
Licensee will work with The 


 


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Regents to ascertain whether any third party,
including Inventors, are requesting sublicenses.


 


3.                                       ROYALTIES


 


A.            Paragraph 5.1 is deleted in its
entirety and replaced with the following:


 


5.1           The Licensee shall also pay to The
Regents an earned royalty as follows: 
(a) two percent (2%) of the Net Sales by the Licensee, its Sublicensee,
or Affiliate of Licensed Product or Licensed Method, except that for the
GlucoWatchâ AutoSensor, Licensee shall pay to The
Regents an earned royalty of one and one half percent (1.5%) of Net Sales when
this product is sold separately; (b) in the case where Licensee sells the
Licensed Product to a U.S. Marketing Partner, two percent (2%) of Net Sales,
except that for the GlucoWatchâ AutoSensor this amount shall be one and
one half percent (1.5%) of Net Sales, of either (i) the Licensee’s actual
transfer (invoice) price of Licensed Products to the Marketing Partner or (ii)
sixty percent (60%) of the U.S. Marketing Partner’s Net Sales of Licensed
Product, whichever is greater. 
Notwithstanding the above, for the first three (3) Sales Years the
royalty rates above shall be reduced to one percent (1%) of Net Sales of
Licensed Product or Licensed Method. 
For purpose of clarity, it is understood that only one royalty shall be
due under this Paragraph 5.1 with respect to any particular Licensed Product
regardless of whether the Licensed Product can also be used in a Licensed
Method.


 


B.                                     Paragraph 5.2 of the Agreement is deleted
in its entirety and replaced with the following:


 


5.2           For Sales of
Licensed Products to an Affiliate or a non-U.S. Marketing Partner from the
Licensee at a reduced price from that customarily charged to an unrelated third
party, the royalty paid to The Regents shall be based on the Net Sales of
Licensed Products of the Affiliate or the non-U.S. Marketing Partner to the
Affiliate’s or non-U.S. Marketing Partner’s customers.  Where the Licensee sells or transfers
Licensed Products for end-use to itself or an Affiliate or a non-U.S. Marketing
Partner, such sale shall be considered a sale at list price and The Regents
shall be entitled to receive a royalty


 


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thereon in accordance with this Article.  Each reference to the Licensee herein shall be meant to include
its Affiliates and non-U.S. Marketing Partners.


 


C.            Paragraph 5.5 of the Agreement is deleted in its entirety
and replaced with the following:


 


5.5           Paragraph 1.1,
amended Paragraph 1.2 and amended Paragraph 1.3 define Regents’ Patent Rights,
Licensed Product and Licensed Method so that royalties shall be payable on
Licensed Product and Licensed Method covered by both pending applications and
issued patents.  Royalties will accrue
in each country for the duration of Regents’ Patent Rights in that country and
are payable to The Regents when Licensed Product is invoiced or if not
invoiced, when delivered to a third party.


 


D.            Paragraph 5.7 of the Agreement, setting forth the minimum
annual royalty, is deleted in its entirety and replaced with  the following:


 


5.7           Licensee shall pay
to The Regents a minimum annual royalty for the life of Regents’ Patents Rights
during the term of this Agreement, beginning with the first Sales Year as
follows:  forty thousand dollars
($40,000) for the first Sales Year; seventy thousand dollars ($70,000) for the
second Sales Year; one hundred thousand dollars ($100,000) for the third Sales
Year; one hundred fifty thousand dollars ($150,000) for the fourth Sales Year;
and two hundred thousand dollars ($200,000) for the fifth and subsequent Sales
Years.  This minimum annual royalty
shall be paid to The Regents by thirty (30) days after the close of each Sales Year
and shall be credited against the earned royalty due and owing for the calendar
year in which the minimum annual royalty payment was made.


 


4.                                       DUE DILIGENCE


 


A.            Paragraphs 6.4.6 and 6.4.7 of the
Agreement are deleted and replaced with the following:


 


6.4.6        Submit an application for regulatory clearance of commercial
scale manufacturing process for Licensed Product to the FDA or equivalent
foreign regulatory authority within twelve (12) months of receiving marketing
approval from the FDA or such equivalent foreign regulatory authority for such
Licensed Product; or


 


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6.4.7        Reasonably fill the market demand for
Licensed Product within twenty-four (24) months of submitting the application
for regulatory clearance as provided for in Paragraph 6.4.6 above using
processes and equipment approved by the FDA or such equivalent foreign
regulatory authority; or


 


B.            New Paragraph 6.4.8 is added:


 


6.4.8        Continue to
reasonably fill the market demand for Licensed Product by adding capacity as
necessary and obtaining FDA approval for such additional capacity processes and
equipment or approval from equivalent foreign regulatory authority.


 


C.            Paragraph 6.5 of the
Agreement is deleted in its entirety, as are all references to Paragraph 6.5 in
the Agreement.


 


                The Agreement shall remain in
full force and effect in accordance with its terms except as amended herein.


 


                The Regents and Licensee have executed this Second
Amendment in duplicate originals, by their respective and duly authorized
officers, as evidenced by the signatures below.


 


	
  CYGNUS,
  INC.

  	
  THE
  REGENTS OF THE UNIVERSITY OF CALIFORNIA

  
	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ John C Hodgman

  	
  By:

  	
  /s/ Alan B. Bennett

  
	
   

  	
  (Signature)

  	
   

  	
  (Signature)

  
	
   

  	
   

  	
   

  	
   

  
	
  Name:

  	
  John C Hodgman

  	
  Name:

  	
  Alan B. Bennett

  
	
   

  	
   

  	
   

  	
   

  
	
  Title:

  	
  Chairman, President and
  CEO

  	
  Title:

  	
  Executive Director,
  Research Administration and Technology 

  Transfer

  
	
   

  	
   

  	
   

  	
   

  
	
  Date:

  	
  September 18, 2002

  	
  Date:

  	
  September 19, 2002

  



 


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