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Recent Learnings A Legal Perspective

Recent Learnings A Legal Perspective. Presentation to SPBD 24 November 2006. AGENDA. Intro to Legal Department Mediolanum – the lessons learnt Risk Analysis – a useful tool? Jargon explained. Global Legal Department. Chairman/Board. David Brennan. Tony Zook. Graeme Musker

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Recent Learnings A Legal Perspective

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  1. Recent LearningsA Legal Perspective Presentation to SPBD 24 November 2006

  2. AGENDA Intro to Legal Department Mediolanum – the lessons learnt Risk Analysis – a useful tool? Jargon explained

  3. Global Legal Department

  4. Chairman/Board David Brennan Tony Zook Graeme Musker Stanhope Gate Göran Lerenius Stanhope Gate Glenn EngelmannLegal US Local Management Local marketing companies dedicated local lawyers in 9 countries Anita Goff Aptium Chris PettyLegal Alderley Park Johannes LindeLegal Södertälje/Mölndal Susanne Ås-SivborgGlobal IP Katarina Ageborg IP Litigation andRegulatory Mölndal/Södertälje ISMO Country Lawyers & Astra Tech AstraZeneca Legal Department Organisational Structure Jan Zetterberg ISMO&CanadaCorporate Lawyer Södertälje

  5. LEGAL DEPARTMENT ALDERLEY PARK Assistant General Counsel Chris Petty Shiona McGillivraySeniorCounsel Joanne Flitcroft Senior Counsel Vanessa FrenchSeniorCounsel AndrewGoreckiSeniorCounsel Robert Sherville-PayneSenior Counsel Katie Jackson-TurnerSeniorCounsel Liam McIlveen Senior Counsel Ellis Parry Global Privacy Officer Catriona Kinloch(Trainee) Seb KramerLegal Counsel Lucy AllisonLegal Counsel Mandy Cressey Legal Counsel Rachael JenkinsonLegal Counsel Catherine Higgs Legal Counsel Michelle DaviesLegal Counsel

  6. ASTRAZENECA LEGAL DEPARTMENT, SWEDEN Johannes Linde Assistant General Counsel Anders Burén Senior Counsel Leif GalloSenior Counsel Olof Ljungstrand Senior Counsel and Manager Legal Department Mölndal Marianne Holgersson Legal Counsel Jesper BergkvistSenior Counsel Pia JansonSenior Counsel Cecilia Nordenfors Senior Counsel Mathias Lyon Legal Counsel Christian Johard Legal Counsel Ulrika Lilja Steval Legal Counsel Katarina Lahneljung Paralegal

  7. AstraZeneca Legal Department, Wilmington VP General Counsel Glenn M Engelmann RoseAnne M Scanlan Assistant General Counsel Richard J Kenny Assistant General Counsel Thomas A Behan Sr Dir Corporate Compliance George Gilbert Dir Patents CNS TA & NA Office Leslie M Mitchell Sr AdministrativeCoordinator Laura J Davies Assistant GeneralCounsel Marie L Martino Assistant General Counsel Gary J Marini Assistant General Counsel

  8. What does Legal Do? Charter (as approved by SET) • to provide a comprehensive and cost-effective legal service to AZ of a standard that is comparable to or better than that supplied by the best legal functions in other major international pharma companies.

  9. Scope of Activities • Unique - provision of legal advice and support - instruction of external lawyers - management of litigation

  10. Lead - drafting and support in negotiation of Legal documentation - support Legal and regulatory compliance - Legal education

  11. Areas of Responsibility

  12. Mediolanum - the lessons learnt

  13. Background • In-licence of a niche oncology product in 1999 • Mediolanum’s main product • After 14 months no PK assay,US sales forecasts declined, Japanese regulatory delay. • Decision to terminate taken in Oct 2000 • Meeting with Mediolanum • Settlement negotiations and mediation held • Litigation commenced in 2003

  14. The Agreement • “If AZ determines that it is not feasible for AZ to pursue the development, launch or sale of any Licensed Product…due to a material scientific, technical, regulatory and/or commercial reason,including…(b) the commercial viability of the Licensed Product, AZ shall notify M in writing and provide M with its reasons for such a decision …. the parties shall discuss the situation in good faith. Following such discussion…AZ may terminate this Agreement ….

  15. What were the issues? • This was a “partnership” • Allegation that AZ had breached the agreement • Question whether still “feasible” to develop • Product required independent assessment • Trust

  16. Implications of being in dispute • Distraction of resources • Document searches and interpretation • Financial exposure • Exposure of individuals • Reputational risk

  17. Key Lesson • In licensed products are not your own! • Portfolio prioritisation decisions need careful review • Diligence obligations v termination rights • Objectivity test

  18. Lessons I • Importance of active alliance management • Expectations aligned from the start • “No surprises” rule • Reasons for termination : objectivity • Damaging documents

  19. Lessons II • Due diligence issues kept in view • Termination letter includes all material reasons for termination • Records of meetings made • Sensitivity to other party’s issues eg disclosure to investors

  20. Actions • Training module developed for SPBD • EPT’s being briefed • “Bad documents” training undertaken

  21. Are we alone? • Biota v GSK • Licence to develop Relenza in 1990 • Claimed GSK failed to use its best endeavours to promote and support Relenza • Claim valued between $308m and $430m • GSK produced over 200k documents • Biota legal costs $4m pa • Trial set for April 2008

  22. Mediolanum- the lessons learnt

  23. Background • In-licence of a niche oncology product in 1999 • Mediolanum’s main product • After 14 months no PK assay, US sales forecasts declined, Japanese regulatory delay. • Decision to terminate taken in Oct 2000 • Meeting with Mediolanum • Settlement negotiations and mediation held • Litigation commenced in 2003

  24. The Agreement • “If AZ determines that it is not feasible for AZ to pursue the development, launch or sale of any Licensed Product…due to a material scientific, technical, regulatory and/or commercial reason,including…(b) the commercial viability of the Licensed Product, AZ shall notify M in writing and provide M with its reasons for such a decision …. the parties shall discuss the situation in good faith. Following such discussion…AZ may terminate this Agreement ….

  25. What were the issues? • This was a “partnership” • Allegation that AZ had breached the agreement • Question whether still “feasible” to develop • Product required independent assessment • Trust

  26. Implications of being in dispute • Distraction of resources • Document searches and interpretation • Financial exposure • Exposure of individuals • Reputational risk

  27. Key Lesson • In licensed products are not your own! • Portfolio prioritisation decisions need careful review • Diligence obligations v termination rights • Objectivity test

  28. Lessons I • Importance of active alliance management • Expectations aligned from the start • “No surprises” rule • Reasons for termination : objectivity • Damaging documents

  29. Lessons II • Due diligence issues kept in view • Termination letter includes all material reasons for termination • Records of meetings made • Sensitivity to other party’s issues eg disclosure to investors

  30. Are we alone? • Biota v GSK • Licence to develop Relenza in 1990 • Claimed GSK failed to use its best endeavours to promote and support Relenza • Claim valued between $308m and $430m • GSK produced over 200k documents • Biota legal costs $4m pa • Trial set for April 2008

  31. RISK ANALYSIS - A USEFUL TOOL? Project Oz - CytoFab • New disease area – sepsis • Polyclonal antibody fragment • Protherics to continue process development • Protherics the sole source of supply • Complex manufacturing route

  32. Project Oz - CytoFab • Risks recognised by team • How to communicate them? • How to mitigate them? • Which to accept? • Risk analysis • excluding clinical development risks • excluding technical risks in process development • excluding IP

  33. Project Oz - CytoFab • The process development is delayed and causes a major delay to the launch date. • Oz defaults on its contractual obligations to carry out the process development work. • Oz becomes insolvent. • AZ and Oz fail to agree on a final MSA. • An MSA is signed, but there is a supply shortage due to Oz’s default. • The clinical development fails. • AZ decides to de-prioritise the project within AZ’s portfolio.

  34. Project Oz - CytoFab • Oz seeks to terminate the contract for AZ’s alleged breach of contract. • The clinical development is delayed (including for regulatory reasons). • AZ has difficulty in setting up and validating a second source of supply. • There are major supply shortages due to force majeure • Oz are unable to source TNF-alpha from Boehringer-Ingelheim (BI) for commercial use. • One of AZ’s competitors makes a bid to take over Oz.

  35. Project Oz - CytoFab Specific risks Oz becomes insolvent. Likelihood: Low. Impact: Medium. Recommendations for reducing or managing risk: Under the contract, AZ’s rights to patent and know-how continue in the event of Oz’s insolvency. To preserve security of supply, AZ should be prepared to purchase the company or manufacturing assets from the liquidator in these circumstances.

  36. Project Oz - CytoFab Specific risks The clinical development is delayed (including for regulatory reasons). Likelihood: Medium. Impact: Medium. Recommendations for reducing or managing risk: • Based on our financial modelling, the deal remains attractive with a 2-year delay in launch (no further detailed delay scenarios have been prepared). • There is a previous history of successful commercialisation of products using Oz’s technology. • A single Phase III study has provided an approvable package in US and EU in the past for a product used in the treatment of sepsis.

  37. JARGON EXPLAINED

  38. Consideration Representation Warranty Condition Force majeure Indemnity Severance Term Jargon Explained = Money = Promise = Promise = Something that must happen before the contract “bites” = Meaningless! But usually defined as “performance impossible” = Promise to pay money on a certain event = Ignore this clause = Clause; or duration of contract

  39. Jurisdiction = Arbitration = Mediation = Assignment = Waiver = No Benefit to Third Parties = Title = INCOTERM = Which court we all go to Private Court Parties work it out for themselves Passing on the contract Ignoring a breach of contract Nobody else can sue Ownership Special rules governing sales of goods Jargon Explained

  40. Liability = Exclusion of liability = Limitation of liability = Licence = Consequential loss = Mitigation = You have to pay You don’t have to pay You only have to pay $xxx Permission (usually from an IP owner to use that IP) Loss arising from a breach that is not immediate Keeping to a minimum the loss arising from a breach Jargon Explained

  41. Best endeavours = Reasonable endeavours = Best endeavours! Reasonable endeavours! Jargon Explained

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