Hybridon/Novartis Collaboration Agreements

From Hybridon's Form 8-K:

"On May 31, 2005, Hybridon, Inc. (the “Company”) entered into a research collaboration and option agreement and a license, development and commercialization agreement with Novartis to discover, develop and potentially commercialize immunomodulatory oligonucleotides (IMOs) that are toll-like receptor 9 agonists and that are identified as potential treatments for human allergy and respiratory diseases. In addition, beginning on May 31, 2007, if specified conditions are satisfied, Novartis may expand the collaboration to include additional human disease areas, other than oncology and infectious diseases. Under the terms of the agreements:

• Upon execution of the agreements, Novartis agreed to pay the Company a $4 million license fee;

• Novartis agreed to fund substantially all research activities;

• If Novartis elects to exercise its option to develop and commercialize licensed IMOs in the initial collaboration disease areas, Novartis is potentially obligated to pay the Company up to $132 million based on the achievement of clinical development, regulatory approval and annual net sales milestones;

• Novartis is potentially obligated to pay the Company additional milestone payments if Novartis elects to expand the collaboration to include additional disease areas and then develops and commercializes licensed IMOs in the additional disease areas based on the achievement of clinical development and regulatory approval milestones; and

• Novartis is also obligated to pay the Company a royalty on net sales of all products, if any, commercialized by Novartis, its affiliates and sublicensees."

Under the agreements, Novartis’ obligations to pay the Company royalties extend, on a product-by-product and country-by-country basis, until the expiration of the patent rights covering the product licensed to Novartis in countries in which there is coverage by licensed patent rights, and, in countries in which there is no coverage by licensed patent rights, until the later of the last day of the calendar year in which Novartis loses market exclusivity with respect to a product and the date 10 years after the product’s commercial launch. The royalty rate on net sales of products in countries in which there is no coverage by licensed patent rights is less than the royalty rate on net sales of products in countries in which there is coverage by licensed patent rights. The applicable royalty rate is reduced if Novartis is required to pay license fees or royalties to any third party for licenses to specified categories of third party intellectual property rights necessary to develop, make, use or sell the product or if the ratio of Novartis’ cost of goods to net sales for a product exceeds a specified threshold. Novartis’ royalty and milestone obligations are also reduced if Novartis terminates the license, development and commercialization agreement based on an uncured material breach by the Company.

Novartis’ rights under the agreements to products that it elects to develop and commercialize are worldwide, exclusive rights. In addition, during the term of the agreements, the agreements prohibit the Company from developing or commercializing any IMO in a collaboration disease area and from granting licenses to third parties to develop or commercialize any IMO in a collaboration disease area.

Either party may terminate the collaboration relationship based upon specified uncured breaches by the other party and, subject to restrictions under applicable U.S. federal bankruptcy law, in the event of the other party’s bankruptcy or insolvency. In addition, Novartis may terminate the collaboration relationship for its convenience at any time after providing the Company with specified advance notice of termination.

During the research phase of the collaboration, the collaboration is governed by a joint research committee, consisting of an equal number of representatives of the Company and Novartis. Ultimate decisionmaking authority is vested in Novartis as to most matters.

Full text of the Research Collaboration and Option Agreement and the License, Development and Commercialization Agreement.