Exhibit 10.32

***Text Omitted and Filed Separately
with the Securities and Exchange Commission.
Confidential Treatment Requested
Under 17 C.F.R. Sections 200.80(b)(4)
and 240.24b-2.
[ex10322010zurichlicen_image1.gif]

LICENSING AGREEMENT
between
ETH Zurich
Raemistrasse 101, 8092 Zurich, Switzerland
(hereinafter referred to as “Licensor” or “ETH”)
and
Regulus Therapeutics Inc.
Rutherford Road, Carlsbad, CA 92008-7208, U.S.A.
(hereinafter referred to as “Licensee”)
Collectively called the “Parties” or individually the “Party”

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PREAMBLE
Licensor has developed certain Technology and owns certain Patents relating to
oligonucleotides targeting miRNAs for the treatment of insulin resistance and
type 2 diabetes. Licensor is desirous that such Technology and Patents be
developed and exploited to the fullest possible extent so that their benefits
can be enjoyed by the general public.
The Licensee wishes to acquire rights in the Technology for the development and
commercialization in the Field of Use and in the Territory, all in accordance
with the terms of this licensing agreement (Agreement).
1.
DEFINITIONS

Affiliate
Shall mean any corporation or other business entity which controls, is
controlled by or is under common control of Licensee. For purposes of this
definition, an entity shall be regarded as in “control” of another entity if it
owns or controls, directly or indirectly, at least fifty percent (50%) of the
outstanding stock or other voting rights entitled to elect directors (or, in the
case of an entity that is not a corporation, the corresponding managing
authority).

Blocking Inventions
Any patent or patent application controlled by Licensor necessary to practice
the Technology.

Effective Date
Shall be defined as the date of the last signature of the Parties on this
Agreement.

Field of Use
All fields of use covered by the Patents

License
Shall be defined as the rights granted by the Licensor under the terms of this
Agreement.

License Fees
Shall mean the fees payable by the Licensee to the Licensor for the rights
granted to Licensee under this Agreement.

Licensed Products
Shall mean any products whose making, using, selling or other commercialization
would infringe a Valid Claim of the Patents.

Net Sales
Shall mean the total of the gross amounts received for sales of Licensed
Products by or on behalf of Licensee, Affiliates

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or Sub-licensees, less the sum of the following actual and customary deductions
where applicable: cash, trade, or quantity discounts; value added, sales or use
taxes, and custom duties; transportation charges; and credits to customers
because of rejections, returns or rebates.
Patent(s)
Shall mean (1) patent (application): […***…], any members of the patent family
claiming priority of these original patent applications, including any patent
application or granted patent, whether domestic or foreign, including all
provisionals, and all divisionals, continuations, continuations-in-part,
reissues, reexaminations, renewals, extensions, and supplementary protection
certificates of any such patents and patent applications, and (ii) any patent
issuing therefrom.

Sub-license
Shall mean a sublicense granted by Licensee to a non-Affiliate third party,
giving rights derived from the license granted to Licensee under Section 3 of
this Agreement.

Sub-licensee
Shall mean a non-Affiliate third party to whom Licensee grants a Sub-license.

Technology
Shall be defined as the inventions claimed in the Patents.

Territory
Shall be defined as the countries where (provisional) patent protection for the
Patents is sought or granted.

Valid Claim
Shall be defined as any (i) issued claim of a Patent not rejected by a final
decision of a patent office or of a court of competent jurisdiction until the
date of such final decision; or (ii) a claim of a pending patent application of
the Patents that has not been abandoned, finally rejected or expired without the
possibility of appeal or refiling, provided however, that (a) Valid Claim will
exclude any such pending claim that does not have a reasonable bona fide basis
for patentability (such reasonable bona fide basis to be determined by outside
counsel selected by the parties the event that the parties disagree as to
whether there is a reasonable bona fide basis for patentability for such a
claim).

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2.
OBJECT OF LICENSE

Licensor grants Licensee a License under the terms of this Agreement.
3.
SCOPE OF LICENSE

Licensor grants Licensee an exclusive License in the Territory, under the
Patents to research, develop, make, have made, use, sell, offer for sale, have
sold, export and import Licensed Products in the Field of Use.
Licensor retains the right to use the Patents and consent to the use of the
Patents by academic and research institutions for non-commercial purposes, free
of charge. Licensor is further allowed to use the Patents for non-commercial
collaborations with commercially oriented third parties. In case of any
commercialization by said third party, this party has to negotiate an agreement
with Licensor/Licensee or the Licensee directly, as the case may be. For purpose
of clarification, non-commercial purposes does not include human clinical
trials.
Licensee gets a free, non-exclusive license on Blocking Inventions held by
Licensor if this is required to commercialize the Patents and only to the extent
that no third party rights existing as of the Effective Date are in conflict
with such a non-exclusive license.
4.
RIGHT TO GRANT SUB-LICENSES

Licensee has the right to grant Sub-licenses within the scope of this Agreement
under the following conditions.
Licensee shall:
(i)
to the extent possible, ensure that the terms of any Sub-license agreement
include obligations equivalent to those contained in this Agreement;

(ii)
provide Licensor with a copy of each Sub-license contract issued within 30 days
of execution (which copy may be redacted to remove confidential information so
long as such redactions will not prevent Licensor’s reasonable determination as
to whether such Sub-license was entered into in accordance with this Agreement);

(iii)
collect and guarantee payment from Sub-licensees according to Article 5.

Any Sub-license entered into in accordance with the terms of this Agreement
prior to the date of any termination of this Agreement that is not in breach of
this Agreement as of the date of such termination shall survive any such
termination of this Agreement if (i) the relevant Sub-licensee is not in breach
of this Agreement; and (ii) the relevant Sub-licensee agrees in writing to make
any

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payments required under this Agreement directly to Licensor and to comply with
the terms of this Agreement (including for the avoidance of doubt the direct
obligation vis-a-vis Licensor to provide reports in accordance with Section 7).
Licensor shall however not be bound to take over any duties of Licensee towards
the Sub-licensee, if he is not able to do so in his capacity as a public
research institution.
5.
LICENSE FEES

Licensee shall pay the following types of License Fees:
(1)
Upfront payment: CHF 20,000

(2)
Milestone payments: With respect to the 1st Licensed Product covered by a Valid
Claim to achieve a milestone event set forth below, Licensee will pay the
following amounts:

Ù
Upon entrance into clinical trial phase I: […***…] CHF

Ù
Upon entrance into clinical trial phase II: […***…] CHF

Ù
Upon entrance into clinical trial phase III: […***…] CHF

Ù
Upon market approval: […***…] CHF

Milestone Payments will be due only once upon the 1st achievement of a milestone
event by Licensee or any of its Affiliates or Sublicensees (e.g. if a second
phase I trial is initiated for the 1st Licensed Product, no additional payment
will be due).
(3)
Annual minimum payments: CHF 10,000

Such annual minimum payments are creditable against any other royalties due
according to this Paragraph in the same calendar year.
Out-of-pocket patent costs paid by Licensee are creditable against the Annual
minimum payments of the same calendar year.
(4)
Royalties: […***…]% on Net Sales of Licensed Products covered by a Valid Claim
of the Patent, and sold by either the Licensee, an Affiliate or a Sub-licensee.

In the event that the Licensee is required to make payments to a 3rd party in
respect of licenses to intellectual property necessary or useful to make, use,

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and/or sell Licensed Products, Royalties due to ETH hereunder will be subject to
reduction by an amount equal to […***…]% of the amounts paid to any such 3rd
party, provided that in no event will such Royalties be reduced to less than a
minimum Royalty of […***…]%.
Royalties are owed on a country by country base where a Valid Claim of a License
Patent, but for the license granted under this Agreement, would be infringed by
the making, using or selling of a Licensed Product in such country.
In the event of substantial changes of Patent claims or invalidation of the
whole Patent by a final decision of a patent office or of a court of competent
jurisdiction, Parties agree to renegotiate the License Fees in good faith,
taking into consideration the effect of the changes in view of the remaining
possibility of Licensee to generate income from the Patents. Licensee shall not,
however, be relieved from paying License Fees that are due until the date of
such final decision.
6.
CONDITIONS OF PAYMENT

Upfront payments are due within 30 days after the Effective Date.
License Fees will be reported by Licensee to Licensor according to Article 7 no
later than the end of January for the preceding calendar year, the first time no
later than end of March 2010. Payments will be made in Swiss Francs (CHF) within
30 days after invoicing by Licensor to the following account with the remark
“Licensing Agreement” and referring to the invoice number and the ETH-internal
Fonds number […***…]:
[…***…]

Late payments will bear 5% interest without further reminder.
All payments named in this Agreement are without VAT; VAT shall be added by
Licensor to any invoice, if applicable.
Licensee shall bear any withholding taxes on such payments as required by law
and provide to Licensor appropriate documentation of such tax payment. The
Parties shall use reasonable efforts to: (i) avoid or minimize any such
withholding; and (ii) take advantage of any double taxation treaty as may be
available.
7.
REPORTING AND BOOK INSPECTION

7.1    Licensee shall submit to Licensor annual progress reports covering
Licensee’s and each Affiliate’s and Sub-licensee’s activities to develop and
commercialize the Technology. Such

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reports shall be due on or before January 31 (starting with January 31, 2011) of
each calendar year and shall include a summary of work completed; summary of
work in progress; current schedule of anticipated events or Milestones; plans
for marketing approval of Licensed Products; governmental approvals necessary
for marketing; and summary of resources spent in the reporting period.
Royalty report: Licensee shall submit to Licensor yearly royalty and other
License Fees reports on or before January 31 of each calendar year. Each royalty
report shall cover Licensee’s and each Affiliate’s most recently completed
calendar year and shall include the basis for calculation.
Report on Sub-licenses: Licensee shall submit to Licensor a list of all
Sub-licensees including the Net Sales of each Sub-licensee separately on a
yearly basis together with the royalty report of the previous paragraph.
If no sales of Licensed Products have been made during any reporting period,
Licensee shall so report.
7.2    Licensee will grant Licensor access to all necessary books, which must be
kept to allow for checking of the correctness of the report in accordance with
the terms of this Agreement. Licensor is entitled itself or by a reputable
auditing firm to audit the report.
Licensor carries the cost of such audit. The cost will be borne by Licensee if
the audit shows an underpayment of Licensee by 5% or more.
8.
DUTIES OF LICENSEE

8.1    Licensee is obliged to use diligent and reasonable efforts to develop and
commercially exploit the Patents in connection with at least one Licensed
Product to the maximum extent worldwide and throughout the Territory.
8.2    If Licensor determines that Licensee has not fulfilled its obligations
under Section 8.1, Licensor shall furnish Licensee with written notice of the
determination. Within sixty (60) days after receipt of the notice, Licensee
shall either (a) fulfill the relevant obligation or (b) negotiate with Licensor
a mutually acceptable development and commercialization plan, including a
schedule of diligence events for the Licensed Product to cure such breach. In
the event Licensor and Licensee are unable to reach a mutually acceptable
resolution, the dispute shall be referred to senior executives of each Party,
who shall meet at a mutually acceptable time and location within thirty (30)
days after expiration of the specified sixty (60) day period and attempt to
negotiate a settlement which may include development and commercialization plan,
including a schedule of diligence events. In the event the designated senior
executives are not able to resolve such dispute during such thirty (30) day
period, then the affected party, upon written notice to the other party, may
initiate arbitration pursuant to Section 14, wherein the arbitrator shall be
permitted to consider a new development

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and commercialization plan, including a schedule of diligence events for the
Licensed Product, and termination of the Agreement in resolving the dispute. The
award of the arbitrator shall be the sole and exclusive remedy between the
affected Parties regarding any such dispute and shall be final and binding upon
the Parties.
9.
CONFIDENTIALITY

The Licensee shall hold confidential any and all communicated data, documents
and information transferred, even if they have not been explicitly defined as
being secret or confidential. This confidentiality obligation also continues to
be valid subsequent to an ordinary or extraordinary termination of this
Agreement. The Licensee shall oblige its employees, its possible Sub-licensees
and their employees, as well as persons and companies co-operating with the
Licensee to comply with the same confidentiality obligation.
The above confidentiality obligation of the Licensee shall not apply to
information which:
(i)
has been known to the general public prior to disclosure by the Licensor or
becomes public domain thereafter;

(ii)
came to the knowledge of the Licensee through a third party which obtained such
information without breach of any agreement or contract and which was or is
authorized to have such information or which obtained such information by an
authorized party;

(iii)
has been known by the Licensee prior to communication or disclosure by the
Licensor.

10.
WARRANTY AND LIABILITY

10.1    The Licensor represents and warrants that it is the owner and can
dispose of the Patents and that it has not granted any rights to third parties
which are in contradiction to the rights granted in this Agreement. In addition
thereto, Licensor does not give any representations or warranties in respect to
the legal existence or the extent of the protection of the Patents.
Licensor has not performed any searches or investigations into the existence of
any third party rights that may affect commercial use of the Patents. Licensor
does not give any warranty that the exercise of any of the rights granted under
this Agreement will not infringe any other intellectual property or other rights
of any third party.
Each Party acknowledges that the Technology is at an early stage of development.
Accordingly, efficacy and usefulness cannot be guaranteed and any results,
materials, information or other items provided under this Agreement are provided
“as is” and without any express or implied warranties, representations or
undertakings. As examples, but without limiting the foregoing, no Party is
giving any warranty to the other Party that any product derived from the

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Patents is of merchantable or satisfactory quality, is fit for any particular
purpose, complies with any sample or description, or is viable, uncontaminated,
safe or non-toxic.
10.2    The Licensor shall not be liable for indirect damages, including but not
limited to damages resulting from the manufacturing, the sale and the
distribution of Licensed Products by the Licensee or the Sub-licensees for which
the Licensee or the Sub-licensees are held responsible by third parties. In the
event of a statutory liability of the Licensor for third party damages, Licensee
shall indemnify and hold the Licensor harmless against any and all claims of
third parties resulting from damages caused by Licensed Products which are
manufactured, sold and distributed by the Licensee, Affiliates or Sub-licensees.
For direct damages incurred by the Licensee in connection with the present
licensing, the Licensor is liable only if they are caused by unlawful intent or
gross negligence. Any further liability shall be excluded to the extent legally
admissible. in addition Licensee’s agreement to indemnify and hold Licensor
harmless is conditioned upon Licensor (i) providing written notice to Licensee
of any claim, demand or action arising out of the indemnified activities within
thirty (30) days after Licensor has knowledge of such claim, demand or action,
(ii) permitting Licensee to assume full responsibility to investigate, prepare
for and defend against any such claim or demand, (iii) assisting Licensee, at
Licensee’s reasonable expense, in the investigation of, preparation of and
defense of any such claim or demand; (iv) undertaking reasonable steps to
mitigate any loss, damage or expense with respect to the applicable claim; and
(v) not compromising or settling such claim or demand without Licensee’s prior
written consent.
11.
ADMINISTRATION, COSTS AND MAINTENANCE OF PATENTS

11.1    Licensee is responsible for filing and administration of the Patents on
behalf of Licensor and will directly communicate with the patent attorney and/or
patent offices. The Patents will be filed in the name of ETH. The Licensee shall
take any and all actions necessary in order to prosecute and maintain the
Patents. Licensee will carry all costs for the Patent prosecution, maintenance
and renewal. All out-of-pocket patent costs paid by Licensee are creditable
against the Annual minimum payments of the same calendar year.
11.2    The Licensee will use good faith commercially reasonable efforts to
file, prosecute and maintain the Patents in at feast the following countries:
EP (including DE, FR, GB, CH, IT, ES); US; JP
11.3    Licensee shall send a copy of any significant Patent document to the
Licensor. Any important decisions and actions that have to be taken must be
discussed between the Parties in good faith and well in advance; provided,
subject to Section 11.2 Licensee will have final discretion regarding the
filing, prosecution and maintenance of the Patents. This is especially true for
changes

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in the country list, substantial changes in Patent claims and other irreversible
actions. Notwithstanding the foregoing, in the event that Licensee elects not to
pursue or continue the filing, prosecution (including any material reduction in
claim scope) or maintenance of any Patent in any country, Licensee shall provide
Licensor with an opportunity to assume responsibility for such filing,
prosecution or maintenance of such Patent; and Licensee will cooperate with
Licensor as reasonably requested by Licensor to facilitate control of such
filing, prosecution and maintenance by Licensor.
12.
DEFENCE OF PATENTS

The Parties will inform each other of any violation of the Patents by third
parties or of any third party’s attack against one of the Parties for the use of
a Patent or against the validity of the Patents. The Parties shall jointly
decide on first actions to be taken in connection with such violation.
12.1    Patent defence: ETH shall have the first right to defend the Patents at
its expense. It has, however, no obligation. In case ETH does not make use of
its first right, Licensee shall have the right to defend the Patents at its own
expense.
12.2    Patent enforcement: Licensee shall have the first right to enforce the
Patents.
The Parties will coordinate all efforts to defend and enforce the Patents and
will reasonably support each other at their own expense.
Any recovery made by Licensee, through court judgment or settlement, first will
be applied to reimburse each Party for its litigation expense and any remaining
recoveries will be retained by Licensee; provided Licensee will pay royalties to
Licensor on such retained amounts as Net Sales of Licensed Products in
accordance with subsection (4) of Section 5. Any recovery made by Licensor in
enforcing a Patent in accordance with Section 12.2, through court judgment or
settlement, first will be applied to reimburse each Party for its litigation
expense and any remaining recoveries will be retained by Licensor.
13.
TERM OF THE AGREEMENT

13.1    This Agreement enters into force with the last signature of the Parties.
13.2    This Agreement terminates regularly when the last Patent claim expires.
13.3    This Agreement may be terminated by Licensee with 60 days written
notice.
13.4    This Agreement can be terminated with immediate effect if:
(a)    Licensee itself or a third party files for insolvency, bankruptcy or
liquidation of Licensee. Licensee has the duty to inform Licensor on any
imminent insolvency.

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(b)    By Licensee for any or no reason upon at least 60 days written notice to
Licensor.
(c)    Either Party breaches material terms of this Agreement and does not
remedy such breach within 30 days after written notice by the other Party.
Material breaches for Licensee are limited to the following events:
(i)    does not make undisputed payments when due and payable under this
Agreement within the time agreed upon;
(ii)    does not develop or commercialize a Licensed Product and under Article
8, the arbitrator rules Licensor may terminate this Agreement;
(iii)    challenges the validity of the Patents.
Upon termination of this Agreement, Licensee shall immediately refrain from any
use or exploitation of the Patents licensed under this Agreement. Furthermore,
immediately upon termination of this Agreement, Licensee is obliged to return to
the Licensor or cease using any documents and/or materials made available in
connection with this Agreement. The same shall apply for copies made thereof.
If, upon termination of this Agreement, a stock of products remains, which were
manufactured on the basis of the Patents, the Licensee may sell and distribute
such products during six months subsequent to the termination of this Agreement.
For such sales, the royalties and payment conditions as agreed under Article 5
and 6 shall apply.
14.
APPLICABLE LAW AND PLACE OF JURISDICTION

Any dispute, controversy, or claim arising out of or in relation to this
Agreement, including the validity, invalidity, breach or termination thereof,
shall be settled by arbitration in accordance with the Swiss Rules of
International Arbitration of the Swiss Chambers of Commerce in force on the date
when the Notice of Arbitration is submitted in accordance with these Rules.
The number of arbitrators shall be one or three; the seat of the arbitration
shall be determined by the arbitrator(s); the arbitral proceedings shall be
conducted in English.
The applicable law shall be Swiss law.
15.
FINAL PROVISIONS

15.1    Advertising: Nothing contained in this Agreement confers any right to
use in advertising, publicity, or other promotional activities any name, trade
name, trademark, or other designation of either party hereto unless mutually
agreed in writing.

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15.2    Confidentiality of this Agreement: The Parties may acknowledge and
communicate the existence of this Agreement and the extent of the license grant
in Article 3 to third parties, but shall not disclose the financial terms of
this Agreement to third parties without the prior written consent of the other
Party, except where one Party is required by law to do so. In addition, Licensee
may disclose this Agreement and its terms to advisors (including financial
advisors, attorneys and accountants); actual or potential acquisition partners,
private investors or Sub-licensees; and others on a need to know basis, in each
case under the confidentiality provisions. Licensor may disclose this Agreement
and its terms to its superior entities as required by ETH regulations.
15.3    Duty of assistance: The Parties will provide each other promptly, to the
extent possible and reasonable, with any mutual assistance required to enable
the Parties to exercise the rights which are conferred on them by this
Agreement. In particular, they will provide the signatures required to obtain
Patents.
15.4    Assignment: Licensee may not assign this Agreement and/or rights arising
from this Agreement without the prior written consent of Licensor; except that
either party may assign this agreement in connection with the sale (whether by
merger, stock sale or asset sale) of all or substantially all of its business to
which this Agreement relates.
15.5    Severability clause: Should any provision of this Agreement be invalid
or unenforceable or should the Agreement contain an omission, the remaining
provisions shall remain valid. In the place of an invalid provision, a valid
provision is presumed to be agreed upon by the Parties which comes closest to
the one actually agreed upon; the same shall apply in case of an omission.
15.6    Entire Agreement and amendments: This Agreement embodies the entire
understanding of the Parties and supersedes all previous communications,
representations or understandings, either oral or written, between the Parties
relating to the subject matter hereof. No amendment or modification of this
Agreement shall be valid or binding on the Parties unless made in writing and
signed on behalf of each Party.
The Parties shall not infer from this Agreement any other rights than those that
are explicitly stated herein.
Addresses for correspondence:
ETH Zurich, ETH transfer, HG E 43-49, Raemistrasse 101, CH-8092 Zurich
Regulus Therapeutics Inc., 1896 Rutherford Road, Carlsbad, CA 92008-7208, U.S.A.
Signed by the duly authorized representatives of the Parties:

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ETH Zurich    Zurich, May 7, 2010    
/s/ M. Stoffel        /s/ R. Siegwart    
Prof. Markus Stoffel

/s/ M. Stoffel
 
/s/ R. Siegwart
Prof. Markus Stoffel
 
Roland Siegwart Vice President Research and
 
 
Corporate Relations

Regulus Therapeutics Inc.    Carlsbad, California, April 30, 2010    
/s/ Kleanthis G. Xanthopoulos
 
 
Kleanthis G. Xanthopoulos, Ph.D.
 
 
President and Chief Executive Officer

 
 

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