Negotiating Collaborative Healthcare Research Agreements - - PowerPoint PPT Presentation

Negotiating Collaborative Healthcare Research Agreements

Structuring Joint Obligations, IP Rights, Confidentiality and Other Key Provisions

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THURSDAY, JULY 28, 2016

Presenting a live 90-minute webinar with interactive Q&A Eve M. Brunts, Partner, Ropes & Gray, Boston Susan M. Galli, Partner, Ropes & Gray, Boston Julie Rusczek, Esq., Health Sciences Law Group, Milwaukee

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Research Collaborations: Intersection of Academia and Industry

Strafford Webinars July 28, 2016

Eve Brunts Susan Galli Julie Rusczek Ropes & Gray Ropes & Gray Health Sciences Law Group 614.951.7911 617.951.7497 414.206.2102 eve.brunts@ropesgray.com susan.galli@ropesgray.com julie.rusczek@healthscienceslawgroup.com 57957354_3

Agenda

• Scope and Background (Rusczek)
• Structure and Governance (Rusczek)
• Regulatory Considerations (Brunts)
• Transactional Considerations (Galli)

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Scope

• “Research collaboration” can encompass a broad range of

arrangements and activities involving academia (including healthcare provider components) and industry

– Participants

• All academia (e.g., consortium)
• All industry (e.g., product co-development, extremely rare side effects)
• Government and academia and/or industry (e.g., NIH Brain Initiative)
• Non-profit foundations and academia and/or industry

– Focus here is on research collaborations between academia and industry

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Scope

• Research

– Pre-clinical research – Clinical research

• Pre-commercialization and post-marketing

– Data and biospecimen registries

• Focus here covers full range of research activities

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Scope

• No generally recognized definition for “research

collaboration”

• Focus here on research arrangements in which academia and

industry jointly contribute resources towards the conduct of research that: (1) is developed by both parties and (2) serves a common interest/mutually beneficial purpose

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Agenda

• Scope and Background (Rusczek)
• Structure and Governance (Rusczek)
• Regulatory Considerations (Brunts)
• Transactional Considerations (Galli)

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Trend toward Collaboration

• 2003: NIH Roadmap in Science

– Encouraged cross-disciplinary and multi-sector collaboration and non- traditional teams

• 2004: FDA Critical Path Initiative

– “The monumental effort involved in creating the scientific tools and processes necessary to support 21st-Century medical product regulation cannot be undertaken by any one entity alone. It requires the collaboration of all stakeholders—federal agencies, patient groups, academic researchers, industry, healthcare practitioners, and others.”

• Increasing need for big data and specimens in research

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Impetus for Collaboration - Industry

• Industry facing declining R&D (e.g., July 12, 2016 news –

Merck cutting 360 R&D jobs)

• Productivity in drug development is falling over historical

levels

• Cost to bring new drug to market has been rising
• Drug patents expiring

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Impetus for Collaboration - Academia

• NIH funding at an all time low
• Applications to NIH for competing research project grants at

an all time high for FY2015 – 52,190

• NIH funding struggles to keep up with inflation.
• The success rate for competing FY 2015 RPG applications was

18.3% (compared to 18.1% in FY14). Remains far below the 30% approval levels 15 years ago

• FY 2016, NIH budget increased by 5.9%
• NIH’s capacity to fund research is still lower than it was before

sequestration (prior to FY 2013).

https://nexus.od.nih.gov/all/2016/03/14/fy2015-by-the-numbers/ http://faseb.org/Science-Policy-and-Advocacy/Federal-Funding-Data/NIH- Research-Funding-Trends.aspx

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Industry-Academia Collaboration - Examples

Yale – Gilead collaboration

• Formed in 2011, extended for 3 more years in 2014
• Focused on developing novel targeted cancer therapies and

determining the genetic basis and underlying molecular mechanisms for various cancers

• Gilead provided $40M in research support and basic science

infrastructure in first 4 years

• Gilead has first option to license Yale inventions resulting

from the collaboration

• Research projects governed by joint steering committee

http://news.yale.edu/2011/03/30/yale-and-gilead-sciences-announce- cancer-research-collaboration http://news.yale.edu/2014/10/23/yale-and-gilead-sciences-extend-cancer- research-collaboration

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Industry-Academia Collaboration – Examples

Bayer – UCSF collaboration

• In 2011, entered into 10 year master R&D agreement
• Goals include

– Efficiency – provide framework for approval and funding of projects, cuts down on negotiation time for each project – Expedite the identification of potential therapeutic targets and development of drug discovery tools https://www.ucsf.edu/news/2011/02/8449/nurturing-delicate-balance-ucsfs- industry-partnerships

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Industry-Academia Collaboration - Challenges

• Competing goals

– Industry – development/protection of intellectual property – Academia – freedom to publish results for public benefit

• Conflict of interest concerns

– Age of transparency/Sunshine Act – Non-exclusive relationship, researchers/institution free to work with

• thers

 Address through research collaboration agreement

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Collaboration Structure

• Establish mutual goals

– Benchmarks – Evaluate progress on periodic basis

• Define scope of collaboration

– Focus of research – Included/excluded topics or project types – Require industry and institution co-PIs for each project?

• Set term and renewal options

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Collaboration Governance

• Typically governed by a steering committee

– Membership – equal numbers from both sides? Provision for tiebreaker? – May be tasked with establishing more detailed policies and procedures for review, approval, funding, and monitoring of projects – Handling disputes – Regular meetings – Need for subcommittees?

• Steering committee goals: efficiency, fairness, and fostering
• n-going collaboration

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Infrastructure and Administration

• Depends on scope of collaboration
• Could include:

– Space lease – Equipment lease – Establishing/maintaining biobank and/or databank (run by one of the parties or third party vendor) – Provision of research staff (e.g., industry scientist on-site at institution)

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Budgeting and Funding

• Agreement should establish cash and in-kind contributions

from each party

• Mechanism for determining funding for proposed projects
• ver course of collaboration term
• Critical for addressing potential conflict of interest concerns

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Budgeting and Funding

• Potential Anti-Kickback Statute concerns
• AKS prohibits any person

– from knowingly and willfully – offering, paying, soliciting, or receiving – any remuneration, directly or indirectly, – in return for

• referring an individual to a person for the furnishing or arranging for the

furnishing of an item or service for which payment may be made under a federal health care program, or

• purchasing, leasing, ordering an item, good, or service for which payment

may be made under a federal health care program.

• Violators are subject to criminal and civil penalties and exclusion

from federal health care programs.

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Budgeting and Funding

• Fair market value exchange

– Take into account not only cash but in-kind contributions to work (e.g., use of space, equipment) – Often more complicated to determine in context of collaborative relationship

• Ensure projects within defined scope of collaboration and help

advance legitimate goals of partnership

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Agenda

• Scope (Rusczek)
• Structure and Governance (Rusczek)
• Regulatory Considerations (Brunts)
• Transactional Considerations (Galli)

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Regulatory Considerations: General

• Research collaborations implicate a number of regulatory

considerations

• Regulatory considerations depend on the specific research

collaboration

– Structure of the collaboration – Nature of the research

• Human subjects?
• Individually identifiable information?
• Atypical nature of research collaboration can enhance regulatory

complexity

• Regulatory concerns may differ for different collaborators
• Preliminary need to define the applicable regulatory requirements

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Regulatory Considerations: General

• FDA Marketing Authorization

– Investigational new drug application (IND) – Investigational device exemption (IDE) – FDA financial disclosure

• Human Subjects Protection
• Privacy/Data Protection
• Ownership of Specimens
• Fraud and Abuse
• FDA Promotional Restrictions
• Federal and State Transparency Laws
• Non-Profit Tax Laws
• Government Intellectual Property Rights

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Regulatory Considerations: Status of Collaboration

• Status of the collaboration as “research” may be threshold issue

– Status determines the applicable regulatory and internal policy considerations

• FDA Clinical Investigation: Experiment that involves a test article and one
• r more human subjects and that either is subject to requirements for

prior submission to the FDA or the results of which are intended to be submitted to the FDA as part of an application for a research or marketing permit

• Common Rule Research: Systematic investigation, including research

development, testing and evaluation, designed to develop or contribute to generalizable knowledge. Human subjects research involves interaction with human subjects or individually identifiable data

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Regulatory Considerations: Status of Collaboration

• Some activities involving collaborations may not be “research” even

if related to research

– Examples

• Quality improvement activities whose purposes are limited to:

(1) implementing a practice to improve the quality of patient care, and (2) collecting patient or provider data regarding the implementation of that practice for clinical, practical, or administrative purposes

• Case study that analyzes the condition of a specific patient
• Product development not involving administration of a test article or

systematic investigation

• If initially determined not to be research, activities should be

re-evaluated if activities change over time

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Regulatory Considerations: FDA IND/IDE Requirements

• FDA IND/IDE requirements allocate responsibility among

research sponsor and investigator

– Sponsor is defined as “a person who initiates a clinical investigation, but who does not actually conduct the investigation, i.e., the test article is administered or dispensed to or used involving, a subject under the immediate direction of another individual”

• FDA recognizes only one research sponsor

– Research collaborations in which both parties develop and implement the research may require clear identification of research sponsor and requirement that sponsor comply with FDA regulatory responsibilities

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Regulatory Considerations: FDA Financial Disclosure

• FDA submissions must include information regarding financial interests of

investigators conducting clinical trials (21 C.F.R. Part 50 and Forms 3454/3455)

– Certification that no financial interests exist or disclosure of the financial interests (during clinical trial and 1 year after)

• Financial interests:

– Results of the study affect the amount of compensation – Other significant payments ($25,000) from “sponsor” – Proprietary interests in the product being tested – Significant equity interest ($50,000) in the “sponsor”

• “Sponsor” for FDA financial disclosure purposes may not be the regulatory

sponsor of the clinical investigation or the person submitting the marketing application

– “Sponsor” is any party supporting the clinical investigation (including through cash or in-kind support) – Multiple sponsors are possible

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Regulatory Considerations: Human Subjects Protection

• Research collaboration involving human subjects or individually identifiable

information requires assessment of applicable human subjects protection requirements

– Common Rule – FDA – State laws (supplemental or “gap fill” if no federal regulation) – Internal policies

• Application of standards even if not required by law mitigates risk and

avoids impediments to publication

– Federal and state laws are based on fundamental ethical principles about the conduct of human subjects research – International Committee of Medical Journal Editors (ICMJE) recommends that research subject to publication be conducted in accordance with the Declaration of Helsinski (2013) which includes IRB oversight and informed consent

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Regulatory Considerations: Privacy/Data Protection

• Primary focus of research collaboration is often the

generation of data or creation of data repository for future research

– Collection, maintenance (including costs), access to, and use of data

• Primary privacy law is Health Insurance Portability and

Accountability Act of 1996 (“HIPAA”) and implementing regulations (“Privacy Rule”)

– Every use and disclosure of “protected health information” (PHI) by a covered entity (including most health care providers) or its business associate is prohibited unless specifically permitted or required – PHI is individually identifiable health information in any form created by or received by a covered entity

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Regulatory Considerations: Privacy/Data Protection

• Under HIPAA Privacy Rule, a covered entity may use or disclose PHI for

research purposes only in the following circumstances:

– With subject authorization – Without subject authorization

• Waiver or alteration of authorization by IRB or privacy board
• Purposes preparatory to research
• Decedents’ protected health information
• Limited data set
• De-identified data
• HIPAA prohibits PHI from being sold absent notice of sale in the HIPAA

authorization

– PHI provided as part of a contract for a research study is not a sale – No notice if sale of PHI is for “research” with only “reasonable cost-based fee” for preparation/transmission of PHI

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Regulatory Considerations: Ownership/Use of Specimens

• Collection or use of specimens in collaboration can raise regulatory

concerns if subject to legal or contractual restrictions

• Regulation of Ownership/Use

– Common Law

• Individuals do not have a property interest in their biological specimens.

See Moore v. Board of Regents of the University of California; Washington University v. Catalona

– State Law

• Alaska: “A DNA sample and the results of a DNA analysis performed on

the sample are the exclusive property of the person sample or analyzed.” Alaska Stat. § 18.13.010(a)(2)

• Specimens are limited resource

– Access and use

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Regulatory Considerations: Data and Specimen Use

• Data/specimen use must be consistent with applicable restrictions

– Informed consent form and HIPAA authorization – Sponsor/funding source for prior research that generated the data/specimens

• Existing data/specimens pose particular concerns

– Initial collection may not have contemplated future transfer – Common issues even if some future research contemplated:

• Only future research by institution researchers
• Only non-commercial research
• Only research related to certain conditions
• No appropriate consent for genetic analysis
• Collaboration Agreement

– Assurances from contributors about freedom to use data/specimens – Structure/process for oversight of access and use – Disposition upon termination

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Regulatory Considerations: Fraud and Abuse

• Research arrangements generally represent well-recognized

categories with understood standards to minimize fraud and abuse concerns

– Sponsored Research

• Fee-for-service arrangement
• Researchers perform research directed by industry (such as clinical trial to

support approval of new drug)

– Independent Research

• Grant arrangement
• Industry funds research independently developed by researchers

– Technology Transfer

• Industry obtains rights to technology developed by researchers

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Regulatory Considerations: Fraud and Abuse

• A research collaboration can implicate fraud and abuse concerns if

the collaboration is perceived as a mechanism for transferring value to a health care customer in exchange for federally reimbursable business

• No generally accepted standards for collaborations to ensure

collaboration is structured appropriately

– Diversity in collaboration structures renders specific standards difficult – Longstanding government scrutiny and concern regarding informal or contractual joint ventures

• 1989 Fraud Alert on Joint Ventures
• 2003 Special Advisory Bulletin on Contractual Joint Ventures

– Principles derived from small entity safe harbor/contractual joint venture guidance can be adapted

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Regulatory Considerations: Fraud and Abuse

• Key Considerations

– Legitimate business need – Selection of collaboration partner – Structure of the collaboration – Contributions to/benefits derived from collaboration

• Valuing the contribution

– In-kind contributions (e.g., time and effort of company personnel) – Intangible benefits (e.g., data)

• Aligning the benefit

– Participation of/benefit to collaborators on equal terms or, if contributions unequal, participation on terms/benefits received consistent with collaborators’ respective relative contributions

– Key considerations addressed through internal documentation as well as collaboration agreement

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Regulatory Considerations: FDA Promotional Restrictions

• FDA promotional concerns can arise for industry collaborator if the

collaboration involves promotion of a manufacturer’s product

– Manufacturer’s responsibility for promotional activities undertaken by the collaboration or by other collaboration partners may be less clear

• Collaboration partner as independent actor or agent?

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Regulatory Considerations: Federal and State Transparency Laws

• Federal sunshine law requires disclosure of research-related transfers of value

– Manufacturers of a drug, device, biological or medical supply covered under Medicare, Medicaid or the Children’s Health Insurance Program must report most payments or

• ther transfers of value made to a covered recipient (i.e., physicians and teaching

hospitals) – Payments related to “research” activities that are covered by either written agreement

• r protocol are reported separately from other transfers of value
• Research definition similar to Common Rule definition
• State law obligations vary

– Vermont and Connecticut require disclosure of research-related transfers of value – Massachusetts exempts from disclosure transfers of value genuine research projects and bona fide clinical trials

• Exemption does not include post-marketing clinical trials
• Collaboration agreements should address disclosure of information necessary for

manufacturer to meet reporting obligations

– Is there a transfer of value if joint contributions to common endeavor?

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Regulatory Considerations: Non-Profit Tax Laws

• Tax-Exempt Status

– Academic/health care provider collaborators may be tax-exempt charitable organization subject to specific restrictions due to status – Organization must be organized and operated exclusively for charitable, scientific and educational purposes – Internal Revenue Service (IRS) tolerates some unrelated business activity

• Unrelated Business Taxable Income (UBTI)

– Organization is taxed, at ordinary corporate rates, on the net income derived from unrelated trade or business – Unrelated trade or business is activity not “substantially related” to its tax-exempt purposes – Research is an exempt activity if “scientific research” and conducted in the public interest – Examples of exclusions from UBTI:

• Income earned by hospitals, colleges and universities from performing “research” for any

person

• Certain passive income (such as royalties) so long as not debt-financed

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Regulatory Considerations: Non-Profit Tax Laws

• Private Use of Tax-Exempt Bond Financed Space

– Use of space financed with tax-exempt bonds by private user in trade or business must be limited to preserve tax-exempt status of bonds (generally 5% limit) – Common Examples:

• Use for unrelated trade or business
• Use by industry under a lease or management contract (with certain exceptions)
• Use by industry as a sponsor of a “basic research” contract unless
• Rev. Proc. 2007-47 is satisfied
• Use by industry as a sponsor of a clinical research contract (open issue)

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Regulatory Considerations: Non-Profit Tax Laws

• IRS Rev. Proc. 2007-47

– Sets forth safe harbor under which “research agreements” do not result in private use of a bond-financed facility – Safe Harbor: Exclusive Licenses

• Research agreement relates to property used for “basic research” supported (or sponsored) by

a sponsor

• “Basic research” means any original investigation for the advancement of scientific knowledge

not having a specific commercial objective

• License or other use of resulting technology by sponsor is permitted only on competitive terms
• Price paid for use is determined at the time the license or other resulting technology is

available for use

– Safe Harbor: Non-Exclusive Licenses

• Sponsor agrees to fund “basic research”
• Organization determines research to be performed and manner performed
• Organization owns title to any patent resulting from research
• Sponsor has no more than non-exclusive, royalty-free license to the research

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Regulatory Considerations: Government Rights in Intellectual Property

• Research collaborations may build upon existing intellectual property

– Government rights if development was federally funded – Collaboration identify pre-existing rights or representation that no such rights

• Bayh-Dole Act

– Uniform policy for disposition/licensing of rights to patentable inventions conceived or first reduced to practice in performance of government-funded project

• Grantee/contractor first right to invention if notice to government, government license, patent

application acknowledgement and pursuit of commercialization

• No assignment rights to inventions without government approval
• Government “march-in” rights
• NIH Guidance: Developing Sponsored Research Agreements:

Considerations for Recipients of NIH Research Grants and Contracts (1994)

– Academic freedom and publication – Site not let research agreement impede commercialization – Limit sponsor’s exclusive licensing rights before sponsor decides to commercialize product

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Agenda

• Scope (Rusczek)
• Structure and Governance (Rusczek)
• Regulatory Considerations (Brunts)
• Transactional Considerations (Galli)

57957354_3 43

Collaborations: Current Trends

• There has been a significant increase in industry-academic alliances
• Economic drivers
• Industry-academic collaborations seek to understand the

foundational science

– Industry partners are increasingly willing to spend to obtain know-how regarding the underlying biology

• These collaborations are using techniques found in commercial

agreements

– Looking for development candidates and doing pre POC development

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Collaborations: Many Shapes and Sizes

• There are many points along the drug discovery pathway for

productive institution-industry collaborations

– Target validation – Small molecule or antibody screening

• Industry has libraries of interest and/or
• Institution has libraries or screening platform of interest

– Lead optimization

• Specialized assay
• Institution animal model

– Pivotal animal studies – Clinical trials

• The needs and assets of the parties lead to different deal structures

57957354_3 45

Governance

Tackling the issue of tie-breaking

• Who has the ultimate authority regarding various types of decisions made

by Joint or Research Steering Committees?

• Are there decisions requiring consensus?

57957354_3 46

Governance

• Research Institution Considerations

– Institutions/investigators want to control the nature and scope of their research – Can the Company unilaterally discontinue a particular program?

• If so, what, if anything, protects the faculty, students and staff working on

that program?

• Company Considerations

– Research being performed is relevant to drug discovery and development – Company wants ability to manage spend on various programs and to terminate program if research is no longer relevant or is not working,

• r if priorities shift

57957354_3 47

Intellectual Property

Background IP

– One or both of the parties may have background IP that is necessary

• r useful for:
• the conduct of the collaboration
• the ultimate commercialization of product

57957354_3 48

Intellectual Property

• Research Institution Considerations

– Unintentional sweeping in of its IP – whether from another principal investigator or other collaborations – Dedicating certain IP to the collaboration, thus limiting the ability to exclusively license the IP to a third party – Covering IP expenses for Background IP – Compliance with Bayh-Dole

• Company Considerations

– Ensuring that Background IP is not encumbered – e.g., by a previous (or ongoing) collaboration with a third party -- so that the Company can take forward what is generated during the collaboration – Added expense of prosecution or maintenance of Institution Background IP

57957354_3 49

Intellectual Property

Collaboration IP

• Challenges related to IP created in the collaboration

57957354_3 50

Intellectual Property

• Research Institution Considerations

– Access to and use of collaboration results for future research – Company supports the patent costs for the IP covered by option or licensing rights – Freedom to license to other entities if Company declines its

• ption/does not commercialize
• Company Considerations

– Ability to freely use the collaboration IP in R&D – Obtaining commercial rights to Collaboration IP – Ability to ensure commercial exclusivity to support successful product development

57957354_3 51

Economics

How do you develop an economic regime that aligns the parties’ interests and appropriately recognizes each party’s contribution?

57957354_3 52

Economics

• Research Institution Considerations

– Institution contributes important scientific knowledge that is critical to the ultimate product but may not end up owning patents that cover these products – In some cases, Institutions cannot pre-negotiate financial terms (value) for the IP created during collaboration due to IRS limitations.

• Company Considerations

– Not overpaying for know-how

• What are reasonable limits?
• Is the Company in a worse position than the market for having to pay for

know-how that has long since been made public?

– Unclear financial obligations can make it difficult to decide what programs to advance

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IRS Requirements: Private Use

• Considerations

– The IRS limits the amount of “private business use” of facilities financed with tax-exempt bonds, including research facilities – Not a private use if resulting IP is licensed

• On competitive terms at a price determined at the time the IP is available

for use or

• Non-exclusively, the Institution determines the research to be performed

and the manner of performance, and title remains with the nonprofit Institution [See Rev. Proc. 2007-47]

– Generally means can’t pre-determine the royalties in an exclusive license – Use of savings clauses

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Restrictions on Investigators/Institutions

What is the most equitable way to incorporate investigator/institution restrictions into research collaborations?

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Investigator Restrictions

• Institution Considerations

– Restricting Institution or certain investigators may interfere with continued research in areas of investigator’s expertise – Restrictions are difficult to keep track of – Reservation of rights to use licensed collaboration IP for academic research and educational purposes – Avoid doing multiple research collaborations with different companies with

• verlapping research scopes
• Company Considerations

– Investigator collaborating with another commercial party could lead to confusion over what work was done for the Company and what work was done for the other party, or result in improper use of information/materials

• Could complicate licensing of IP arising out of the Company’s collaboration
• Could create contamination risk that may impact later ability to commercialize

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Publication

• Research Institution Considerations

– Mission includes use of research to address unmet needs of the public and to disseminate information – Publication is important to investigators for various personal and professional reasons

• Company Considerations

– Early publication may force earlier filing of IP, which can be weaker and result in a shorter period of patent exclusivity – Early publication will allow competitors to gain benefit from Company’s sponsored research – Shortens head start and may weaken competitive position

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IRS Circular 230 Notice: To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. tax advice contained herein is not intended or written to be used, and cannot be used by any taxpayer, for the purpose of avoiding U.S. tax penalties.

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