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CONFIDENTIAL TREATMENT REQUESTED
UNDER 17 C.F.R §§ 200.80(B)4, AND 240.24B-2

Exhibit 10.1
 
Confidential
Execution Copy

 
 License Agreement

Between

Isis Pharmaceuticals, Inc.,

And

Bayer Pharma AG
 

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LICENSE AGREEMENT

This LICENSE AGREEMENT (the “Agreement”) is entered into as of the 1st day of
May, 2015 (the “Execution Date”) by and between Isis Pharmaceuticals, Inc., a
Delaware corporation, having its principal place of business at 2855 Gazelle
Court, Carlsbad, CA 92010, USA (“Isis”), and Bayer Pharma AG, a company
organized under the laws of Germany, having its principal place of business at
Muellerstraße 178, 13353 Berlin, Germany (“Bayer”). Bayer and Isis each may be
referred to herein individually as a “Party” or collectively as the “Parties.”
Capitalized terms used in this Agreement, whether used in the singular or the
plural, have the meaning set forth in Appendix 1. All attached appendices and
schedules are a part of this Agreement.

RECITALS

WHEREAS, Isis has discovered and developed through human proof-of concept a
novel antithrombotic drug, ISIS-FXIRx, based on Isis’ knowledge, experience and
intellectual property rights to both antisense technology and to ISIS-FXIRx;

WHEREAS, Isis seeks a partner with sufficient expertise in researching,
developing and commercializing human therapies to enable the further development
and commercialization of ISIS-FXIRx;

WHEREAS, Isis is conducting, and may in the future conduct, research and
development of antithrombotic drugs, and may develop and commercialize such
antithrombotic drugs to the extent permitted by this Agreement;

WHEREAS, Bayer has expertise in researching, developing and commercializing
human therapeutics and, in particular, antithrombotic drugs, and is interested
in developing and commercializing ISIS-FXIRx with the assistance and input of
Isis as further described herein;

WHEREAS, Bayer is conducting, and may in the future conduct, research and
development in antithrombotic mechanisms, including inhibition of Factor XI, and
may develop and commercialize antithrombotic drugs, including drugs whose
mechanism of action is the inhibition of Factor XI;

WHEREAS, Bayer is interested in working with Isis to create a suite of
antithrombotic drugs over time to complement ISIS-FXIRx as further set forth
herein, and is therefore interested in obtaining options from Isis to a not yet
developed follow-on compound targeting Factor XI [***] utilizing new
advancements to antisense technology;

WHEREAS, in pursuit of the development and commercialization of ISIS-FXIRx Bayer
intends to make significant upfront investments in clinical trials and to share
with Isis the results of its proprietary and commercially sensitive research
regarding Factor XI;

WHEREAS, Bayer desires Isis to (i) grant Bayer an exclusive license to
ISIS-FXIRx to enable Bayer to further develop and commercialize ISIS-FXIRx under
a mutually agreed strategic development and commercialization plan to optimize
the global commercial value of ISIS-FXIRx, (ii) provide Bayer with target
exclusivity with respect to ASOs targeting Factor XI, [***], and (iii) grant
Bayer exclusive options to a drug discovery program to identify a follow-on
development candidate targeting Factor XI [***]; and
 
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WHEREAS, the Parties intend that they will jointly pursue the development and
commercialization of ISIS-FXIRx, with Isis completing certain clinical and
non-clinical studies that are ongoing for ISIS-FXIRx as of the Execution Date
and Bayer conducting all other development and all commercialization of
ISIS-FXIRx, with the input of Isis as further described herein, where such
development will initially focus on one indication for specific patient
populations, and may subsequently expand development and commercialization of
ISIS-FXIRx to potentially include other commercially-viable indications.

NOW, THEREFORE, in consideration of the respective covenants, representations,
warranties and agreements set forth herein, the Parties hereto agree as follows:

ARTICLE 1.
DEVELOPMENT & COMMERCIALIZATION PROGRAM FOR ISIS-FXIRX

1.1. The Strategic Plan for ISIS-FXIRx. Subject to and in accordance with the
terms of this Agreement, Bayer will use Commercially Reasonable Efforts to
Develop and Commercialize ISIS-FXIRx for an indication in [***] (the “First
Indication”) and, if it is commercially reasonable to do so, Bayer will use
Commercially Reasonable Efforts to Develop and Commercialize ISIS-FXIRx in
Additional Indications, in each case in accordance with a global strategic
development and commercialization plan (the “Strategic Plan”).

The Strategic Plan will cover both the long-term global strategy for ISIS-FXIRx,
the Isis Completion Activities, as well as, on a rolling [***]-month basis, the
more detailed activities Bayer will perform over the course of the next [***]
months. The activities and strategy in the Strategic Plan will be driven by
[***].

As such, it is anticipated that the Strategic Plan will evolve over time and
become more detailed (particularly with regard to Commercialization and
pre-Commercialization activities) as the Products move closer to market. The
Strategic Plan will, to the extent possible and useful, contain [***]. Without
limiting the foregoing, solely to the extent Bayer has the information for its
own internal purposes and in a reasonable level of detail, when updating the
Strategic Plan, Bayer will include the following components:

(i) The objectives of the Strategic Plan and estimated timelines;

(ii) Indications for ISIS-FXIRx (including the First Indication Bayer will
pursue for ISIS-FXIRx) and the indications for the other Products, if any (which
indications will be added to and/or refined over time);

 
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(iii) The estimated timing and launch sequence of initial and subsequent
indications for ISIS-FXIRx and the other Products;

(iv) The key Clinical Studies, [***];

(v) Key elements of the manufacturing planning and strategy to support
Development, Product Approvals and Commercialization; and

(vi) Key elements of the global Commercialization strategy for each Product
[***], including – each on a high level basis – [***], which shall be updated
[***] for a rolling [***] months outlook and [***] a year for a rolling [***]
months outlook.

In addition, if Bayer exercises its Option to ISIS-FXIRx-2 and/or [***], those
Products will be included in the Strategic Plan in accordance with the
principles set forth in this Section 1.1.

1.2. Initial Strategic Plan. The Parties expect the initial Strategic Plan
(attached hereto as Appendix 2) agreed to by the Parties as of the Execution
Date and as further updated under this Section 1.2 will not contain all of the
items and level of detail listed above in items (i) through (vi) of Section 1.1,
but rather will contain the items and level of detail appropriate as of the
Execution Date consistent with the level of detail Bayer uses generally for its
other products at similar stages of development, [***]. Within [***] days after
the Effective Date, Bayer will deliver to Isis a proposed updated Strategic Plan
in accordance with Section 1.1, as applicable at an appropriate level of detail
for a product in [***], and Bayer will finalize such updated Strategic Plan at
the appropriate level of detail Bayer generally uses for a product in [***]
within [***] days after Isis’ receipt of such proposed updated plan using the
process described in Section 1.3 below.

1.3. Updating the Strategic Plan. The initial Development activities performed
by Bayer and Isis under the Strategic Plan will be designed to support market
Approval and Commercialization of the First Indication of ISIS-FXIRx.

1.3.1. Bayer will review and update the Strategic Plan every [***] months and
the Parties will meet with one another or hold a telephone conference to review
such updates. In addition, the Parties may meet or hold a telephone conference
more often as mutually agreed on an ad-hoc basis to address any urgent matters
that arise with respect to Products. Each Party will ensure that its
representatives at such meetings are senior development and/or commercial
executives or have similar experience and expertise. Bayer will be primarily
responsible for coordinating and scheduling such meetings or telephone
conferences, and the Parties will mutually determine the location of meetings.
Each Party will be responsible for the costs of its own representatives
attending such meetings. At such meeting or telephone conference, as applicable,
the Parties will discuss inter alia:

 
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(i) any available new data and results from ongoing or completed Clinical
Studies and non-clinical studies;

(ii) available updates regarding the progress of ongoing Clinical Studies and
any New Drug Option Programs;

(iii) technology advancements potentially relevant to the Products;

(iv) changes proposed by either Party to the Strategic Plan;

(v) upcoming scientific, development or commercial events that may impact the
Products;

(vi) publication plan (including the strategy for scientific publications and
presentations at medical meetings); and

(vii) the evolving competitive landscape [***] and its impact on the Products
and strategy.

1.3.2. Material Changes to the Strategic Plan. Bayer has primary responsibility
for preparing each proposed updated Strategic Plan and the agenda for each
meeting or telephone conference, and will submit such proposed updated plan and
agenda to Isis at least [***] days prior to the date of the Parties’ next
scheduled meeting or telephone conference, as applicable. Any changes to the
Strategic Plan materially changing [***] (each, a “Material Change”) shall be
treated in accordance with Schedule 1.3.2.

In addition, at such meetings or telephone conferences Isis will have the right
to review and comment on (but not approve) non-material changes to the Strategic
Plan and may propose non-material changes to the Strategic Plan, and Bayer will
consider Isis’ comments and proposals in good faith. Bayer shall timely
communicate any update of the Strategic Plan to Isis and, provided any Material
Changes have been determined in accordance with this Section 1.3.2, then upon
Isis’ receipt of the updated Strategic Plan from Bayer, the updated Strategic
Plan shall apply and supersede any prior versions of the Strategic Plan.

1.4. Development of Additional Indications. If Isis decides to request Bayer to
Develop and Commercialize an Additional Indication for ISIS-FXIRx that Bayer is
not then currently Developing or Commercializing, Isis and Bayer shall discuss
such request in good faith and either Party shall have the opportunity to
conduct the commercially reasonable analysis to decide if the Development and
Commercialization of such Additional Indication shall be pursued. If, after the
end of such discussions and analysis, Isis and Bayer do not mutually agree that
Bayer shall Develop and Commercialize such Additional Indication, Isis may
formally request Bayer in writing to Develop and Commercialize such an
Additional Indication for ISIS-FXIRx. If Bayer does not confirm to Isis in
writing that Bayer will initiate the Clinical Study required for the Development
of such Additional Indication for ISIS-FXIRx within [***] Business Days
following Bayer’s receipt of Isis’ request under this Section 1.4, then Isis
shall have the right to conduct the Development of such Additional Indication
for ISIS-FXIRx, unless Bayer reasonably believes in good faith and delivers a
written objection to Isis detailing that [***], provided however, that Bayer has
provided Isis with reasonable evidence documenting such issue or concern. If the
prerequisites under this Section 1.4 are fulfilled and in the event the Clinical
Study regarding such Additional Indication for ISIS-FXIRx [***], then Bayer
shall exert Commercially Reasonable Efforts to Commercialize ISIS-FXIRx in such
Additional Indication in the same countries Bayer is Commercializing ISIS-FXIRx,
and shall [***]. Nothing in this Section 1.4 limits or otherwise relieves Bayer
of its obligations under Section 1.1 or Section 1.6, provided however, that Isis
[***].

 
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1.5. Clinical Study Data Sharing.

1.5.1. Advance Notice of Upcoming SAP Data. On or about [***] days before the
date a Party estimates that the data generated based on the primary database
lock under the statistical analysis plan will be available for a Clinical Study
such Party is conducting, such Party will provide the other Party with a written
notice of such Clinical Study data event date (and a copy of any material
event-related documentation), so that the Parties may prepare for their next
meeting to discuss such data and plan for any potential disclosures in
accordance with Section 12.4.4 or Section 12.4.5 (as applicable).

1.5.2. SAP Data Sharing. The Party conducting a Clinical Study will notify the
other Party within [***] Business Days after the data generated based on the
primary database lock under the statistical analysis plan is available for such
Clinical Study (and, together with such notice, will provide the other Party
with such available data), and the Parties will discuss the need for any
potential disclosure in accordance with Section 12.4.4, and as soon as
reasonably practicable (but no later than [***] days), will meet or hold a
telephone conference to review and discuss such data and analyze any impact on
the Strategic Plan; provided, however, that this Section 1.5.2 will not prevent
either Party from fulfilling its disclosure obligations required under
Applicable Law (including under Section 1.8 below).

1.6. Bayer Diligence.

1.6.1. Generally. Bayer’s obligations under ARTICLE 1 (including conducting
Bayer’s activities set forth in the Strategic Plan), will be to use Commercially
Reasonable Efforts to Develop and Commercialize Products. Bayer will [***]
regarding [***] so long as such [***] are consistent with the Strategic Plan and
Bayer’s obligations under Section 1.6.2. Unless specifically set forth otherwise
in this Agreement, Isis shall reasonably support and provide Bayer with all
information and records requested by Bayer that are necessary or useful to
Develop or Commercialize Products to the extent reasonably available to Isis and
not already provided to Bayer with respect to Bayer’s obligations under ARTICLE
1.

 
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1.6.2. Specific Performance Milestone Events. Bayer will use Commercially
Reasonable Efforts to achieve the specific performance milestone events set
forth in Schedule 1.6.2 (“Specific Performance Milestone Events”); provided,
however, [***]. In addition, the Parties acknowledge that each of the Specific
Performance Milestone Events for a given Product [***], each time the Strategic
Plan is modified in accordance with this Agreement.

1.7. Isis Completion Activities for ISIS-FXIRx. In partial consideration for the
up-front payment to Isis under Section 7.1, Isis will use Commercially
Reasonable Efforts to complete the ongoing activities expressly set forth on
Schedule 1.7 for ISIS-FXIRx (the “Isis Completion Activities”), in accordance
with the timelines specified therein. Isis will [***] regarding [***] so long as
such [***] are consistent with Schedule 1.7. Isis only obligations regarding
Development of ISIS-FXIRx will be to use Commercially Reasonable Efforts to
complete the Isis Completion Activities. Except for the Isis Completion
Activities, Bayer will be solely responsible for the Development and
Commercialization of ISIS-FXIRx. On a study-by-study basis, within [***] days
after Isis completes a study within the Isis Completion Activities, Isis will
provide Bayer [***].

1.8. Safety Reporting; Regulatory Coordination. The Parties agree that Bayer
shall apply for and remain the IND-holder in the United States and in any other
jurisdiction in which Bayer will conduct Clinical Studies for ISIS-FXIRx. Isis
shall fully support Bayer in its application of such IND and as IND-holder in
such jurisdictions and provide Bayer with all required or useful available
documentation and information, including a copy of Isis’ IND filed in Canada for
ISIS-FXIRx and the investigator brochure related to ISIS-FXIRx no later than
[***] days following Bayer’s written request thereof. In addition, upon Bayer’s
reasonable request, Isis will transfer to Bayer Isis’ then current global safety
database established and maintained sufficient for regulatory submissions for
ISIS-FXIRx in an electronic (i.e., ARGUS) or written format in which Isis stores
such database. The Parties agree that it is important that Isis and Bayer
coordinate their respective ISIS-FXIRx Clinical Studies and pre-clinical, and
regulatory activities, including the collection and reporting of adverse events
involving ISIS-FXIRx. Upon import of Isis’ then current global safety database
for ISIS-FXIRx into Bayer’s safety database, Bayer will assume responsibility
for the global safety database related to Clinical Studies of ISIS-FXIRx.
Furthermore, Bayer will be responsible for reporting to the competent Regulatory
Authorities, ethics committees and investigators in accordance with the
Applicable Law for expeditable adverse events and for periodic safety reporting
relating to the safety of ISIS-FXIRx in all applicable jurisdictions where Bayer
holds an IND, Clinical Trial Application (CTA) or equivalent. Isis will continue
to fulfill all sponsor obligations related to Isis’ sponsored Clinical Studies,
including but not limited to expedited reporting to Regulatory Authorities,
ethics committees and investigators in all applicable jurisdictions where Isis
holds an IND, CTA or equivalent.

1.8.1. In furtherance of the safety reporting, coordination and cooperation
under this Section 1.8, as soon as reasonably practicable after the Effective
Date (but in any case before Bayer Initiates a Clinical Study of ISIS-FXIRx),
the Parties will develop and agree in writing on a drug safety information
agreement (the “Drug Safety Information Agreement”) that will include safety
data exchange procedures governing the collection, investigation, reporting, and
delivery of information between Bayer and Isis concerning any adverse
experiences, and any product quality and product complaints involving adverse
experiences related to ISIS-FXIRx, sufficient to enable both Parties to comply
with their legal and regulatory obligations and internal processes and
consistent with the terms of this Agreement.

 
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1.8.2. Following the Effective Date and until the Drug Safety Information
Agreement is executed by the Parties, Isis will promptly report to Bayer (and
provide documentation to Bayer related to) any serious adverse events (SAEs),
suspected unexpected serious adverse reactions (SUSARs), and any other
information Bayer reasonably requires to comply with its legal and regulatory
requirements inter alia as future IND-holder or sponsor of any Clinical Study
conducted by or on behalf of Bayer for ISIS-FXIRx. In addition, unless
explicitly set forth otherwise in the Drug Safety Information Agreement, Isis
will provide Bayer with [***] updates regarding adverse events and lab findings
under any Clinical Study for ISIS-FXIRx being conducted by or on behalf of Isis.

1.9. Manufacturing and Supply.

1.9.1. ISIS-FXIRx API and Finished Drug Product Manufacturing Transition
Strategy. Within the first [***] days after the Effective Date and thereafter
upon request of a Party, the Parties will discuss and mutually agree on a
strategy to transition API and Finished Drug Product Manufacturing for
ISIS-FXIRx to a Third Party CMO or Bayer’s own manufacturing site. Bayer will
compensate Isis in accordance with Section 7.13 for Isis’ technology transfer
activities associated with such transfer under a plan mutually agreed by the
Parties.

1.9.2. Supplies under the Strategic Plan.

(a) Supplies for Bayer’s Activities. Bayer shall provide, [***], all API and
Finished Drug Product sufficient to support Bayer’s activities under the
Strategic Plan, except Isis will supply Bayer the following:

(i) API Supply. Upon Bayer’s written request delivered to Isis during the first
[***] months after the Effective Date, in partial consideration for the up-front
payment to Isis under Section 7.1 [***], Isis will (on its own or through a CMO)
supply to Bayer by a reasonable delivery date mutually agreed by the Parties (i)
[***] of API (the “Initial Supply”) ([***]) using Isis’ standard form of quality
agreement with such changes as mutually agreed by the Parties and in a quality
complying with the provisions set forth in such quality agreement, and (ii)
[***] of [***] oligonucleotides to support the activities under the Strategic
Plan.

 
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(ii) Finished Drug Product Supply. To support the first [***] Bayer will conduct
under the Strategic Plan, upon Bayer’s written request, Isis will use
Commercially Reasonable Efforts to have its CMO supply Finished Drug Product
(using API made by Isis or Isis’ CMO) to Bayer in a quantity, quality and by a
delivery date mutually agreed by the Parties that is reasonably sufficient for
such [***], on the commercial terms applicable to Finished Drug Product set
forth in Schedule 1.9.2(a). Isis shall ensure that the supply of Finished Drug
Product is accompanied by all information and documents reasonably requested by
Bayer, including the analytical release data.

(b) Supplies for the Isis Completion Activities. Isis will provide, [***], API
and Finished Drug Product sufficient to support the Isis Completion Activities.

1.9.3. After Isis Completes the Isis Completion Activities. After Isis completes
the Isis Completion Activities set forth on Schedule 1.7 for ISIS-FXIRx, in
addition to the Initial Supply and such Finished Drug Product under Section
1.9.2, [***].

 
ARTICLE 2.
REQUESTS TO INITIATE NEW DRUG DISCOVERY PROGRAMS; OPTIONS

2.1. Requests to Initiate a New Drug Discovery Program. During the first [***]
years after the Effective Date, so long as Bayer is using Commercially
Reasonable Efforts to Develop and/or Commercialize at least one Product under
this Agreement, Bayer may deliver to Isis a written request (each, a “Drug
Discovery Request Notice”) with the commencement fee set forth in Section 7.2 to
initiate either or both of the drug discovery program(s) described below;
provided the commencement fee for each such program is only paid once:

2.1.1. The ISIS-FXIRx-2 Option. A request for Isis to initiate a drug discovery
program to identify a follow-on Development Candidate targeting Factor XI
incorporating Isis’ then current antisense technology (such follow-on
Development Candidate, “ISIS-FXIRx-2” and such program, the “ISIS-FXIRx-2
Program”); and/or

2.1.2. The [***] Option. A request for Isis to initiate a drug discovery program
to identify a Development Candidate targeting [***] incorporating Isis’ then
current antisense technology (such Development Candidate, “[***]” and such
program, the “[***] Program”).

The ISIS-FXIRx-2 Program and the [***] Program are each referred to as a “New
Drug Option Program.” During the [***]-year period described in this Section
2.1, at Bayer’s request, Isis will meet with Bayer to update Bayer on the
current state of Isis’ technology and any advancement relevant to this
Agreement, and will discuss the applicability of these advancements to drugs
targeting Factor XI and [***]. Bayer will have the right to obtain an exclusive
license to ISIS-FXIRx-2 and/or [***] as further described in Section 2.4 below.
 
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2.2. New Drug Option Program Activities.

2.2.1. Development Candidate Identification Plans. After Bayer delivers a Drug
Discovery Request Notice to Isis under Section 2.1, the Parties will discuss
[***]. For each New Drug Option Program, Isis will provide Bayer an initial
draft plan to identify a Development Candidate under the applicable New Drug
Option Program (the “Development Candidate Identification Plan”). Bayer will
review such plan with Isis and the Parties will agree on a final Development
Candidate Identification Plan for such New Drug Option Program. Isis will use
Commercially Reasonable Efforts to complete the activities for each New Drug
Option Program set forth in the applicable Development Candidate Identification
Plan [***] in a manner consistent with its internal practices for other gene
targets with the goal of identifying a Development Candidate for the applicable
New Drug Option Program as soon as possible. If the Parties cannot mutually
agree on a final Development Candidate Identification Plan for a given New Drug
Option Program, Isis will perform such New Drug Option Program under a plan
consistent with Isis’ other plans to create Development Candidates for other
gene targets in Isis’ own internal programs. Bayer may propose changes to the
Development Candidate Identification Plan, and Isis will consider Bayer’s
comments and proposals in good faith [***] regarding the conduct of the
Development Candidate Identification Plan so long as [***].

2.2.2. Third Party Obligations Applicable to Development Candidates. While the
Parties are reviewing technology options for the Development Candidate to be
used under a Development Candidate Identification Plan, the Parties will discuss
any Third Party Obligations they believe apply to such technology. Isis will
disclose to Bayer any Third Party Obligations known by Isis that apply to
technology under consideration by the Parties, [***]. Any Third Party
Obligations arising under agreements Isis has with Third Parties covering [***]
that Bayer agrees to incorporate into the Development Candidate under the
Development Candidate Identification Plan, will be [***] (such technology,
collectively “Bayer Opt-In Technology”). All other Third Party Obligations that
[***] as a result of technology that is not Bayer Opt-In Technology used in a
Development Candidate under the applicable Development Candidate Identification
Plan will be [***]. Isis will update Appendix 4 to reflect any additional
agreements Isis has with Third Parties covering such Bayer Opt-In Technology.

2.2.3. New Drug Option Program Development Candidate Selection. Isis will notify
Bayer in writing promptly after Isis has designated a Lead Candidate for a given
New Drug Option Program and, together with such notice, Isis will provide Bayer
[***]. Bayer will then have the opportunity to determine, by the Option
Deadline, whether the Lead Candidate [***] will be selected as the Development
Candidate.

 
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2.3. New Drug Option Program Term. The period during which Isis will perform the
activities under a New Drug Option Program will begin on the date Isis receives
the applicable Drug Discovery Request Notice and will end on the earlier of the
date (i) Isis completes the activities Isis agreed to perform under the
applicable Development Candidate Identification Plan, or (ii) the Parties [***]
(such period, a “New Drug Option Program Term”).

2.4. Options. On a New Drug Option Program-by-New Drug Option Program basis,
beginning on the date Isis receives the applicable Drug Discovery Request Notice
under Section 2.1 and ending on or before 5:00 p.m. (Eastern Time) on the later
of (y) the [***] day (each, an “Option Deadline”) following Bayer’s receipt of
[***] for such New Drug Option Program or – if applicable – (z) [***] Business
Days following the date on which antitrust clearance for the exercise of the
Option (as defined below) has been obtained (using the process described in
Section 13.6, mutatis mutandis, under which the Parties will make the
appropriate filings under the HSR Act within [***] days after Bayer’s receipt of
[***] for such New Drug Option Program), Bayer will have an exclusive option
(each, an “Option”) to obtain from Isis the license set forth in Section 5.1.2
or Section 5.1.3 (as applicable); provided, however, [***]. Bayer will determine
whether to select the Lead Candidate [***] as the Development Candidate, and
will notify Isis whether Bayer is exercising its Option to license the
applicable Development Candidate from such New Drug Option Program by notifying
Isis in writing on or before the applicable Option Deadline.

2.4.1. If, by the Option Deadline, Bayer (i) notifies Isis in writing that Bayer
has selected a Development Candidate and is exercising the Option for a
particular New Drug Option Program, and (ii) pays Isis – subject to prior
antitrust clearance (if applicable) – the license fee in accordance with Section
7.3 for the applicable New Drug Option Program, Isis will, and hereby does,
grant to Bayer the license set forth in Section 5.1.2 or Section 5.1.3 (as
applicable).

2.4.2. If, by the Option Deadline for a particular New Drug Option Program,
Bayer has not both (i) selected a Development Candidate and provided Isis a
written notice stating that Bayer is exercising the Option, and (ii) paid Isis
the license fee in accordance with Section 7.3 for the applicable New Drug
Option Program, then Bayer’s Option with respect to such New Drug Option Program
will expire. In such a case, subject to Section 4.1, Bayer will have no further
rights to (and Isis will have no further obligations with respect to) such New
Drug Option Program (including all Compounds included in the applicable New Drug
Option Program).

 

2.5. Expiration of New Drug Option Program Term.

 

2.5.1. Effects of Expiration of New Drug Option Program Term. On a New Drug
Option Program-by-New Drug Option Program basis, if by the expiration of the
applicable New Drug Option Program Term, Isis has not – after having consulted
with Bayer – designated in good faith a Lead Candidate under a particular New
Drug Option Program, then, subject to Section 2.5.2, the Option will expire and
such program will no longer be a New Drug Option Program under this Agreement.
Following expiration of any unexercised Option for a New Drug Option Program,
subject to Section 2.5.2 and to Isis’ exclusivity covenants under Section 4.1,
(i) Isis will own any Compounds discovered under such New Drug Option Program
and will be free to Develop and Commercialize such Compounds on its own or with
a Third Party; (ii) Isis will own all data, results, Patent Rights and
information generated under the New Drug Option Program and Bayer will upon
Isis’ request promptly transfer to Isis all such data, results, Patent Rights
and information in Bayer’s possession; and; (iii) the Parties’ will no longer
have an obligation to perform any activities under this ARTICLE 2 with respect
to such New Drug Option Program.

 
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2.5.2. Carryover Development Candidates. If, by the expiration of the applicable
New Drug Option Program Term for a particular New Drug Option Program, Isis has
not designated a Lead Candidate for such New Drug Option Program in accordance
with Section 2.5.1, and at any time during the [***]-month period after the end
of the applicable New Drug Option Program Term Isis designates an ASO discovered
by Isis that is designed to bind to the RNA that encodes the Exclusive Target
for such New Drug Option Program as a development candidate (such ASO, a
“Carryover Development Candidate”), then, Isis will notify Bayer and will
provide Bayer with [***], and Bayer will have an exclusive option (“Carryover
Option”) to obtain from Isis the license under Section 5.1.2 or Section 5.1.3
(as applicable) [***], except the applicable option deadline will be deemed
extended such that it begins on the date Bayer receives [***] and ends at 5:00
p.m. (Eastern Time) on the [***] Business Day thereafter (such period, the
“Carryover Option Deadline”). The Carryover Option Deadline may be extended, if
requested by Bayer, in the same manner as the Option Deadline as described in
Section 2.4.

If Bayer’s Carryover Option expires unexercised, then, subject to Isis’
exclusivity obligations under Section 4.1 [***], Bayer will have no further
rights to (and Isis will have no further obligations with respect to) such
Carryover Development Candidate (including all Compounds included in the
applicable New Drug Option Program); provided, however, [***].

2.6. New Drug Option Program Development Plans – After Option Exercise. With
respect to each Development Candidate for which Bayer has exercised its Option
in accordance with Section 2.4 or Section 2.5.2 above, the Parties will promptly
integrate such Development Candidate into the Strategic Plan in accordance with
Section 1.3 above at the next scheduled meeting or telephone conference of the
Parties following such Option exercise. The components of the Strategic Plan
applicable to such Development Candidate will be consistent with Section 1.1 and
Bayer’s Specific Performance Milestone Events and estimated timelines set forth
in Schedule 1.6.2.

 
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ARTICLE 3.
PROGRAM MANAGEMENT AND COSTS

3.1. Alliance Managers; Meeting Participation. If the Parties mutually agree
that it would be beneficial to progress the activities under this Agreement,
each Party may appoint a representative to act as its alliance manager (each, an
“Alliance Manager”). Each Alliance Manager will be responsible for performing
the activities listed in Schedule 3.1. Except as set forth in Section 6.2 (if
requested by the other Party to so attend the meeting), Section 8.1.3(c) (if the
Parties mutually agreed to establish a JPC) or in Schedule 1.3.2, Isis has the
right, but not the obligation, to attend any meetings described in this
Agreement (including the meetings described in ARTICLE 1), and may discontinue
attending such meetings at any time after providing written notice to Bayer. For
clarity, Isis shall not be entitled to attend any Bayer internal meetings
(including internal meetings with Bayer’s Sublicensees or contractors).

3.2. Records and Quality; Inspections; Materials Transfer.

3.2.1. Records. Each Party will maintain records consistent with its own
practice of all work such Party performs under this Agreement and all results,
data, inventions and developments made in the performance of such work. Such
records will be in sufficient detail and in good scientific manner appropriate
for patent and regulatory purposes. Upon prior written notice, a Party will
provide the other Party with copies of all requested records, to the extent
reasonably required for the performance of a Party’s rights and obligations
under this Agreement.

3.2.2. Inspections. Each Party will cooperate in good faith with respect to the
conduct of any inspections by any Regulatory Authority of a Party’s site or a
Party’s contractor’s site and facilities if such inspection concerns work being
performed under this Agreement. Each Party will be given the opportunity to
attend any inspections by any Regulatory Authority of the other Party’s or such
Party’s contractor’s site and facilities with one of its representatives if such
inspections concern work being performed under this Agreement, and the summary
(or wrap up) meeting with a Regulatory Authority at the conclusion of such site
inspection unless the Regulatory Authority expresses its preference that such
other Party should not participate in such meetings. If, during that inspection
of the Party’s facilities, a Regulatory Authority finds such facilities to be
non-compliant with one or more GLP, GMP, GCP or current standards for
pharmacovigilance practice compliance standards and such facilities are being
used to conduct work under this Agreement, such Party will promptly notify the
other Party of such finding and will submit a proposed recovery/corrective
action plan, including a time line for implementation of the plan, within [***]
days of such notification of non-compliance.

 

3.2.3. Materials Transfer. In order to facilitate the activities under this
Agreement, either Party may provide to the other Party certain materials for use
by the other Party in furtherance of the activities to be performed under this
Agreement. Unless agreed otherwise between the Parties, all such materials will
be used by the receiving Party in accordance with the terms and conditions of
this Agreement solely for purposes of exercising its rights and performing its
obligations under this Agreement, and the receiving Party will not transfer such
materials to any Third Party unless expressly contemplated by this Agreement or
upon the written consent of the supplying Party. Except as expressly agreed in
writing between the Parties before or after the Effective Date, SUCH MATERIALS
ARE PROVIDED “AS IS” AND WITHOUT ANY REPRESENTATION OR WARRANTY, EXPRESS OR
IMPLIED, INCLUDING ANY IMPLIED WARRANTY OF MERCHANTABILITY OR OF FITNESS FOR ANY
PARTICULAR PURPOSE OR ANY WARRANTY THAT THE USE OF THE MATERIALS WILL NOT
INFRINGE OR VIOLATE ANY PATENT OR OTHER PROPRIETARY RIGHTS OF ANY THIRD PARTY.

 
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3.3. Program Costs.

3.3.1. Isis Completion Activities.

(a) Except as otherwise provided under Section 3.3.1(b), Isis will be
responsible for all costs associated with [***], including any costs associated
with [***].

(b) If Bayer requests any changes to the Isis Completion Activities which are
[***] and Isis agrees to implement such changes, then [***]. Isis and Bayer will
update Schedule 1.7 with any such revised activities.

3.3.2. Strategic Plan. Bayer will be responsible for all costs associated with
[***] under the Strategic Plan.

3.3.3. Development Candidate Identification Plan Costs.

(a) Isis Activities. Isis will be responsible for all costs associated with the
activities Isis agrees to perform under each Development Candidate
Identification Plan; provided, since Factor XI [***] as of the Execution Date,
if the Parties mutually agree [***] under Isis’ plans to create development
candidates for other previously validated gene targets in Isis’ own internal
programs, Bayer will [***] in accordance with [***].

(b) Bayer Activities. Bayer will be responsible for any costs associated with
[***] under each Development Candidate Identification Plan.

 
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ARTICLE 4.
EXCLUSIVITY COVENANTS

4.1. Exclusivity Covenants.

4.1.1. Isis’ and Bayer’s Exclusivity Covenants. Isis and Bayer each acknowledge
and agree that, during the Agreement Term, and subject to the exclusivity
granted in Section 5.1, each Party may, independently or for or with any of its
Affiliates (including with Third Party academic collaborators and other
independent contractors for the sole benefit of such Party or its Affiliate),
conduct Research with an ASO that is designed to bind to the RNA that encodes
Factor XI or [***]. Except in the performance of its obligations or exercise of
its rights under this Agreement and except as set forth in Section 4.1.2,
Section 4.1.3 or Section 4.2, Isis [***] will not work independently or for or
with any of its Affiliates or any Third Party (including the grant of any
license to any Third Party) with respect to:

(a) The Drug Discovery, Development or Commercialization of an ASO that is
designed to bind to the RNA that encodes Factor [***], until the [***]
anniversary of the Effective Date; and

(b) After the [***] anniversary of the Effective Date, on a country-by-country
basis, Commercializing an ASO that is designed to bind to the RNA that encodes
Factor XI [***], so long as Bayer is Developing or Commercializing a Product
under this Agreement [***];

provided, however, in no way will Section 4.1.1(a) or Section 4.1.1(b) permit
Isis to Commercialize a Product in violation of Bayer’s exclusive license to
such Product under Section 5.1.1, Section 5.1.2 or Section 5.1.3 (as
applicable).

As of the Effective Date, Isis does not have (nor intends to have) an internal
Drug Discovery program for Factor XI incorporating Isis’ latest antisense
technology.

4.1.2. Isis-Products. Notwithstanding the provisions of Section 4.1.1, on a New
Drug Option Program-by-New Drug Option Program basis, if (A) Bayer does not ask
Isis to identify a Development Candidate for such New Drug Option Program under
Section 2.1 by the [***] anniversary of the Effective Date, or (B) Bayer timely
asks Isis to identify a Development Candidate for such New Drug Option Program
under Section 2.1 but either (a) no Lead Candidate has been designated by the
end of the New Drug Option Program Term in accordance with Section 2.5.1, or (b)
Bayer either does not (X) timely exercise its Option with respect to such
Development Candidate, or (Y) use Commercially Reasonable Efforts to continue to
Develop and Commercialize such Development Candidate, then, subject - in the
case of [***] - to Section 4.2, (i) each Party (for itself or with or for a
Third Party) will be permitted to conduct Research, Drug Discovery and Develop
an ASO (and, solely in the case of Isis, such Development Candidate) designed to
bind to the RNA that encodes such Exclusive Target that is not the Product being
developed by Bayer (an “Isis-Product”), (ii) after expiration of the Full
Royalty Period for ISIS-FXIRx in a country, Isis will be permitted to
Commercialize an Isis-Product that encodes Factor XI in such country, and (iii)
after expiration of the Full Royalty Period for [***] (if any) in a country,
Isis will be permitted to Commercialize an Isis-Product that encodes [***] in
such country.

 
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4.1.3. Limitations and Exceptions to Isis’ Exclusivity
Covenants. Notwithstanding anything to the contrary in this Agreement, Isis’
practice of the following will not violate ARTICLE 4:

(i) Any activities pursuant to the Prior Agreements as in effect on the
Effective Date as described on Appendix 8;

(ii) The granting of, or performance of obligations under, Permitted Licenses;
and

(iii) Any activities pursuant to Section 4.2 below.

4.2. Isis’ Right to Initiate  a New Drug Option Program for [***].
Notwithstanding any provision to the contrary in this Agreement, if Isis intends
to initiate a program to conduct Drug Discovery and Develop an ASO that is
designed to bind to the RNA that encodes [***] (“[***]” and such program, the
“[***] Program”) before the date Bayer delivers Isis a Drug Discovery Request
Notice under Section 2.1, then the following provisions shall apply:

(a) Promptly after Isis has designated a [***] as a lead candidate ready to
start [***] in accordance with the principles for the Lead Candidate set forth
in ARTICLE 2, Isis will provide written notice to Bayer of such designation and
together with such notice shall provide Bayer with documentation corresponding
in content and detail to [***]. Upon receipt of such documentation, Bayer shall
have [***] days to decide whether it wishes to participate in the [***] Program,
and if Bayer chooses [***] to participate in such [***] Program, the provisions
regarding [***] shall apply as if Bayer had submitted a Drug Discovery Request
Notice under Section 2.1.2 with respect to [***] (and after Option exercise,
such [***] shall constitute [***] under this Agreement);

(b) If Bayer does not timely notify Isis under Section 4.2(a) above of Bayer's
decision to participate in the [***] Program, Isis may proceed with the Drug
Discovery and Development of the [***]  subject to the terms of this Section
4.2;

(c) During the course of such Drug Discovery and Development activities with the
[***], Isis shall provide Bayer with periodic (at least [***]) updates of
progress of such Drug Discovery and Development;

 
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(d) If Isis conducts any Clinical Studies of the [***] before the date Bayer
delivers to Isis a Drug Discovery Request Notice under Section 2.1 or exercises
its Option pursuant to Section 4.2(e) then, in addition to the periodic updates
provided for in Section 4.2(c), Isis shall, within [***] days following
Completion of each such Clinical Study  provide Bayer with the data generated
based on the primary database lock under the statistical analysis plan for such
Clinical Study in order to assist Bayer with its decision of whether to exercise
its Option to the [***]. In addition, Isis shall provide Bayer with any
additional information and data in Isis' possession that Bayer reasonably
requests;

(e) Unless Bayer’s Option to [***] has already expired unexercised under Section
2.4, at any time until 5:00 pm (Eastern Time) on the [***] anniversary of the
Effective Date, Bayer may exercise its Option to the [***];

(f) If Bayer timely exercises its Option to the [***] and timely pays Isis the
license fee for the [***] in accordance with Section 7.3.2, then Isis will grant
Bayer the license set forth in Section 5.1.3. In addition, within [***] days
after such Option exercise (and Bayer's receipt of an invoice from Isis), Bayer
shall pay Isis [***] of the total amount of [***] that Isis incurred in
Developing the [***] up to the date of such Option exercise; provided, however,
that [***];

(g) If Bayer does not timely exercise its Option to the [***] in accordance with
Section 2.4 or this Section 4.2, then, Isis shall have the right to further
Develop and Commercialize the [***]  and, subject to Section 4.2(h), Bayer will
have no further rights to (and Isis will have no further obligations with
respect to) the [***] (including all Compounds included in the applicable New
Drug Option Program);

(h) For the avoidance of doubt, none of the foregoing affects (A) Bayer's
obligation to pay Isis any payments with respect to [***] that [***] Option
exercise under this Section 4.2, including the license fee under Section 7.3.2,
the milestone payments under Section 7.6 and Section 7.7.3, and royalties under
Section 7.9, or (B) Bayer's rights to deliver to Isis a Drug Discovery Request
Notice to request initiation of a [***] Program pursuant to Section 2.1 of this
Agreement.

(i) Isis hereby covenants as of the Effective Date that it will not during the
Agreement Term grant any right or license to any Third Party that would conflict
with the rights granted to Bayer under this Section 4.2 and that it will not
take any action that would conflict with or adversely affect its obligations to
Bayer under this Section 4.2.

 

4.3. Effect of Exclusivity on Indications. The Compounds and Products are
designed to bind to the RNA that encodes Factor XI or [***] in the Field, which
are known to play a role in [***]. Isis and Bayer are subject to exclusivity
obligations under Section 4.1.1; however, the Parties acknowledge and agree that
each Party (on its own or with a Third Party) may continue to discover,
research, develop, manufacture and commercialize products which are not covered
by the exclusivity obligations under Section 4.1.1, including ASOs that are
designed to bind to the RNA that encodes a gene that is not an Exclusive Target
for any indication, even if such products are designed to treat [***].

 
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ARTICLE 5.
LICENSE GRANTS; TECHNOLOGY TRANSFER AND SUPPORT

5.1. License Grants to Bayer.

5.1.1. ISIS-FXIRx Development, Manufacture and Commercialization License.
Subject to the terms and conditions of this Agreement, Isis hereby grants to
Bayer a worldwide, exclusive, royalty-bearing license under the Licensed
Technology to Research, Develop, Manufacture, have Manufactured and
Commercialize ISIS-FXIRx in the Field.

5.1.2. ISIS-FXIRx-2 Development, Manufacture and Commercialization License.
Subject to the terms and conditions of this Agreement, effective upon Bayer’s
exercise of the Option for ISIS-FXIRx-2 in accordance with Section 2.4, or
Section 2.5.2, Isis grants to Bayer a worldwide, exclusive, royalty-bearing
license under the Licensed Technology to Research, Develop, Manufacture, have
Manufactured and Commercialize ISIS-FXIRx-2 in the Field.

5.1.3. [***] Development, Manufacture and Commercialization License. Subject to
the terms and conditions of this Agreement, effective upon Bayer’s exercise of
the Option for [***] in accordance with Section 2.4, Section 2.5.2, or Section
4.2 Isis grants to Bayer a worldwide, exclusive, royalty-bearing license under
the Licensed Technology to Research, Develop, Manufacture, have Manufactured and
Commercialize [***] in the Field.

5.1.4. Sublicense Rights. Bayer may only grant sublicenses under the licenses
granted to Bayer in Section 5.1 as expressly permitted by this Section 5.1.4.

(a) Right to Grant Sublicenses. Bayer acknowledges that the licenses under
Section 5.1 are personal to Bayer and are granted to Bayer due to Bayer’s strong
development and commercialization experience with therapeutics to treat [***].
Therefore, to help ensure that a partner of similar quality and experience as
Bayer will continue to diligently Develop and Commercialize the Products, Bayer
will only have the right to grant sublicenses under the licenses granted under
Section 5.1.1, Section 5.1.2 and Section 5.1.3 above:

 
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(i) under the Licensed Technology to an Affiliate of Bayer to Research, Develop,
Manufacture, have Manufactured and Commercialize a Product in the Field; or

(ii) under the Licensed Technology to a Bayer alliance partner for purposes of
further Development, Manufacturing and Commercialization of a Product in the
Field [***] if [***], provided Bayer gives Isis [***] days advance written
notice of such sublicense; or

(iii) under the Isis Core Technology Patents, Isis Product-Specific Patents,
Isis Manufacturing and Analytical Patents and Isis Manufacturing and Analytical
Know-How solely to [***]; or

(iv) in all other cases with Isis’ prior written consent (which consent will not
be unreasonably withheld, conditioned or delayed), under the Licensed Technology
to a Third Party solely for purposes of further Research, Manufacturing,
Development and Commercialization of a Product in the Field;

provided that each such sublicense will be subject to, and consistent with, the
terms and conditions of this Agreement.

(b) Enforcement of Sublicense Agreements. If, within [***] days after first
learning of any breach of the terms of any such sublicense agreement, Bayer
fails to take any action to enforce the sublicense terms of a sublicense granted
pursuant to this Section 5.1.4, which failure would cause a material adverse
effect on Isis, Bayer will cooperate with and support Isis (which cooperation
will be at Bayer’s sole reasonable expense and will include, Bayer joining any
action before a court or administrative body filed by Isis against such
Sublicensee if and to the extent necessary for Isis to have legal standing
before such court or administrative body) in connection with enforcing such
terms. Bayer will provide Isis with a copy of any sublicense granted pursuant to
this Section 5.1.4 within [***] days after the execution thereof; provided,
however, Bayer may redact any information in such sublicense that does not
pertain to Products.

(c) CMO Agreements. In connection with Bayer’s selecting and engaging one or
more CMOs to supply API or Finished Drug Product for Development or
Commercialization, Isis will grant, at Bayer’s request, a [***] license from
Isis to [***] under the [***] to the extent necessary for [***], provided
however, [***]. Isis shall use Commercially Reasonable Efforts to conclude a
respective license agreement with [***] within [***] days following Bayer’s
request thereof. If and to the extent [***] requires further sublicenses under
the Licensed Technology to Manufacture API or Finished Drug Product for the
Development or Commercialization of Product, any prior written approval required
by Bayer under Section 5.1.4(a)(iv) shall be deemed received upon conclusion of
a license agreement between Isis and [***]. In addition, if Bayer intends to
[***], then Isis will [***]. Isis and Bayer shall use Commercially Reasonable
Efforts to [***] within [***] days following [***].

 
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(d) Effect of Termination on Sublicenses. If this Agreement terminates for any
reason, any Sublicensee will, from the effective date of such termination,
automatically become a direct licensee of Isis with respect to the rights
sublicensed to the Sublicensee by Bayer; so long as (i) such Sublicensee is not
in breach of its sublicense agreement, (ii) such Sublicensee agrees in writing
to comply with all of the terms of this Agreement to the extent applicable to
the rights originally sublicensed to it by Bayer, and (iii) such Sublicensee
agrees to pay directly to Isis such Sublicensee’s payments under this Agreement
to the extent applicable to the rights sublicensed to it by Bayer. Bayer agrees
that it will confirm clause (i) of the foregoing in writing at the request and
for the benefit of Isis or if requested by the Sublicensee.

5.1.5. Consequence of Natural Expiration of this Agreement. If this Agreement
naturally expires in accordance with Section 11.1 then, in addition to the terms
set forth in Section 11.3.1(c), Section 11.3.1(e), Section 11.3.1(g) and Section
11.3.1(h), Isis will and hereby does grant to Bayer a perpetual, nonexclusive,
worldwide, royalty-free license under the Licensed Know-How to Research,
Develop, Manufacture, have Manufactured and Commercialize the Product that is
the subject of such expiration.

5.1.6. No Implied Licenses. All rights in and to Licensed Technology not
expressly licensed to Bayer under this Agreement are hereby retained by Isis or
its Affiliates. All rights in and to Bayer Technology not expressly licensed or
assigned to Isis under this Agreement, are hereby retained by Bayer or its
Affiliates. Except as expressly provided in this Agreement, no Party will be
deemed by estoppel or implication to have granted the other Party any license or
other right with respect to any intellectual property.

5.1.7. License Conditions; Limitations. Subject to Section 7.11, the licenses
granted under Section 5.1.1, Section 5.1.2 and Section 5.1.3 and the sublicense
rights under Section 5.1.4 are subject to and limited by (i) the Prior
Agreements and (ii) the Isis In-License Agreements, in each case to the extent
the provisions of such obligations or agreements are specifically disclosed to
Bayer in this Agreement, including its Schedules (x) prior to the Execution
Date, with respect to ISIS-FXIRx and/or the Licensed Patents Covering
ISIS-FXIRx, or (y) in writing prior to Bayer’s exercise of the applicable
Option, with respect to ISIS-FXIRx-2 or [***] and/or the Licensed Patents
Covering ISIS-FXIRx-2 or [***].

 

5.1.8. Trademark and Domain Names

 
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(a) Bayer shall be solely responsible for the selection, registration and
maintenance of the Trademarks which it employs in connection with the
Commercialization of the Products. Bayer shall own and control the Trademarks
and pay all relevant costs related thereto.

 (b) Isis recognizes the exclusive ownership by Bayer of any proprietary Bayer
Marks, logotype, Trademarks or Trade Dress furnished by Bayer (e.g. the name
“Bayer” and the “Bayer Cross”) for use in connection with the Commercialization
of the Products. Isis shall not, either during the Agreement Term, or at any
time thereafter, register, use or challenge or assist others to challenge the
Trademark, the Bayer Marks, logotype and trade dress furnished by Bayer or
attempt to obtain any right in or to any such name, logotype, Trademarks or
Trade Dress confusingly similar for the marketing of the Product or any other
goods and products, irrespective of the fact that such goods or products have a
different use or are dissimilar to the Product.

(c) Only Bayer will be authorized to initiate at its own discretion legal
proceedings against any infringement or threatened infringement of the
Trademarks.

(d) Bayer shall be responsible for the registration, hosting, maintenance and
defense of the Domain Names under all generic Top Level Domains (gTLDs) and
under all relevant country code Top Level Domains (ccTLD). For the avoidance of
doubt Bayer is allowed to register such Domain Names in its own name, to host on
its own servers, maintain and defend the Domain Names and use them for websites.

5.1.9. Subsequently Acquired Formulation Technology or Delivery Devices. On a
Product-by-Product basis, if Isis Controls any Formulation Technology or
delivery device that would be useful with a Product, Isis will notify Bayer of
such technology and will discuss in good faith with Bayer the terms under which
Isis would be willing to grant Bayer a license under such technology for use
with such Product.

5.2. Assignment of Certain Licensed Patents; Grant Back to Isis.

5.2.1. Certain Licensed Patents Covering ISIS-FXIRx. With respect to ISIS-FXIRx,
when Bayer pays Isis the milestone payment for Completion of the CS IV Study,
following Bayer’s written request and review and consideration by each Party’s
patent representatives and, except as otherwise provided in Section 5.2.3, Isis
will assign to Bayer, Isis’ ownership interest in (i) all Isis Product-Specific
Patents Covering ISIS-FXIRx that are owned by Isis (whether solely owned or
jointly owned with one or more Third Parties), and (ii) all Jointly-Owned
Program Patents Covering ISIS-FXIRx, and thereafter, except as otherwise
provided in Section 8.2.3, Bayer will be fully responsible for the Prosecution
and Maintenance of such Isis Product-Specific Patents and such Jointly-Owned
Program Patents and Bayer will use Commercially Reasonable Efforts to Prosecute
and Maintain such Patent Rights. The assignment of Patent Rights assigned in
this Section 5.2.1 will occur within [***] days after Bayer’s request.

 
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5.2.2. Certain Licensed Patents Covering ISIS-FXIRx-2 and/or [***]. If Bayer (a)
exercises its Option for ISIS-FXIRx-2 or [***] (as applicable), and (b) together
with such Option exercise notice, elects to have Isis commence the assignment
under this Section 5.2.2, then following the review and consideration by each
Party’s patent representatives and, except as otherwise provided in Section
5.2.3, Isis will assign to Bayer, Isis’ ownership interest in (i) all Isis
Product-Specific Patents Covering such Product that are owned by Isis (whether
solely owned or jointly owned with one or more Third Parties), and (ii) all
Jointly-Owned Program Patents Covering such Product, and thereafter, except as
otherwise provided in Section 8.2.3, Bayer will be fully responsible for the
Prosecution and Maintenance of such Isis Product-Specific Patents and such
Jointly-Owned Program Patents and Bayer will use Commercially Reasonable Efforts
to Prosecute and Maintain such Patent Rights. The assignment of Patent Rights
assigned in this Section 5.2.2 will occur within [***] days after Bayer’s
written notice to Isis under Section 7.3 of Bayer’s election to have Isis
commence such assignment.

5.2.3. Notwithstanding the foregoing, if either Party reasonably determines that
the assignment contemplated under Section 5.2.1 or Section 5.2.2 would be likely
to adversely affect the applicable Licensed Patent (including diminishing the
scope, term, validity or enforceability of such Licensed Patent), or otherwise
at Bayer’s request (and on payments made pursuant to Section 7.3), then, in lieu
of such assignment, Bayer will retain its exclusive license to such Licensed
Patent under Section 5.1.

5.2.4. Bayer grants to Isis a fully-paid, royalty-free (except to the extent
Section 7.10 requires a royalty on a Discontinued Product), worldwide,
non-exclusive, sublicensable license under any Isis Product-Specific Patents and
Jointly-Owned Program Patents assigned to Bayer under Section 5.2.1 and Section
5.2.2, (i) for [***], (ii) to complete the Isis Completion Activities and any
activities under a New Drug Option Program, and (iii) to conduct the activities
permitted by Section 4.1.2 or Section 4.2.

5.2.5. For purposes of clarification, any Isis Product-Specific Patents and
Jointly-Owned Program Patents assigned to Bayer under Section 5.2.1 and Section
5.2.2 are royalty-bearing and will still be considered Licensed Patents Covering
the applicable Product for determining the royalty term and applicable royalty
rates under ARTICLE 7.

5.3. Subcontracting. Subject to the terms of this Section 5.3, each Party may
engage Third-Party subcontractors to perform its obligations under this
Agreement. Any subcontractor engaged by a Party will meet the qualifications
typically required by such Party for the performance of work similar in scope
and complexity to the subcontracted activity and will enter into such Party’s
standard nondisclosure agreement consistent with such Party’s standard
practices. Any Party engaging such a subcontractor will remain responsible for
such activities and will not grant rights that interfere with the other Party’s
rights under this Agreement. Notwithstanding the foregoing sentence, each Party
shall at all times have the right to engage its Affiliates to perform its
obligations under this Agreement.

 
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5.4. Technology and Information Transfer. Isis will (i) promptly, but no later
than [***] days following the date (y) Bayer pays Isis the milestone payment for
[***], in the case of the Licensed Know-How licensed to Bayer under Section
5.1.1, or (z) on a New Drug Option Program-by-New Drug Option Program basis, the
license under Section 5.1.2 or Section 5.1.3 (as applicable) is granted to Bayer
with respect to the Development Candidate for such New Drug Option Program, and
(ii) during the Agreement Term promptly following Bayer’s reasonable request
deliver to Bayer the following Licensed Know-How:

5.4.1. Licensed Know-How - Generally. Copies of Licensed Know-How (other than
the Isis Manufacturing and Analytical Know-How) in the Field in Isis’ possession
that has not previously been provided hereunder, for use solely in accordance
with the licenses granted under Section 5.1.1, Section 5.1.2 or Section 5.1.3,
as the case may be, to Bayer, which includes, for ISIS-FXIRx, (i) the
information included in the IND, and (ii) the data from the Phase 1 Clinical
Trials and Phase 2 Clinical Trials conducted by Isis, together with all
regulatory documentation.

5.4.2. Isis Manufacturing and Analytical Know-How. Solely for use by Bayer, its
Affiliates or a Third Party acting on Bayer’s behalf to Manufacture API in
Bayer’s own [***] manufacturing facility, copies of the Isis Manufacturing and
Analytical Know-How relating to Products in Isis’ possession that has not
previously been provided hereunder, which is necessary for the exercise by
Bayer, [***] of the Manufacturing rights granted under Section 5.1.1, Section
5.1.2 or Section 5.1.3, as the case may be.

5.4.3. Isis Assistance. If requested by Bayer, Isis will provide Bayer with a
timely and reasonable level of assistance in connection with such Licensed
Know-How under Section 5.4.1 and Section 5.4.2, and Bayer will reimburse Isis
for its time incurred in providing such assistance in accordance with Section
7.13.

5.5. Cross-Licenses under Program Technology.

5.5.1. Enabling Patent Licenses from Bayer to Isis. Subject to the terms and
conditions of this Agreement (including Isis’ exclusivity obligations under
Section 4.1 and without limiting the license(s) granted to Bayer under Section
5.1), Bayer hereby grants Isis a fully-paid, royalty-free, irrevocable,
worldwide, non-exclusive, sublicensable license under any Bayer Program
Technology (excluding any Product-Specific Patents) to Research, Develop,
manufacture, have manufactured and Commercialize [***]; provided, however, that
Isis will not have the right to use or grant a sublicense to a Third Party under
any [***] or [***] included within such Bayer Program Technology for any Bayer
Excluded Indication. For purposes of this Section 5.5.1, “Bayer Excluded
Indication” means [***] (such notification to be in writing together with a list
of such Bayer Excluded Indications).

 
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5.5.2. Enabling Patent Licenses from Isis to Bayer. Subject to the terms and
conditions of this Agreement (including Bayer’s exclusivity obligations under
Section 4.1 and without limiting the license(s) granted to Bayer under Section
5.1), Isis hereby grants Bayer a fully-paid, royalty-free, irrevocable,
worldwide, non-exclusive, sublicensable license under any Isis Program
Technology (excluding any Product-Specific Patents) to Research, Develop,
manufacture, have manufactured and Commercialize [***]; provided, however, that
Bayer will not have the right to use or grant a sublicense to a Third Party
under any [***] or [***] included within such Isis Program Technology for any
Isis Excluded Indication. For purposes of this Section 5.5.2, “Isis Excluded
Indication” means [***] (such notification to be in writing together with a list
of such Isis Excluded Indications).

 
ARTICLE 6.
REGULATORY MATTERS AND THE ISIS INTERNAL ASO SAFETY DATABASE

6.1. Investigator’s Brochure. Bayer will keep Isis reasonably informed with
respect to the status, activities and progress of Development of Products
licensed by Bayer hereunder by providing updated versions of the investigator’s
brochure to Isis [***] and when Development of the Products results in any
substantive change to the safety or risk to the Products.

6.2. Participation in Regulatory Meetings. Prior to any scheduled meeting with a
Regulatory Authority regarding a Product [***] (i) the Parties will discuss the
timing and objectives for such meeting, and (ii) the Party who is the IND-holder
will provide the other Party with an opportunity to discuss the strategy for
such meeting with the IND-holder it being understood that the IND-holder shall
have the right to set the timeline for such discussions between the Parties and
that the IND-holder shall have the final decision-making authority regarding
[***]. In addition, the IND-holder will allow the other Party to participate
[***] in any such meeting with a Regulatory Authority [ ***] as an [***] unless
the Regulatory Authority expresses its preference that such other Party should
not participate in such meeting. Upon request of the IND-holder the respective
other Party shall participate in any meetings with the Regulatory Authority and
at all times support the IND-holder in a timely manner with respect to its
obligations under this Section 6.2.

6.3. Regulatory Communications. The Party who is the IND-holder will provide the
other Party with a draft of all material correspondence with and submissions to
any Regulatory Authority [***], sufficiently in advance of providing such
correspondence or submission to the applicable Regulatory Authority to enable
the other Party [***]. The contents of such correspondence or submission to any
Regulatory Authority will reflect the applicable aspects of the Strategic Plan.
The IND-holder will have the final decision-making authority regarding the
contents of all such correspondence or submissions but [***]. Upon request of
the IND-holder the respective other Party shall timely support the IND-holder at
all times with respect to its obligations under this Section 6.3.

 
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6.4. Class Generic Claims. To the extent Bayer intends to make any claims in a
Product label or regulatory filing that are class generic to ASOs, Isis’
generation 2.0 or 2.5 chemistry platform(s), Conjugate Technology, or any other
Isis technology included in a Product, Bayer will provide such claims and
regulatory filings to Isis in advance and will consider in good faith any
proposals and comments made by Isis.

6.5. Applicable Laws. Each Party will perform its activities pursuant to this
Agreement (and will use reasonable efforts to require Third Parties to perform
any such activities) in compliance with good laboratory practices (GLP), good
clinical practices (GCP), and good manufacturing practices (GMP), in each case
as applicable under the laws and regulations of the country and the state and
local government wherein such activities are conducted or which are otherwise
affected, in particular through the Commercialization of Products.

6.6. The Isis Internal ASO Safety Database.

(a) Isis maintains an internal database that includes information regarding the
tolerability of its drug compounds, individually and as a class, including
information discovered during pre-clinical and clinical development (the “Isis
Internal ASO Safety Database”). In an effort to maximize understanding of the
safety profile and pharmacokinetics of Isis compounds, Bayer will reasonably
cooperate in connection with populating the Isis Internal ASO Safety Database.
To the extent collected by Bayer and in the form in which Bayer stores such
information for its own purposes, Bayer will provide Isis with information
concerning toxicology, pharmacokinetics, safety pharmacology study(ies) and
adverse events related to Products licensed by Bayer under this Agreement within
a reasonable period of time. In connection with any reported serious adverse
event, Bayer will provide Isis all serious adverse event reports. In addition,
with respect to Products, Bayer will provide Isis with copies of Annual safety
updates filed with each IND and the safety sections of any final Clinical Study
reports within [***] days following the date such information is filed, as
applicable. Furthermore, Bayer will provide in a timely manner to Isis any
supporting data reasonably related to such safety information provided by Bayer
under this Section 6.6(a) and answer any follow-up questions reasonably
requested by Isis to the extent such data and answers are reasonably available
to Bayer. All such information disclosed by Bayer to Isis will be Bayer
Confidential Information; provided, however, that so long as Isis does not
disclose the identity of a Product or Bayer’s identity, Isis may disclose any
such Bayer Confidential Information to (i) Isis’ other partners pursuant to
Section 6.6(b) below if such information is regarding class generic properties
of ASOs, (ii) any Third Party (other than a Regulatory Authority) that [***], or
(iii) a Regulatory Authority. Bayer will deliver all such information to Isis
for the Isis Internal ASO Safety Database to Isis Pharmaceuticals, Inc., 2855
Gazelle Court, Carlsbad, California 92010, Attention: Chief Medical Officer (or
to such other address/contact designated in writing by Isis). Bayer will also
cause its Affiliates to comply with this Section 6.6(a), and will cause its
Sublicensees to comply with this Section 6.6(a) with respect to all major
Clinical Studies conducted by or on behalf of such Sublicensee.

 
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(b) From time to time, Isis utilizes the information in the Isis Internal ASO
Safety Database to conduct analyses to keep Isis and its partners informed
regarding class generic properties of ASOs, including with respect to safety. As
such, if and when Isis identifies safety or other related issues that may be
relevant to a Product (including any potential class-related toxicity), Isis
will inform Bayer in a timely manner of such issues and, if requested, provide
the data supporting Isis’ conclusions.

(c) [***], Bayer may submit written requests to Isis for Isis to run queries of
the Isis Internal ASO Safety Database relevant to Products licensed to Bayer
under this Agreement, and Isis will use Commercially Reasonable Efforts to
promptly run such queries and deliver to Bayer the results of such queries. Any
information disclosed between the Parties under this Section 6.6(c) will be
treated as Confidential Information in accordance with ARTICLE 12 below.

 
ARTICLE 7.
FINANCIAL PROVISIONS

7.1. Up-Front Fee. Within 10 Business Days after the Effective Date and
following Bayer’s receipt of an invoice from Isis (not to be sent to Bayer prior
to the Effective Date), Bayer will pay Isis an up-front fee equal to
$100,000,000 as follows:

(a) [***] in consideration for the exclusive license granted to Bayer under the
Licensed Patents and Licensed Know-How for ISIS-FXIRx;

(b) [***] in consideration for Isis’ agreement to [***]; and

(c) [***] in consideration for the [***] of API and [***] oligonucleotides Isis
agrees to supply to Bayer under Section 1.9.2(a)(i).

7.2. New Drug Option Program Commencement Fees. If Bayer delivers a Drug
Discovery Request Notice to Isis under Section 2.1 stating that Bayer requests
Isis to initiate a drug discovery program to identify a Development Candidate
for a New Drug Option Program in accordance with this Agreement, then within
[***] days following Bayer’s receipt of an invoice from Isis (such invoice not
to be sent prior to Isis’ receipt of such Drug Discovery Request Notice) Bayer
will pay Isis:

 
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7.2.1. a fee of [***] if such Drug Discovery Request Notice is to initiate such
New Drug Option Program for ISIS-FXIRx-2; and

7.2.2. a fee of [***] if such Drug Discovery Request Notice is to initiate such
New Drug Option Program for [***].

7.3. New Drug Option Program License Fees.

7.3.1. License Fee for ISIS-FXIRx-2. If Bayer timely delivers written notice to
Isis under Section 2.4 or Section 2.5.2 (as applicable) that Bayer is exercising
the Option for ISIS-FXIRx-2 and (if applicable) antitrust clearance for
ISIS-FXIRx-2 has been obtained (using the process described in Section 13.6,
mutatis mutandis), then within [***] days following Bayer’s receipt of an
invoice from Isis, Bayer will pay Isis a license fee of [***]. Bayer will
include in such written notice whether or not Bayer elects under Section 5.2.2
to have all Isis Product-Specific Patents and all Jointly-Owned Program Patents
for ISIS-FXIRx-2 assigned to Bayer in accordance with Section 5.2.2. If Bayer
does not provide Isis such a written notice that Bayer elects to have Isis
assign such Patent Rights to Bayer in accordance with Section 5.2.2, then within
[***] days following Bayer’s receipt of an invoice from Isis, Bayer will pay
Isis a fee of [***] as consideration for the Maintenance and Prosecution of such
Isis Product-Specific Patents and Jointly-Owned Program Patents for
ISIS-FXIRx-2.

7.3.2. License Fee for [***]. If Bayer timely delivers written notice to Isis
under Section 2.4, Section 2.5.2 or Section 4.2 (as applicable) that Bayer is
exercising the Option for [***] and (if applicable) antitrust clearance for
[***] has been obtained (using the process described in Section 13.6, mutatis
mutandis), then within [***] days following Bayer’s receipt of an invoice from
Isis, Bayer will pay Isis a license fee of [***]. Bayer will include in such
written notice whether or not Bayer elects under Section 5.2.2 to have all Isis
Product-Specific Patents and all Jointly-Owned Program Patents for [***]
assigned to Bayer in accordance with Section 5.2.2. If Bayer does not provide
Isis such a written notice that Bayer elects to have Isis assign such Patent
Rights to Bayer in accordance with Section 5.2.2, then within [***] days
following Bayer’s receipt of an invoice from Isis, Bayer will pay Isis a fee of
[***] as consideration for the Maintenance and Prosecution of such Isis
Product-Specific Patents and Jointly-Owned Program Patents for [***].

7.4.
Milestone Payments for Achievement of Development Milestone Events by
ISIS-FXIRx. Bayer will pay to Isis within [***] days following Bayer’s receipt
of an invoice from Isis, the milestone payments as set forth in Table 1 below
when a development milestone event listed in Table 1 is first achieved by
ISIS-FXIRx:

 
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Table 1
Development Milestone Event
Milestone Event Payment
45 days following Bayer’s receipt of the Completion Notice regarding Completion
of the CS IV Study and Bayer not having delivered a notice of termination to
Isis under Section 11.2.1 during such 45-day period.
$55,000,000
[***]
[***]

 

7.5. Milestone Payments for Achievement of Development Milestone Events by
ISIS-FXIRx-2. Bayer will pay to Isis within [***] days following Bayer’s receipt
of an invoice from Isis, the milestone payments as set forth in Table 2 below
when a development milestone event listed in Table 2 is first achieved by
ISIS-FXIRx-2:

 
Table 2
Development Milestone Event
Milestone Event Payment
[***]
[***]
[***]
[***]

 

7.6. Milestone Payments for Achievement of Development Milestone Events by
[***]. Bayer will pay to Isis within [***] days following Bayer’s receipt of an
invoice from Isis, the milestone payments as set forth in Table 3 below when a
development milestone event listed in Table 3 is first achieved by [***]:

 
Table 3
Development Milestone Event
Milestone Event Payment
[***]
[***]
[***]
[***]
[***]
[***]

 

7.7. Milestone Payments for Achievement of First Commercial Sale Milestone
Events by a Product.

7.7.1. ISIS-FXIRx or ISIS-FXIRx-2. Upon the earlier to occur of (i) First
Commercial Sale of ISIS-FXIRx [***], or (ii) First Commercial Sale of
ISIS-FXIRx-2 [***], Bayer will pay to Isis within [***] days following Bayer’s
receipt of an invoice from Isis, a one-time milestone payment equal to [***].

 
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7.7.2. ISIS FXIRx-2. Bayer will pay to Isis within [***] days following Bayer’s
receipt of an invoice from Isis, a one-time milestone payment equal to [***], if
(i) ISIS-FXIRx achieves First Commercial Sale [***], and (ii) ISIS-FXIRx-2
achieves First Commercial Sale [***].

7.7.3. [***]. Bayer will pay to Isis within [***] days following Bayer’s receipt
of an invoice from Isis, a one-time milestone payment equal to [***], upon
achievement of First Commercial Sale of [***].

7.8. Limitations on Milestone Payments; Exceptions; Notice.

7.8.1. Each milestone payment set forth in Table 1, Table 2, Table 3 and Section
7.7 above will be paid only once upon the first achievement of the milestone
event by the applicable Product regardless of how many times such Product
achieves such milestone event.

7.8.2. If a particular milestone event is not achieved by a Product, then upon
achievement of a later milestone event by such Product the milestone event
payment applicable to such earlier milestone event will also be due.

7.8.3. If a particular milestone event is achieved by a Product
contemporaneously with or in connection with another milestone event by such
Product, then both milestone events will be deemed achieved and the milestone
payments for both milestone events are due.

7.8.4. Each time a milestone event is achieved under this ARTICLE 7, Bayer will
send Isis, or Isis will send Bayer, as the case may be, a written notice thereof
within [***] Business Days following the date of achievement of such milestone
event. Bayer will use good faith efforts to provide Isis advanced notice orally
or in writing (including email) of any anticipated achievement of a milestone
event under this ARTICLE 7.

7.9. Royalty Payments to Isis. As partial consideration for the rights granted
to Bayer hereunder, subject to the provisions of this Section 7.9 (including the
minimum royalty required under Section 7.9.3(f)(ii)), Bayer will pay to Isis
royalties on the Annual worldwide Gross Margin of Products sold by Bayer, its
Affiliates or Sublicensees, on a country-by-country basis in accordance with
this Section 7.9. On a country-by-country basis, for each Calendar Quarter
during the Full Royalty Period, royalties will be calculated as follows:

 
[***]
 
 
 
[***]
[***]
 
 
[***]
 
[***]
 
 
   
 
 

  
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The Bayer Base Royalty Rate is calculated in accordance with Section 7.9.1 below
and the applicable Regional Adjustment is calculated in accordance with Section
7.9.2 below.

7.9.1. Bayer Base Royalty Rate. The Bayer Base Royalty Rate will be used to
calculate the royalty payment based on Gross Margin derived from Annual
worldwide Net Sales of Products according to Table 4 below (the “Bayer Base
Royalty Rate”):

 
 
Table 4
 
Royalty
Tier
Annual Worldwide Net Sales of Products
Bayer
Base
Royalty
Rate
1
For the portion of Annual Worldwide Net Sales
< [***]
[***]%
2
For the portion of Annual Worldwide Net Sales
> [***] but < [***]
[***]%
3
For the portion of Annual Worldwide Net Sales
> [***] but < [***]
[***]%
4
For the portion of Annual Worldwide Net Sales
> [***]
[***]%

 

(a) Annual worldwide Net Sales will be calculated by taking the aggregate sum of
Net Sales of all Products for all countries worldwide. For example, if Annual
worldwide Net Sales of Products are [***], then the Bayer Base Royalty Rate
would be [***].  As an additional example, if Annual worldwide Net Sales of
Products are [***], then the Bayer Base Royalty Rate would be [***].

(b) Bayer will pay Isis royalties on Gross Margin of Products arising from
pre-Approval sales, including named patient and other similar programs under
Applicable Laws where Bayer, its Affiliate or Sublicensee sells such Product to
a Third Party, and Bayer will provide reports and payments to Isis consistent
with Section 7.14.2. No royalties are due on Gross Margin of Products arising
from compassionate use and other programs providing for the delivery of Product
at no cost. The sales of Products arising from named patient or other similar
programs will not be considered a First Commercial Sale for purposes of
calculating the Full Royalty Period or determining whether a milestone event is
achieved in Section 7.7 above.

 
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7.9.2. Regional Adjustment. A specific adjustment (each, a “Regional
Adjustment”) will be used for each of the following four regions (each, a
“Region”) to calculate the actual royalty rate (each, a “Regional Royalty Rate”)
Bayer will pay Isis on Gross Margin of Products sold by Bayer, its Affiliates or
Sublicensees in countries within such Region: the Region consisting of the [***]
(the “[***] Region”), the Region consisting of [***] (the “[***] Region”), the
Region consisting of [***] (the “[***] Region”), and the Region consisting of
[***] (the “[***] Region”).

(a) [***] Region. The Regional Adjustment for the [***] equals [***]% such that
there is no [***]; and

(b) [***] Region, [***] Region and the [***] Region. On a Calendar
Quarter-by-Calendar Quarter basis, the Regional Adjustment for the [***] Region,
the [***] Region and the [***] Region is calculated by using the following
formula: [***](the “Average Regional Price”), [***] (the “Average [***] Price”)
[***]. The foregoing calculation is illustrated as follows:

[***]
 
 
 
[***]
[***]
 
 
[***]
[***]
 
 

 
[***]
 
 
 
[***]
[***]
 
[***]
[***]
 

 
Provided:

(i) In no event will the Regional Adjustment for such [***] Region, [***] Region
and the [***] Region be greater than [***]% or less than [***]%;

(ii) If, in a given Calendar Quarter, the Average Regional Price in the [***]
Region, the [***] Region or the [***] Region for Product is higher than [***],
then the Regional Adjustment for such [***] Region, [***] Region or the [***]
Region (as applicable) for such Calendar Quarter will be [***]%; and

(iii) If, in a given Calendar Quarter, there are Product sales in the [***]
Region, the [***] Region or the [***] Region but not in the [***] Region, then
the Regional Adjustment for such [***] Region, [***] Region or the [***] Region
(as applicable) for such Calendar Quarter will be [***]% until there are sales
of such Product in the [***] Region.

 
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7.9.3. Application of Royalty Rates. All royalties set forth under Section 7.9
are subject to the provisions of this Section 7.9.3, and are payable as follows:

(a) Full Royalty Period. Except as otherwise set forth in Section 7.9.3(b),
Bayer’s obligation to pay Isis the Regional Royalty Rates above with respect to
a Product will continue on a country-by-country and Product-by-Product basis
from the date of First Commercial Sale (except as stated in Section 7.9.1(b)) of
such Product until the later of the date of expiration (i) of the last Valid
Claim within the Orange Book Patents (or the foreign equivalent or counterpart
of such Orange Book Patents) exclusively licensed by Isis to Bayer under Section
5.1 (but excluding any Jointly-Owned Program Patents that are not
Product-Specific Patents) Covering such Product in the country in which such
Product is made, used or sold, (ii) of the data exclusivity period conferred by
the applicable Regulatory Authority in such country with respect to such
Product, and (iii) in consideration for the valuable Licensed Know-How
exclusively licensed to Bayer under Section 5.1 and Isis’ exclusivity covenants
in Section 4.1, the [***] anniversary of the First Commercial Sale of such
Product in such country (such royalty period, the “Full Royalty Period”).

(b) Competition from Generic Products for Products. On a Generic
Country-by-Generic Country and Product-by-Product basis, if at any time after
[***], a Generic Product is sold in such Generic Country, then Bayer may deliver
written notice to Isis electing to use the Generic Product reduced royalty
adjustment set forth in this Section 7.9.3(b) for a given Generic Country in
lieu of the applicable Regional Adjustment applicable to such country. If Bayer
delivers such a written notice to Isis then in lieu of the applicable Regional
Adjustment applicable to such country, (i) Bayer will pay Isis royalties on the
Gross Margin of Products sold by Bayer, its Affiliates and Sublicensees in such
Generic Country equal to [***].

In any Generic Country for which Bayer has elected to use the Generic Product
reduced royalty adjustment under this Section 7.9.3(b), on a Calendar
Quarter-by-Calendar Quarter basis, the applicable “Generic Royalty Quotient”
will be calculated by [***].
 

(c) Reduced Royalty. Bayer acknowledges that Isis’ contribution (and the value
Bayer is deriving) under this Agreement is not limited to the exclusive licenses
granted to Bayer under the Licensed Patent Rights, but also includes exclusive
licenses to the Licensed Know-How, which contains critically valuable Know-How
created and compiled by Isis from its antisense platform technology and over 25
years of experience discovering, researching, and developing ASOs, including
important pre-clinical data, clinical data, and, in the case of ISIS-FXIRx, a
robust Phase 2 clinical data package, the broad exclusivity covenants Isis is
providing under Section 4.1, and (upon Bayer’s request) the assignment of
certain Licensed Patents to Bayer under Section 5.2.1 and Section 5.2.2.
Therefore, subject to Section 7.9.3(f) and subject to Bayer’s right to calculate
royalties in accordance with the Generic Royalty Quotient in a Generic Country
in lieu of calculating royalties using the Royalty Quotient under this Section
7.9.3(c), on a country-by-country basis, after the expiration of the Full
Royalty Period and until the end of the Reduced Royalty Period, in lieu of the
applicable full Regional Royalty Rate for such country, Bayer will pay Isis
royalties (the “Bayer Reduced Royalty”) on Gross Margin of Products where the
applicable royalty rate is calculated on a Calendar Year-by-Calendar Year basis
by [***]; provided, however, that the Bayer Reduced Royalty rate in each country
will in no event exceed the [***].

 
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(d) End of Royalty Obligation for Products. On a country-by-country basis, other
than [***], Bayer’s obligation to make royalty payments hereunder for Products
in such country will end on the expiration of the Reduced Royalty Period in such
country. “Reduced Royalty Period” means, on a country-by-country basis, the
period commencing upon the expiration of the [***] for Products in such country
and ending when [***].

(e) Royalty Examples. Schedule 7.9.3(e) attached hereto contains examples of how
royalties will be calculated under this Section 7.9.

(f) Limitation on Aggregate Reduction for Bayer Royalties.

(i) In no event will the aggregate royalty reductions under Section 7.9.2(b),
Section 7.9.3(b), or Section 7.9.3(c) reduce the royalties payable to Isis on
Gross Margin of a Product in any given period to an amount that is less than the
[***].

(ii) Notwithstanding any provision to the contrary in this Agreement, in no
event will the royalties payable to Isis during the Full Royalty Period under
this Section 7.9 be less than [***]% of worldwide Net Sales.

(iii) In no event will the aggregate offsets under Section 7.11 reduce the
royalties payable to Isis on Gross Margin of a Product in any given period to an
amount that is less than the greater of [***].

7.10. Reverse Royalty Payments to Bayer for a Discontinued Product.

  7.10.1. Reverse Royalty for a Discontinued Product. If Isis or any of its
Affiliates or Sublicensees Commercializes a Discontinued Product, then following
the First Commercial Sale of such Discontinued Product by Isis or its Affiliates
or Sublicensees, Isis will pay Bayer a royalty of [***]% of Annual worldwide Net
Sales of such Discontinued Product (“Reverse Royalties”). Isis’ obligation to
pay Bayer Reverse Royalties will [***].

 
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  7.10.2. Applicable Royalty Provisions. In addition to this Section 7.10, the
definition of “Net Sales” in Appendix 1 and the other provisions contained in
this ARTICLE 7 governing payment of royalties from Bayer to Isis will govern the
payment of Reverse Royalties from Isis to Bayer under this Section 7.10, mutatis
mutandis, including the provisions of Sections 7.9.3, 7.11, 7.14, 7.15, 7.16,
and 7.17.

7.11. Third Party Payment Obligations. Other than Bayer Opt-In Technology, any
Third Party Obligations that become payable by Isis or Bayer under an agreement
such Party has entered into to license or otherwise acquire Third Party Patent
Rights will be paid by a Party or shared by the Parties as expressly set forth
in this Section 7.11.

  7.11.1. Existing In-License Agreements.

(a) Isis’ Existing In-License Agreements. Certain of the Licensed Technology
Controlled by Isis as of the Effective Date licensed to Bayer under Section
5.1.1 or that may be licensed to Bayer under Section 5.1.2 or Section 5.1.3, as
the case may be, are in-licensed or were acquired by Isis under the agreements
with Third Party licensors or sellers listed on Appendix 4 (such license or
purchase agreements being the “Isis In-License Agreements”), and certain
milestone, royalty payments, license maintenance fees and other payments may
become payable by Isis to such Third Parties under the Isis In-License
Agreements based on the Development or Commercialization of a Product by Bayer,
its Affiliate or Sublicensee under this Agreement. Any payment obligations
arising under the Isis In-License Agreements for Third Party Patent Rights that
would be considered:

(i) Isis Core Technology Patents or Isis Manufacturing and Analytical Patents
hereunder, will be paid by [***] as [***], and

(ii) Isis Product-Specific Patents hereunder, will be [***] as [***] and [***].

(b) Bayer’s Existing In-License Agreements. [***] will be solely responsible for
any Third Party Obligations that become payable by Bayer to Third Parties under
any agreements or arrangements Bayer has with such Third Parties as of the
Effective Date, based on the Development or Commercialization of a Product by
Bayer, its Affiliate or Sublicensee under this Agreement. Any such payment
obligations will be paid by [***] as [***].

  7.11.2. New In-Licensed Isis Core Technology Patents, Isis Manufacturing and
Analytical Patents or Isis Product-Specific Patents.

 
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(a) New In-Licensed Isis Core Technology Patents. If after the Effective Date,
Isis obtains Third Party Patent Rights necessary to Develop, Manufacture or
Commercialize a Product that would have been considered an Isis Core Technology
Patent or an Isis Manufacturing and Analytical Patent had Isis Controlled such
Patent Rights on the Effective Date, Isis will include such Third Party Patent
Rights in the license granted to Bayer under Section 5.1.1 for ISIS-FXIRx, under
Section 5.1.2 for ISIS-FXIRx-2 or Section 5.1.3 for [***] and any and all costs
arising under such Third Party agreement as they apply to Product will be paid
solely by [***] as [***].

 

(b) New In-Licensed Isis Product-Specific Patents. If after the Effective Date,
Isis obtains Third Party Patent Rights necessary to Develop, Manufacture or
Commercialize a Product that would have been considered an Isis Product-Specific
Patent had Isis Controlled such Patent Rights on the Effective Date, Isis will
include such Third Party Patent Rights in the license granted to Bayer under
Section 5.1.1 for ISIS-FXIRx under Section 5.1.2 for ISIS-FXIRx-2 or Section
5.1.3 for [***] and any and all costs arising under such Third Party agreement
as they apply to Product will be [***].

  7.11.3. Additional Core IP In-License Agreements.

(a) Bayer will promptly provide Isis written notice of any Additional Core IP
Bayer believes it has identified and Isis will have the first right, but not the
obligation, to negotiate with, and obtain a license from the Third Party
Controlling such Additional Core IP. If Isis obtains such a Third Party license,
Isis will include such Additional Core IP in the license granted to Bayer under
Section 5.1.1, Section 5.1.2, or Section 5.1.3 (as applicable), and [***] will
pay any financial obligations under such Third Party agreement as [***].

(b) If, however, Isis elects not to obtain such a license to such Third Party
intellectual property, Isis will so notify Bayer, and Bayer may obtain such a
Third Party license and Bayer may offset an amount equal to [***]% of any [***]
paid by Bayer under such Third Party license against any [***].

(c) If it is unclear whether certain intellectual property identified by Bayer
pursuant to Section 7.11.3(a) is Additional Core IP under Section 7.11.3(b),
Isis will send written notice to such effect to Bayer, and the Parties will
engage a mutually agreed upon independent Third Party intellectual property
lawyer with expertise in the patenting of oligonucleotides, and appropriate
professional credentials in the relevant jurisdiction, to determine the question
of whether or not such Third Party intellectual property is Additional Core IP.
The determination of the Third Party expert engaged under the preceding sentence
will be binding on the Parties solely for purposes of determining whether Bayer
is permitted to [***]. The costs of any Third Party expert engaged under this
Section 7.11.3(c) will be paid by the Party against whose position the Third
Party lawyer's determination is made.

 
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7.12. Other Third Party Payments.

  7.12.1. Isis’ Third Party Agreements. Except as otherwise expressly agreed to
by Bayer under Section 7.11.1 or Section 7.11.2, after Bayer is granted the
applicable license under Section 5.1 for a particular Product, Bayer will be
responsible for paying [***]% of the [***] arising under any Third Party
agreements entered into by Isis where [***], [***].

7.12.2. Bayer’s Third Party Agreements. Without limiting any applicable [***]
under Section 7.11.3(b), Bayer will be responsible for paying [***]% of the
[***] arising under any Third Party agreements entered into by Bayer as they
apply to Products.

7.13. Invoices. If the Parties explicitly refer to this Section 7.13, for any
mutually agreed work performed by Isis at Bayer’s request under this Agreement
(other than the Isis Completion Activities) after the first [***] hours of Isis’
time, Bayer will pay Isis as a lump sum within [***] days from the date an
invoice is received by Bayer; provided that any invoiced costs are for fees or
services that have been rendered by Isis plus out-of-pocket costs incurred by
Isis. Isis’ invoices will include Isis’ good faith estimate of the FTE cost
incurred by Isis in performing the services and the amount of any out-of-pocket
costs incurred and charged by Isis. Before Isis commences work, Bayer and Isis
will agree to a budget for the work Bayer requests Isis to perform that will
include Isis’ good faith estimate of the FTE cost plus any out-of-pocket costs.

7.14. Payments.

7.14.1. Commencement. Beginning with the Calendar Quarter in which the First
Commercial Sale for a Product is made and for each Calendar Quarter thereafter,
Bayer will make royalty payments to Isis under this Agreement based on the
Preliminary Royalty Report for the applicable Calendar Quarter within [***] days
following Bayer’s receipt of an invoice from Isis.

7.14.2. Reports. After the First Commercial Sale of a Product, within [***] days
after the end of the most recently completed Calendar Quarter, Bayer will
provide Isis with both the preliminary report and the reconciled report as
described in greater detail below:

 

(a) Bayer shall send to Isis a preliminary royalty report summarizing Gross
Margin for Products during the most recently completed Calendar Quarter on a
country-by-country and Product-by-Product basis and the calculation of royalties
due thereon, including sales price, Gross Margin, Bayer’s Cost of Goods Sold,
the exchange rate used, total sales, total units sold, if applicable the
calculation of the Regional Adjustment used for each Region and any adjustment
made in a Generic Country (including the calculation used for such Generic
Country adjustment and all components of such calculation), or an estimate of
any portions of the items set forth in the first sentence of this Section
7.14.2(a) where actuals are not known as of such time (the “Preliminary Royalty
Report”). If no royalties are payable in respect of a given Calendar Quarter,
Bayer will submit a written royalty report to Isis so indicating. In addition,
beginning with the Calendar Quarter in which the First Commercial Sale for a
Product is made and for each Calendar Quarter thereafter, within [***] Business
Days following the end of each such Calendar Quarter, Bayer will provide Isis a
[***] report estimating the Gross Margin and total Net Sales of, and royalties
payable to Isis for, Products sold for such Calendar Quarter.

 
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(b) Bayer shall send to Isis a reconciled royalty report summarizing Gross
Margin for Products during the Calendar Quarter prior to the most recently
completed Calendar Quarter on a country-by-country and Product-by-Product basis
and the calculation of royalties due thereon, including sales price, Gross
Margin, Bayer’s Cost of Goods Sold, the exchange rate used, total sales, total
units sold, if applicable the calculation of the Regional Adjustment used for
each Region and any adjustment made in a Generic Country (including the
calculation used for such Generic Country adjustment and all components of such
calculation) (the “Reconciled Royalty Report”). In addition, following the
royalty payments made by Bayer to Isis on the basis of the respective
Preliminary Royalty Reports, the Reconciled Royalty Report shall state any
payments due by one Party to the other Party. If the royalty payments made by
Bayer to Isis on the basis of a Preliminary Royalty Report is less than the
royalty payments owed by Bayer to Isis according to the applicable Reconciled
Royalty Report for the applicable Calendar Quarter, Bayer shall pay to Isis the
difference between such amounts as part of Bayer’s next payment to Isis, and if
the royalty payments made by Bayer to Isis on the basis of a Preliminary Royalty
Report is more than the royalty payments owed by Bayer to Isis according to the
applicable Reconciled Royalty Report for the applicable Calendar Quarter, Bayer
will have a credit against any royalties due to Isis in an amount equal to the
difference between such amounts (or to the extent there will be no future
royalties due, then in lieu of such credit, Isis will make a payment to Bayer in
an amount equal to the overpaid amount). The Parties acknowledge and agree that
the Reconciled Royalty Report for the fourth Calendar Quarter in a given
Calendar Year will reconcile the actual Gross Margin for Products as compared to
the estimated Gross Margin for Products for both such fourth Calendar Quarter
and for such entire Calendar Year.

 
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7.14.3. Mode of Payment. All payments under this Agreement will be (i) payable
in full in U.S. dollars, regardless of the country(ies) in which sales are made,
(ii) made by wire transfer of immediately available funds to an account
designated by Isis in writing, and (iii) non-creditable (except as otherwise
provided in Sections 7.14.2(b) and 7.15), irrevocable and non-refundable. Gross
Margin in currencies other than USD will be converted into USD using the average
exchange rate for the applicable month as for Bayer’s internal accounting and
reporting process, consistently applied across Bayer’s business for Bayer’s
pharmaceutical products.

7.14.4. Payment Rule. If the terms for a particular payment are not otherwise
set out in this Agreement, such payment shall be made by Bayer according to the
following rule: If invoices are received by Bayer at the address set forth in
this Section 7.14.4 by the [***] day of the current month, then payments shall
be made by the [***] day of the [***]. If invoices are received by Bayer at the
below address after the [***] day [***], then payments shall be made by the
[***] day of the [***]. For example, if Isis submits an invoice to Bayer and
such invoice is received by Bayer on [***], then Bayer will pay such invoice by
[***]. All invoices referred to in this ARTICLE 7 shall be made in compliance
with Applicable Law.

All invoices shall be sent to the following address:

Bayer Pharma AG
Rechnungseingangsstelle c/o
[***]
51368 Leverkusen Germany

7.14.5. Bank Account. All payments made by Bayer to Isis under the Agreement
shall be made by wire transfer to the following bank account of Isis, or such
other United States bank account as notified by Isis to Bayer in a timely manner
from time to time:

Account Holder: Isis Pharmaceuticals, Inc.
Bank: [***]
Bank Address: [***]
Account Number: [***]
Routing & Transit Number: [***]
SWIFT (BIC): [***]

7.14.6. Records Retention. Commencing with the First Commercial Sale of a
Product, Bayer will keep complete and accurate records pertaining to the sale of
Products for a period of [***] months after the year in which such sales
occurred, and in sufficient detail to permit Isis to confirm the accuracy of the
Gross Margin or royalties paid by Bayer hereunder.

 
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7.15. Audits. No more frequently than [***] during [***] during the Agreement
Term and for a period of [***] months thereafter, at the request and expense of
Isis, Bayer will permit an independent certified public accountant of nationally
recognized standing appointed by Isis (to whom Bayer has no reasonable
objection), and with at least [***] days advance notice, during normal business
hours, accompanied by a Bayer representative at all times, to examine such
records as are necessary to verify the calculation and reporting of Gross Margin
and the correctness of any royalty payment made under this Agreement for any
period within the preceding [***] months – [***] (except in the case of fraud,
in which case Isis may audit earlier periods to the extent the relevant records
are available) -including, on a Region-by-Region and Product-by-Product basis,
the calculation of the applicable Regional Adjustment and any adjustment due to
a Generic Product entering a Generic Country, and information relevant to total
sales, total units sold, average price in the Region versus average price in the
United States and the applicable royalty rate used in such Region. As a
condition to examining any records of Bayer, such auditor will sign a
nondisclosure agreement reasonably acceptable to Bayer. Any records of Bayer
examined by such accountant will be deemed Bayer’s Confidential Information.
Upon completion of the audit, the accounting firm will provide both Parties with
a written report disclosing whether the royalty payments made by Bayer are
correct or incorrect and the specific details concerning any discrepancies
(“Audit Report”). If the Audit Report shows that Bayer’s payments under this
Agreement were less than the royalty amount that should have been paid, then
Bayer will pay Isis the difference between such amounts to eliminate any
discrepancy revealed by said inspection within [***] Business Days of receiving
the Audit Report and following Bayer’s receipt of an invoice from Isis, with
interest calculated under Section 7.17. If the Audit Report shows that Bayer’s
payments under this Agreement were greater than the royalty amount that should
have been paid, then [***]. Isis will pay for such audit, except that if Bayer
is found to have underpaid Isis by more than [***]% of the amount that should
have been paid, Bayer will reimburse Isis’ reasonable costs of the audit.

7.16. Taxes.

7.16.1. Taxes on Income. Each Party will be solely responsible for the payment
of all taxes imposed on its share of income arising directly or indirectly from
the activities of the Parties under this Agreement.

7.16.2. VAT. The prices set forth in this ARTICLE 7, including its Schedules do
not include Value Added Tax. If Value Added Tax is legally owed by Isis, Value
Added Tax applies and will be invoiced additionally by Isis and has to be paid
by Bayer to Isis after receipt of a correct invoice, which meets all legal
requirements according to the Applicable Law. Any refunds of such Value Added
Tax shall be to the account of Bayer and Isis shall provide all reasonable
assistance as requested by Bayer in obtaining any such refunds.

7.16.3. Withholding Tax. The Parties agree to cooperate with one another and use
reasonable efforts to lawfully avoid or reduce tax withholding or similar
obligations in respect of royalties, milestone payments, and other payments made
by the paying Party to the receiving Party under this Agreement. To the extent
the paying Party is required to deduct and withhold taxes, interest or penalties
on any payment, the paying Party will pay the amounts of such taxes to the
proper governmental authority for the account of the receiving Party and remit
the net amount to the receiving Party in a timely manner. The paying Party will
furnish the receiving Party with proof of payment of such taxes in due course.
Any withheld tax shall be treated as having been paid by paying Party to
receiving Party for all purposes of this Agreement. If documentation is
necessary in order to secure an exemption from, or a reduction in, any
withholding taxes, the Parties will provide such documentation to the extent
they are entitled to do so.

 
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7.16.4. Tax Cooperation. Isis will provide Bayer with any and all tax forms that
may be reasonably necessary in order for Bayer to lawfully not withhold tax or
to withhold tax at a reduced rate under an applicable bilateral income tax
treaty. Following Bayer’s timely receipt of such tax forms from Isis and the
confirmation of German tax authorities for tax exemption (if necessary), Bayer
will not withhold tax or will withhold tax at a reduced rate under an applicable
bilateral income tax treaty, if appropriate under the Applicable Law. Isis will
provide any such tax forms to Bayer upon request and in advance of the due date.
Each Party will provide the other with reasonable assistance to determine if any
taxes are applicable to payments under this Agreement and to enable the
recovery, as permitted by Applicable Law, of withholding taxes resulting from
payments made under this Agreement, such recovery to be for the benefit of the
Party who would have been entitled to receive the money but for the application
of withholding tax under this Section 7.16.

The provisions of this Section 7.16 are to be read in conjunction with the
provisions of Section 13.4 below.

7.17. Interest. Any payments due under this Agreement shall be due on such date
as specified in the Agreement. Any failure by Bayer to make a payment within ten
(10) days after the date when due shall obligate Bayer to pay interest on the
due payment to Isis. The interest period shall commence on the due date
(inclusive) and end on the payment date (exclusive). Interest shall be
calculated based on the actual number of days in the interest period divided by
360. The interest rate per annum shall be equal to the one (1) month US Libor
rate, currently published on Reuters screen <LIBOR01>, fixed two Business Days
prior to the due date and reset to the prevailing one (1) month US Libor rate in
monthly intervals thereafter, plus a premium of [***], or shall be equal to an
interest rate according to Law, whatever is lower.

ARTICLE 8.
INTELLECTUAL PROPERTY

8.1. Ownership.

8.1.1. Isis Technology and Bayer Technology. As between the Parties, Isis will
own and retain all of its rights, title and interest in and to the Licensed
Know-How and Licensed Patents and Bayer will own and retain all of its rights,
title and interest in and to the Bayer Know-How and Bayer Patents, subject to
any assignments, rights or licenses expressly granted by one Party to the other
Party under this Agreement.

 
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8.1.2. Agreement Technology. As between the Parties, Bayer is the sole owner of
any Know-How discovered, invented or created solely by or on behalf of Bayer or
its Affiliates in connection with the Manufacture, Development or
Commercialization of a Product under this Agreement (“Bayer Program Know-How”)
and any Patent Rights that claim or cover Bayer Program Know-How (“Bayer Program
Patents” and together with the Bayer Program Know-How, the “Bayer Program
Technology”), and will retain all of its rights, title and interest thereto,
subject to any rights or licenses expressly granted by Bayer to Isis under this
Agreement. As between the Parties, Isis is the sole owner of any Know-How
discovered, invented or created solely by or on behalf of Isis or its Affiliates
in connection with the Manufacture, Development or Commercialization of a
Product under this Agreement (“Isis Program Know-How”) and any Patent Rights
that claim or cover such Know-How (“Isis Program Patents” and together with the
Isis Program Know-How, the “Isis Program Technology”), and will retain all of
its rights, title and interest thereto, subject to any assignment, rights or
licenses expressly granted by Isis to Bayer under this Agreement. Any Know-How
discovered, invented or created jointly in connection with the Manufacture,
Development or Commercialization of a Product under this Agreement by or on
behalf of both Parties or their respective Affiliates or Third Parties acting on
their behalf (“Jointly-Owned Program Know-How”), and any Patent Rights that
claim or cover such Jointly-Owned Program Know-How (“Jointly-Owned Program
Patents”, and together with the Jointly-Owned Program Know-How, the
“Jointly-Owned Program Technology”), are owned jointly by Bayer and Isis on an
equal and undivided basis, including all rights, title and interest thereto,
subject to any rights or licenses expressly granted by one Party to the other
Party under this Agreement. Except as expressly provided in this Agreement,
neither Party will have any obligation to account to the other for profits with
respect to, or to obtain any consent of the other Party to license or exploit,
Jointly-Owned Program Technology by reason of joint ownership thereof, and each
Party hereby waives any right it may have under the laws of any jurisdiction to
require any such consent or accounting. Each Party will promptly disclose to the
other Party in writing, and will cause its Affiliates to so disclose, the
discovery, invention or creation of any Bayer Program Technology, Isis Program
Technology or Jointly-Owned Program Technology. The Bayer Program Patents, Isis
Program Patents and Jointly-Owned Program Patents are collectively referred to
herein as the “Program Patents.”

 

8.1.3. Joint Patent Committee.

 

(a) If the Parties mutually agree, the Parties may establish a “Joint Patent
Committee” or “JPC.” If such a JPC is formed, the JPC will serve as the primary
contact and forum for discussion between the Parties with respect to
intellectual property matters arising under this Agreement, and will cooperate
with respect to the activities set forth in this Section 8.1.3. If the JPC is
not formed or it dissolves, each Party may designate a patent attorney who will
be responsible for intellectual property matters under this Agreement. A
strategy will be discussed with regard to (i) prosecution and maintenance,
defense and enforcement of Isis Product-Specific Patents that would be or are
licensed to Bayer under Section 5.1 in connection with a Product and Bayer
Product-Specific Patents, (ii) defense against allegations of infringement of
Third Party Patent Rights, (iii) licenses to Third Party Patent Rights or
Know-How, and (iv) the timing and subject matter of any potential publications
regarding a Product, in each case to the extent such matter would be reasonably
likely to have a material impact on the Agreement or the licenses granted
hereunder, which strategy will be considered in good faith by the Party entitled
to prosecute, enforce and defend such Patent Rights, as applicable, hereunder,
but will not be binding on such Party.

 
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(b) In addition, any Joint Patent Committee (or the Parties’ respective patent
representatives if no JPC exists) will be responsible for the assessment of
inventorship of Program Patents in accordance with United States patent laws. In
case of a dispute in the Joint Patent Committee (or otherwise between Isis and
Bayer) over inventorship of Program Patents, if the Joint Patent Committee (or
the Parties’ respective patent representatives if no JPC exists) cannot resolve
such dispute, such dispute will be resolved by independent patent counsel not
engaged or regularly employed in the past two years by either Party and
reasonably acceptable to both Parties. The decision of such independent patent
counsel will be binding on the Parties. Expenses of such patent counsel will be
shared equally by the Parties.

(c) If the Parties form a JPC, it will comprise an equal number of at most three
members from each Party. The Joint Patent Committee will meet as often as agreed
by them (and at least semi-Annually), to discuss matters arising out of the
activities set forth in this Section 8.1.3. The JPC will determine the JPC
operating procedures at its first meeting, including the JPC’s policies for
replacement of JPC members, and the location of meetings, which will be codified
in the written minutes of the first JPC meeting. The Parties may escalate issues
to the Executives for input and resolution pursuant to Section 13.1. Each
Party’s representatives on the Joint Patent Committee will consider comments and
suggestions made by the other in good faith. Each Party will bear their own cost
of participation on the JPC.

8.2. Filing, Prosecution and Maintenance of Patents.

8.2.1. Patent Filings. Subject to Section 8.2.2(c), the Party responsible for
Prosecution and Maintenance of any Patent Rights as set forth in this Section
8.2 will endeavor to obtain patent protection for the Product as it Prosecutes
and Maintains its other patents Covering products in development, using counsel
of its own choice in such countries as the responsible Party sees fit.

 
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8.2.2. Licensed Patents and Bayer Patents.

(a) Isis Core Technology Patents and Isis Manufacturing and Analytical Patents.
During the Agreement Term, Isis will control and be responsible for all aspects
of the Prosecution and Maintenance of the Isis Core Technology Patents, the Isis
Manufacturing and Analytical Patents and the Isis Program Patents.

(b) Isis Product-Specific Patents and Jointly-Owned Program Patents Covering
ISIS-FXIRx. So long as Bayer has not exercised its right under Section 5.2.1,
subject to the obligation to provide information and cooperate, and the step-in
rights, under Section 8.2.3 and Section 8.4.3 respectively, Isis will control
and be responsible for all aspects of the Prosecution and Maintenance of Isis
Product-Specific Patents and Jointly-Owned Program Patents Covering ISIS-FXIRx
using the same level of judgment and diligence (and in the same countries) as
Isis uses to Prosecute and Maintain product-specific patents for Isis’ own
internal drug products. Isis will consider in good faith any comments or
instructions Bayer timely provides Isis related to the Prosecution and
Maintenance of such Isis Product-Specific Patents and Jointly-Owned Program
Patents. Isis will have final decision making authority regarding the
Prosecution and Maintenance of such Isis Product-Specific Patents and
Jointly-Owned Program Patents. In addition, Isis will Prosecute and Maintain
such Isis Product-Specific Patents and Jointly-Owned Program Patents in
countries that are in addition to the countries in which Isis Prosecutes and
Maintains product-specific patents for Isis’ own internal drug products so long
as (i) Bayer pays the costs of such Prosecution and Maintenance in such
additional countries, and (ii) Bayer provides its written request to Isis for
such additional countries with a sufficient amount of time in advance of the
applicable filing deadline in such countries. Isis may use the legal counsel
Isis normally uses to Prosecute and Maintain its other Patent Rights in the
relevant country; provided, if Isis does not have its own legal counsel in such
country Isis will, subject to a conflicts check, use the legal counsel Bayer
uses in such country to Prosecute and Maintain Bayer’s own Patent Rights in such
country.

 

(c) Isis Product-Specific Patents and Jointly-Owned Program Patents Covering
ISIS-FXIRx-2 or [***]. Prior to and after the exercise of an Option and so long
as Bayer has not exercised its right under Section 5.2.2, subject to the
obligation to provide information and cooperate, and the step-in rights, under
Section 8.2.3 and Section 8.4.3 respectively, Isis will control and be
responsible for all aspects of the Prosecution and Maintenance of all Isis
Product-Specific Patents and Jointly-Owned Program Patents that are the subject
of such Option using the same level of judgment and diligence (and in the same
countries) as Isis uses to Prosecute and Maintain product-specific patents for
Isis’ own internal drug products. Isis will consider in good faith any comments
or instructions Bayer timely provides Isis related to the Prosecution and
Maintenance of such Isis Product-Specific Patents and Jointly-Owned Program
Patents. Isis will have final decision making authority regarding the
Prosecution and Maintenance of such Isis Product-Specific Patents and
Jointly-Owned Program Patents. In addition, Isis will Prosecute and Maintain
such Isis Product-Specific Patents and Jointly-Owned Program Patents in
countries that are in addition to the countries in which Isis Prosecutes and
Maintains product-specific patents for Isis’ own internal drug products so long
as (i) Bayer pays the costs of such Prosecution and Maintenance in such
additional countries, and (ii) Bayer provides its written request to Isis for
such additional countries with a sufficient amount of time in advance of the
applicable filing deadline in such countries. Isis may use the legal counsel
Isis normally uses to Prosecute and Maintain its other Patent Rights in the
relevant country; provided, if Isis does not have its own legal counsel in such
country Isis will, subject to a conflicts check, use the legal counsel Bayer
uses in such country to Prosecute and Maintain Bayer’s own Patent Rights in such
country.

 
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(d) Bayer Patents. Bayer will control and be responsible for all aspects of the
Prosecution and Maintenance of all Bayer Patents, subject to Section 8.2.3.

(e) Isis Product-Specific Patents Arising From Prosecution of Isis Core
Technology Patents. If each Party’s patent representatives believe an Isis Core
Technology Patent contains claimable subject matter that, if prosecuted under a
separate patent application, could become an Isis Product-Specific Patent, then
upon Bayer’s written request (and at Bayer’s expense) Isis will use Commercially
Reasonable Efforts to prosecute such Isis Core Technology Patent in a manner
that would result in a separate patent application meeting the requirements of
an Isis Product-Specific Patent. Once Isis has prosecuted such Isis Core
Technology Patent in a manner that results in a separate patent application
meeting the requirements of an Isis Product-Specific Patent, Bayer will have the
right but not the obligation to request assignment of such separate Isis
Product-Specific Patent under Section 5.2; provided, that Bayer will not have
the right to (and Isis will not be required to) prosecute such Patent Right to
include claims that are (i) directed to subject matter applicable to ASOs in
general, (ii) directed to an ASO, the sequence of which targets an RNA that does
not encode an Exclusive Target, or (iii) directed to an RNA that is not an
Exclusive Target.

 

8.2.3. Other Matters Pertaining to Prosecution and Maintenance of Patents.

 
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(a) Each Party will keep the other Party informed through the Joint Patent
Committee (or through the other Party’s patent representative if no JPC exists)
as to material developments with respect to the filing, Prosecution and
Maintenance of the Product-Specific Patents or Jointly-Owned Program Patents for
which such Party has responsibility for Prosecution and Maintenance pursuant to
Section 8.2.2, or this Section 8.2.3, including by providing copies of material
data as it arises, any office actions or office action responses or other
correspondence that such Party provides to or receives from any patent office,
including notice of all interferences, reissues, re-examinations, oppositions or
requests for patent term extensions, and all patent-related filings, and by
providing the other Party the timely opportunity to have reasonable input into
the strategic aspects of such Prosecution and Maintenance.

(b) If Bayer elects (i) not to file and prosecute patent applications for the
Jointly-Owned Program Patents or Isis Product-Specific Patents that have been
assigned to Bayer under this Agreement or the Bayer Product-Specific Patents
(“Bayer-Prosecuted Patents”) in a particular country, (ii) not to continue the
prosecution (including any interferences, oppositions, reissue proceedings,
re-examinations, and patent term extensions, adjustments, and restorations) or
maintenance of any Bayer-Prosecuted Patent in a particular country, or (iii) not
to file and prosecute patent applications for the Bayer-Prosecuted Patent in a
particular country following a written request from Isis to file and prosecute
in such country, then Bayer will so notify Isis promptly in writing of its
intention (including a reasonably detailed rationale for doing so) in good time
to enable Isis to meet any deadlines by which an action must be taken to
establish or preserve any such Patent Right in such country; and Isis will have
the right, but not the obligation, to file, prosecute, maintain, enforce, or
otherwise pursue such Bayer-Prosecuted Patent in the applicable country at its
own expense with counsel of its own choice. In such case, Bayer will cooperate
with Isis to file for, or continue to Prosecute and Maintain or enforce, or
otherwise pursue such Bayer-Prosecuted Patent in such country in Isis’ own name,
but only to the extent that Bayer is not required to take any position with
respect to such abandoned Bayer-Prosecuted Patent that would be reasonably
likely to adversely affect the scope, validity or enforceability of any of the
other Patent Rights being prosecuted and maintained by Bayer under this
Agreement. Notwithstanding anything to the contrary in this Agreement, if Isis
assumes responsibility for the Prosecution and Maintenance of any such
Bayer-Prosecuted Patent under this Section 8.2.3(b), Isis will have no
obligation to notify Bayer if Isis intends to abandon such Bayer-Prosecuted
Patent.

 

(c) If, during the Agreement Term, Isis intends to abandon any Isis
Product-Specific Patent or Jointly-Owned Program Patents for which Isis is
responsible for Prosecution and Maintenance without first filing a continuation
or substitution, then Isis will notify Bayer of such intention at least [***]
days before such Patent Right will become abandoned, and Bayer will have the
right, but not the obligation, to assume responsibility for the Prosecution and
Maintenance thereof at its own expense (subject to Section 8.3.1) with counsel
of its own choice.  Notwithstanding anything to the contrary in this Agreement,
if Bayer assumes responsibility for the Prosecution and Maintenance of any such
Isis Product-Specific Patent under this Section 8.2.3(c), Bayer will have no
obligation to notify Isis if Bayer intends to abandon such Isis Product-Specific
Patent. Section 8.2.3(c) shall not apply for Isis Product-Specific Patents and
Jointly-Owned Program Patents Covering ISIS-FXIRx-2 or [***] if the applicable
Option Deadline has passed and Bayer has not exercised its Option as provided
under Section 2.4. For clarity, if Bayer assumes responsibility for any such
Isis Product-Specific Patent under this Section 8.2.3(c), such Isis
Product-Specific Patent shall not be taken into account in determining the Full
Royalty Period.

 
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(d) The Parties, through the Joint Patent Committee (or the Parties’ patent
representatives if no JPC exists), will cooperate in good faith to determine if
and when any divisional or continuation applications will be filed with respect
to any Jointly-Owned Program Patents or Product-Specific Patents, and where a
divisional or continuation patent application filing would be practical and
reasonable, then such a divisional or continuation filing will be made.

(e) If the Party responsible for Prosecution and Maintenance pursuant to Section
8.2.2 intends to abandon such Jointly-Owned Program Patent without first filing
a continuation or substitution, then such Party will notify the other Party of
such intention at least [***] days before such Jointly-Owned Program Patent will
become abandoned, and such other Party will have the right, but not the
obligation, to assume responsibility for the Prosecution and Maintenance thereof
at its own expense (subject to Section 8.3.1) with counsel of its own choice, in
which case the abandoning Party will, and will cause its Affiliates to, assign
to the other Party (or, if such assignment is not possible, grant a fully-paid
exclusive license in) all of their rights, title and interest in and to such
Jointly-Owned Program Patents. If a Party assumes responsibility for the
Prosecution and Maintenance of any such Jointly-Owned Program Patents under this
Section 8.2.3(e), such Party will have no obligation to notify the other Party
of any intention of such Party to abandon such Jointly-Owned Program Patents.

(f) In addition, the Parties will consult, through the Joint Patent Committee
(or the Parties’ patent representatives if no JPC exists), and take into
consideration the comments of the other Party for all matters relating to
interferences, reissues, re-examinations and oppositions with respect to those
Patent Rights in which such other Party (i) has an ownership interest, (ii) has
received a license thereunder in accordance with this Agreement, or (iii) may in
the future, in accordance with this Agreement, obtain a license or sublicense
thereunder.

 
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8.3. Patent Costs.

8.3.1. Jointly-Owned Program Patents. Unless the Parties agree otherwise, Isis
and Bayer will share equally the Patent Costs associated with the Prosecution
and Maintenance of Jointly-Owned Program Patents; provided that, either Party
may decline to pay its share of costs for filing, prosecuting and maintaining
any Jointly-Owned Program Patents in a particular country or particular
countries, in which case the declining Party will, and will cause its Affiliates
to, assign to the other Party (or, if such assignment is not possible, grant a
fully-paid exclusive license in) all of their rights, titles and interests in
and to such Jointly-Owned Program Patents.

8.3.2. Licensed Patents and Bayer Patents. Except as set forth in Section 8.3.1,
each Party will be responsible for all Patent Costs incurred by such Party prior
to and after the Effective Date in all countries in the Prosecution and
Maintenance of Patent Rights for which such Party is responsible under Section
8.2.

8.4. Defense of Claims Brought by Third Parties; Oppositions.

8.4.1. ISIS-FXIRx-2 [***] – Prior to Option Exercise. If a Third Party initiates
a Proceeding claiming a Patent Right owned by or licensed to such Third Party is
infringed by the Development, Manufacture or Commercialization of ISIS-FXIRx-2
or [***] being researched or Developed under a New Drug Option Program with
respect to which Bayer has not yet exercised its Option, Isis will have the
first right, but not the obligation, to defend against any such Proceeding at
its sole cost and expense. If Isis elects to defend against such Proceeding,
then Isis will have the sole right to direct the defense and to elect whether to
settle such claim. Bayer will reasonably assist Isis in defending such
Proceeding and cooperate in any such litigation at the request and expense of
Isis. Isis will provide Bayer with prompt written notice of the commencement of
any such Proceeding that is of the type described in this Section 8.4, and Isis
will keep Bayer apprised of the progress of such Proceeding. If Isis elects not
to defend against such a Proceeding, then Isis will so notify Bayer in writing
within [***] days after Isis first receives written notice of the initiation of
such Proceeding, and Bayer will have the right, but not the obligation, to
defend against such Proceeding at its sole cost and expense and thereafter Bayer
will have the sole right to direct the defense thereof, including the right to
settle such claim (but only with the prior written consent of Isis, which
consent will not be unreasonably withheld, delayed or conditioned). In any
event, the Party not defending such Proceeding will reasonably assist the other
Party and cooperate in any such litigation at the request and expense of the
Party defending such Proceeding. Each Party may at its own expense and with its
own counsel join any defense initiated or directed by the other Party under this
Section 8.4. Each Party will provide the other Party with prompt written notice
of the commencement of any such Proceeding under this Section 8.4, and such
Party will promptly furnish the other Party with a copy of each communication
relating to the alleged infringement that is received by such Party.

 
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8.4.2. Products Licensed to Bayer. If a Third Party initiates a Proceeding
claiming a Patent Right owned by or licensed to such Third Party is infringed by
the Development, Manufacture or Commercialization of any Product being Developed
or Commercialized by Bayer under this Agreement, then Bayer will have the first
right, but not the obligation, to defend against any such Proceeding at its sole
cost and expense. If Bayer elects to defend against such Proceeding, then Bayer
will have the sole right to direct the defense and to elect whether to settle
such claim. Isis will reasonably assist Bayer in defending such Proceeding and
cooperate in any such litigation at Bayer’s request and expense. Bayer will
provide Isis with prompt written notice of the commencement of any such
Proceeding that is of the type described in this Section 8.4, and Bayer will
keep Isis apprised of the progress of such Proceeding. If Bayer elects not to
defend against a Proceeding, then Bayer will so notify Isis in writing within
[***] days after Bayer first receives written notice of the initiation of such
Proceeding, and Isis shall not have the right to defend against such a
Proceeding unless Isis is a defendant under such Proceeding in which event Isis
shall have the right to defend against such a Proceeding at its sole cost and
expense. Thereafter, Isis will have the sole right to direct the defense of such
Proceeding, including the right to settle such claim (but only with the prior
written consent of Bayer, which consent will not be unreasonably withheld,
delayed or conditioned). In any event, the Party not defending such Proceeding
will reasonably assist the other Party and cooperate in any such litigation at
the request and expense of the Party defending such Proceeding. Each Party may
at its own expense and with its own counsel join any defense initiated or
directed by the other Party under this Section 8.4. Each Party will provide the
other Party with prompt written notice of the commencement of any such
Proceeding under this Section 8.4, and such Party will promptly furnish the
other Party with a copy of each communication relating to the alleged
infringement that is received by such Party.

8.4.3. Interferences, Reissues, Re-Examinations and Oppositions. If a Third
Party initiates a Proceeding related to an interference, reissue, re-examination
or opposition of an Isis Product-Specific Patent, Bayer will by written notice
to Isis either (i) control the defense of such Proceeding at Bayer’s expense, or
(ii) have Isis control the defense of such Proceeding at Bayer’s expense,
provided if Bayer makes no such election within a reasonable period of time,
then Isis will have the right, but not the obligation, to control the defense of
such Proceeding and Isis and Bayer will evenly split the cost of such defense.

8.5. Enforcement of Patents Against Competitive Infringement.

 
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8.5.1. Duty to Notify of Competitive Infringement. If either Party learns of an
infringement, unauthorized use, misappropriation or threatened infringement by a
Third Party with respect to any Product-Specific Patents by reason of the
development, manufacture, use or commercialization of a product directed against
the RNA that encodes an Exclusive Target (“Competitive Infringement”), such
Party will promptly notify the other Party in writing and will provide such
other Party with available evidence of such Competitive Infringement; provided,
however, that for cases of Competitive Infringement under Section 8.5.6 below,
such written notice will be given within 10 days.

8.5.2. Control of Competitive Infringement Proceedings. For any Competitive
Infringement with respect to a particular Product for which Bayer is Developing
or Commercializing under this Agreement, so long as part of such Proceeding
Bayer also enforces any Orange Book Patents Controlled by Bayer being infringed
that Cover the Product, then Bayer will have the first right, but not the
obligation, to institute, prosecute, and control a Proceeding to enforce the
Isis Product-Specific Patents with respect thereto by counsel of its own choice
at its own expense, and Isis will have the right, at its own expense, to be
represented in that action by counsel of its own choice, however, Bayer will
have the right to control such litigation. If Bayer fails to initiate a
Proceeding within a period of 90 days after receipt of written notice of such
Competitive Infringement (subject to a 90-day extension to conclude
negotiations, if Bayer has commenced good faith negotiations with an alleged
infringer for elimination of such Competitive Infringement within such 90 day
period), Isis will have the right to initiate and control a Proceeding with
respect to such Competitive Infringement by counsel of its own choice, and Bayer
will have the right to be represented in any such action by counsel of its own
choice at its own expense. Isis will at all times have the sole right to
institute, prosecute, and control any Proceeding under this Section 8.5.2 to the
extent involving Isis Core Technology Patents or Isis Manufacturing and
Analytical Patents.

8.5.3. Joinder; Cooperation.

(a) If a Party initiates a Proceeding in accordance with this Section 8.5, the
other Party agrees to be joined as a party plaintiff upon request of the first
Party and to give the first Party reasonable assistance and authority to file
and prosecute the Proceeding. Subject to Section 8.5.4, each Party bears its own
cost and expense incurred pursuant to this Section 8.5.3(a).

(b) If one Party initiates a Proceeding in accordance with this Section 8.5.3,
the other Party may join such Proceeding as a party plaintiff where necessary
for such other Party to seek lost profits with respect to such infringement.

(c) If a Third Party asserts in writing or in any legal proceeding that any of
the Licensed Patents are unenforceable based on any term or condition of this
Agreement, the Parties will amend this Agreement as may reasonably be required
to effect the original intent of the Parties, including preserving the
enforceability of such Licensed Patents.

 
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8.5.4. Share of Recoveries. Any damages or other monetary awards recovered with
respect to a Proceeding brought pursuant to this Section 8.5 will be shared as
follows:

(a) the amount of such recovery will first be applied to the Parties’ reasonable
out-of-pocket costs incurred in connection with such Proceeding (which amounts
will be allocated pro rata if insufficient to cover the totality of such
expenses); then

(b) any remaining proceeds will be allocated [***]% to [***]% in favor of the
Party initiating the Proceeding pursuant to Section 8.5.

8.5.5. Settlement. Notwithstanding anything to the contrary in this ARTICLE 8,
neither Party may enter a settlement, consent judgment or other voluntary final
disposition of a suit under this ARTICLE 8 that disclaims, limits the scope of,
admits the invalidity or unenforceability of, or grants a license, covenant not
to sue or similar immunity under a Patent Right Controlled by the other Party or
admits any fault or liability on the part of the other Party without first
obtaining the written consent of the Party that Controls the relevant Patent
Right which shall not be unreasonably withheld, delayed or conditioned.

8.5.6. 35 USC 271(e)(2) Infringement. Notwithstanding anything to the contrary
in this Section 8.5, solely with respect to Licensed Patents that have not been
assigned to Bayer under this Agreement, for a Competitive Infringement under 35
USC 271(e)(2), the time period set forth in Section 8.5 during which a Party
will have the initial right to bring a Proceeding will be shortened to a total
of 25 days, so that, to the extent the other Party has the right, pursuant to
such Section to initiate a Proceeding if the first Party does not initiate a
Proceeding, such other Party will have such right if the first Party does not
initiate a Proceeding within 25 days after such first Party’s receipt of written
notice of such Competitive Infringement.

8.6. Other Infringement.

8.6.1. Jointly-Owned Program Patents. With respect to the infringement of a
Jointly-Owned Program Patent, the Parties will cooperate in good faith to bring
suit together against such infringing party or the Parties may decide to permit
one Party to solely bring suit. Any damages or other monetary awards recovered
with respect to a Proceeding brought pursuant to this Section 8.6.1 will be
shared as follows: (i) the amount of such recovery will first be applied to the
Parties’ reasonable out-of-pocket costs incurred in connection with such
Proceeding (which amounts will be allocated pro rata if insufficient to cover
the totality of such expenses); (ii) (A) if the Parties jointly initiate a
Proceeding pursuant to this Section 8.6.1, [***]; and (B) if only one Party
initiates the Proceeding pursuant to this Section 8.6.1, any damages or other
monetary awards will be allocated [***]% to [***]% in favor of the Party
initiating the Proceeding pursuant to this Section 8.6.1.

 
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8.6.2. Patents Solely Owned by Isis. Unless agreed otherwise between the Parties
in this ARTICLE 8, Isis will retain all rights to pursue an infringement of any
Patent Right solely owned by Isis and Isis will retain all recoveries with
respect thereto.

8.6.3. Patents Solely Owned by Bayer. Unless agreed otherwise between the
Parties in this ARTICLE 8, Bayer will retain all rights to pursue an
infringement of any Patent Right solely owned by Bayer and Bayer will retain all
recoveries with respect thereto.

8.7. Patent Listing. Bayer will promptly, accurately and completely list, with
the applicable Regulatory Authorities during the Agreement Term, all applicable
Orange Book Patents.  Prior to such listings, the Parties will meet, through the
Joint Patent Committee (or between the Parties if no Joint Patent Committee
exists), to evaluate and identify all applicable Patent Rights, and Bayer will
have the right to review, where reasonable, original records relating to any
invention for which Patent Rights are being considered by the Joint Patent
Committee (or the Parties) for any such listing.  Notwithstanding the preceding
sentence, Bayer will retain final decision-making authority as to the listing of
all applicable Orange Book Patents for such Product (excluding Isis Core
Technology Patents), regardless of which Party owns such Orange Book Patent.

8.8. Joint Research Agreement under the Leahy-Smith America Invents Act. If a
Party intends to invoke its rights under 35 U.S.C. § 102(c) of the Leahy-Smith
America Invents Act, once agreed to by the other Party, it will notify the other
Party and the Parties will use reasonable efforts to cooperate and coordinate
their activities with such Party with respect to any submissions, filings or
other activities in support thereof. The Parties acknowledge and agree that this
Agreement is a “joint research agreement” as defined in 35 U.S.C. § 100(h).

8.9. Obligations to Third Parties. Notwithstanding any of the foregoing, each
Party’s rights and obligations with respect to Licensed Technology under this
ARTICLE 8 will be subject to the restrictions set forth in Section 5.1.7,
provided, however, that, to the extent that Isis has a non-transferable right to
prosecute, maintain or enforce any Patent Rights licensed to Bayer hereunder
and, this Agreement purports to grant any such rights to Bayer, Isis will act in
such regard with respect to such Patent Rights at Bayer’s direction.

8.10. Additional Rights and Exceptions. Notwithstanding any provision of this
ARTICLE 8, Isis retains the sole right to Prosecute and Maintain Isis Core
Technology Patents and Isis Manufacturing and Analytical Patents during the
Agreement Term and to control any enforcement of Isis Core Technology Patents
and Isis Manufacturing and Analytical Patents, and will take the lead on such
enforcement solely to the extent that the scope or validity of any Patent Rights
Controlled by Isis and Covering the Isis Core Technology Patents or Isis
Manufacturing and Analytical Patents is at risk.

 
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8.11. Patent Term Extension. The Parties will cooperate with each other in
gaining patent term extension for Isis Product-Specific Patents wherever
applicable to a Product. After Bayer is granted the applicable license under
Section 5.1 with respect to the applicable Isis Product-Specific Patents, Bayer
will determine which such relevant Isis Product-Specific Patents will be
extended.

8.12. Rights in Bankruptcy. All rights and licenses granted under or pursuant to
any Section of this Agreement are and will otherwise be deemed to be for
purposes of Section 365(n) of Title 11, United States Code (the “Bankruptcy
Code”) licenses of rights to “intellectual property” as defined in Section
101(56) of the Bankruptcy Code. The Parties will retain and may fully exercise
all of their respective rights and elections under the Bankruptcy Code. Upon the
bankruptcy of any Party, the non-bankrupt Party will further be entitled to a
complete duplicate of, or complete access to, any such intellectual property,
and such, if not already in its possession, will be promptly delivered to the
non-bankrupt Party, unless the bankrupt Party elects in writing to continue, and
continues, to perform all of its obligations under this Agreement.

8.13. Patent Challenge. If, during the Agreement Term, with respect to rights to
the Licensed Patents that are included in a license granted to Bayer under
Section 5.1.1, Section 5.1.2 or Section 5.1.3, Bayer, its Affiliates or
Sublicensees, in the United States or any other country:

(a) commence or otherwise voluntarily determine to participate in (other than as
may be necessary or reasonably required to assert a cross-claim or a
counter-claim or to respond to a court request or order or administrative law
request or order) any action or proceeding, challenging or denying the
enforceability or validity of any claim within an issued patent or patent
application within such Licensed Patents, or

(b) direct, support or actively assist any other Person (other than as may be
necessary or reasonably required to assert a cross-claim or a counter-claim or
to respond to a court request or order or administrative law request or order)
in bringing or prosecuting any action or proceeding challenging or denying the
validity of any claim within an issued patent or patent application within such
Licensed Patents,

then, [***]. In addition, if Bayer, its Affiliates or Sublicensees take any of
the actions described in clause (a) or clause (b) of this Section 8.13 and
[***], Bayer will [***].
 
ARTICLE 9.
REPRESENTATIONS AND WARRANTIES

9.1. Representations and Warranties of Both Parties. Each Party hereby
represents and warrants as of both the Execution Date and the Effective Date to
the other Party that:

 
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9.1.1. it has the power and authority and the legal right to enter into this
Agreement and perform its obligations hereunder, and that it has taken all
necessary action on its part required to authorize the execution and delivery of
this Agreement and the performance of its obligations hereunder;

9.1.2. this Agreement has been duly executed and delivered on behalf of such
Party and constitutes a legal, valid and binding obligation of such Party and is
enforceable against it in accordance with its terms subject to the effects of
bankruptcy, insolvency or other laws of general application affecting the
enforcement of creditor rights and judicial principles affecting the
availability of specific performance and general principles of equity, whether
enforceability is considered a proceeding at law or equity;

9.1.3. all necessary consents, approvals and authorizations of all Regulatory
Authorities and other parties required to be obtained by such Party in
connection with the execution and delivery of this Agreement and the performance
of its obligations hereunder have been obtained;

9.1.4. the execution and delivery of this Agreement and the performance of such
Party’s obligations hereunder (a) do not conflict with or violate any
requirement of Applicable Law or any provision of the certificate of
incorporation, bylaws or any similar instrument of such Party, as applicable, in
any material way, and (b) do not conflict with, violate, or breach or constitute
a default or require any consent not already obtained under, any contractual
obligation or court or administrative order by which such Party is bound; and

9.1.5. all employees, consultants, or (sub)contractors (except academic
collaborators or Third Parties under material transfer agreements) of such Party
or Affiliates performing development activities hereunder on behalf of such
Party will be obligated to assign all right, title and interest in and to any
inventions developed by them, whether or not patentable, to such Party or
Affiliate, respectively, as the sole owner thereof.

9.2. Representations and Warranties of Isis. Isis hereby represents and warrants
to Bayer as of the Execution Date and the Effective Date, that:

9.2.1. Isis is the owner of, or otherwise has the right to grant all rights and
licenses it purports to grant to Bayer with respect to the Licensed Technology
under this Agreement for ISIS-FXIRx as it exists on the Execution Date and the
Effective Date;

9.2.2. all Licensed Patents that are owned by Isis (“Isis Owned Patents”) have
been filed and maintained properly and correctly in all material respects;

9.2.3. Isis has not previously entered into any agreement, whether written or
oral, with respect to, or otherwise assigned, transferred, licensed, conveyed or
otherwise encumbered its right, title or interest in or to, the Licensed
Technology (including by granting any covenant not to sue with respect thereto)
in such a way as to make the representation set forth in Section 9.2.1 not true;

 
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9.2.4. each of the Isis Owned Patents that are Isis Product-Specific Patents
properly identifies each and every inventor of the claims thereof as determined
in accordance with the laws of the jurisdiction in which such Patent Right is
issued or such application is pending;

9.2.5. to Isis’ Knowledge, each of the Isis Owned Patents that are Isis Core
Technology Patents properly identifies each and every inventor of the claims
thereof as determined in accordance with the laws of the jurisdiction in which
such Patent Right is issued or such application is pending;

9.2.6. Isis has not received any written claim alleging that any of the Licensed
Technology is invalid or unenforceable, including any Isis Owned Patents
required in order for Isis to perform the Isis Completion Activities;

9.2.7. Isis has not received any written claim alleging that any of Isis’
activities relating to ISIS-FXIRx infringes any intellectual property rights of
a Third Party;

9.2.8. to Isis’ Knowledge, (i) the licenses granted to Isis under the Isis
In-License Agreements are in full force and effect, (ii) Isis has not received
any written notice, and is not aware, of any breach by any party to the Isis
In-License Agreements, and (iii) Isis’ performance of its obligations under this
Agreement (including the Strategic Plan as it exists on the Execution Date) will
not constitute a breach of Isis’ obligations under the Isis In-License
Agreements and the licenses granted to Isis thereunder;

9.2.9. to Isis’ Knowledge, in respect of the pending United States patent
applications included in the Isis Owned Patents, Isis has submitted all material
prior art of which it is aware in accordance with the requirements of the United
States Patent and Trademark Office;

9.2.10. to Isis’ Knowledge, neither Isis nor its Affiliates owns or Controls any
Patent Rights or Know How covering formulation or delivery technology as of the
Execution Date or the Effective Date that would be necessary in order for Bayer
to further Develop or Commercialize ISIS-FXIRx contemplated under the Strategic
Plan as it exists on the Execution Date;

9.2.11. except for the activities Isis is obligated to conduct under the Prior
Agreements as in effect on the Execution Date and the Effective Date, Isis does
not conduct any activities which would violate ARTICLE 4;

9.2.12. to Isis’ Knowledge, Bayer’s performance of its rights and obligations
under this Agreement does not infringe any of Isis’ or Third Party’s Patent
Rights, Know-How or other intellectual property rights; provided, Bayer cannot
assert a claim against Isis for breach of this Section 9.2.12 related to any
Third Party Patent Rights Bayer has Knowledge of as of the Execution Date or the
Effective Date;

 
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9.2.13. all preclinical and clinical studies and trials conducted by Isis on
ISIS-FXIRx, have been conducted in accordance with Applicable Law and, as
applicable, GLP and GCP, and to Isis’ Knowledge no claim for injury, loss or
damage has been initiated or received in respect of any such studies or trials;
and

9.2.14. to Isis’ Knowledge, Isis has not employed or otherwise used in any
capacity the services of any person or entity debarred under Section 21 U.S.C. §
335a for purposes of conducting the preclinical and clinical studies and trials
on ISIS-FXIRx.

9.3. DISCLAIMER OF WARRANTY. EXCEPT FOR THE EXPRESS WARRANTIES SET FORTH IN THIS
ARTICLE 9, BAYER AND ISIS MAKE NO REPRESENTATIONS AND GRANT NO WARRANTIES,
EXPRESS OR IMPLIED, EITHER IN FACT OR BY OPERATION OF LAW, BY STATUTE OR
OTHERWISE, AND BAYER AND ISIS EACH SPECIFICALLY DISCLAIM ANY WARRANTIES, WHETHER
WRITTEN OR ORAL, OR EXPRESS OR IMPLIED, INCLUDING ANY WARRANTY OF QUALITY,
MERCHANTABILITY OR FITNESS FOR A PARTICULAR USE OR PURPOSE OR ANY WARRANTY AS TO
THE VALIDITY OF ANY PATENT RIGHTS OR THE NON-INFRINGEMENT OF ANY INTELLECTUAL
PROPERTY RIGHTS OF THIRD PARTIES.

ARTICLE 10.
INDEMNIFICATION; INSURANCE

10.1. Indemnification by Bayer. Bayer agrees to defend Isis, its Affiliates and
their respective directors, officers, employees and their respective successors,
heirs and assigns (collectively, the “Isis Indemnitees”), and will indemnify and
hold harmless the Isis Indemnitees, from and against any liabilities, losses,
costs, damages, fees or expenses payable to a Third Party, and reasonable
attorneys’ fees and other legal expenses with respect thereto (collectively,
“Losses”) arising out of any claim, action, lawsuit or other proceeding by a
Third Party (collectively, “Third Party Claims”) brought against any Isis
Indemnitee and resulting from or occurring as a result of: (a) any activities
conducted by a Bayer employee, consultant, Affiliate, Sublicensee, or
(sub)contractor in the performance of the activities Bayer agrees to perform
under this Agreement, including, the Manufacture, Development or
Commercialization of any Product, or (b) any breach by Bayer of any of its
representations, warranties or covenants pursuant to this Agreement; except in
any such case to the extent such Losses result from: (i) the negligence or
willful misconduct of any Isis Indemnitee, (ii) any breach by Isis of any of its
representations, warranties, covenants or obligations pursuant to this
Agreement, or (iii) any breach of Applicable Law by any Isis Indemnitee.

 
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10.2. Indemnification by Isis. Isis agrees to defend Bayer, its Affiliates and
their respective directors, officers, employees and their respective successors,
heirs and assigns (collectively, the “Bayer Indemnitees”), and will indemnify
and hold harmless the Bayer Indemnitees, from and against any Losses arising out
of Third Party Claims brought against any Bayer Indemnitee and resulting from or
occurring as a result of: (a) any activities that an Isis employee, consultant,
Affiliate, Sublicensee, or (sub)contractor has undertaken in respect of Products
either prior to the Effective Date or outside the scope of this Agreement, or in
the performance of the activities Isis agreed to perform under this Agreement,
including, the Manufacture, Development or Commercialization of any Product or
Discontinued Product, or (b) any breach by Isis of any of its representations,
warranties or covenants pursuant to this Agreement; except in any such case to
the extent such Losses result from: (i) the negligence or willful misconduct of
any Bayer Indemnitee, (ii) any breach by Bayer of any of its representations,
warranties, covenants or obligations pursuant to this Agreement, or (iii) any
breach of Applicable Law by any Bayer Indemnitee.

10.3. Procedure. If a Person entitled to indemnification under Section 10.1 or
Section 10.2 (an “Indemnitee”) seeks such indemnification, such Indemnitee will
inform the indemnifying Party in writing of a Third Party Claim as soon as
reasonably practicable after such Indemnitee receives notice of such Third Party
Claim; provided, however, that the failure to so notify the indemnifying Party
shall not relieve the indemnifying Party of its obligations hereunder except to
the extent such failure shall have actually materially prejudiced the
indemnifying Party.

10.3.1. Defense of Third Party Claim.

(a) Control of the Defense.

(i) If (y) both Parties are named as defendants in the Third Party Claim and at
least one Party seeks indemnification hereunder, or (z) the Third Party Claim
relates to a Product liability claim or a claim for the infringement of Third
Party intellectual property by a Product, then, within 30 days after receipt of
such notice, the Parties will use good faith efforts to mutually agree on which
Party will assume control of the defense of such Third Party Claim. If the
Parties cannot agree on which Party will assume such control, then Bayer will
assume control of the defense of such Third Party Claim at Bayer’s expense. In
all cases at the conclusion of the Third Party Claim, each Party will have the
right to seek indemnification from the other Party, including the costs to
defend such Third Party Claim, any damages awarded against the Parties from such
Third Party Claim, or any settlements made in accordance with Section 10.3.2
from such Third Party Claim.

 

(ii) Unless covered by Section 10.3.1(a)(i) above, if a Party is named as a
defendant in the Third Party Claim and seeks indemnification hereunder, then,
within thirty (30) days after receipt of such notice, the indemnifying Party
may, upon written notice thereof to and prior written approval of the
Indemnitee, assume control of the defense of the Third Party Claim. If the
Indemnitee does not provide its written approval for the indemnifying Party to
assume control of the defense of such Third Party Claim, then the indemnifying
Party will be relieved of any obligation under this Agreement to indemnify and
defend the Indemnitee for such Third Party Claim, unless both Parties agree in
good faith after the final and binding decision of the court or other authority
ruling upon such defense of the Third Party Claim, that such defense was duly
conducted by the Indemnitee. If the indemnifying Party receives written approval
from the Indemnitee to assume control of the defense but does not assume such
control, then the Indemnitee shall control such defense and, at the conclusion
of the Third Party Claim, will be entitled to recover from the other Party its
defense costs, any damages awarded against such Indemnitee from such Third Party
Claim, or any settlements made in accordance with Section 10.3.2 from such Third
Party Claim.

 
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(b) Participation and Cooperation. The Party not controlling any such defense
hereunder may participate therein at its own expense. The Party controlling such
defense shall keep the other Party advised of the status of such Third Party
Claim and the defense thereof and shall consider in good faith reasonable
recommendations made by the other Party with respect thereto. The Party not
controlling such defense shall, and shall cause each of its Affiliates and each
of their respective directors, officers and employees to reasonably cooperate in
the defense or prosecution thereof and shall furnish such records, information
and testimony, provide such witnesses and attend such conferences, discovery
proceedings, hearings, trials and appeals as may be reasonably requested in
connection therewith. Such cooperation shall include reasonable retention by
such Party of records and information that are reasonably relevant to such Third
Party Claim, and making such Party, its Affiliates and its and their respective
directors, officers and employees available on a mutually convenient basis to
provide additional information and explanation of any records or information
provided, and the Party controlling the defense of such Third Party Claim shall
reimburse the respective other Party for all of its related reasonable
out-of-pocket expenses.

10.3.2. Settlement of Third Party Claim. No Indemnitee shall agree to any
settlement of any such Third Party Claim without the prior written consent of
the indemnifying Party, which shall not be unreasonably withheld, delayed or
conditioned. The indemnifying Party shall not agree to any settlement of such
Third Party Claim or consent to any judgment in respect thereof that does not
include a complete and unconditional release of the Indemnitee from all
liability with respect thereto or that imposes any liability or obligation on
the Indemnitee without the prior written consent of the Indemnitee which shall
not be unreasonably withheld, conditioned or delayed.

 
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10.4. Insurance.

10.4.1. Isis’ Insurance Obligations. Isis will maintain, at its cost, reasonable
insurance against liability and other risks associated with its activities
contemplated by this Agreement.

10.4.2. Bayer’s Insurance Obligations. Bayer will maintain, at its cost,
reasonable insurance against liability and other risks associated with its
activities contemplated by this Agreement in accordance with its internal
insurance policy consistently applied.

10.5. LIMITATION OF CONSEQUENTIAL DAMAGES. EXCEPT FOR (a) THIRD PARTY CLAIMS
THAT ARE SUBJECT TO INDEMNIFICATION UNDER THIS ARTICLE 10, (b) CLAIMS ARISING
OUT OF A PARTY’S WILLFUL MISCONDUCT OR FRAUD UNDER THIS AGREEMENT, (c) A PARTY’S
BREACH OF ARTICLE 4, (d) ISIS’ BREACH OF EXCLUSIVITY UNDER SECTION 5.1.1 THROUGH
SECTION 5.1.3, (e) CLAIMS ARISING OUT OF A PARTY’S BREACH OF ITS CONFIDENTIALITY
OBLIGATIONS UNDER THIS AGREEMENT, NEITHER PARTY NOR ANY OF ITS AFFILIATES WILL
BE LIABLE TO THE OTHER PARTY TO THIS AGREEMENT OR ITS AFFILIATES FOR ANY
INCIDENTAL, CONSEQUENTIAL, SPECIAL, PUNITIVE OR OTHER INDIRECT DAMAGES OR LOST
OR IMPUTED PROFITS OR ROYALTIES, LOST DATA OR COST OF PROCUREMENT OF SUBSTITUTE
GOODS OR SERVICES, WHETHER LIABILITY IS ASSERTED IN CONTRACT, TORT (INCLUDING
NEGLIGENCE AND STRICT PRODUCT LIABILITY), INDEMNITY OR CONTRIBUTION, AND
IRRESPECTIVE OF WHETHER THAT PARTY OR ANY REPRESENTATIVE OF THAT PARTY HAS BEEN
ADVISED OF, OR OTHERWISE MIGHT HAVE ANTICIPATED THE POSSIBILITY OF, ANY SUCH
LOSS OR DAMAGE.

ARTICLE 11.
TERM; TERMINATION

11.1. Agreement Term; Expiration. This Section 11.1, ARTICLE 12 and ARTICLE 13
of this Agreement shall become effective on the Execution Date and the remainder
of the Agreement shall become effective as of the Effective Date and, unless
earlier terminated pursuant to the other provisions of this ARTICLE 11, will
continue in full force and effect until the expiration of all payment
obligations under this Agreement with respect to the last Product (or
Discontinued Product) in all countries. The period from the Effective Date until
the date of expiration or earlier termination of this Agreement pursuant to this
ARTICLE 11 is the “Agreement Term”. If the antitrust clearance required for
ISIS-FXIRx in accordance with Section 13.6 is not obtained by December 31, 2015
this Agreement, including this Section 11.1, ARTICLE 12 and ARTICLE 13 shall
automatically expire.

 
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11.2. Termination of the Agreement.

11.2.1. Bayer’s Termination for Convenience. At any time following payment by
Bayer of the payment under Section 7.1, subject to Sections 11.3.1, 11.3.2 and
11.3.3 below, Bayer may terminate this Agreement on a Product-by-Product basis
for convenience by providing [***] days written notice to Isis of such
termination; provided however, that for purposes of this ARTICLE 11 ISIS-FXIRx
and ISIS-FXIRx-2 together shall constitute a Product and [***] shall constitute
the other Product.

11.2.2. Termination for Material Breach.

(a) Bayer’s Right to Terminate for Material Breach. If Isis is in material
breach of this Agreement (including with respect to a failure to use
Commercially Reasonable Efforts under ARTICLE 1 or ARTICLE 2), then Bayer may
deliver notice of such material breach to Isis. If the breach is curable, Isis
will have [***] days to cure such breach. If Isis fails to cure such breach
within the [***] day period (or during a longer period of time if such breach is
not reasonably curable within such [***]-day period, so long as Isis is pursuing
a cure in good faith), or if the breach is not subject to cure, Bayer may
terminate this Agreement in its entirety if such breach relates to this
Agreement in its entirety, or in relevant part as such breach relates to the
applicable Product, by providing written notice to Isis.

(b) Isis’ Right to Terminate for Material Breach. If Bayer is in material breach
of this Agreement (including with respect to a failure to use Commercially
Reasonable Efforts under ARTICLE 1 or ARTICLE 2), then Isis may deliver notice
of such material breach to Bayer. If the breach is curable, Bayer will have
[***] days to cure such breach (except to the extent such breach involves the
failure to make a payment when due, which breach must be cured within [***] days
following such notice). If Bayer fails to cure such breach within the [***] day
(or during a longer period of time if such breach is not reasonably curable
within such [***]-day period, so long as Bayer is pursuing a cure in good faith)
or [***] day period, as applicable, or if the breach is not subject to cure,
Isis may terminate this Agreement in its entirety if such breach relates to this
Agreement in its entirety, or in relevant part as such breach relates to the
applicable Product, by providing written notice to Bayer.

11.2.3. Disputes Regarding Material Breach. Notwithstanding the foregoing, if
the Breaching Party in Section 11.2.2 disputes the existence, materiality, or
failure to cure of any such breach, and provides notice to the Non-Breaching
Party of such dispute within such [***]-day or [***]-day period (as applicable),
the Non-Breaching Party will not have the right to terminate this Agreement in
accordance with Section 11.2.2, unless and until it has been determined in
accordance with Section 13.1 that this Agreement was materially breached by the
Breaching Party and the Breaching Party fails to cure such breach within [***]
days (or during a longer period of time if such breach is not reasonably curable
within such [***]-day period, so long as the Non-Breaching Party is pursuing a
cure in good faith) following such determination. It is understood and
acknowledged that during the pendency of such dispute, all the terms and
conditions of this Agreement will remain in effect and the Parties will continue
to perform all of their respective obligations hereunder, including satisfying
any payment obligations. In addition, the fact that Bayer is conducting its
activities in accordance with the Strategic Plan is not in and of itself
dispositive of whether Bayer is or is not using Commercially Reasonable Efforts
under this Agreement.

 
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11.2.4. Termination for Insolvency. Either Party may terminate this Agreement
if, at any time, the other Party files in any court or agency pursuant to any
statute or regulation of any state or country a petition in bankruptcy or
insolvency or for reorganization or for an arrangement or for the appointment of
a receiver or trustee of the Party or of substantially all of its assets; or if
the other Party proposes a written agreement of composition or extension of
substantially all of its debts; or if the other Party will be served with an
involuntary petition against it, filed in any insolvency proceeding, and such
petition will not be dismissed within 90 days after the filing thereof; or if
the other Party will propose or be a party to any dissolution or liquidation; or
if the other Party will make an assignment of substantially all of its assets
for the benefit of creditors. Notwithstanding any further rights under
Applicable Law, upon written request of the other Party, the Party filing for
bankruptcy, insolvency or a similar proceeding as set forth in this Section
11.2.4 shall promptly provide to such other Party all information and documents
necessary to prosecute, maintain and enjoy its rights under the terms of this
Agreement.

11.3. Consequences of Expiration or Termination of this Agreement.

11.3.1. Consequences of Termination of this Agreement. If this Agreement is
terminated by a Party in accordance with this ARTICLE 11 in its entirety or on a
Product-by-Product basis at any time and for any reason, the following terms
will apply to any such termination, but only to the extent of any such
termination (i.e., related to a Product or in its entirety):

(a) Licenses. Unless otherwise agreed in writing by the Parties, the licenses
granted by Isis to Bayer under this Agreement will terminate and Bayer, its
Affiliates and Sublicensees will cease selling Products.

(b) Options. Bayer’s Option will terminate with respect to any terminated New
Drug Option Program.

 
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(c) Exclusivity. Unless otherwise agreed in writing by the Parties, neither
Party will have any further obligations under Section 4.1 of this Agreement.

(d) Development Candidate Identification Plans. Neither Party will have any
further obligations with respect to the terminated Development Candidate
Identification Plan(s).

(e) Return of Information and Materials. The Parties will return (or destroy, as
directed by the other Party) all data, files, records and other materials
containing or comprising the other Party’s Confidential Information.
Notwithstanding the foregoing, the Parties will be permitted to retain one copy
of such data, files, records, and other materials for archival and legal
compliance purposes.

(f) Return of IND and Documentation. Bayer will transfer to Isis the IND
together with all necessary documentation and information, and will take all
necessary actions in relation thereto to affect such transfer.

(g) Accrued Rights. Termination of this Agreement for any reason will be without
prejudice to any rights or financial compensation that will have accrued to the
benefit of a Party prior to such termination. Such termination will not relieve
a Party from obligations that are expressly indicated to survive the termination
of this Agreement. For purposes of clarification, milestone payments under
ARTICLE 7 which are achieved before the effective date of termination, accrue as
of the date the applicable milestone event is achieved even if the payment is
not due at that time. Notwithstanding the foregoing, solely with respect to the
Completion of the CS IV Study, if Bayer delivers a notice of termination to Isis
under Section 11.2.1 within 45 days after the date Isis delivered the Completion
Notice to Bayer regarding Completion of the CS IV Study, then the milestone
payment for such milestone event will not be due.

(h) Survival. The following provisions of this Agreement will survive the
expiration or earlier termination of this Agreement: Section 2.5 (Expiration of
New Drug Option Program Term); Section 4.1.2 (Isis-Products); Section 5.1.4(d)
(Effect of Termination on Sublicenses); Section 5.1.5 (Consequences of Natural
Expiration of this Agreement); Section 5.1.8(b) (Trademark and Domain Names);
Section 5.2.4, Section 5.5 (Cross-Licenses Under Program Technology); Section
6.6(c) (The Isis Internal ASO Safety Database), Section 7.14.6 (Records
Retention), Section 7.15 (Audits), Section 7.16 (Taxes), Section 8.1.1 (Isis
Technology and Bayer Technology), Section 8.1.2 (Agreement Technology), Section
8.12 (Rights in Bankruptcy), Section 11.2.4 (Termination for Insolvency);
Section 11.3 (Consequences of Expiration or Termination of this Agreement);
ARTICLE 10 (Indemnification; Insurance); ARTICLE 12 (Confidentiality), ARTICLE
13 (Miscellaneous); and Appendix 1 (to the extent definitions are embodied in
the foregoing listed Articles and Sections).

 
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11.3.2. Special Consequences of Certain Terminations. If (A) Bayer terminates
this Agreement under Section 11.2.1 (Bayer’s Termination for Convenience) or (B)
Isis terminates this Agreement under Section 11.2.2(b) (Isis’ Right to Terminate
for Material Breach) or Section 11.2.4 (Termination for Insolvency), then, in
addition to the terms set forth in Section 11.3.1 (Consequences of Termination
of this Agreement), the following additional terms will also apply:

(i) Bayer will and hereby does grant to Isis a sublicensable, worldwide,
non-exclusive license or sublicense, as the case may be, under all Bayer
Technology Controlled by Bayer as of the effective date of such termination that
Covers the Discontinued Product solely as necessary to Develop, make, have made,
use, sell, offer for sale, have sold, import and otherwise Commercialize the
Discontinued Product;

(ii) Bayer will negotiate with Isis in good faith about a sublicensable,
worldwide, non-exclusive license or sublicense, as the case may be, under all
Bayer Technology Controlled by Bayer as of the effective date of such
termination that Covers any [***] used with the Discontinued Product solely as
necessary to Develop, make, have made, use, sell, offer for sale, have sold,
import and otherwise Commercialize the Discontinued Product. In addition, upon
Isis’ written request, Bayer will provide Isis with an introduction to any Third
Party from which Bayer was sourcing any such [***] used with the Discontinued
Product and will not interfere with Isis’ or such Third Party’s efforts to enter
into a license to such a [***] (which will include Bayer releasing such Third
Party from any exclusivity Bayer has with such Third Party to the extent
necessary for Isis to obtain such a license);

(iii) Bayer will assign back to Isis any Patent Rights that relate to the
Discontinued Product previously assigned by Isis to Bayer under this Agreement;

(iv) Bayer will transfer to Isis for use with respect to the Development and
Commercialization of the Discontinued Product, any Know-How, data, results,
regulatory information, filings (including the IND), and files in the possession
of Bayer as of the date of such termination or reversion that relate solely to
such Discontinued Product, and any other information or material specified in
Section 5.4;

 
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(v) Bayer will provide Isis with copies of any internal or external market
research reports and other market research documentation if related to Product;

(vi) Bayer will [***] on a non-exclusive, license under any Trademark that is
specific to a Discontinued Product solely for use with such Discontinued
Product; provided, however, that in no event will Bayer have any obligation to
license to Isis any Trademark used by Bayer in connection with the Product or
any other trademarks of Bayer, including any Bayer Marks;

(vii) Isis will control and be responsible for all aspects of the Prosecution
and Maintenance of all Jointly-Owned Program Patents, and Bayer will provide
Isis with (and will instruct its counsel to provide Isis with) all reasonably
required information and records in Bayer’s and its counsel’s possession related
to the Prosecution and Maintenance of such Jointly-Owned Program Patents; and

(viii) upon Isis’ written request pursuant to a mutually agreed supply
agreement, Bayer will sell to Isis any bulk API and Finished Drug Product in
Bayer’s possession related to the Discontinued Products that are the subject of
the termination at the time of such termination, at a price equal to [***] at
the time such material is requested by Isis.

11.3.3. Termination of Entire Agreement if there is only one Product.
Notwithstanding any provision to the contrary in this ARTICLE 11, if at the time
a notice of termination is delivered under this ARTICLE 11 (i) there is only one
license in effect under Section 5.1.1, Section 5.1.2 or Section 5.1.3 to a
Product, and (ii) Isis is not obligated to conduct any drug discovery activities
pursuant to a New Drug Option Programs under ARTICLE 2, then such termination
notice will terminate this Agreement in its entirety (including any and all of
Bayer’s unexercised Options).

 
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ARTICLE 12.
CONFIDENTIALITY

12.1. Confidentiality; Exceptions. Except to the extent expressly authorized by
this Agreement or otherwise agreed in writing, the Parties agree that, during
the Agreement Term and for five years thereafter, the receiving Party (the
“Receiving Party”) and its Affiliates will keep confidential and will not
publish or otherwise disclose or use for any purpose other than as provided for
in this Agreement any Confidential Information disclosed by the other Party or
its Affiliates (the “Disclosing Party”).

12.2. Prior Confidentiality Agreement Superseded. As of the Effective Date, this
Agreement supersedes the Amended and Restated Mutual Confidential Disclosure
Agreement executed by Isis and Bayer on August 17, 2012 (including any and all
amendments thereto). All information exchanged between the Parties under such
Confidential Disclosure Agreement will be deemed Confidential Information
hereunder and will be subject to the terms of this ARTICLE 12.

12.3. Authorized Disclosure. Except as expressly provided otherwise in this
Agreement, a Receiving Party or its Affiliates may use and disclose to Third
Parties Confidential Information of the Disclosing Party as follows: (i) solely
in connection with the performance of its obligations or exercise of rights
granted or reserved in this Agreement under confidentiality provisions no less
restrictive than those in this Agreement, and (ii) to the extent reasonably
necessary to file or prosecute patent, copyright and trademark applications
(subject to Section 12.4 below), complying with applicable governmental
regulations, obtaining Approvals, conducting Pre-Clinical Studies or Clinical
Studies, marketing the Product, or as otherwise required by applicable law,
regulation, rule or legal process (including the rules of the SEC and any stock
exchange); provided, however, that if a Receiving Party or any of its Affiliates
is required by law or regulation to make any such disclosure of a Disclosing
Party’s Confidential Information it will, except where impracticable for
necessary disclosures, give reasonable advance notice to the Disclosing Party of
such disclosure requirement and will use its reasonable efforts to secure
confidential treatment of such Confidential Information required to be
disclosed; (iii) on a need-to-know basis, in communication with actual or
potential lenders, investors, consultants, or professional advisors, in each
case under confidentiality provisions no less restrictive than those of this
Agreement; (iv) to the extent such disclosure is required to comply with
existing expressly stated contractual obligations owed to such Party’s or its
Affiliates’ licensor with respect to any intellectual property licensed to the
other Party under this Agreement; or (v) as mutually agreed to in writing by the
Parties.

 
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12.4. Press Release; Publications; Disclosure of Agreement.

12.4.1. Announcement of Transaction. On or promptly after each of the Execution
Date and the Effective Date, the Parties will issue a public announcement of the
execution of this Agreement in form and substance mutually agreed by the
Parties.

12.4.2. Other Disclosures. Except to the extent required to comply with
applicable law, regulation, rule or legal process or as otherwise permitted in
accordance with this Section 12.4, neither Party nor such Party’s Affiliates
will make any public announcements, press releases or other public disclosures
concerning a Product, a New Drug Option Program, this Agreement or the terms or
the subject matter hereof without the prior written consent of the other, which
will not be unreasonably withheld, conditioned or delayed.

12.4.3. Use of Name. Except as set forth in Section 12.4.8, neither Party will
use the other Party’s name in a press release or other publication without first
obtaining the prior consent of the Party to be named.

12.4.4. Notice of Significant Events; Disclosure of Information Related to
Products. Each Party will immediately notify (and provide as much advance notice
as possible, but at a minimum two Business Days advance notice to) the other
Party of any event materially related to a Product (including in such notice any
disclosure of the starting, stopping or clinical hold of a Clinical Study,
clinical data or results, material regulatory discussions, filings or Approval
or Bayer’s sales projections related to a Product) so the Parties may analyze
the need for or desirability of publicly disclosing or reporting such event. If
Bayer intends to make a press release or similar public communication disclosing
material information regarding a Product licensed by Bayer hereunder, including
starting, stopping or clinical hold of a Clinical Study, clinical data or
results, material regulatory discussions, filings, Approval or Bayer’s sales
projections related to a Product) (i) Bayer will submit such proposed
communication to Isis for review at least two Business Days in advance of such
proposed public disclosure, (ii) Isis will have the right to review and
recommend changes to such communication, and (iii) Bayer will in good faith
consider any changes that are timely recommended by Isis.

12.4.5. Scientific or Clinical Presentations. The Parties agree to use
Commercially Reasonable Efforts to control public scientific disclosures of
results of the Development activities under this Agreement to prevent any
potential adverse effect of any premature public disclosure of such results.
Each Party will first submit to the other Party an early draft of all such
publications or presentations, whether they are to be presented orally or in
written form, at least 14 days prior to submission for publication including to
facilitate the publication of any summaries of Clinical Studies data and results
as required on the clinical trial registry of each respective Party. Each Party
will review such proposed publication in order to avoid the unauthorized
disclosure of a Party’s Confidential Information and to preserve the
patentability of inventions arising under this Agreement. If, during such 14 day
period, the other Party informs such Party that its proposed publication
contains Confidential Information the Parties shall discuss the matter in good
faith and use Commercially Reasonable Efforts to resolve the matter. If at any
time during such 14-day period, the other Party informs such Party that its
proposed publication discloses inventions made by either Party under this
Agreement that have not yet been protected through the filing of a patent
application, or the public disclosure of such proposed publication could be
expected to have a material adverse effect on any Patent Rights or Know-How
solely owned or Controlled by such other Party, then such Party will either (i)
delay such proposed publication for up to 60 days from the date the other Party
informed such Party of its objection to the proposed publication, to permit the
timely preparation and first filing of patent application(s) on the information
involved or (ii) remove the identified disclosures prior to publication. Nothing
in this Section 12.4.5 shall be construed to restrict the right of an academic
collaborator to publish clinical trial data in accordance with good publication
practices or guidelines.

 
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12.4.6. SEC Filings. Each Party will give the other Party a reasonable
opportunity to review all material filings with the SEC describing the terms of
this Agreement prior to submission of such filings, and will give due
consideration to any reasonable comments by the non-filing Party relating to
such filing.

12.4.7. Subsequent Disclosure. Notwithstanding the foregoing, to the extent
information regarding this Agreement or a Product has already been publicly
disclosed, either Party (or its Affiliates) may subsequently disclose the same
information to the public without the consent of the other Party.

12.4.8. Acknowledgment. Bayer will acknowledge in any press release, public
presentation or publication regarding a Product, Isis’ role in discovering and
developing the Product, that the Product is under license from Isis and
otherwise acknowledge Isis’ contributions, and Isis’ stock ticker symbol
(Nasdaq: ISIS). Isis may include the Product (and identify Bayer as its partner
for the Product) in Isis’ drug pipeline.

 
ARTICLE 13.
MISCELLANEOUS

13.1. Dispute Resolution.

13.1.1. General. The Parties recognize that a dispute may arise relating to this
Agreement (“Dispute”). Except as set forth in Sections 1.3.2, 7.11.3(c),
8.1.3(b) and 13.1.5, any Dispute between the Parties or its Affiliates will be
resolved in accordance with this Section 13.1.

 
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13.1.2. Continuance of Rights and Obligations during Pendency of Dispute
Resolution. If there are any Disputes in connection with this Agreement,
including Disputes related to termination of this Agreement under ARTICLE 11,
all rights and obligations of the Parties will continue until such time as any
Dispute has been resolved in accordance with the provisions of this Section
13.1.

13.1.3. Escalation. Subject to Section 13.1.5, any claim, Dispute, or
controversy as to the breach, enforcement, interpretation or validity of this
Agreement will be referred to the Head of Development of Bayer Healthcare prior
to FDA Approval of a Product and to the Head of the Bayer Pharmaceutical’s
Business after FDA Approval of a Product and to the Chief Operating Officer of
Isis (the “Executives”) for attempted resolution. If the Executives are unable
to resolve such Dispute within 30 days of such Dispute being referred to them,
then, upon the written request of either Party to the other Party, the Dispute
will be subject to arbitration in accordance with Section 13.1.4, except as
expressly set forth in Section 13.1.5 or Section 13.3.

13.1.4. Arbitration.

(a) If the Parties fail to resolve the Dispute through Escalation, and a Party
desires to pursue resolution of the Dispute, any Dispute shall be finally
settled under the Rules of Arbitration of the International Chamber of Commerce
by a panel of three arbitrators appointed in accordance with said Rules,
provided however, that the third arbitrator, who will act as president of the
arbitral tribunal, shall not be appointed by the International Court of
Arbitration, but by the two arbitrators which have been appointed by either of
the Parties in accordance with Article 12 para 4 of said Rules.

(b) The place of arbitration shall be New York, New York and the language to be
used in any such proceeding (and for all testimony, evidence and written
documentation) shall be English. The IBA Rules on the Taking of Evidence in
International Arbitration shall apply on any evidence to be taken up in the
arbitration.

(c) Without limiting any other remedies that may be available under law, the
arbitrators shall have no authority to award consequential damages not permitted
to be recovered pursuant to Section 10.5. The Parties agree to select the
arbitrator(s) within 45 days of initiation of the arbitration. The hearing will
be concluded within six months after selection of the arbitrator(s) and the
award will be rendered within 60 days of the conclusion of the hearing, or of
any post hearing briefing, which briefing will be completed by both Parties
within 45 days after the conclusion of the hearing. If the Parties cannot agree
upon a schedule, then the arbitrator(s) will set the Schedule following the time
limits set forth above as closely as practical.

 
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(d) If the arbitration proceedings have been initiated under this Section 13.1.4
in order to fully or partially terminate this Agreement in accordance with
Section 11.2.2 for material breach, both Parties shall – during the pendency of
the arbitration proceedings – strive to find an amicable solution to resolve the
Dispute with the support of the arbitrators. If through such process Isis and
Bayer agree to a remediation plan and to a failure remedy that will apply if
such breach is not cured (which may include the non-breaching Party’s right to
terminate this Agreement upon written notice to the breaching Party), then if
the breaching Party subsequently materially fails to execute such plan within 90
days after the conclusion of the remediation plan (or during a longer period of
time if such breach is not reasonably curable within such 90-day period, so long
as the breaching Party is pursuing a cure in good faith) the non-breaching Party
will have the right to exercise and receive the applicable failure remedy. In
such case the Parties will mutually terminate the pending arbitration procedure
and, so long as the non-breaching Party has received the applicable failure
remedy, the non-breaching Party shall not be entitled to reinitiate the
arbitration proceedings to seek the full or partial termination of this
Agreement on the same or essentially the same facts.

(e) EXCEPT IN THE CASE OF COURT ACTIONS PERMITTED BY SECTION 13.1.5 AND FOR
CLAIMS NOT SUBJECT TO ARBITRATION PURSUANT TO SECTION 13.1.4 AS SET FORTH IN
SECTION 13.1.5, EACH PARTY HERETO WAIVES: (1) ITS RIGHT TO TRIAL OF ANY ISSUE BY
JURY, (2) WITH THE EXCEPTION OF RELIEF MANDATED BY STATUTE, ANY CLAIM TO
PUNITIVE, EXEMPLARY, MULTIPLIED, INDIRECT, CONSEQUENTIAL OR LOST
PROFITS/REVENUES DAMAGES, AND (3) ANY CLAIM FOR ATTORNEY FEES, COSTS AND
PREJUDGMENT INTEREST.

(f) Each Party will bear its own attorneys’ fees, costs, and disbursements
arising out of the arbitration, and will pay an equal share of the fees and
costs of the arbitrators; provided, however, the arbitrators will be authorized
to determine whether a Party is the prevailing party, and if so, to award to
that prevailing party reimbursement for any or all of its reasonable attorneys’
fees, costs and disbursements (including, for example, expert witness fees and
expenses, photocopy charges, travel expenses, etc.), and/or the fees and costs
of the administrators and the arbitrators.

13.1.5. Injunctive Relief; Court Actions. Notwithstanding anything to the
contrary in this Agreement, each Party will be entitled to seek from any court
of competent jurisdiction, in addition to any other remedy it may have at law or
in equity, injunctive or other equitable relief in the event of an actual or
threatened breach of this Agreement by the other Party, without the posting of
any bond or other security, and such an action may be filed and maintained
notwithstanding any ongoing discussions between the Parties or any ongoing
arbitration proceeding. The Parties agree that in the event of a threatened or
actual material breach of this Agreement injunctive or equitable relief may be
an appropriate remedy. In addition, except as set forth otherwise in Section
7.11.3(c) and Section 8.1.3(b) either Party may bring an action in any court of
competent jurisdiction to resolve disputes pertaining to the validity,
construction, scope, enforceability, infringement or other violations of Patent
Rights or other intellectual property rights, and no such claim will be subject
to arbitration pursuant to Section 13.1.4.

 
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13.2. Governing Law; Jurisdiction; Venue; Service of Process. This Agreement and
any Dispute will be governed by and construed and enforced in accordance with
the laws of the State of New York, U.S.A., without reference to conflicts of
laws principles. ﻿

13.3. Recovery of Losses. Neither Party will be entitled to recover any Losses
relating to any matter arising under one provision of this Agreement to the
extent that such Party has already recovered Losses with respect to such matter
pursuant to other provisions of this Agreement (including recoveries under
Section 10.1 or Section 10.2, and the offset under Sections 7.11.3(b) and
7.14.2(b)). Except for the offset and credits explicitly set forth in Section
7.15, and Sections 7.11.3(b) and 7.14.2(b), a final and binding decision of the
arbitrators in accordance with Section 13.1.4 or by the court of competent
jurisdiction in accordance with Section 13.1.5 neither Party will have the right
to set off any amount it is owed or believes it is owed against payments due or
payable to the other Party under this Agreement.

13.4. Assignment and Successors. Neither this Agreement nor any obligation, of a
Party hereunder may be assigned by either Party without the consent of the
other, which will not be unreasonably withheld, delayed or conditioned, except
that each Party may assign this Agreement and the rights, obligations and
interests of such Party, in whole or in part, without the other Party's consent,
to any of its Affiliates, to any purchaser of all or substantially all of its
assets or all or substantially all of its assets to which this Agreement relates
or to any successor corporation resulting from any merger, consolidation, share
exchange or other similar transaction subject to Section 13.5.1. In addition,
Isis may assign or transfer its rights to receive payments under this Agreement
(but no liabilities), without Bayer’s consent, to an Affiliate or to a Third
Party in connection with a payment factoring transaction. Unless explicitly
agreed otherwise in writing between the Parties, if any assignment of this
Agreement or of any rights or obligations under this Agreement results in [***].
Any purported assignment or transfer made in contravention of this Section 13.4
will be null and void. This Section 13.4 shall apply to the assignment of
Licensed Technology mutatis mutandis.

13.5. Change of Control Events.

13.5.1. Change of Control Event Involving Bayer. Bayer will provide written
notice to Isis within [***] days following the closing of a Change of Control
Event involving Bayer, and such notice will identify the Third Party acquiring
company (the “Bayer-Acquirer”) and the contact information of the person at the
Bayer-Acquirer with whom Isis will work to schedule meetings between the
Bayer-Acquirer and Isis. Within [***] days following the closing of such Change
of Control Event, Bayer will meet with Isis at a mutually agreed date and time
at Isis’ facilities to discuss any possible impacts of the Change of Control
Event for this Agreement.

 
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13.5.2. Change of Control Event Involving Isis. Isis will provide written notice
to Bayer within [***] days following the closing of a Change of Control Event
involving Isis, and such notice will identify the Third Party acquiring company
(the “Isis-Acquirer”) and the contact information of the person at the
Isis-Acquirer with whom Bayer will work to schedule meetings between the
Isis-Acquirer and Bayer. If a Change of Control Event occurs involving Isis and
the Isis-Acquirer that, at the time of the close of such Change of Control
Event, is developing in human clinical trials or commercializing an
antithrombotic product that competes or may compete with a Product (“Competing
Product”) or, at any time during the Agreement Term after the closing of such
Change of Control Event, develops, commercializes or acquires a Competing
Product and such Isis-Acquirer has not, within [***] months of either (i) the
closing of the Change of Control Event if the Competing Product is being
developed in human clinical trials or commercialized as of such closing date or
(ii) the date of first development, commercialization or acquisition of such
Competing Product (the “Divestiture Period”) divested itself of the Competing
Product, or terminated development and commercialization of such Competing
Product, [***].

13.6. Antitrust Filing.

13.6.1. Each Party agrees to prepare and make or cause to be prepared and made
appropriate filings under the HSR Act and any other antitrust requirements
relating to this Agreement and the transactions contemplated under this
Agreement within 10 Business Days after the Execution Date. Each of the Parties
agrees to cooperate in the antitrust clearance process, including by furnishing
to the other Party such necessary information and reasonable assistance as the
other Party may request in connection with its preparation of any filing or
submission that is necessary under the HSR Act and other antitrust requirements,
and to furnish promptly with the United States Federal Trade Commission (“FTC”),
the Antitrust Division of the United States Department of Justice (“DOJ”) and
any other antitrust authority, any information reasonably requested by them in
connection with such filings. Each Party shall furnish copies (subject to
reasonable redactions for privilege or confidentiality concerns) of, and shall
otherwise keep the other Party apprised of the status of any communications
with, and any inquiries or requests for additional information from, the FTC,
DOJ and any other antitrust authority, and shall comply promptly with any such
inquiry or request. Each Party shall give the other Party the opportunity to
review in advance, and shall consider in good faith the other Party’s reasonable
comments in connection with any proposed filing or communication with the FTC,
DOJ or any other antitrust authority. Each Party shall consult with the other
Party, to the extent practicable, in advance of participating in any substantive
meeting or discussion with the FTC, the DOJ or any other antitrust authority
with respect to any filings, investigation or inquiry and, to the extent
permitted by such antitrust authority, give the other Party to the opportunity
to attend and participate thereat. Neither Party shall withdraw its filing under
the HSR Act or agree to delay the Effective Date without the prior written
consent of the other Party. The Parties’ rights and obligations hereunder apply
only in so far as they relate to the Agreement and to the transactions
contemplated under the Agreement.

 
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13.6.2. Each Party shall use Commercially Reasonable Efforts to obtain the
expiration or early termination of the HSR Act and any other clearance required
under other antitrust requirements relating to the Agreement and the
transactions contemplated under the Agreement. Commercially Reasonable Efforts
as used in this Section 13.6.2 shall not include proposing, negotiating,
committing to and effecting, by consent decree, hold separate order, or
otherwise, (a) the sale, divestiture, disposition, licensing or sublicensing of
any of a Party’s or its Affiliates’ assets, properties or businesses, (b)
behavioral limitations, conduct restrictions or commitments with respect to such
assets, properties or business, or of any of the rights or obligations of a
Party under this Agreement, or (c) defending through litigation any claim
asserted in court by any party that would restrain, prevent or delay the
Effective Date.

(i) Other than the provisions of Sections 11.1, ARTICLE 12 and ARTICLE 13 which
shall apply as of the Execution Date, the rights and obligations of the Parties
under this Agreement shall not become effective until the waiting period under
the HSR Act has been terminated or expired, or any other timeline required by
another antitrust authority and there is no proceeding, order, injunction or
judgment relating thereto, pending before any governmental authority in which it
is sought to restrain or prohibit the transaction(s) contemplated hereby.  Upon
the occurrence of the Effective Date, all other provisions of the Agreement
shall become effective automatically without the need for further action by the
Parties.

13.6.3. Each Party shall be responsible for its fees and costs associated with
the preparation and submission of any required notification and report form
under the HSR Act (or to any other antitrust authority), and the provision of
any supplemental information to the FTC, DOJ or other antitrust authority,
including any legal fees incurred by such Party in connection with such Party’s
obligations pursuant to this Section 13.6.

13.7. Force Majeure. No Party will be held responsible to the other Party nor be
deemed to be in default under, or in breach of any provision of, this Agreement
for failure or delay in performing any obligation of this Agreement when such
failure or delay is due to force majeure, and without the fault or negligence of
the Party so failing or delaying. For purposes of this Agreement, force majeure
means a cause beyond the reasonable control of a Party, which may include acts
of God, war, terrorism, civil commotion, fire, flood, earthquake, tornado,
tsunami, explosion or storm; pandemic; epidemic and failure of public utilities
or common carriers. In such event the Party so failing or delaying will
immediately notify the other Party of such inability and of the period for which
such inability is expected to continue. The Party giving such notice will be
excused from such of its obligations under this Agreement as it is thereby
disabled from performing for so long as it is so disabled for up to a maximum of
90 days, after which time the Parties will negotiate in good faith any permanent
or transitory modifications of the terms of this Agreement that may be necessary
to arrive at an equitable solution, unless the Party giving such notice has set
out a reasonable timeframe and plan to resolve the effects of such force majeure
and executes such plan within such timeframe. To the extent possible, each Party
will use reasonable efforts to minimize the duration of any force majeure.

 
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13.8. Notices. Any notice or request required or permitted to be given under or
in connection with this Agreement will be deemed to have been sufficiently given
if in writing and personally delivered or sent by certified mail (return receipt
requested), facsimile transmission (receipt verified), or overnight express
courier service (signature required), prepaid, to the Party for which such
notice is intended, at the address set forth for such Party below:

 
If to Isis, addressed to:
Isis Pharmaceuticals, Inc.
 
2855 Gazelle Court
 
Carlsbad, CA 92010
 
Attention: Chief Operating Officer
 
Fax: 760-918-3592
   
with a copy to:
Isis Pharmaceuticals, Inc.
 
2855 Gazelle Court
 
Carlsbad, CA 92010
 
Attention: General Counsel
 
Fax: 760-268-4922
   
If to Bayer, addressed to:
Bayer Pharma AG
 
Muellerstrasse 178
 
13353 Berlin
 
Attention: Head of Strategic Marketing General Medicine
 
Fax: +49 30 468 14086
   
with a copy to:
Bayer Pharma AG
 
Muellerstrasse 178
 
13353 Berlin
 
Attention: General Counsel
 
Fax: +49 30 468 14086

 
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or to such other address for such Party as it will have specified by like notice
to the other Party; provided that notices of a change of address will be
effective only upon receipt thereof. If delivered personally or by facsimile
transmission, the date of delivery will be deemed to be the date on which such
notice or request was given. If sent by overnight express courier service, the
date of delivery will be deemed to be the next Business Day after such notice or
request was deposited with such service.

13.9. Export Clause. Each Party acknowledges that the laws and regulations of
the United States restrict the export and re-export of commodities and technical
data of United States origin. Each Party agrees that it will not export or
re-export restricted commodities or the technical data of the other Party in any
form without the appropriate United States and foreign government licenses.

13.10. Waiver. Neither Party may waive or release any of its rights or interests
in this Agreement except in writing. The failure of either Party to assert a
right hereunder or to insist upon compliance with any term or condition of this
Agreement will not constitute a waiver of that right or excuse a similar
subsequent failure to perform any such term or condition. No waiver by either
Party of any condition or term in any one or more instances will be construed as
a continuing waiver or subsequent waiver of such condition or term or of another
condition or term.

13.11. Severability. If any provision hereof should be held invalid, illegal or
unenforceable in any jurisdiction, the Parties will negotiate in good faith a
valid, legal and enforceable substitute provision that most nearly reflects the
original intent of the Parties and all other provisions hereof will remain in
full force and effect in such jurisdiction and will be liberally construed in
order to carry out the intentions of the Parties hereto as nearly as may be
possible. Such invalidity, illegality or unenforceability will not affect the
validity, legality or enforceability of such provision in any other
jurisdiction.

13.12. Entire Agreement; Modifications. This Agreement (including the attached
Appendices and Schedules) sets forth and constitutes the entire agreement and
understanding between the Parties with respect to the subject matter hereof, and
all prior agreements, understanding, promises and representations, whether
written or oral, with respect thereto are superseded hereby. Each Party confirms
that it is not relying on any representations or warranties of the other Party
except as specifically set forth herein. No amendment, modification, release or
discharge will be binding upon the Parties unless in writing and duly executed
by authorized representatives of both Parties.

13.13. Independent Contractors. Nothing herein will be construed to create any
relationship of employer and employee, agent and principal, partnership or joint
venture between the Parties. Each Party is an independent contractor. Neither
Party will assume, either directly or indirectly, any liability of or for the
other Party. Neither Party will have the authority to bind or obligate the other
Party, and neither Party will represent that it has such authority.

 

13.14. Interpretation. Except as otherwise explicitly specified to the contrary,
(a) references to a section, exhibit, Appendix or Schedule means a Section of,
or Schedule or exhibit or Appendix to this Agreement, unless another agreement
is specified, (b) the word “including” (in its various forms) means “including
without limitation,” (c) the words “shall” and “will” have the same meaning, (d)
references to a particular statute or regulation include all rules and
regulations thereunder and any predecessor or successor statute, rules or
regulation, in each case as amended or otherwise modified from time to time, (e)
words in the singular or plural form include the plural and singular form,
respectively, (f) references to a particular Person include such Person’s
successors and assigns to the extent not prohibited by this Agreement, (g)
unless otherwise specified, “$” is in reference to United States dollars, and
(h) the headings contained in this Agreement, in any exhibit or Appendix or
Schedule to this Agreement are for convenience only and will not in any way
affect the construction of or be taken into consideration in interpreting this
Agreement.

 
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13.15. Books and Records. Any books and records to be maintained under this
Agreement by a Party or its Affiliates or Sublicensees will be maintained in
accordance with their respective Applicable Law.

13.16. Further Actions. Each Party will execute, acknowledge and deliver such
further instruments, and do all such other acts, as may be necessary or
appropriate in order to carry out the expressly stated purposes and the clear
intent of this Agreement.

13.17. Construction of Agreement. The terms and provisions of this Agreement
represent the results of negotiations between the Parties and their
representatives, each of which has been represented by counsel of its own
choosing, and neither of which has acted under duress or compulsion, whether
legal, economic or otherwise. Accordingly, the terms and provisions of this
Agreement will be interpreted and construed in accordance with their usual and
customary meanings, and each of the Parties hereto hereby waives the application
in connection with the interpretation and construction of this Agreement of any
rule of law to the effect that ambiguous or conflicting terms or provisions
contained in this Agreement will be interpreted or construed against the Party
whose attorney prepared the executed draft or any earlier draft of this
Agreement.

13.18. Supremacy. In the event of any express conflict or inconsistency between
this Agreement and any Schedule or Appendix hereto, the terms of this Agreement
will apply. The Parties understand and agree that the Appendices identifying the
Licensed Technology are not intended to be the final and complete embodiment of
any terms or provisions of this Agreement, and are to be updated from time to
time during the Agreement Term, as appropriate and in accordance with the
provisions of this Agreement.

13.19. Counterparts. This Agreement may be signed in counterparts, each of which
will be deemed an original, notwithstanding variations in format or file
designation which may result from the electronic transmission, storage and
printing of copies of this Agreement from separate computers or printers.
Facsimile signatures and signatures transmitted via electronic mail in PDF
format will be treated as original signatures.

 
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13.20. Compliance with Laws. Each Party will, and will ensure that its
Affiliates will, comply with all relevant laws and regulations in exercising its
rights and fulfilling its obligations under this Agreement.

13.21. Debarment. Neither Party is debarred under the United States Federal
Food, Drug and Cosmetic Act or comparable Applicable Laws and it does not, and
will not during the Agreement Term, employ or use the services of any person or
entity that is debarred, in connection with the Development, Manufacture or
Commercialization of the Products. If either Party becomes aware of the
debarment or threatened debarment of any person or entity providing services to
such Party, including the Party itself and its Affiliates, which directly or
indirectly relate to activities under this Agreement, the other Party will be
immediately notified in writing.

13.22. Remedies at Law. Without limiting Section 13.3 and except as expressly
stated in this Agreement the rights and remedies provided in this Agreement and
all other rights and remedies available to either Party at law or in equity are,
to the extent permitted by law, cumulative and not exclusive of any other right
or remedy now or hereafter available at law or in equity.

[SIGNATURE PAGE FOLLOWS]

* - * - * - *
 
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IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed by
their representatives thereunto duly authorized as of the Execution Date.

BAYER PHARMA AG
       
By:
/s/ Dieter Weinand  

 
Name:
Dieter Weinand
 

 
Title:
Chief Executive Officer  

 
 
By:
/s/ Sebastian Guth  

 
Name:
Sebastian Guth
 

 

Title: Head of Strategic Marketing General Medicine

 
Signature Page to License Agreement
 

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IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed by
their representatives thereunto duly authorized as of the Execution Date.

ISIS PHARMACEUTICALS, INC.
 
By:
/s/ B. Lynne Parshall  
Name:  B. Lynne Parshall
 
Title:    Chief Operating Officer
 

 
Signature Page to License Agreement
 

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List of Appendices and Schedules
 
Appendix 1 – Definitions
 
Appendix 2 – Initial Strategic Plan
 
Appendix 3 – Isis’ Development Candidate Checklist and Bayer’s Development
Candidate Guidelines
 
Appendix 4 – Isis In-License Agreements
 
Appendix 5 – Isis Core Technology Patents
 
Appendix 6 – Isis Manufacturing and Analytical Patents
 
Appendix 7 – Isis Product-Specific Patents
 
Appendix 8 – Prior Agreements
 
Appendix 9 – Isis’ Fully Absorbed Cost of Good Methodology
 
Appendix 10 – Bayer’s Costs of Goods Sold
 
Schedule 1.3.2 – Expedited Resolution of Strategic Plan Material Changes
Disputes
 
Schedule 1.6.2 – Bayer’s Development and Commercialization Activities
 
Schedule 1.7 – Isis Completion Activities
 
Schedule 1.9.2(a) – Terms for Supply of API, Finished Drug Product and Packaged
Clinical Study Materials
 
Schedule 3.1 – Alliance Management Activities
 
Schedule 7.9.3(e) – Royalty Calculation Examples
 
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Appendix 1

DEFINITIONS
 
For purposes of this Agreement, the following capitalized terms will have the
following meanings:
 
“Additional Core IP” means Third Party intellectual property that is necessary
to [***]. For clarity, Additional Core IP does not include any Patent Rights
claiming (or intellectual property related to) [***].
 
“Additional Indication” means any indication in addition to the First
Indication.
 
“Affiliate” of an entity means any corporation, firm, partnership or other
entity which directly or indirectly through one or more intermediaries controls,
is controlled by or is under common control with a Party to this Agreement. An
entity will be deemed to control another entity if it (i) owns, directly or
indirectly, at least 50% of the outstanding voting securities or capital stock
(or such lesser percentage which is the maximum allowed to be owned by a foreign
corporation in a particular jurisdiction) of such other entity, or has other
comparable ownership interest with respect to any entity other than a
corporation; or (ii) has the power, whether pursuant to contract, ownership of
securities or otherwise, to direct the management and policies of the entity.
For clarity, Regulus Therapeutics Inc. will not be deemed an “Affiliate” of Isis
for the purposes of this Agreement under any circumstances.
 
“Agreement” has the meaning set forth in the Preamble of this Agreement.
 
“Agreement Term” has the meaning set forth in Section 11.1.
 
“Alliance Manager” has the meaning set forth in Section 3.1.
 
“Annual” or “Annually” means the period covering a Calendar Year or occurring
once per Calendar Year, as the context requires.
 
“API” means the bulk active pharmaceutical ingredient manufactured in accordance
with cGMP (unless expressly stated otherwise) for a Product. The quantity of API
will be the as-is gross mass of the API after lyophilization (i.e., including
such amounts of water, impurities, salt, heavy, metals, etc. within the limits
set forth in the API specifications).
 
“Applicable Law” or “Law” means all applicable laws, statutes, rules,
regulations and other pronouncements having the effect of law of any federal,
national, multinational, state, provincial, county, city or other political
subdivision, agency or other body, domestic or foreign, including any applicable
rules, regulations, guidelines, or other requirements of the Regulatory
Authorities that may be in effect from time to time.
 
“Approval” means approval sufficient for the manufacture, distribution, use,
marketing and sale of such Product in such jurisdiction in accordance with
Applicable Laws.
 
“ASO” means a single-stranded or double-stranded oligonucleotide compound, or
analog, variant, mimic, or mimetic thereof, having a sequence that is at least
six bases long and is designed to hybridize to a nucleic acid transcript via the
binding, partially or wholly, of such compound to the nucleic acid transcript.
 
“Audit Report” has the meaning set forth in Section 7.15.
 
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 “Average Regional Price” has the meaning set forth in Section 7.9.2(b).
 
“Average U.S. Price” has the meaning set forth in Section 7.9.2(b).
 
“Bankruptcy Code” has the meaning set forth in Section 8.12.
 
“Bayer” has the meaning set forth in the Preamble of this Agreement.
 
“Bayer-Acquirer” has the meaning set forth in Section 13.5.1.
 
“Bayer Base Royalty Rate” has the meaning set forth in Section 7.9.1.
 
“Bayer’s Cost of Goods Sold” has the meaning set forth in Appendix 10.
 
“Bayer Excluded Indication” has the meaning set forth in Section 5.5.1.
 
“Bayer Indemnitees” has the meaning set forth in Section 10.2.
 
“Bayer Know-How” means any Know-How owned, used, developed by, or licensed to
Bayer or its Affiliates, in each case to the extent Controlled by Bayer or its
Affiliates on the Effective Date or at any time during the Agreement Term, but
specifically excluding the Bayer Program Know-How.
 
“Bayer Marks” means any proprietary Bayer name, logotype, Trade Dress (including
the name “Bayer” and the “Bayer Cross”) other than the Trademark.
 
“Bayer Opt-In Technology” has the meaning set forth in Section 2.2.2.
 
“Bayer Patents” means any Patent Rights included in the Bayer Technology.
 
“Bayer Product-Specific Patents” means all Product-Specific Patents owned, used,
developed by, or licensed to Bayer or its Affiliates, in each case to the extent
Controlled by Bayer or its Affiliates on the Effective Date or at any time
during the Agreement Term.
 
“Bayer Program Know-How” has the meaning set forth in Section 8.1.2.
 
“Bayer Program Patents” has the meaning set forth in Section 8.1.2.
 
“Bayer Program Technology” has the meaning set forth in Section 8.1.2.
 
“Bayer-Prosecuted Patents” has the meaning set forth in Section 8.2.3(b).
 
“Bayer Supported Pass-Through Costs” means [***].
 
“Bayer Technology” means the Bayer Program Technology, Bayer’s interest in
Jointly-Owned Program Technology, Bayer Product-Specific Patents, owned, used,
developed by, or licensed to Bayer or its Affiliates that are necessary or
useful to Develop, register, Manufacture or Commercialize a Product.
 
“Breaching Party” means the Party that is believed by the Non-Breaching Party to
be in material breach of this Agreement.
 
“Business Day” means any day other than a Saturday or Sunday on which banking
institutions in New York, New York, Berlin, Germany and Leverkusen, Germany are
open for business.
 
“Calendar Quarter” means a period of three consecutive months ending on the last
day of March, June, September, or December, respectively, and will also include
the period beginning on the Effective Date and ending on the last day of the
Calendar Quarter in which the Effective Date falls.
 
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 “Calendar Year” means a year beginning on January 1 (or, with respect to 2015,
the Effective Date) and ending on December 31.
 
“Carryover Development Candidate” has the meaning set forth in Section 2.5.2.
 
“Carryover Option” has the meaning set forth in Section 2.5.2.
 
“Carryover Option Deadline” has the meaning set forth in Section 2.5.2.
 
“cGMP” means current Good Manufacturing Practices as specified in the United
States Code of Federal Regulations, ICH Guideline Q7A, or equivalent laws,
rules, or regulations of an applicable Regulatory Authority at the time of
manufacture.
 
“Change of Control Event” means any (a) direct or indirect acquisition of all or
substantially all of the assets of a Party, (b) direct or indirect acquisition
by a Person, or group of Persons acting in concert, of 50% or more of the voting
equity interests of a Party, (c) tender offer or exchange offer that results in
any Person, or group of Persons acting in concert, beneficially owning 50% or
more of the voting equity interests of a Party, or (d) merger, consolidation,
other business combination or similar transaction involving a Party, pursuant to
which any Person owns all or substantially all of the consolidated assets, net
revenues or net income of such Party, taken as a whole, or which results in the
holders of the voting equity interests of such Party immediately prior to such
merger, consolidation, business combination or similar transaction ceasing to
hold 50% or more of the combined voting power of the surviving, purchasing or
continuing entity immediately after such merger, consolidation, other business
combination or similar transaction, in all cases where such transaction is to be
entered into with any Person other than Isis, Bayer or their respective
Affiliates.
 
“Clinical Study” or “Clinical Studies” means, with respect to a Product (or, in
the case of Section 4.2 only [***]), a Phase I Clinical Trial, Phase II Clinical
Trial, Phase III Clinical Trial or Registration-Directed Trial, Phase IV
Clinical Trial or such other study in humans that is conducted in accordance
with good clinical practices and is designed to generate data in support or
maintenance of an NDA, MAA, JNDA or other similar marketing application.
 
“CMO” means a Third Party contract manufacturer Manufacturing API, clinical
supplies or Finished Drug Product for any purpose under this Agreement.
 
“Combination Product” means the combination of the Product and any separately
packaged drug or biological product, administered either sequentially or
concurrently, whether or not such separately packaged drug or biological product
is approved for marketing and sale under Applicable Law.
 
“Commercialize,” “Commercialization” or “Commercializing” means any and all
activities directed to registering, marketing, promoting, detailing,
distributing, importing, having imported, exporting, having exported, selling or
offering to sell a product containing an ASO (including a Product) following
receipt of Approval for such ASO-product in the applicable country, including
conducting pre-and post-Approval activities, including studies reasonably
required to increase the market potential of such ASO-product and studies to
provide improved formulation and ASO-product delivery, and launching and
promoting the ASO-product in each country.
 
“Commercially Reasonable Efforts” means the level of effort, budget and
resources normally used by a company in the pharmaceutical industry of similar
size as the respective Party or in case there is no such industry standard, the
level of effort, budget and resources normally used by the respective Party for
a product owned or controlled by it, which is of similar profitability and at a
similar stage in its development or product life, taking into account with
respect to a product inter alia any issues of patent coverage, safety and
efficacy, pricing, product profile, the proprietary position of the product, the
competitive environment for the product and the likely timing of the product(s)
entry into the market, the regulatory environment of the product and other
relevant scientific, technical and commercial factors. Commercially Reasonable
Efforts shall be determined on a Product-by-Product and country-by-country
basis.
 
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“Competing Product” has the meaning set forth in Section 13.5.2.
 
“Competitive Infringement” has the meaning set forth in Section 8.5.1.
 
“Complete,” “Completed,” or “Completion” means, with respect to a Clinical
Study, the point in time at which the primary database lock for such study has
occurred and, if such study has a statistical analysis plan, the data generated
based on that primary database lock under the statistical analysis plan for such
study are available.
 
“Completion Notice” means, with respect to the CS IV Study for ISIS-FXIRx, a
written notice containing the tables, listings and figures in a CDISC format to
be sent to Bayer within [***] Business Days following database lock in
accordance with Isis’ standard operating procedures.
 
“Compound” means any ASO that is designed to bind to the RNA that encodes the
applicable Exclusive Target, where such ASO is discovered by Isis prior to or in
the performance of the applicable Development Candidate Identification Plan.
 
“Confidential Information” means any confidential or proprietary information or
materials, patentable or otherwise, in any form (written, oral, photographic,
electronic, magnetic, or otherwise) which is disclosed by the Disclosing Party
or otherwise received or accessed by the Receiving Party in the course of
performing its obligations or exercising its rights under this Agreement,
including trade secrets, Know-How, inventions or discoveries, proprietary
information, formulae, processes, techniques and information relating to the
past, present and future marketing, financial, and research and development
activities of any product or potential product or useful technology of the
Disclosing Party or its Affiliates and the pricing thereof. “Confidential
Information” does not include information that:
 

(a) was in the lawful knowledge and possession of the Receiving Party or its
Affiliates prior to the time it was disclosed to, or learned by, the Receiving
Party or its Affiliates, or was otherwise developed independently by the
Receiving Party or its Affiliates, as evidenced by written records kept in the
ordinary course of business, or other documentary proof of actual use by the
Receiving Party or its Affiliates;

 

(a) was generally available to the public or otherwise part of the public domain
at the time of its disclosure to the Receiving Party or its Affiliates;

 

(b) became generally available to the public or otherwise part of the public
domain after its disclosure and other than through any act or omission of the
Receiving Party or its Affiliates in breach of this Agreement; or

 
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(c) was disclosed to the Receiving Party or its Affiliates, other than under an
obligation of confidentiality, by a Third Party who had no obligation to the
Disclosing Party or its Affiliates not to disclose such information to others.

 
“Conjugate Technology” means chemistry designed to enhance targeting of
antisense drugs to specific tissues and cells. Conjugate Technology includes
N-acetylgalactosamine (GalNAc) ligand conjugates capable of binding to the
asialoglycoprotein receptor (ASGP-R) and enhancing the targeting of antisense
drugs.
 
“Control” or “Controlled” means possession of the ability to grant a license or
sublicense hereunder without violating the terms of any agreement with any Third
Party; provided, however, that if a Party has a right to grant a license or
sublicense, with respect to an item of intellectual property to the other Party
only upon payment of compensation (including milestones or royalties) to a Third
Party (“Third Party Compensation”) (other than Isis Supported Pass-Through Costs
in the case of Isis, and other than Bayer Supported Pass-Through Costs in the
case of Bayer), then the first Party will be deemed to have “Control” of the
relevant item of intellectual property only if the other Party agrees to bear
the cost of such Third Party Compensation unless the first Party is obliged to
pay such costs under this Agreement. Notwithstanding anything to the contrary
under this Agreement, with respect to any Third Party that becomes an Affiliate
of a Party after the Effective Date (including a Third Party acquirer), no
intellectual property of such Third Party owned or controlled by such Third
Party immediately prior to the date such Third Party becoming an Affiliate of a
Party hereunder will be included in the licenses granted hereunder by virtue of
such Third Party becoming an Affiliate of such Party.
 
“Cover,” “Covered” or “Covering” means, with respect to a patent, that, but for
rights granted to a Person under such patent, the act of making, using or
selling by such Person would infringe a Valid Claim included in such patent, or
in the case of a patent that is a patent application, would infringe a Valid
Claim in such patent application if it were to issue as a patent.
 
“CS IV Study” means the Phase II Clinical Trial Isis is conducting to assess the
pharmacokinetics and pharmacodynamics of ISIS-FXIRx in patients on dialysis in
accordance with the Strategic Plan.
 
“Develop,” “Developing” or “Development” means, with respect to a product
containing an ASO (including a Product) after such ASO-product is designated as
the development candidate, any and all non-clinical, clinical or regulatory
activity with respect to such ASO-product to seek approval by a regulatory
authority to market and sell such ASO-product (including the submission of all
necessary filings with applicable Regulatory Authorities to support such
preclinical and clinical activities and Approval), including pharmacokinetic and
toxicology studies required to meet the requirements for filing an IND and
filing an IND with any regulatory authority, human clinical trials conducted
after Approval of such ASO-product to seek approval by a regulatory authority to
market and sell such ASO-product for additional indications.
 
“Development Candidate” means a Compound that Bayer has determined meets Bayer’s
internal criteria for, and which Bayer selects as ready to start, IND-Enabling
Toxicology Studies as provided herein.
 
“Development Candidate Identification Plan” has the meaning set forth in Section
2.2.1.
 
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“Disclosing Party” has the meaning set forth in Section 12.1.
 
“Discontinued Product” means a Product for which Bayer was granted a license
under Section 5.1, and which Product is the subject of a termination under this
Agreement.
 
“Dispute” has the meaning set forth in Section 13.1.1.
 
“Divestiture Period” has the meaning set forth in Section 13.5.2.
 
“DOJ” means the Antitrust Division of the United States Department of Justice.
 
“Domain Names” means any Domain Name identical or similar with the Trademarks
under any ccTLD (country code Top Level Domain) and gTLD (generic Top Level
Domain) address area.
 
“Drug Discovery” means, with respect to a product containing an ASO (including a
Product), a scope of work that includes human clinical lead optimization with
the goal of identifying a development candidate.
 
“Drug Discovery Request Notice” has the meaning set forth in Section 2.1.
 
“Drug Safety Information Agreement” has the meaning set forth in Section 1.8.1.
 
 “Effective Date” means the date that all necessary authorizations, consents,
orders or approval of, or declarations or filings with, or expirations of
waiting periods under the HSR Act, as applicable to the consummation of the
transactions contemplated by this Agreement, shall have been received,
authorized, permitted or expired.
 
“EMA” means the European Medicines Agency and any successor entity thereto.
 
“European Union” or “EU” means each and every country or territory that is
officially part of the European Union.
 
“[***]” has the meaning set forth in [***].
 
“Excluded Payments” means [***].
 
“Exclusive Target” means (i) Factor XI, and (ii) [***] during the period [***]
is the subject of a New Drug Option Program and, after the applicable Option
exercise, so long as Bayer is Developing and/or Commercializing [***] under this
Agreement.
 
“Execution Date” has the meaning set forth in the Preamble of this Agreement.
 
“Executives” has the meaning set forth in Section 13.1.3.
 
“Factor XI” means the gene coagulation factor XI (NCBI Gene ID: 2160; example
identifier NCBI RefSeq NM_000128), or any alternative splice variants, mutants,
polymorphisms and fragments thereof.
 
[***].
 
“FDA” means the United States Food and Drug Administration and any successor
entity thereto.
 
“Field” means any use or form of administration in humans or non-humans of a
Product for any indication.
 
“Finished Drug Product” means any drug product containing API as an active
ingredient, in finished form for the Development or Commercialization by a Party
under this Agreement.
 
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“First Commercial Sale” means the first sale of a Product by Bayer, its
Affiliate or its Sublicensee to a Third Party in a country after Approval of
such Product has been obtained in such country, provided that where such a first
commercial sale has occurred in a country for which Pricing Approval is
necessary for widespread sale, then such sale shall not be deemed a First
Commercial Sale until such Pricing Approval has been obtained. For the avoidance
of doubt, supply of Product as samples or to patients for compassionate use,
named patient use, Clinical Trials or other similar purposes shall not be
considered a First Commercial Sale.
 
“First Indication” has the meaning set forth in Section 1.1
 
 “Formulation Technology” means technology designed to enhance the stability or
delivery of an oligonucleotide where such technology is not an Oligonucleotide
Modification. “Oligonucleotide Modification” means [***]. Conjugate Technology
is an example of an “Oligonucleotide Modification,” but does not represent
“Formulation Technology.” Lipid nanoparticle technology is an example of
“Formulation Technology.”
 
 “FTC” the Antitrust Division of the United States Department of Justice.
 
“Full Royalty Period” has the meaning set forth in Section 7.9.3(a).
 
“[***]” has the meaning set forth in Section 4.2.
 
“[***]” has the meaning set forth in Section 4.2.
 
“Generic Country” means a country in which a Generic Product is sold.
 
“Generic Product” means, with respect to a particular Product, one or more Third
Party product(s) (i) having the same active pharmaceutical ingredient as such
Product, and (ii) such Third Party product(s) when taken in the aggregate have a
market share (measured in number of prescriptions with the numerator of such
fractional share being such Third Party product(s) taken in the aggregate, and
the denominator being the total of such Third Party product(s) taken in the
aggregate plus such Product taken in the aggregate, as provided by IMS or
calculated using such other data as mutually agreed by the Parties (such
agreement not to be unreasonably withheld, conditioned or delayed)) during the
applicable Calendar Quarter in such country of at least [***]%; provided,
however, [***].
 
 “Generic Royalty Quotient” has the meaning set forth in Section 7.9.3(b).
 
“Gross Margin” means [***].
 
“HSR Act” means the United States Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended from time to time.
 
“IND” means an Investigational New Drug Application (as defined in the Food,
Drug and Cosmetic Act, as amended) filed with the FDA or its foreign
counterparts.
 
“Indemnitee” has the meaning set forth in Section 10.3.
 
“IND-Enabling Toxicology Studies” means the pharmacokinetic and toxicology
studies required to meet the requirements for filing an IND.
 
“Initial Supply” has the meaning set forth in Section 1.9.2(a)(i).
 
“Initiation” or “Initiate” means, with respect to any Clinical Study, dosing of
the first human subject in such Clinical Study.
 
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“Isis” has the meaning set forth in the Preamble of this Agreement.
 
“Isis-Acquirer” has the meaning set forth in Section 13.5.2.
 
“Isis Completion Activities” has the meaning set forth in Section 1.7.
 
“Isis Core Technology Patents” means any necessary or useful Patent Rights
owned, used, developed by, or licensed to Isis or its Affiliates, in each case
to the extent Controlled by Isis or its Affiliates on the Effective Date or at
any time during the Agreement Term, claiming subject matter generally applicable
to ASOs, other than Isis Product-Specific Patents or Isis Manufacturing and
Analytical Patents. A list of Isis Core Technology Patents as of the Effective
Date is set forth on Appendix 5 attached hereto. Appendix 5 will be updated
during the Agreement Term with any additional Isis Core Technology Patents
claiming technology incorporated into a Product.
 
“Isis Excluded Indication” has the meaning set forth in Section 5.5.2.
 
“Isis’ Fully Absorbed Cost of Good Methodology” means the costs incurred by Isis
as determined using the methodology set forth in Appendix 9 fairly applied and
as employed on a consistent basis throughout Isis’ operations.
 
“ISIS-FXIRx” means the Compound known as ISIS 416858 having the following
sequence and chemistry: 5′-AMeCGGMeCATTGGTGMeCAMeCAGMeUMeUMeU- 3′. The
underlined residues are 2'-O-(2-methoxyethyl) ribose (2'-MOE nucleosides). The
residues are arranged so that there are five 2'-MOE nucleosides at the 5' and
3'-ends of the molecule flanking a gap of ten 2'-deoxynucleosides. All of the
cytosine bases are methylated at the 5-position (5-methylcytosine). Each of the
19 internucleoside linkages is a 3'-O to 5'-O phosphorothioate diester. It
should be noted that 2'-(2-methoxyethyl)-5-methyluridine (2'-MOE MeU)
nucleosides are sometimes referred to as 2'-(2-methoxyethyl)ribothymidine
(2'-MOE T). ISIS-FXIRx does not include any product containing Conjugate
Technology.
 
“ISIS-FXIRx-2” has the meaning set forth in Section 2.1.1. ISIS-FXIRx-2 in its
finished form is the finished drug product containing the Development Candidate
designated under the ISIS-FXIRx-2 Program as an active pharmaceutical
ingredient.
 
“ISIS-FXIRx-2 Program” has the meaning set forth in Section 2.1.1.
 
“[***].
 
“[***].
 
“Isis Indemnitees” has the meaning set forth in Section 10.1.
 
“Isis In-License Agreements” means the agreements listed on Appendix 4. If, as a
result of Section 2.2.2, where Bayer has elected to use Bayer Opt-In Technology,
or as a result of Section 7.11.3(a) where Isis elects to obtain Additional Core
IP, amendments to Appendix 4 are required and Appendix 4 will be updated to
include any additional Isis In-License Agreements.
 
 “Isis Internal ASO Safety Database” has the meaning set forth in Section
6.6(a).
 
“Isis Know-How” means any Know-How, including Isis’ interest in any
Jointly-Owned Program Know-How, owned, used, developed by, or licensed to Isis
or its Affiliates, in each case to the extent Controlled by Isis or its
Affiliates on the Effective Date or at any time during the Agreement Term. Isis
Know-How does not include the Isis Manufacturing and Analytical Know-How.
 
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“Isis Manufacturing and Analytical Know-How” means Know-How, including Isis’
interest in any Jointly-Owned Program Know-How, that relates to the synthesis or
analysis of a Product regardless of sequence or chemical modification, owned,
used, developed by, or licensed to Isis or its Affiliates, in each case to the
extent Controlled by Isis or its Affiliates on the Effective Date or at any time
during the Agreement Term. Isis Manufacturing and Analytical Know-How do not
include the Isis Know-How.
 
“Isis Manufacturing and Analytical Patents” means Patent Rights, including Isis’
interest in any Jointly-Owned Program Patents, that claim Manufacturing
Technology owned, used, developed by, or licensed to Isis or its Affiliates, in
each case to the extent Controlled by Isis or its Affiliates on the Effective
Date or at any time during the Agreement Term. A list of Isis Manufacturing and
Analytical Patents as of the Effective Date is set forth on Appendix 6 attached
hereto. Appendix 6 will be updated during the Agreement Term with any additional
Isis Manufacturing and Analytical Patents claiming technology incorporated into
a Product. Isis Manufacturing and Analytical Patents do not include the Isis
Product-Specific Patents or the Isis Core Technology Patents.
 
“Isis Owned Patents” has the meaning set forth in Section 9.2.2.
 
“Isis Product” has the meaning set forth in Section 4.1.2.
 
“Isis Product-Specific Patents” means all Product-Specific Patents, in each case
to the extent Controlled by Isis or its Affiliates on the Effective Date or at
any time during the Agreement Term. A list of Isis Product-Specific Patents as
of the Effective Date is set forth on Appendix 7 attached hereto. Appendix 7
will be updated during the Agreement Term with any additional Isis
Product-Specific Patents claiming technology incorporated into a Product.
 
“Isis Program Know-How” has the meaning set forth in Section 8.1.2.
 
“Isis Program Patents” has the meaning set forth in Section 8.1.2.
 
“Isis Program Technology” has the meaning set forth in Section 8.1.2.
 
“Isis Supported Pass-Through Costs” means [***].
 
“Japan NDA” or “JNDA” means the Japanese equivalent of an NDA filed with the
Koseisho (i.e., the Japanese Ministry of Health and Welfare, or any successor
agency thereto).
 
“[***]” has the meaning set forth in [***].
 
“Joint Patent Committee” or “JPC” has the meaning set forth in Section 8.1.3(a).
 
“Jointly-Owned Program Know-How” has the meaning set forth in Section 8.1.2.
 
“Jointly-Owned Program Patents” has the meaning set forth in Section 8.1.2.
 
“Jointly-Owned Program Technology” has the meaning set forth in Section 8.1.2.
 
“Know-How” means inventions, technical information, know-how and materials,
including technology, data, compositions, formulas, biological materials,
assays, reagents, constructs, compounds, discoveries, procedures, processes,
practices, protocols, methods, techniques, results of experimentation or
testing, knowledge, trade secrets, skill and experience, in each case whether or
not patentable or copyrightable, and in each case that are unpatented.
 
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“Knowledge” means – with respect to their respective directors, executives
and/or employees – a Party’s and its Affiliates’ good faith, actual
understanding of the facts and information as of the Effective Date; provided
that, with respect to information regarding the status of Patent Rights or other
intellectual property rights, “Knowledge” means – with respect to their
respective directors, executives and/or employees – such Party’s or its
Affiliate’s good faith, actual understanding of the facts and information as of
the Effective Date after performing a diligent investigation with respect to
such facts and information as is customary in the conduct of its business with
respect to such Patent Rights or other intellectual property rights (and not,
for clarity, a diligent investigation solely in connection with this Agreement).
 
“Lead Candidate” means a Compound that is reasonably determined by Isis’
Research Management Committee in accordance with Isis’ standard procedures for
designating development candidates as [***]. The checklist Isis uses as of the
Effective Date when reviewing potential development candidates for approval is
attached hereto as Appendix 3 [***].
 
“Lead Candidate Data Package” means, with respect to a Lead Candidate, [***].
 
“Licensed Know-How” means Isis Manufacturing and Analytical Know-How, Isis
Program Know-How and Isis Know-How. For clarity, Licensed Know-How does not
include any Know-How covering formulation technology or delivery devices.
 
“Licensed Patents” means the Isis Product-Specific Patents, Isis Core Technology
Patents, Isis Manufacturing and Analytical Patents, Isis Program Patents and
Isis’ interest in Jointly-Owned Program Patents. For clarity, Licensed Patents
do not include any Patent Rights claiming formulation technology or delivery
devices except to the extent such Patent Rights are Jointly-Owned Program
Patents.
 
“Licensed Technology” means, on a Product-by-Product basis, any and all Licensed
Patents and Licensed Know-How to the extent necessary or useful to Research,
Develop, Manufacture, have Manufactured and Commercialize a Product in the
Field.
 
“Losses” has the meaning set forth in Section 10.1.
 
“MAA” means a marketing authorization application filed with the EMA after
completion of Clinical Studies to obtain Approval for a Product under the
centralized European filing procedure or, if the centralized EMA filing
procedure is not used, filed using the applicable procedures in any European
Union country.
 
“MAA Approval” means the Approval of an MAA by the EMA for a Product in any
country in the EU.
 
“Major Indication” means, with respect to ISIS-FXIRx-2, [***].
 
“Major Market” means any of the following countries: [***].
 
“Manufacture” or “Manufactured” or “Manufacturing” means any activity involved
in or relating to the manufacturing, quality control testing (including
in-process, release and stability testing), releasing or packaging, for
pre-clinical and clinical purposes, of API or a Product in finished form.
 
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“Manufacturing Technology” means (i) methods and materials used in the synthesis
or analysis of an oligonucleotide regardless of sequence or chemical
modification, and (ii) methods of making components of an oligonucleotide.
 
“Material Change” has the meaning set forth in Section 1.3.2.
 
“Minimum Third Party Payments” means [***].
 
“NDA” means a New Drug Application filed with the FDA after completion of
Clinical Studies to obtain Approval for a Product in the United States.
 
“Net Sales” means, with respect to any Product sold by Bayer, its Affiliates or
Sublicensees to any unaffiliated Third Party, the gross amount invoiced by
Bayer, its Affiliates or Sublicensees to such unaffiliated Third Party and
calculated using Bayer’s internal audited system used to report such sales, less
the following items:
 

(i) [***] percent ([***]%) of gross amount for transportation, freight
insurance, distribution, packing and handling,

 

(ii) sales and excise taxes or customs duties paid by Bayer, its Affiliates or
Sublicensees or any other governmental charges imposed upon the sale of a
Product and paid by Bayer, its Affiliates or Sublicensees;

 

(iii) rebates and premiums granted or allowed by Bayer, its Affiliates or
Sublicensees in connection with the sale of a Product;

 

(iv) allowances or credits granted by Bayer, its Affiliates or Sublicensees to
customers on account of governmental requirements, rejections, outdating,
returns, billing errors or recalls of a Product;

 

(v) trade, cash and quantity discounts, bonuses or chargebacks granted by Bayer,
its Affiliates or Sublicensees in connection with the sale of a Product;

 

(vi) costs of customer programs such as cost effectiveness or patient assistance
studies or programs designed to aid in patient compliance with medication
schedules in connection with the sales of Products;

 

(vii) [***] percent ([***]%) of gross amount for bad debts; and

 

(viii) any item substantially similar in character and/or substance to the
above.

 
For the purpose of calculating Net Sales, the Parties recognize that customers
may include persons in the chain of commerce who enter into agreements with
Bayer, its Affiliates or Sublicensees as to price even though title to the
Product does not pass directly from Bayer, its Affiliates or Sublicensees to
such customers and even though payment for such Product is not made by such
customers directly to Bayer, its Affiliates or Sublicensees; and in such cases,
chargebacks paid by Bayer, its Affiliates or Sublicensees to or through a Third
Party (such as a wholesaler) that are not described in items (iii) or (v) listed
above, can be deducted by Bayer, its Affiliates or Sublicensees from gross
revenue in order to calculate Net Sales.
 
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In the event that a Product is sold in the form of a Combination Product, Net
Sales for such Combination Product will be adjusted by multiplying actual Net
Sales of such Combination Product by the fraction A/(A+B) where A is the invoice
price of the Product if sold separately and B is the invoice price of any other
active ingredient(s) in the Combination Product, if sold separately. If, on a
country-by-country basis, the other active ingredient(s) in the Combination
Product are not sold separately in that country, Net Sales shall be calculated
by multiplying actual Net Sales of such Combination Product by the fraction A/C
where A is the invoiced price of the Product if sold separately and C is the
invoiced price of the Combination Product. If, on a country-by-country basis,
neither the Product nor the other active ingredient(s) of the Combination
Product is sold separately in such country, then the value of the active
ingredient(s) for the purpose of determining Net Sales shall be determined
between the Parties in good faith.
 
With respect to Net Sales as it applies to royalties payable by Isis, the
Parties agree that any reasonable definition of “net sales” that is (x)
customarily used in pharmaceutical industry technology licensing or
collaboration contracts and (y) consistent with generally accepted accounting
principles in the United States (“GAAP”) or International Financial Reporting
Standards and is subsequently agreed to by Isis (or a Third Party acquirer or
assignee) and Isis’ sublicensee or commercialization partner in an arms-length
transaction under a particular sublicense or commercialization agreement will
replace the definition of Net Sales in this Agreement and will be used in
calculating the royalty payment to Bayer on sales of products sold pursuant to
such agreement. If Isis uses such an alternate definition of “net sales” in a
particular sublicense, (A) Isis will include such “net sales” definition in the
applicable royalty reports to assist Bayer with verifying royalty payments and
(B) if such definition is not consistent with GAAP or International Financial
Reporting Standards, upon Bayer’s request, Isis will reconcile the royalties
calculated under such definition with GAAP or International Financial Reporting
Standards.
 
“New Drug Option Program” has the meaning set forth in Section 2.1.
 
“New Drug Option Program Term” has the meaning set forth in Section 2.3.
 
“Non-Breaching Party” means the Party that believes the Breaching Party is in
material breach of this Agreement.
 
“Option” has the meaning set forth in Section 2.4.
 
“Option Deadline” has the meaning set forth in Section 2.4.
 
“Orange Book Patents” means the Patent Rights that are listed with, and/or are
required to be listed with, applicable Regulatory Authorities Covering any
Product being Developed by Bayer, its Affiliates or Sublicensees hereunder that
Bayer, its Affiliate or Sublicensee intends to, or has begun to, Commercialize,
and that have become the subject of an NDA submitted to any applicable
Regulatory Authority, such listings to include, without limitation, all
so-called “Orange Book” listings required under the Hatch-Waxman Act and all
so-called “Patent Register” listings as required in Canada.  For purposes of
determining royalties payable under Section 7.9, Orange Book Patents will
include any and all foreign equivalent and counterpart Patent Rights to the
Patent Rights described above.
 
“Party” or “Parties” means Bayer and Isis individually or collectively.
 
“Patent Costs” means the reasonable fees and expenses paid to outside legal
counsel, and filing, maintenance and other reasonable out-of-pocket expenses
paid to Third Parties, incurred in connection with the Prosecution and
Maintenance of Patent Rights.
 
“Patent Rights” means (a) patents, patent applications and similar
government-issued rights protecting inventions in any country or jurisdiction
however denominated, (b) all priority applications, divisionals, continuations,
substitutions, continuations-in-part of and similar applications claiming
priority to any of the foregoing, and (c) all patents and similar
government-issued rights protecting inventions issuing on any of the foregoing
applications, together with all registrations, reissues, renewals,
re-examinations, confirmations, supplementary protection certificates, and
extensions of any of (a), (b) or (c).
 
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“Permitted Licenses” means (1) licenses granted by Isis before or after the
Effective Date to any Third Party under the Isis Core Technology Patents, the
Isis Manufacturing and Analytical Patents, or the Isis Manufacturing and
Analytical Know-How (but not under the Isis Product-Specific Patents) to (a) use
oligonucleotides (or supply oligonucleotides to end users) solely to conduct
Research, or (b) enable such Third Party to manufacture or formulate
oligonucleotides, where (i) such Third Party is primarily engaged in providing
contract manufacturing or services and is not primarily engaged in drug
discovery, development or commercialization of therapeutics; and (ii) Isis does
not assist such Third Party to identify, discover or make an ASO designed to
bind to an Exclusive Target; and (2) material transfer, collaboration, or
sponsored research agreements with academic collaborators or non-profit
institutions solely to conduct non-commercial Research.
 
“Person” means any corporation, limited or general partnership, limited
liability company, joint venture, trust, unincorporated association,
governmental body, authority, bureau or agency, any other entity or body, or an
individual.
 
“Phase I Clinical Trial” means, with respect to a Product, a human clinical
trial that is intended to initially evaluate the safety, metabolism and
pharmacokinetics of such Product that would otherwise satisfy the requirements
of 21 C.F.R. 312.21(a) or an equivalent clinical trial in a country in the
Territory other than the United States.
 
“Phase II Clinical Trial” means, with respect to a Product, a human clinical
trial for which the primary endpoints include a determination of safety, dose
ranges or an indication of efficacy of such Product in patients being studied as
described in 21 C.F.R. §312.21(b), or an equivalent clinical trial in a country
in the Territory other than the United States, and that is prospectively
designed to generate sufficient data (if successful) to commence pivotal
clinical trials.
 
“Phase III Clinical Trial” or “Registration-Directed Trial” means, with respect
to a Product, a human clinical trial (regardless of whether actually designated
as “Phase III”) that is prospectively designed, along with other Phase III
Clinical Trials, to demonstrate statistically whether such Product is safe and
effective for use in humans in the indication being investigated as described in
21 C.F.R. §312.21(c), or an equivalent clinical trial in a country in the
Territory other than the United States.
 
“Phase IV Clinical Trial” means, with respect to a Product, (a) any Clinical
Study conducted to satisfy a requirement of a Regulatory Authority in order to
maintain an Approval for such Product or (b) any Clinical Study conducted after
the first Approval in the same disease state for which such Product received
Approval other than for purposes of obtaining Approval.
 
 “Pre-Clinical Studies” means in vitro and in vivo studies of a Product or its
animal surrogate molecule, not in humans, including those studies conducted in
whole animals and other test systems, designed to determine the pharmacology,
toxicity, bioavailability, metabolism and pharmacokinetics of such Product and
whether such Product has a desired effect.
 
“Preliminary Royalty Report” has the meaning set forth in Section 7.14.2(a).
 
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“Pricing Approval” means all applicable governmental pricing and reimbursement
approvals required from the relevant Regulatory Authority to market and sell,
and/or obtain reimbursement for, the Product in a particular country or
jurisdiction.
 
“Prior Agreements” means the agreements listed on Appendix 8 attached hereto.
 
“Proceeding” means an action, suit or proceeding.
 
“Product” means, as applicable (i) ISIS-FXIRx, (ii) ISIS-FXIRx-2, and/or (iii)
[***].
 
“Product-Specific Patents” means Patent Rights Controlled by a Party or any of
its Affiliates on or after the Effective Date, including any Program Patents,
claiming (i) the specific composition of matter of a Product, or (ii) methods of
using a Product as a prophylactic or therapeutic; provided however, Patent
Rights Controlled by Isis or any of its Affiliates that include claims that are
(x) directed to subject matter applicable to ASOs in general, (y) directed to an
ASO, the sequence of which targets an RNA that does not encode an Exclusive
Target, or (z) directed to an RNA that is not an Exclusive Target, will not be
considered Product-Specific Patents, and in the case of (x), (y) and (z), such
Patent Rights will be considered Isis Core Technology Patents.
 
“Program Patents” has the meaning set forth in Section 8.1.2.
 
“Prosecution and Maintenance” or “Prosecute and Maintain” means, with regard to
a Patent Right, the preparing, filing, prosecuting and maintenance of such
Patent Right, as well as handling re-examinations, reissues, and requests for
patent term extensions with respect to such Patent Right, together with the
conduct of interferences, the defense of oppositions and other similar
proceedings with respect to the particular Patent Right. For clarification,
“Prosecution and Maintenance” or “Prosecute and Maintain” will not include any
other enforcement actions taken with respect to a Patent Right.
 
“Receiving Party” has the meaning set forth in Section 12.1.
 
“Reconciled Royalty Report” has the meaning set forth in Section 7.14.2(b).
 
“Reduced Royalty Period” has the meaning set forth in Section 7.9.3(d).
 
“Region” has the meaning set forth in Section 7.9.2.
 
“Regional Adjustment” has the meaning set forth in Section 7.9.2.
 
“Regional Royalty Rate” has the meaning set forth in Section 7.9.2.
 
“Regulatory Authority” means any governmental authority, including the FDA, EMA
or Koseisho (i.e., the Japanese Ministry of Health and Welfare, or any successor
agency thereto), that has responsibility for granting any licenses or approvals
or granting pricing or reimbursement approvals necessary for the marketing and
sale of a Product in any country.
 
“Research” means, with respect to a product containing an ASO (including a
Product), pre-clinical research, including gene function, gene expression,
target validation research, and investigating inhibition of a target in
therapeutic models, but specifically excludes Drug Discovery, Development and
Commercialization.
 
“Reverse Royalties” has the meaning set forth in Section 7.10.1.
 
“RMC” means Isis’ Research Management Committee, or any successor committee.
 
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“[***]” has the meaning set forth in [***].
 
“Royalty Quotient” has the meaning set forth in Section 7.9.3(c).
 
“Specific Performance Milestone Events” has the meaning set forth in Section
1.6.2.
 
“Strategic Plan” has the meaning set forth in Section 1.1. The initial Strategic
Plan agreed to by the Parties as of the Effective Date is attached hereto as
Appendix 2.
 
“Sublicensee” means a Third Party to whom a Party or its Affiliates or
Sublicensees has granted a sublicense or license under any Licensed Technology
or Bayer Technology, as the case may be, licensed to such Party in accordance
with the terms of this Agreement.
 
“[***]” has the meaning set forth in [***].
 
“Territory” means worldwide.
 
“Third Party” means a Person other than the Parties or their respective
Affiliates.
 
“Third Party Claims” has the meaning set forth in Section 10.1.
 
“Third Party Obligations” means any financial and non-financial encumbrances,
obligations, restrictions, or limitations imposed by an agreement between a
Party and a Third Party that relate to a Product or an Exclusive Target,
including field or territory restrictions, covenants, milestone payments,
diligence obligations, sublicense revenue, royalties, or other payments.
 
“Trade Dress” means any package design of Bayer such as Bayer’s wave design.
 
“Trademark” means any trademark owned and controlled by Bayer and used by Bayer
in connection with the marketing of the Product.
 
“United States” or “U.S.” means the fifty states of the United States of America
and all of its territories and possessions and the District of Columbia.
 
“[***]” has the meaning set forth in [***].
 
“Valid Claim” means a claim (i) of any issued, unexpired United States or
foreign Patent Right, which will not, in the country of issuance, have been
donated to the public, disclaimed, nor held invalid or unenforceable by a court
of competent jurisdiction in an unappealed or unappealable decision, or (ii) of
any United States or foreign patent application within a Patent Right, which
will not, in the country in question, have been cancelled, withdrawn, abandoned
nor been pending for more than seven years, not including in calculating such
seven-year period of time in which such application is in interference or
opposition or similar proceedings or time in which a decision of an examiner is
being appealed. Notwithstanding the foregoing, on a country-by-country basis, a
patent application pending for more than seven years will not be considered to
have any Valid Claim for purposes of this Agreement unless and until a patent
meeting the criteria set forth in clause (i) above with respect to such
application issues.
 
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Appendix 2

Initial Strategic Plan as of the Execution Date

[***]
 

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Appendix 3

Isis’ Development Candidate Checklist
 
[***]
 
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Appendix 4
 
Isis In-License Agreements
 
(Relevant to the Strategic Plan as of the Effective Date)
 
[***]
 

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Appendix 5
 
Isis Core Technology Patents
 
[***]
 
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Appendix 6
 
Isis Manufacturing and Analytical Patents
 
[***]
 

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Appendix 7

Isis Product-Specific Patents

(Relevant to Factor XI)
[***]

(Relevant to [***])
 
[***]
 

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Appendix 8
Prior Agreements
 
[***]

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Appendix 9

Isis’ Fully Absorbed Cost of Goods Methodology
Cost Estimate of API Cost per Kilogram
(OOO’s)

[***]
 

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Appendix 10

Bayer’s Cost of Goods Soldor Bayer’s COGS shall mean:

[***]
 

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Schedule 1.3.2

Expedited Resolution of Strategic Plan Material Changes Disputes

If, within 10 days after first discussing the matter in good faith, the Parties
cannot mutually agree on any Material Change (or whether a proposed change
constitutes a Material Change) to the Strategic Plan, the Parties will, as
promptly as possible (but no later than 45 days thereafter), convene a meeting
of a group of subject matter experts (the “Group of Experts”) to discuss the
matter.

At such meeting each Party will have the right to present its position to the
Group of Experts regarding the proposed Material Change. The meeting will be
held in person or telephonically as mutually agreed by the Parties and will
allow for sufficient time to allow the Parties to each present their views
regarding the dispute and for the Group of Experts to express their views on the
proposed Material Change. The Group of Experts may comprise, at its core, any
standing advisory group Bayer has in place to advise on the Strategic Plan, and
each Party will have the unilateral right to choose at least one expert to
attend the meeting. Each Party will bear its own costs relating to the meeting.

At the end of such meeting, after considering the Strategic Plan and the value
of making the proposed Material Change, with both Parties and the Group of
Experts participating in appropriate presentations and discussions, each member
of the Group of Experts will provide his or her recommendation regarding the
value of making the proposed Material Change.

If, following the meeting of the Group of Experts, the Parties still disagree,
then within 15 days thereafter, the Executives will meet in person or
telephonically at a date, time and location as mutually agreed. At such meeting,
the Executives will use their good faith efforts to mutually agree on a
resolution acceptable to both Parties. If, after discussing in good faith, such
Executives cannot reach an amicable agreement within two Business Days following
the end of such meeting, then Bayer will have the final decision making
authority regarding such Material Change, provided however, that a Material
Change regarding a change of the First Indication shall require the prior
written approval of Isis which shall not be unreasonably withheld, conditioned,
or delayed.
 

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Schedule 1.6.2
 
Bayer’s Development and Commercialization Activities
 
[***]
 

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Schedule 1.7

Isis Completion Activities
[***]
 

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Schedule 1.9.2(a)

Terms for Supply of API, Finished Drug Product and Packaged Clinical Study
Materials

[***]
 

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Schedule 3.1

Alliance Management Activities
 
If the Parties mutually agree to appoint Alliance Managers, each Alliance
Manager is responsible for:
 

(a) Promoting the overall health of the relationship between the Parties;

 

(b) Developing a mutually agreed alliance launch plan covering any major
activities and systems that the Parties need to implement within the first 100
days after the Effective Date to support the Strategic Plan;

 

(c) Organizing each meeting of the Parties, including agendas, drafting minutes,
and publishing final minutes;

 

(d) Preparing status and progress reports on the above as determined necessary
by the Parties;

 

(e) Ensuring compliance in maintaining the Isis Internal ASO Safety Database as
outlined in Section 6.6; and

 

(f) Ensuring proper approval of publications prior to submission as required in
Section 12.4.

 

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Schedule 7.9.3(e)
 
Royalty Calculation Examples
 
[***]
 
 

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