Exhibit 10.48

***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.
DEVELOPMENT FUNDING AND ROYALTIES AGREEMENT

THIS DEVELOPMENT FUNDING AND ROYALTIES AGREEMENT (this “Agreement”) is made and
entered into effective as of December 13, 2018 (the “Effective Date”) by and
between LIGAND PHARMACEUTICALS, INC., a Delaware company having a place of
business at 3911 Sorrento Valley Boulevard, Suite 110, San Diego, California
92121, U.S.A., (“Ligand”), and PALVELLA THERAPEUTICS, INC., a Delaware company
having a place of business at 125 Strafford Avenue, Suite #360, Wayne, PA 19087,
and its Affiliates (“Palvella”). Palvella and Ligand may be referred to herein
individually as a “Party” or collectively as the “Parties.”

RECITALS

WHEREAS, Ligand is engaged in the development and commercialization of
pharmaceutical products;

WHEREAS, Palvella owns or otherwise controls certain intellectual property
rights and regulatory filings relating to the compound designated as PTX-022 (as
defined below), which is the subject of clinical development;

WHEREAS, Ligand desires to contribute to the funding of the development of
PTX-022 in exchange for the right to receive future payments based on the
development and commercialization of PTX-022; and

WHEREAS, Palvella would like to obtain such funding from Ligand for such
development activities, and make such future payments to Ligand, as set forth in
this Agreement below.

NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants
herein contained, the Parties hereby agree as follows.

ARTICLE 1 
DEFINITIONS
The terms in this Agreement with initial letters capitalized, whether used in
the singular or the plural, will have the meaning set forth below or, if not
listed below, the meaning designated in places throughout this Agreement.

1.1 “Accredited Investor” has the meaning ascribed to such term in Rule 501 of
Regulation D promulgated under the Securities Act.
1.2 “Affiliate” of a Person means any other Person that (directly or indirectly)
is controlled by, controls or is under common control with such initial Person.

CONFIDENTIAL

--------------------------------------------------------------------------------

For the purposes of this definition, the term “control” (and, with correlative
meanings, the terms “controlled by” and “under common control with”) as used
with respect to a Person means: (a) direct or indirect ownership of more than
fifty percent (50%) of the voting interest in the Person in question, or more
than fifty percent (50%) interest in the income of the Person in question;
provided, however, that, if local law requires a minimum percentage of local
ownership, control will be established by direct or indirect beneficial
ownership of one hundred percent (100%) of the maximum ownership percentage that
may, under such local law, be owned by foreign interests; or (b) possession,
directly or indirectly, of the power to direct or cause the direction of
management or policies of the Person in question (whether through ownership of
securities or other ownership interests, by contract, or otherwise).
1.3 “Applicable Law” means all laws, statutes, ordinances, codes, rules, and
regulations that have been enacted by a Governmental Authority and are in force
as of the Effective Date or come into force during the Term, in each case to the
extent that the same are applicable to the performance by a Party of its
obligations, and/or exercise of its rights, under this Agreement.
1.4 “Bankruptcy Event” means the occurrence of any of the following in respect
of a Person: (a) an admission in writing by such Person of its inability to pay
its debts generally or a general assignment by such Person for the benefit of
creditors; (b) the filing of any petition or answer by such Person seeking to
adjudicate itself as bankrupt or insolvent, or seeking for itself any
liquidation, winding-up, reorganization, arrangement, adjustment, protection,
relief or composition of such Person or its debts under any Applicable Law
relating to bankruptcy, insolvency, receivership, winding-up, liquidation,
reorganization, examination, relief of debtors or other similar Applicable Law
now or hereafter in effect, or seeking, consenting to or acquiescing in the
entry of an order for relief in any case under any such Applicable Law, or the
appointment of or taking possession by a receiver, trustee, custodian,
liquidator, examiner, assignee, sequestrator or other similar official for such
Person or for any substantial part of its property; (c) corporate or other
entity action taken by such Person to authorize any of the actions set forth in
clause (a) or clause (b) above; (d) without the consent or acquiescence of such
Person, the entering of an order for relief or approving a petition for relief
or reorganization or any other petition seeking any reorganization, arrangement,
composition, readjustment, liquidation, dissolution or other similar relief
under any present or future bankruptcy, insolvency or similar Applicable Law, or
the filing of any such petition against such Person, or, without the consent or
acquiescence of such Person, the entering of an order appointing a trustee,
custodian, receiver or liquidator of such Person or of all or any substantial
part of the property of such Person, in each case where such petition or order
shall remain unstayed or shall not have been stayed or dismissed within ninety
(90) days from entry thereof; provided that in the case of an involuntary
petition, such Person has not challenged such petition within ninety (90) days
thereof; (e) the appointment of a trustee, receiver, or custodian for all or
substantially all of the property of such Person, or for any lesser portion of
such property, if the result materially and adversely affects the ability of
such Person to fulfill its obligations hereunder, which appointment is not
dismissed within sixty (60) days; or (f) the dissolution or liquidation of
Palvella.
1.5 “Business Day” means any day that is not a Saturday, Sunday or other day on
which commercial banks in New York City are authorized or required by Applicable
Law to remain closed.
1.6 “Calendar Quarter” means the respective periods of three (3) consecutive
calendar months ending on March 31, June 30, September 30 and December 31;
provided, however, that (a) the
2

--------------------------------------------------------------------------------

first Calendar Quarter of the Term will extend from the Effective Date to the
end of the first complete Calendar Quarter thereafter, and (b) the last Calendar
Quarter of the Term will end upon the expiration or termination of this
Agreement.
1.7 “Calendar Year” means (a) for the first Calendar Year of the Term, the
period beginning on the Effective Date and ending on December 31, 2018, (b) for
each Calendar Year of the Term thereafter, each successive period beginning on
January 1 and ending twelve (12) consecutive calendar months later on December
31, and (c) for the last Calendar Year of the Term, the period beginning on
January 1 of the Calendar Year in which this Agreement expires or terminates and
ending on the effective date of expiration or termination of this Agreement.
1.8 “Change of Control” means with respect to a Party: (a) the sale or exclusive
license of all or substantially all of such Party’s assets or business relating
to this Agreement to a Third Party; (b) a merger, reorganization or
consolidation involving the Party and a Third Party in which the voting
securities of the Party outstanding immediately prior thereto cease to represent
at least fifty percent (50%) of the combined voting power of the surviving
entity immediately after such merger, reorganization or consolidation; or (c) a
transaction (which may include a tender offer for such Party’s stock or the
issuance, sale or exchange of stock of such Party) with a Third Party or Third
Parties in which the stockholders of such Party immediately prior to the
transaction do not, immediately after consummation of such transaction, (i) own,
directly or indirectly through one or more intermediaries, stock or other
securities of such Party that possess a majority of the voting power of all of
such Party’s outstanding stock and other securities or (ii) possess the power to
elect a majority of the members of such Party’s board of directors; provided,
however, that, notwithstanding subsections (a), (b), and (c) above, a bona fide
debt or equity financing of Palvella, including without limitation an IPO,
Qualified Financing Event, Qualified Licensing Event or any equity financing
involving a private placement of Palvella’s securities, will not constitute a
Change of Control.
1.9 “Claims” has the meaning set forth in Section 8.1.
1.10 “Commercially Reasonable Efforts” means, as to Palvella and a Product, the
level of effort, expertise, and resources required to Develop and Commercialize
a Product consistent with the reasonable efforts that would be typically exerted
by a biotechnology or pharmaceutical company of comparable size and capabilities
as Palvella in pursuing the development and commercialization of a similar
product with similar product characteristics at a similar stage in its
development or product life, including without limitation with respect to
commercial potential, the proprietary position of the Product, the regulatory
status and approval process and other relevant technical, scientific, medical or
legal factors.
1.11 “Commercialize,” “Commercializing,” and “Commercialization” means
activities directed to manufacturing, obtaining pricing and reimbursement
approvals for, marketing, promoting, distributing, importing, and/or selling a
Product.
1.12 “Confidential Information” means any and all technical, business or other
information or materials that are deemed confidential or proprietary to or by a
Party and are disclosed or provided by such Party to the other Party under or in
connection with this Agreement, whether disclosed or provided in oral, written,
graphic, or electronic form, which may include without limitation trade secrets,
processes, formulae, data, Know-How, improvements, inventions, chemical or
biological materials, chemical
3

--------------------------------------------------------------------------------

structures, techniques, clinical, sublicensing and marketing and other
Development and/or Commercialization plans, strategies, customer lists,
financial data, intellectual property information, tangible or intangible
proprietary information or materials or other information in whatever form.
1.13 “Control” or “Controlled” means, with respect to an item, information, or
an intellectual property right, that the applicable Party owns or has a license
or other appropriate rights in, to, and under such item, information, or
intellectual property right and has the ability to disclose and grant a license
or sublicense to the other Party as provided for in this Agreement in, to, and
under such item, information, or intellectual property right without violating
the terms of any written agreement with any Third Party.
1.14 “Cover,” “Covered,” or “Covering” means, with respect to a Patent Right,
that, in the absence of ownership of or a license under such Patent Right, the
manufacture, use, offer for sale, sale or importation of such Product or
components thereof would infringe a Valid Claim in such Patent Right.
1.15 “Development” means non-clinical, pre-clinical and clinical drug discovery,
research, and/or development activities, including without limitation quality
assurance and quality control development, and any other activities reasonably
related to or leading to the development and submission of information to a
Regulatory Authority. When used as a verb, “Develop” means to engage in
Development.
1.16 “Development Budget” has the meaning set forth in Section 2.2.
1.17 “Development Plan” has the meaning set forth in Section 2.2.
1.18 “Disclosing Party” has the meaning set forth in Section 5.1.
1.19 “Dollars” or “US$” means the lawful currency of the United States.
1.20 “Enforcing Party” has the meaning set forth in Section 6.2.1.
1.21 “Export Control Laws” means all applicable U.S., European Union or other
applicable laws and regulations relating to (a) sanctions and embargoes imposed
by the Office of Foreign Assets Control of the U.S. Department of the Treasury
or the European Union or (b) the export or re-export of commodities,
technologies or services or data, including without limitation the Export
Administration Act of 1979, 24 U.S.C. §§ 2401-2420; the International Emergency
Economic Powers Act, 50 U.S.C. §§ 1701-1706; the Trading with the Enemy Act, 50
U.S.C. App. §§ 1 et. seq.; the Arms Export Control Act, 22 U.S.C. §§ 2778 and
2779; and the International Boycott Provisions of Section 999 of the U.S.
Internal Revenue Code of 1986, and European Union laws and regulations
(including without limitation Regulation (EC) No 428/2009, as amended), in each
case as amended.
1.21 “FCPA” means the U.S. Foreign Corrupt Practices Act (15 U.S.C. § 78dd-1 et.
seq.), as amended.
1.22 “FDA” means the United States Food and Drug Administration, or any
successor agency thereto.
1.24 “Field” means the treatment of any and all indications, including without
limitation pachyonychia congenita (“PC”).
1.25 “First Commercial Sale” means, with respect to a particular Product, the
first commercial sale for monetary value by Palvella, one or more of its
Affiliates or one or more of its Licensees in an
4

--------------------------------------------------------------------------------

arm’s length transaction to a Third Party that is not a Licensee, including
without limitation any final sale to a distributor or wholesaler under any
non-conditional sale arrangement, of such Product in the Field in the Territory
after Regulatory Approval of such Product has been granted in the Field in the
Territory. For the avoidance of doubt, sales or transfers of a Product for
clinical and non-clinical research and trials (including studies reasonably
necessary to comply with Applicable Law or requests by a Regulatory Authority),
early access programs or for compassionate or similar use, shall not be
considered a First Commercial Sale.
1.26 “GAAP” means generally accepted accounting principles in the United States,
consistently applied.
1.27 “Governmental Authority” will mean any supranational, federal, national,
multinational, regional, provincial, county, city, state, or local government,
court, governmental agency, authority, board, bureau, instrumentality,
regulatory body, or other political subdivision, domestic or foreign.
1.28 “Indemnitee” has the meaning set forth in Section 8.1.
1.29 “Initiate” means, when used with respect to a Phase 2/3 Clinical Study, the
dosing of the first human patient with the first dose in such Phase 2/3 Clinical
Study.
1.30 “IPO” means a transaction pursuant to which Palvella’s stock becomes
publicly traded, including without limitation through a merger with a company
whose stock is publicly traded or a firm commitment underwritten public offering
of common stock of Palvella registered under the Securities Act.
1.31 “Know-How” means technical information and materials, including without
limitation technology, software, instrumentation, devices, data, biological
materials, assays, constructs, compounds, inventions (patentable or otherwise),
practices, methods, algorithms, models, knowledge, know‑how, trade secrets,
skill and experience (including without limitation all biological, chemical,
pharmacological, toxicological, clinical, assay and related know-how and trade
secrets, and all manufacturing data, manufacturing processes, specifications,
assays, quality control and testing procedures, regulatory submissions and
related know-how and trade secrets).
1.32 “Knowledge” means the actual knowledge of [***], after reasonable due
inquiry, but is not meant to require or imply that any type of search
(independent of that performed by the actual Governmental Authority during the
normal course of patent prosecution, as applicable in a jurisdiction) has been
conducted or opinion of counsel obtained.

_______________________________
[***] Certain information on this page has been omitted and filed separately
with the Commission. Confidential treatment has been requested with respect to
the omitted portions.

5

--------------------------------------------------------------------------------

1.33 “License” means any agreement pursuant to which Palvella grants to a Third
Party (a “Licensee”) a license, sublicense, or other right to any Palvella
Patents or Regulatory Filings or Regulatory Approvals relating to the Products;
provided, however, that a License shall not include (a) any agreement pursuant
to which a Licensee obtains solely the right to distribute a Product after
purchase from Palvella, or (b) any agreement pursuant to which Palvella or any
of its Affiliates grants a license or sublicense of any of its intellectual
property rights (i) solely to conduct research, (ii) solely to manufacture a
Product, or (iii) otherwise to service providers solely on a non-exclusive basis
in the ordinary course of Development or Commercialization of a Product (e.g.,
material transfer agreements, distribution agreements, and consulting
agreements).
1.34 “Licensee” has the meaning set forth in the definition of License.
135 “Losses” has the meaning set forth in Section 8.1.
1.36 “Milestone Payment” has the meaning set forth in Section 4.2.
1.37 “NDA” means a New Drug Application filed with the FDA that is required for
approval for the applicable Product in the United States, or its foreign
equivalent in the Territory.
1.38 “Net Sales” means, with respect to any Product, the gross amounts
received by Palvella, its Affiliates and Licensees for arm’s length sales of
such Product in the Field in the Territory to a Third Party (excluding any sales
among Palvella, its Affiliates and any Licensee), commencing with the First
Commercial Sale, less the following deductions solely to the extent incurred or
allowed with respect to such sales, and solely to the extent such deductions are
in accordance with GAAP, and which are not already reflected as a deduction from
the invoiced price: (a) discounts (to the extent not previously applied to such
amounts received), charge-back payments, and rebates; (b) credits or allowances
for damaged goods, rejections, recalls or returns of such Product; (c) freight,
insurance, postage, and shipping charges for delivery of such Product, to the
extent separately billed on the invoice; (d) taxes, customs, or duties levied
on, absorbed, or otherwise imposed on the sale of such Product, as adjusted for
rebates and refunds, to the extent not paid by the Third Party and only to the
extent such taxes, customs, or duties are not reimbursed to the paying party,
but excluding all income taxes; and (e) that portion of the annual fees due
under Section 9008 of the United States Patient Protection and Affordable Care
Act of 2010 (Pub. L. No. 111-48) and any other fees imposed by any Applicable
Law. If a Product is sold by Palvella, its Affiliates or Licensees through
intermediaries such as agents, consignees or co-promoters who do not purchase
and take title to Product, Royalties will be due only on sales to those Third
Parties who actually purchase and take title to Product through such
intermediaries. Net Sales will be determined in accordance with GAAP.
With respect to sales of a Product invoiced in Dollars, Net Sales shall be
determined in Dollars. With respect to sales of a Product invoiced in a currency
other than Dollars, Net Sales shall be determined by converting the currencies
at which the sales are made into Dollars, at rates of exchange determined in a
manner consistent with Palvella’s or the applicable Licensee’s methods for
calculating rates of exchange in the preparation of Palvella’s or such
applicable Licensee’s annual financial statements in accordance with GAAP.
A Product transferred to Third Parties in connection with clinical and
non-clinical research and trials (including studies reasonably necessary to
comply with Applicable Law), Product samples, charitable
6

--------------------------------------------------------------------------------

purposes, promotional purposes, early access programs, compassionate sales or
use, or an indigent program or similar bona fide arrangements for which Palvella
or any of its Affiliates or Licensees for good faith business reasons receives
consideration in respect thereof that is less than the average cost of goods for
a Product shall not be included in Net Sales.
1.39 “Non-Enforcing Party” has the meaning set forth in Section 6.2.1.
1.40 “Palvella Patents” means (a) any and all patents and patent applications
that Cover a Product or its manufacture, use, sale, export or import, including
without limitation the patents and patent applications set forth in Appendix B,
and (b) any Patent Rights based on the patents and patent applications described
in subsection (a).
1.41 “Patent Rights” means (a) patents and patent applications, and any foreign
counterparts thereof, (b) all divisionals, continuations, continuations-in-part
of any of the foregoing, and any foreign counterparts thereof, and (c) all
patents issuing on any of the foregoing, and any foreign counterparts thereof,
together with all registrations, reissues, re‑examinations, supplemental
protection certificates, substitutions or extensions thereof, and any foreign
counterparts thereof.
1.42 “Person” means any natural person, firm, corporation, limited liability
company, partnership, joint venture, association, joint-stock company, trust,
business trust, unincorporated organization, Governmental Authority or any other
legal entity, including without limitation public bodies, whether acting in an
individual, fiduciary or other capacity
1.43 “Phase 2/3 Clinical Study” means a human clinical study of a Product in any
country on a sufficient number of subjects that is designed to establish that
such Product is safe and efficacious for its intended use, and to determine
warnings, precautions, and adverse reactions that are associated with such
Product in the dosage range to be prescribed, which trial is intended to support
Regulatory Approval of such Product, as described in 21 C.F.R. § 312.21(c), or
equivalent clinical study in a country other than the United States.
1.44 “Prior CDA” means the Mutual Confidentiality Agreement between the Parties,
effective as of September 25, 2018.
1.45 “Product” means any product that contains PTX-022.
1.46 “PTO” means the United States Patent and Trademark Office.
1.47 “PTX-022” means the compound set forth on Appendix A.
1.48 “Public Official or Entity” means (a) any officer, employee (including
without limitation physicians, hospital administrators or other healthcare
professionals), agent, representative, department, agency, de facto official,
representative, corporate entity, instrumentality or subdivision of any
government, military or international organization, including without limitation
any ministry or department of health or any state-owned or affiliated company or
hospital, or (b) any candidate for political office, any political party or any
official of a political party.

7

--------------------------------------------------------------------------------

1.49 “Qualified Financing Event” means an IPO or one or more equity financings
of Palvella pursuant to which the gross proceeds in the aggregate to Palvella
are at least [***].
1.50 “Qualified Licensing Event” means the date on which Palvella receives an
aggregate of [***] in license fees pursuant to one or more Licenses; provided
that any amounts received by Palvella under such Licenses that are bona fide
reimbursements for expenses incurred by Palvella in the Development of PTX-022
will not be included in such license fees for purposes of this definition.
1.51 “Receiving Party” has the meaning set forth in Section 5.1.
1.52 “Regulatory Approval” means approval of an NDA by the FDA for the
applicable Product in the United States, or approval by the applicable
Regulatory Authority of a regulatory approval application that is equivalent to
an NDA in a country other than the United States, and any approvals, licenses,
registrations, or authorizations necessary for the manufacture, marketing, and
sale of Product in such country and, where relevant, including without
limitation any reimbursement or pricing approvals. For the sake of clarity,
except as otherwise expressly provided herein, “Regulatory Approval” will not be
achieved for a Product in a country or, where applicable, a multinational
jurisdiction until any applicable approvals relating to pricing and
reimbursement from the relevant Regulatory Authorities have been obtained in
such country or such jurisdiction.
1.53 “Regulatory Authority” means any national or supranational Governmental
Authority, including without limitation FDA, that has responsibility for
granting any licenses or approvals or granting pricing and/or reimbursement
approvals necessary for the development, marketing, and sale of a Product in any
country.
1.54 “Regulatory Exclusivity” means any exclusive marketing rights or data
exclusivity rights conferred by any Governmental Authority under Applicable Law
with respect to a Product in a country or jurisdiction in the Territory to
prevent Third Parties from Commercializing such Product in such country or
jurisdiction, other than a Patent Right, including without limitation orphan
drug exclusivity, pediatric exclusivity, rights conferred in the U.S. under the
Hatch-Waxman Act or the FDA Modernization Act of 1997, in the EU under Directive
2001/83/EC, or rights similar thereto in other countries or regulatory
jurisdictions in the Territory.
1.55 “Regulatory Filings” means any and all regulatory applications, filings,
modifications, amendments, supplements, revisions, reports, submissions,
authorizations, and Regulatory Approvals, and associated correspondence required
to Develop and Commercialize Products in the Territory, including without
limitation any reports or amendments necessary to maintain Regulatory Approvals.
1.56 “Royalties” has the meaning set forth in Section 4.3.1.
1.57 “Royalty Term” has the meaning set forth in Section 4.3.2.
1.58 “Securities Act” means the Securities Act of 1933, as amended.
___________________________
[***] Certain information on this page has been omitted and filed separately
with the Commission. Confidential treatment has been requested with respect to
the omitted portions.

8

--------------------------------------------------------------------------------

1.59 “Term” has the meaning set forth in Section 7.1.
1.60 “Territory” means worldwide.
1.61 “Third Party” means any Person other than Palvella, Ligand, and their
respective Affiliates.
1.62 “United States” or “U.S.” means the United States of America and all of its
territories and possessions.
1.63 “Upfront Payment” has the meaning set forth in Section 4.1.
1.64 “Valid Claim” means either (a) a claim of an issued and unexpired patent or
a supplementary protection certificate within the Palvella Patents that has not
been held permanently revoked, unenforceable, or invalid by a decision of a
court or other Governmental Authority of competent jurisdiction, unappealable or
unappealed within the time allowed for appeal and that is not admitted to be
invalid or unenforceable through reissue, disclaimer, or otherwise (i.e., only
to the extent the subject matter is disclaimed or is sought to be deleted or
amended through reissue), or (b) a claim of a pending patent application within
the Palvella Patents that has not been abandoned, finally rejected, or expired
without the possibility of appeal or refilling.
ARTICLE 2  
PALVELLA RESPONSIBILITIES; LICENSING; REPORTING

2.1 Responsibilities. Palvella will have the sole right, as between the Parties,
to Develop and Commercialize Products in the Field, including without limitation
determining the marketing and regulatory strategies for seeking (if and when
appropriate) Regulatory Approvals and Regulatory Exclusivity in the Territory
for Products in the Field, filing for such Regulatory Approvals and Regulatory
Exclusivity for Products in the Field in the Territory, preparing, submitting,
and maintaining any and all Regulatory Filings and Regulatory Approvals for
Products in the Field in the Territory, and seeking any necessary Regulatory
Approvals of Regulatory Authorities for Product labeling and promotional
materials to be used in the applicable jurisdiction(s) in connection with
Commercializing Products in the Field in the Territory. As between the Parties,
Palvella will be responsible for all costs and expenses incurred by Palvella in
connection with the foregoing activities, except for the payment set forth in
Section 4.1. If an Affiliate and/or a Licensee meets or fulfills any or all of
the obligations of Palvella under this Agreement, and/or observes any of the
terms or conditions hereof, then Palvella will be deemed to have met or
fulfilled such obligations or observed such terms or conditions, as the case may
be.

9

--------------------------------------------------------------------------------

2.2 Development Plan and Development Budget. Palvella will conduct the
activities set forth in the Development plan set forth on Appendix C (the
“Development Plan”) in accordance with the Development budget set forth on
Appendix D (the “Development Budget”). Palvella may update or modify in good
faith the Development Plan and the Development Budget from time to time in its
sole discretion without Ligand’s consent, provided that such amendments or
modifications relate to reasonable and customary Development activities and do
not result, in the aggregate, in additional expenditures in excess of [***] of,
or result in a reduction in expenditures by more than [***] of, the aggregate
amount of expenditures set forth in the Development Budget set forth on Appendix
D as of the Effective Date. Otherwise, Palvella must obtain Ligand’s consent
before amending or modifying the Development Budget, with such consent not to be
unreasonably withheld, delayed, or conditioned. Palvella will use the Upfront
Payment solely to fund activities in accordance with the Development Plan and
the Development Budget, each of which may be amended from time to time in
accordance with this Section 2.2. Without limiting any other remedies available,
if all Development of Product(s) in the Field in the Territory is ceased,
Palvella will pay to Ligand an amount equal to [***].
2.3 Diligence. Palvella will use Commercially Reasonable Efforts to carry out
its responsibilities under this Agreement. During the Term, Palvella will use
Commercially Reasonable Efforts to Develop and Commercialize at least one (1)
Product in the Field in the Territory. Without limiting the foregoing, Palvella
will Initiate a Phase 2/3 Clinical Study by December 31, 2019. Palvella will
deliver to Ligand within thirty (30) days after the end of each Calendar Year a
written report summarizing in reasonable detail the efforts of Palvella in the
prior year to meet its obligations to Develop and Commercialize Products
consistent with this Section 2.3 and the planned Development and
Commercialization activities to be conducted by Palvella in the current Calendar
Year.
2.4 Licensing.
2.4.1 Right to License. Palvella will retain the right to perform its activities
under this Agreement through Licensees, subject to this Section 2.4. Palvella
will remain responsible for the performance of Licensees under this Agreement,
including without limitation for all payments due hereunder. Palvella will
provide Ligand with notice of the entering into of each License promptly after
execution of such License. In addition, Palvella will provide a redacted copy of
any such License to Ligand after execution of such License.
2.4.2 Terms. Each License granted by Palvella pursuant to Section 2.4.1 will be
subject to the terms and conditions of this Agreement and will contain terms and
conditions consistent in all material respects with those in this Agreement.
Agreements with any Licensee that include the right to Commercialize any
Product(s) will contain provisions requiring such Licensee to calculate and
report on net sales in sufficient detail to permit Palvella to meet its
obligations set forth in Sections 4.4 and 4.5, and, to the extent that such
Licensee will have access to Ligand’s Confidential Information, a requirement
that such Licensee comply with confidentiality and non-use provisions consistent
in all material respects with those contained in Article 5 with respect to
Ligand’s Confidential Information.
___________________________
[***] Certain information on this page has been omitted and filed separately
with the Commission. Confidential treatment has been requested with respect to
the omitted portions.

10

--------------------------------------------------------------------------------

2.4.3 Subcontracting. Palvella may utilize the services of Third Parties,
including without limitation Third Party contract research organizations,
contract manufacturing organizations, suppliers and service providers to perform
its Development and Commercialization activities; provided that Palvella will
remain at all times fully liable for its respective responsibilities under this
Agreement. Any agreement with a Third Party to perform Palvella’s
responsibilities under this Agreement will include confidentiality and non-use
provisions which are no less stringent than those set forth in Article 5 and
intellectual property provisions that will allow Palvella to comply with Article
6.  
ARTICLE 3  
 
REGULATORY

3.1 Regulatory Filings. Palvella will solely own and control any and all
Regulatory Approvals and any and all other Regulatory Filings submitted in
connection with seeking and maintaining Regulatory Approvals for Products in the
Field in the Territory.
3.2 Regulatory Communications. Palvella will be the sole contact, as between the
Parties, with the applicable Regulatory Authorities and will be solely
responsible, using Commercially Reasonable Efforts, for all communications with
such Regulatory Authorities that relate to any Regulatory Approvals or other
Regulatory Filings prior to and after any Regulatory Approval with respect to
the Products in the Field in the Territory. Except as may be required by
Applicable Law, Ligand will not communicate regarding Products in the Field with
any Governmental Authority having jurisdiction in the Territory unless
explicitly requested or permitted in writing to do so by Palvella or unless so
ordered by such Governmental Authority in the Territory, in which case Ligand
will provide to Palvella notice of such order as soon as practicable, but in no
event later than five (5) business days after receipt of such order. If Ligand
is required to respond to any requests from or by any and all Regulatory
Authorities with respect to any Product, Palvella will have an opportunity to
comment on the response to the extent such response may materially impact the
Product before Ligand submits such response and Ligand will provide a copy of
the final response to Palvella.
3.3 Reports.
3.3.1 Within thirty (30) days after the end of each Calendar Quarter during the
Term, Palvella will deliver to Ligand a report containing information regarding
its Development and Commercialization activities conducted by or on behalf of
Palvella and its Affiliates and Licensees during such Calendar Quarter. Without
limiting the foregoing, such report shall include a description of all material
activities in connection with any Regulatory Approvals and Regulatory
Exclusivity for Products in the Field in the Territory, preparing, submitting,
and maintaining any and all Regulatory Filings and Regulatory Approvals for
Products in the Field in the Territory, and seeking any necessary Regulatory
Approvals of Regulatory Authorities for Product labeling and promotional
materials to be used in the applicable jurisdiction(s) in connection with
Commercializing Products in the Field. In addition, such reports shall contain a
description of Palvella’s performance against the activities and timelines set
forth in the Development Plan and costs and expenses incurred against the
Development Budget, each of which may be amended from time to time in accordance
with Section 2.2.

11

--------------------------------------------------------------------------------

3.3.2 Prior to the consummation of an IPO, Palvella shall deliver to Ligand the
following financial statements:
(a) within thirty (30) days after the end of each of the first three (3)
Calendar Quarters of a Calendar Year, copies of the unaudited financial
statements of Palvella for such Calendar Quarter; and
(b) within one hundred eighty (180) days after the end of each Calendar Year,
copies of the audited financial statements of Palvella for such Calendar Year.
3.3.3 Prior to the consummation of an IPO, Palvella will provide Ligand with
written notice at such time as (a) Palvella becomes insolvent as defined in
Applicable Law, including without limitation interpretations in applicable case
law; (b) Palvella is unable to pay its debts as they become due; (c) Palvella
suspends, closes, or otherwise ceases to operate a portion of its business
having a material adverse effect on Palvella’s ability to comply with its
material obligations under this Agreement; and (d) Palvella fails to have enough
cash on hand to fund at least two Calendar Quarters of its budgeted operating
expenses, based on the Development Budget. In addition, within fifteen (15) days
of a written request of Ligand (such request not to be made more than one time
during any Calendar Year), Palvella will provide Ligand with its most recent
audited financial statements. Ligand shall, and shall cause its representatives
and Affiliates to, treat all notices and financial reports (and the information
contained therein) as Confidential Information of Palvella, subject to the terms
of Article 5.
ARTICLE 4  
 
PAYMENTS
4.1 Upfront Payment. In consideration for the rights granted under this
Agreement to Ligand, including without limitation the right to receive the
payments set forth in Sections 4.2 and 4.3, and to fund the Development
activities described in this Agreement, Ligand shall pay Palvella a one-time
payment of Ten Million Dollars ($10,000,000) (the “Upfront Payment”) on the
Effective Date to an account designated in writing by Palvella.
4.2 Milestone Payments. In consideration for the Upfront Payment paid to
Palvella under Section 4.1, Palvella will pay Ligand each milestone payment set
forth in the table below after the first achievement of the specified milestone
event (each, a “Milestone Event”) by Palvella, its Licensees or their Affiliates
for a Product (each, a “Milestone Payment”). All such payments are
non-refundable and non-creditable. Palvella will notify Ligand of any such
achievement within five (5) business days after such achievement. Ligand may
submit an invoice to Palvella for each Milestone Payment set forth in the table
in this Section 4.2 below at any time after the corresponding Milestone Event is
achieved. Palvella will pay any amounts payable under this Section 4.2 within
thirty (30) days after receipt of an invoice therefor; provided that such
invoice is submitted after the date on which such Milestone Payment becomes
payable. If Ligand does not submit an invoice to Palvella with respect to the
Milestone Payment, then such Milestone Payment will be payable within thirty
(30) days after the date set forth in Palvella’s notice under this Section 4.2.
For the avoidance of doubt, each Milestone Payment is payable a maximum of one
time only, regardless of the number of times a Milestone Event is achieved.  
12

--------------------------------------------------------------------------------

Milestone Event

Milestone Payment
[***]
[***]
[***]
[***]
[***]
[***]

4.3 Royalty Payments.
4.3.1 Royalties on Products.
(a) In partial consideration for the Upfront Payment paid to Palvella under
Section 4.1, Palvella hereby sells to Ligand all of its right, title, and
interest in and to royalties on aggregate annual Net Sales of all Products in
the Territory, as calculated by multiplying the applicable royalty rate in the
table below (as may be adjusted pursuant to Section 4.3.1(a)(ii)) by the
corresponding amount of incremental Net Sales of all Products in the Territory
in each Calendar Year (“Royalties”). Palvella shall have no right, title, or
interest in the Royalties and Palvella shall remit all Royalties to Ligand in
accordance with Section 4.4. Commencing on the date that the Royalties paid to
Ligand under this Section 4.3 and the payments paid to Ligand under Section 4.2
cumulatively equal at least [***] (the “Royalty Buy-Down Date”), Palvella will
have the right to reduce the royalty rates set forth in Section 4.3.1(a)(i) by
making a payment or payments (each, a “Royalty Buy-Down Payment”) at any time
during the Term after the Royalty Buy-Down Date, as set forth in Section
4.3.1(a)(ii).
(i) If Palvella has not made a Royalty Buy-Down Payment within the time period
set forth in Section 4.3.1(a), above, the royalty rates for the Term shall be as
follows:
Net Sales Tier

Royalty Rate

For that portion of annual aggregate Net Sales of Products in a Calendar Year
that are less than or equal to [***]

[***]
For that portion of annual aggregate Net Sales of Products in a Calendar Year
that are greater than [***]but less than or equal to [***]

[***]
For that portion of annual aggregate Net Sales of Products in a Calendar Year
that are greater than [***]

[***]

For example, and without limitation, if aggregate annual Net Sales of all
Products in the Field in the Territory in a Calendar Year is [***], then
Royalties due by Palvella would equal [***].

___________________________
[***] Certain information on this page has been omitted and filed separately
with the Commission. Confidential treatment has been requested with respect to
the omitted portions.

13

--------------------------------------------------------------------------------

(ii) Royalty Buy-Down. At any time on or after the Royalty Buy-Down Date,
Palvella shall have the right to reduce, in accordance with Section
4.3.1(a)(ii)(A), (B), (C), and/or (D), the royalty rates set forth in Section
4.3.1(a)(i). For clarity, Palvella will have the right to elect the options set
forth in one or more of Section 4.3.1(a)(ii)(A), (B), (C), or (D). For example,
and without limitation, Palvella may elect the option set forth in Section
4.3.1(a)(ii)(A) by making the [***] payment set forth therein, and then at a
later time elect the option set forth in Section 4.3.1(a)(ii)(C) by making a
payment equal to (x) [***] less (y) [***] previously paid pursuant to Section
4.3.1(a)(ii)(A).
(A) If Palvella has made a Royalty Buy-Down Payment of [***] within the time
period set forth in Section 4.3.1(a), above, the royalty rates applicable
commencing in the first Calendar Quarter after receipt of such Royalty Buy-Down
Payment shall be as follows:
Net Sales Tier

Royalty Rate

For that portion of annual aggregate Net Sales of Products in a Calendar Year
that are less than or equal to [***]

[***]
For that portion of annual aggregate Net Sales of Products in a Calendar Year
that are greater than [***] but less than or equal to [***]

[***]
For that portion of annual aggregate Net Sales of Products in a Calendar Year
that are greater than [***]

[***]

(B) If Palvella has made Royalty Buy-Down Payment(s) totaling [***] within the
time period set forth in Section 4.3.1(a), above, the royalty rates applicable
commencing in the first Calendar Quarter after receipt of such Royalty Buy-Down
Payment(s) totaling [***] shall be as follows:
Net Sales Tier

Royalty Rate

For that portion of annual aggregate Net Sales of Products in a Calendar Year
that are less than or equal to [***]

[***]
For that portion of annual aggregate Net Sales of Products in a Calendar Year
that are greater than [***] but less than or equal to [***]

[***]
For that portion of annual aggregate Net Sales of Products in a Calendar Year
that are greater than [***]

[***]

___________________________
[***] Certain information on this page has been omitted and filed separately
with the Commission. Confidential treatment has been requested with respect to
the omitted portions.

14

--------------------------------------------------------------------------------

(C) If Palvella has made Royalty Buy-Down Payment(s) totaling [***] within the
time period set forth in Section 4.3.1(a), above, the royalty rates applicable
commencing in the first Calendar Quarter after receipt of such Royalty Buy-Down
Payment(s) totaling [***] shall be as follows:
Net Sales Tier

Royalty Rate

For that portion of annual aggregate Net Sales of Products in a Calendar Year
that are less than or equal to [***]

[***]
For that portion of annual aggregate Net Sales of Products in a Calendar Year
that are greater than [***]

[***]

(D) If Palvella has made Royalty Buy-Down Payment(s) totaling [***] within the
time period set forth in Section 4.3.1(a), above, the royalty rates applicable
commencing in the first Calendar Quarter after receipt of such Royalty Buy-Down
Payment(s) totaling [***] shall be as follows:
Net Sales Tier

Royalty Rate

For that portion of annual aggregate Net Sales of Products in a Calendar Year
that are less than or equal to [***]

[***]
For that portion of annual aggregate Net Sales of Products in a Calendar Year
that are greater than [***]

[***]

4.3.2 Royalty Term. Royalties will be remitted under this Section 4.3, on a
country-by-country basis, commencing on First Commercial Sale of such Product in
such country until the last to occur of: [***] (the “Royalty Term”).
4.4 Royalty Reports and Payments. During the Term following the First Commercial
Sale of any Product, within forty-five (45) days after the end of each of the
first three (3) Calendar Quarters of each Calendar Year and within sixty (60)
days after the end of the last Calendar Quarter of each Calendar Year, Palvella
will pay to Ligand Royalties due for such Calendar Quarter calculated in
accordance with Section 4.3 and will deliver to Ligand a Royalties report
showing, on a country-by-country basis, the information set forth in this
Section 4.4 below:

___________________________
[***] Certain information on this page has been omitted and filed separately
with the Commission. Confidential treatment has been requested with respect to
the omitted portions.

15

--------------------------------------------------------------------------------

4.4.1 the gross amount invoiced for and the amounts received and the Net Sales
resulting from sales of Products sold by Palvella, its Affiliates or Licensees
during such Calendar Quarter, including without limitation the specific
deductions applied in the calculation of such Net Sales amounts, and any amounts
required to be included in Net Sales pursuant to Section 6.2.3;
4.4.2 the Royalties (in Dollars) that have accrued in such Calendar Quarter with
respect to such Net Sales;
4.4.3 withholding taxes, if any, required by Applicable Law to be deducted with
respect to such Royalties; and
4.4.4 the rate of exchange used by Palvella in determining the amount of Dollars
due hereunder.
If no Royalties are due for any Calendar Quarter hereunder, Palvella will so
report. Palvella will keep, and will require in its Licenses, and use good faith
efforts to enforce such requirements, its Licensees and their respective
Affiliates to keep (all in accordance with GAAP), complete and accurate records
in sufficient detail to properly reflect the Net Sales to enable the Royalties
due hereunder to be determined for a period of at least three (3) Calendar
Years.
In addition, Palvella will deliver to Ligand no later than twenty-five (25) days
following the end of each Calendar Quarter a preliminary statement setting forth
the actual Net Sales for the first two (2) months of such Calendar Quarter and
estimated Net Sales for the third (3rd) month of such Calendar Quarter, the
calculation of Royalties or Net Sales due on a country-by-country basis (based
on such actual and estimated Net Sales) and, if applicable, the exchange rate to
be utilized by Palvella to convert a local currency payment to Dollars.
4.5 Audits of Royalty Reports. Upon the written request of Ligand and not more
than once in each Calendar Year, Palvella will permit an independent certified
public accounting firm selected by Ligand and reasonably acceptable to Palvella,
at Ligand’s expense, to have access during normal business hours to such records
of Palvella as may be necessary or reasonably useful to verify the accuracy of
the payment reports made and the amounts owed to Ligand under this Agreement for
any Calendar Year period ending not more than thirty-six (36) months prior to
the date of such request. Such rights with respect to any Calendar Year will
terminate upon the earlier to occur of (a) the completion of an audit pursuant
to this Section 4.5 with respect to such Calendar Year and (b) three (3) years
after the end of any such Calendar Year. Ligand will provide Palvella with a
copy of such accounting firm’s written report within thirty (30) days after
completion of such report. If such accounting firm concludes that an overpayment
or underpayment was made, then the owing Party will pay the amount due within
thirty (30) days after the date Ligand delivers to Palvella such accounting
firm’s written report so concluding, and any accrued interest as determined in
accordance with Section 4.9 from the date such overpayment was paid or such
underpayment was originally due, as applicable, until payment thereof. Ligand
will bear the full cost of such audit unless such audit discloses that the
additional payment payable by Palvella for the audited period is more than five
percent (5%) of the amount of the payments due for that audited period, in which
case Palvella will pay the reasonable documented fees and expenses charged by
the accounting firm. If the Parties dispute any such accounting firm’s
conclusion, they will resolve such issue pursuant to Article 11. Ligand will
treat all information subject to review under Section 4.5 in accordance with the
confidentiality provisions of this Agreement.

16

--------------------------------------------------------------------------------

4.6 Currency of Payments. All payments under this Agreement will be made in
Dollars by wire transfer of immediately available funds into an account
designated by Ligand. Net Sales outside of the U.S. will be first determined in
the currency in which they are earned and will then be converted into an amount
in Dollars using Palvella’s or the Licensee’s, as applicable, customary and
usual conversion procedures used in preparing its financial statements pursuant
to GAAP for the applicable reporting period.
4.7 Blocked Currency. In each country in the Territory where the local currency
is blocked and cannot be removed from the country, at the election of Ligand,
Royalties accrued on Net Sales in such country will be paid to Ligand in local
currency by deposit in a local bank in such country designated by Ligand.
4.8 Taxes. Each Party will be solely responsible for the payment of all taxes
imposed on its share of income arising directly or indirectly from the efforts
of the Parties under this Agreement. The Parties agree to cooperate with one
another and use reasonable efforts to reduce or eliminate tax withholding or
similar obligations in respect of Royalties, Milestone Payments, and other
payments made by Palvella to Ligand under this Agreement. To the extent Palvella
is required under the Internal Revenue Code of 1986, as amended (the “Code”), or
any other tax laws to deduct and withhold taxes on any payment to Ligand, and
Palvella will pay the amounts of such taxes to the proper Governmental Authority
in a timely manner and promptly transmit to Ligand an official tax certificate
or other evidence of such withholding sufficient to enable Ligand to claim such
payment of taxes. Upon Palvella’s reasonable request, Ligand will provide
Palvella any tax forms that may be reasonably necessary in order for Palvella to
determine whether to withhold tax on any such payments or to withhold tax on
such payments at a reduced rate under the Code or any other tax laws, including
without limitation any applicable bilateral income tax treaty. Palvella will
give reasonable support so that any withholding tax or value added tax may be
minimized or avoided to the extent permitted under the Applicable Laws and
treaties. Each Party will provide the other with reasonable assistance to enable
the recovery, as permitted by Applicable Laws, of withholding taxes, value added
taxes, or similar obligations resulting from payments made under this Agreement,
such recovery to be for the benefit of the Party bearing such withholding tax or
value added tax. Palvella will use commercially reasonable efforts to require
its Licensees to cooperate with Palvella and Ligand in a manner consistent with
this Section 4.8. If any payment required to be made by Palvella under this
Agreement is subject to increased deduction or withholding of tax by Ligand,
then the sum payable by Palvella (in respect of which such increased deduction
or withholding is required to be made) will be increased to the extent necessary
to ensure that Ligand receives a sum equal to the sum which it would have
received if no such increased tax deduction or withholding had been required.
4.9 Interest Due. Palvella will pay Ligand interest on any payments that are not
paid on or before the date such payments are due under this Agreement at a
monthly interest rate equal to the U.S. prime interest rate, as reported by The
Wall Street Journal (New York edition) for the first Business Day of the month
in which such payment was due plus five percentage points (5 ppts), or the
maximum applicable legal rate, if less, calculated based on the total number of
days payment is delinquent.

17

--------------------------------------------------------------------------------

ARTICLE 5  
 
NONDISCLOSURE OF CONFIDENTIAL INFORMATION

5.1 Nondisclosure. Each Party agrees that, during the Term and for a period of
ten (10) years thereafter (or, for any trade secret, for so long as the
Disclosing Party maintains such trade secret as a trade secret), a Party (the
“Receiving Party”) receiving Confidential Information of the other Party (the
“Disclosing Party”) will (a) maintain in confidence such Confidential
Information, (b) not disclose such Confidential Information to any Third Party
without the prior written consent of the Disclosing Party, except for
disclosures expressly permitted in this Article 5, and (c) not use such
Confidential Information for any purpose except those expressly permitted by
this Agreement. The Parties agree that any Confidential Information (within the
meaning of the Prior CDA) disclosed by the Parties or their Affiliates pursuant
to the Prior CDA will be Confidential Information within the meaning of, and
will be subject to, this Article 5.
5.2 Exceptions. The obligations under Section 5.1 will not apply with respect to
any portion of Confidential Information of a Disclosing Party that the Receiving
Party can show by competent evidence:
5.2.1 at the time of disclosure to Receiving Party is in the public domain;
5.2.2 after disclosure, becomes part of the public domain by publication or
otherwise, except by breach of this Agreement by the Receiving Party or anyone
to whom the Receiving Party disclosed Confidential Information;
5.2.3 was (a) in the Receiving Party’s possession at the time of disclosure
without any obligation to keep it confidential or any restriction on its use or
(b) subsequently and independently developed by the Receiving Party’s employees
who had no knowledge of and who did not use, rely on or refer to any of
Disclosing Party’s Confidential Information, in each case as shown by Receiving
Party’s records; or
5.2.4 is received by the Receiving Party from a Third Party who has the lawful
right to disclose such Confidential Information and who has not obtained such
Confidential Information either directly or indirectly from the Disclosing
Party.
5.3 Authorized Disclosure. To the extent (and only to the extent) that it is
reasonably necessary or appropriate to fulfill its obligations or exercise its
rights under this Agreement, the Receiving Party may disclose Confidential
Information belonging to the Disclosing Party in the following instances:
5.3.1 prosecuting or defending litigation;
5.3.2 subject to Sections 5.4 and 5.5, required by Applicable Laws (including
without limitation the rules and regulations of the U.S. Securities and Exchange
Commission or any national securities exchange) and with judicial process; and
5.3.3 to Affiliates in connection with the performance of this Agreement and
solely on a need-to-know basis; to potential or actual collaborators (including
without limitation actual and potential
18

--------------------------------------------------------------------------------

Licensees), who prior to disclosure must be bound by written obligations of
confidentiality and non-use no less restrictive than the obligations set forth
in this Article 5; to potential or actual investment bankers, investors,
lenders, acquirers, merger partners or other potential financial partners, and
their attorneys and agents), who prior to disclosure must be bound by written
obligations of confidentiality and non-use no less restrictive than the
obligations set forth in this Article 5; or employees, independent contractors
(including without limitation contract research organizations, contract
manufacturing organizations, consultants and clinical investigators) or agents,
each of whom prior to disclosure must be bound by written obligations of
confidentiality and non-use no less restrictive than the obligations set forth
in this Article 5; provided, however, that the Receiving Party will remain
responsible for any failure by any Person who receives Confidential Information
pursuant to this Section 5.3.3 to treat such Confidential Information as
required under this Article 5.
If and whenever any Confidential Information is disclosed in accordance with
this Section 5.3, such disclosure will not cause any such information to cease
to be Confidential Information except to the extent that such disclosure results
in a public disclosure of such information (other than in breach of this
Agreement). Where reasonably possible and subject to Sections 5.4 and 5.5, the
Receiving Party will notify the Disclosing Party in writing of the Receiving
Party’s intent to make such disclosure pursuant to Sections 5.3.1–5.3.3
sufficiently prior to making such disclosure so as to allow the Disclosing Party
adequate time to take whatever action appropriate to protect the confidentiality
of the information while still permitting such disclosure, and the Receiving
Party will cooperate with the Disclosing Party in such efforts.
5.4 Required Disclosure. A Receiving Party may disclose Confidential Information
of the Disclosing Party to the extent such disclosure is required pursuant to
interrogatories, judicial requests for information or documents, subpoena, civil
investigative demand issued by a court or Governmental Authority or as otherwise
required by Applicable Law; provided, however, that the Receiving Party will
notify the Disclosing Party promptly in writing upon receipt thereof, giving
(where practicable) the Disclosing Party sufficient advance notice to permit it
to oppose, limit or seek a protective order or confidential treatment for such
disclosure; and provided, further, that the Receiving Party will furnish only
that portion of the Confidential Information that it is advised by counsel is
legally required whether or not a protective order or other similar order is
obtained by the Disclosing Party.
5.5 Securities Filings. In the event a Party proposes to file with the U.S.
Securities and Exchange Commission or the securities regulators of any state or
other jurisdiction a registration statement or any other disclosure document
which describes or refers to this Agreement under the Securities Act, the
Securities Exchange Act, of 1934, as amended, or any other applicable securities
laws, such Party will notify the other Party in writing of such intention and
will provide such other Party with a copy of relevant portions of the proposed
filing not less than five (5) days prior to such filing (and any revisions to
such portions of the proposed filing a reasonable time prior to the filing
thereof), including without limitation any appendices to this Agreement, will
consider in good faith the other Party’s comments and will use reasonable
efforts to obtain confidential treatment of any information concerning this
Agreement that such other Party requests, no later than two (2) days prior to
such filing, be kept confidential, and will only disclose Confidential
Information that it is advised by counsel is legally required to be disclosed.
No such notice will be required under this Section 5.5 if the substance of the
description of or reference to this
19

--------------------------------------------------------------------------------

Agreement contained in the proposed filing has been included in any previous
filing made by the either Party hereunder or otherwise approved by the other
Party.
5.6 Disclosure of Agreement. Except as otherwise permitted under Section 5.3.3,
neither Party may issue any press release or make any other public statement or
other disclosure disclosing to any Third Party any information relating to this
Agreement or its terms or the transactions contemplated hereby without the prior
written consent of the other Party, such consent not to be unreasonably
withheld, delayed, or conditioned.
ARTICLE 6  
PATENT MATTERS

6.1  Preparation, Filing, Prosecution, and Maintenance of Palvella Patents.
Palvella will have the responsibility, at its expense, and considering in good
faith any and all recommendations of Ligand, for the preparation, filing,
prosecution, and maintenance of the Palvella Patents, including any patent term
extensions. Palvella will deliver to Ligand within [***] after the end of each
Calendar Quarter a written report summarizing in reasonable detail the efforts
of Palvella in the prior Calendar Quarter with respect to the preparation,
filing, prosecution and maintenance of the Palvella Patents. Palvella will
provide Ligand with notice of its intention to (a) permit any of the Palvella
Patents to be abandoned in any country in the Territory or (b) elect not to file
a new patent application claiming priority to a patent application within the
Palvella Patents, either before such patent application’s issuance or within the
time period required for the filing of an international (i.e., Patent
Cooperation Treaty), regional (including the European Patent Office) or national
patent application, in each case, at least [***] prior to such lapse or
abandonment. In the event of any such lapse or abandonment, Ligand may elect to
assume full responsibility for the continued prosecution and maintenance of such
Palvella Patents, or the filing of such new patent application, in each case,
upon obtaining Palvella’s prior written consent, which consent shall not be
unreasonably withheld, conditioned or delayed.

_______________________________
[***] Certain information on this page has been omitted and filed separately
with the Commission. Confidential treatment has been requested with respect to
the omitted portions.

20

--------------------------------------------------------------------------------

6.2 Intellectual Property Matters.
6.2.1 Procedures and Requirements. In the event that either Party has cause to
believe that a Third Party may be infringing or misappropriating any of the
Palvella Patents in the Field in the Territory, it will promptly notify the
other Party in writing, identifying the alleged infringer and the alleged
infringement or misappropriation complained of and furnishing the information
upon which such determination is based. Palvella will have the first right but
not the obligation to stop such infringement or misappropriation of the Palvella
Patents by such Third Party in the Field in the Territory or settle, pursuant to
Section 6.2.2, with such Third Party. If Palvella fails to take action within
[***] following its receipt of a notice of such infringement or
misappropriation, then Ligand, upon Palvella’s prior written consent, which
consent shall not be unreasonably withheld, conditioned or delayed will have the
right to take action to stop such infringement or misappropriation. Upon
reasonable request by the Party enforcing Palvella Patents in the Field in the
Territory (the “Enforcing Party”), the other Party (the “Non-Enforcing Party”)
will give the Enforcing Party all reasonable information and assistance,
including without limitation allowing the Enforcing Party access to the
Non-Enforcing Party’s files and documents and to the Non-Enforcing Party’s
personnel who may have possession of relevant information and, if necessary or
desirable for the Enforcing Party to prosecute any legal action, joining in the
legal action as a party using counsel of its own choosing. Any such assistance
provided by a Non-Enforcing Party will be rendered at the Enforcing Party’s cost
and expense and the Enforcing Party will reimburse the Non-Enforcing Party for
its reasonable and documented costs and expenses upon the Non-Enforcing Party’s
request.
6.2.2 Settlement of an Enforcement Claim. The Enforcing Party will have the
right to control settlement of any claims that a Third Party may be infringing
or misappropriating any Palvella Patent in the Field and in the Territory;
provided, however, that if such settlement could reasonably be deemed to have a
material adverse effect on the Non-Enforcing Party, the Enforcing Party will not
enter into any such settlement with respect to any Palvella Patent in the
Territory without the prior written consent of the Non-Enforcing Party such
consent not to be unreasonably withheld, delayed, or conditioned.
6.2.3 Expenses and Recovery. As between the Parties, the Enforcing Party will
bear all costs and expenses (including without limitation any costs or expenses
incurred that exceed the amounts recovered by the Enforcing Party pursuing any
action under this Section 6.2.3) and payments awarded against or agreed to be
paid by the Enforcing Party. Any amounts recovered by either Party pursuant to
Section 6.2.1 or 6.2.2, whether by settlement or judgment, will be allocated in
accordance with the following: [***].

_______________________________
[***] Certain information on this page has been omitted and filed separately
with the Commission. Confidential treatment has been requested with respect to
the omitted portions.

21

--------------------------------------------------------------------------------

6.3 Infringement Claims by Third Parties. Ligand and Palvella each will promptly
inform the other Party in writing of any actual, threatened, or alleged
infringement or misappropriation, based on the making, using, selling, or
offering for sale of a Product in the Field in the Territory, of a Third Party’s
intellectual property rights of which it becomes aware. Neither Party will
acknowledge to a Third Party the validity of any such allegation or admit
liability with respect to any Product without the prior written consent of the
other Party. Ligand and Palvella will each keep the other advised of all
material developments in the conduct of any proceedings in defending any claim
of such alleged infringement or misappropriation and will cooperate with the
other in the conduct of such defense. In no event may either Party settle any
such infringement or misappropriation claim in a manner that would materially
adversely affect or impose any obligation on the other Party, without such other
Party’s prior written consent, such consent not to be unreasonably withheld,
delayed, or conditioned. Each Party will have the sole responsibility, at its
cost and in its sole discretion, for defending any such allegations or claims
made against it.
6.4 Limitation on Reporting Obligations. Ligand acknowledges and agrees that (a)
Palvella shall not be in breach of any of its obligations under this Agreement
for failing to disclose any information of a Third Party that is not expressly
required to be disclosed under this Agreement, including notices, correspondence
or reports, that Palvella is not permitted to disclose under its confidentiality
obligations to such Third Party, and (b) Ligand may be excluded from access to
any information or material if Palvella determines in good faith that such
exclusion is reasonably necessary to preserve the attorney-client privilege or
other similar privilege; provided that Palvella will notify Ligand of any such
exclusion and, at Ligand’s request, will enter into a common interest agreement
or similar agreement that will permit disclosure of such information or material
while preserving the attorney-client privilege or other similar privilege.
6.5 Patent Marking. Palvella will include in all package inserts for all
Products in each country in the Territory in which Products are commercialized a
patent notice that includes the patent numbers of all Palvella Patents that
Cover such Product, its method of manufacture or use in such country.
ARTICLE 7  
TERM AND TERMINATION

7.1 Term and Expiration. The term of this Agreement will commence on the
Effective Date, and will continue for as long as payments are due or payable
under this Agreement, or until such date as this Agreement is sooner terminated
in accordance with Section 7.2 or 7.3 or by mutual written consent of the
Parties (the “Term”).
7.2  Termination by Ligand. Ligand may terminate this Agreement for any or no
reason upon ninety (90) days prior written notice to Palvella.
7.3 Termination for Material Breach.
7.3.1 If Ligand believes that Palvella is in material breach of this Agreement,
then Ligand may deliver notice of such breach to Palvella. In such notice Ligand
will identify with specificity the alleged breach and the actions or conduct
that it wishes Palvella to take for an acceptable and prompt cure of such
breach; provided that such identified actions will not be binding upon Palvella
with respect to the
22

--------------------------------------------------------------------------------

actions that it may need to take to cure such breach. Palvella will have ninety
(90) days to cure such breach. If Palvella fails to cure such breach within such
cure period, Ligand may, subject to Section 7.3.2, terminate this Agreement
immediately by providing Palvella a written notice at the end of such cure
period. Notwithstanding the foregoing, if Palvella fails to cure such breach
within such cure period, but within such cure period Palvella is using
commercially reasonable efforts to cure such breach, then Ligand may not
terminate this Agreement for so long as Palvella is using commercially
reasonable efforts to cure such breach.
7.3.2 Notwithstanding the foregoing, if Palvella disputes in good faith the
existence or materiality of such breach and provides notice to Ligand of such
dispute within such cure period, Ligand will not have the right to terminate
this Agreement in accordance with this Section 7.3 unless and until it has been
determined in accordance with Article 11 that this Agreement was materially
breached by Palvella and Palvella failed to cure such breach within the
applicable cure period. It is understood and acknowledged that during the
pendency of such a dispute, all of the terms and conditions of this Agreement
will remain in effect and the Parties will continue to perform all of their
respective obligations hereunder. The Parties further agree that any payments
that are made by one Party to the other Party pursuant to this Agreement pending
resolution of the dispute will be promptly refunded if a court or arbitrator
determines pursuant to Article 11 that such payments are to be refunded by one
Party to the other Party.
7.4 Continuing Obligations. Upon expiration or termination of this Agreement:
(a) neither Party will be relieved of any obligation that accrued prior to the
effective date of such termination and (b) all amounts due or payable to Ligand
that were accrued prior to the effective date of termination will remain due and
payable; provided that the foregoing will not be deemed to limit Palvella’s
indemnification obligations under this Agreement for acts or omissions occurring
prior to the effective date of such termination that are the subject of such
indemnification even if the indemnification amount cannot be accrued or
determined as of the effective date of such termination.
7.5 Retention of Payments. Upon expiration or termination of this Agreement,
Ligand will have the right to retain all amounts previously paid to Ligand by
Palvella.
7.6 Survival. Expiration or termination of this Agreement for any reason will
not (a) release any Party from any obligation that has accrued prior to the
effective date of such expiration or termination, (b) preclude any Party from
claiming any other damages, compensation, or relief that it may be entitled to
upon such expiration or termination, or (c) terminate any right to obtain
performance of any obligation provided for in this Agreement that will survive
expiration or termination. Without limiting the foregoing, upon expiration or
termination of this Agreement, the rights and obligations of the Parties under
Sections 7.4, 7.5, and this Section 7.6 and Articles 1, 5 (for the term set
forth in Section 5.1), 8, 10, 11, and 12 will survive such expiration or
termination.

23

--------------------------------------------------------------------------------

ARTICLE 8  
INDEMNITY

8.1 Palvella Indemnity Obligations. Palvella will defend Ligand, its Affiliates,
and their respective directors, officers, employees, contractors, and agents
(collectively, the “Indemnitees”), and will indemnify and hold harmless the
Indemnitees, from and against any liabilities, losses, costs, damages, fees, or
expenses incurred by such Indemnitees, and reasonable attorney’s fees and other
legal expenses with respect thereto, (“Losses”) arising out of any allegation,
claim, action, lawsuit, or other proceeding (“Claims”) brought against any
Indemnitee to the extent directly resulting from or relating to: (a) any breach
by Palvella of any of its representations, warranties, covenants, or obligations
pursuant to this Agreement, (b) research, Development, manufacturing,
Commercialization, transfer, importation or exportation, labeling, handling or
storage, or use of or other exploitation of any Product by or on behalf of
Palvella, its Affiliates, Licensees, distributors, or contractors, including
without limitation Claims brought following the Effective Date based on product
liability, bodily injury, risk of bodily injury, death, or property damage, (c)
any allegations of infringement or misappropriation of the intellectual property
of any Third Party, (d) the gross negligence or willful misconduct, or (e) any
violation of Applicable Law by Palvella, its Affiliates, or Licensees; except in
any such case to the extent such Losses and Claims directly result from: (i) the
gross negligence or willful misconduct of Ligand, (ii) any breach by Ligand of
any of its representations, warranties, covenants, or obligations pursuant to
this Agreement, or (iii) any violation of Applicable Law by Ligand.
8.2 Procedure. If any Indemnitee intends to claim indemnification under this
Article 8, the Indemnitee will promptly notify Palvella in writing of any Claim
in respect of which the Indemnitee intends to claim such indemnification, and
Palvella will assume the defense thereof with counsel selected by Palvella and
reasonably acceptable to the Indemnitee; provided, however, that an Indemnitee
will have the right to retain its own counsel, with the fees and expenses to be
paid by the Indemnitee, if representation of such Indemnitee by the counsel
retained by Palvella would be inappropriate due to actual or potential differing
interests between such Indemnitee and any other Party represented by such
counsel in such proceedings. Palvella will have the right to control the defense
of, and settle, dispose of or compromise any Claims for which it is providing
indemnification under this Article 8; provided that the prior written consent of
the Indemnitee (which will not be unreasonably withheld, delayed, or
conditioned) will be required in the event any such settlement, disposition or
compromise would adversely affect the interests of the Indemnitee. The failure
to deliver notice to Palvella within a reasonable time after the commencement of
any such action, to the extent prejudicial to Palvella’s ability to defend such
action, will relieve Palvella of any liability to the Indemnitee under this
Article 8, but the omission to so deliver notice to Palvella will not relieve it
of any liability that it may have to any Indemnitee otherwise than under this
Article 8. The Indemnitee under this Article 8, its employees, and its agents,
will cooperate with Palvella and its legal representatives in the investigation
of any Claim covered by this indemnification.
ARTICLE 9  
REPRESENTATIONS, WARRANTIES, AND COVENANTS

24

--------------------------------------------------------------------------------

9.1 Mutual Representations and Warranties. Each Party represents and warrants to
the other Party that:
9.1.1 it has the requisite corporate power and authority to enter into and
perform its obligations under this Agreement;
9.1.2 it has full legal power to extend the rights granted to the other under
this Agreement;
9.1.3 it is not aware of any impediment that would inhibit its ability to
perform the terms and conditions imposed on it by this Agreement; and
9.1.4 it has taken all necessary action on its part required to authorize the
execution and delivery of this Agreement.
9.2 Further Representations and Warranties, and Covenants, of Palvella. Palvella
represents and warrants as of the Effective Date, and Palvella covenants, that:
9.2.1 it has enforceable written agreements with all of its employees,
consultants, or independent contractors who receive Confidential Information
under this Agreement obligating them to keep such information confidential and
to use such information only as permitted in this Agreement, and assigning to
Palvella ownership of all intellectual property rights created in the course of
their employment;
9.2.2 as of the Effective Date, it has the full right to grant the rights to
receive payments granted to Ligand under this Agreement, and is not currently
bound by any agreement with any Third Party, or by any outstanding order,
judgment, or decree of any court or administrative agency, that restricts it
from granting to Ligand the rights as set forth in this Agreement;
9.2.3 it has not granted as of the Effective Date any right, option, license or
interest in or to any Palvella Patents or Regulatory Filings that is in conflict
with the rights granted to Ligand under this Agreement; and it has not granted,
or permitted to be attached, any lien, security interest, or other encumbrance
with respect to the Palvella Patents or Regulatory Filings;
9.2.4 During the Term, Palvella will not create, incur, assume or suffer to
exist any lien, security interest, or other encumbrance on the Palvella Patents
or Regulatory Filings, except to the extent that such lien, security interest,
or encumbrance does not have an adverse effect on the interest of Ligand in
PTX-022, including the right to receive payments and related information under
this Agreement;
9.2.5 Palvella has no Knowledge of any infringement or misappropriation by any
Third Party of any of the Palvella Patents or Regulatory Filings as of the
Effective Date;
9.2.6 to Palvella’s Knowledge, Palvella solely owns the Palvella Patents
existing as of the Effective Date, including without limitation all patents and
patent applications set forth on Appendix B, and such ownership has been duly
recorded with the PTO or corresponding Governmental Authorities;
9.2.7 Appendix B contains a true and complete list of all patents and patent
applications of the Palvella Patents as of the Effective Date;

25

--------------------------------------------------------------------------------

9.2.8 Palvella has not utilized and will not utilize, in the Development or
Commercialization of a Product, any Person that at such time, to Palvella’s
Knowledge, is debarred by FDA or other Regulatory Authority;
9.2.9 To Palvella’s Knowledge, Palvella has obtained, and during the Term will
maintain, all licenses, authorizations, and permissions necessary under
Applicable Law for meeting and performing its obligations under this Agreement
and all such licenses, authorizations, and permissions are in full force and
effect;
9.2.10 To Palvella’s Knowledge, all of Palvella’s activities related to its use
of Palvella Patents, and the Development and Commercialization of the Products
comply in all material respects with Applicable Laws, and Palvella will use good
faith efforts in compliance in all material respects with Applicable Laws during
the Term;
9.2.11 Palvella has not incurred, and does not presently intend to incur, debts,
liabilities, or other obligations beyond its ability to pay such debts,
liabilities, or other obligations as they become absolute and matured. Palvella
is not subject to any Bankruptcy Event, and no action has been taken or is
intended by Palvella or, to its Knowledge, any other Person, to make Palvella
subject to a Bankruptcy Event;
9.2.12 Palvella shall provide Ligand with written notice as promptly as possible
(but in no event more than [***]) after acquiring Knowledge of the occurrence of
a Bankruptcy Event in respect of Palvella;
9.2.13 the claims and rights of Ligand created by this Agreement to receive the
payments set forth in Article 4 are not and shall not be subordinated to any
creditor of Palvella or any other Person (other than as a result of Ligand’s own
election);
9.2.14 Palvella and, to its Knowledge, its Affiliates and Licensees and their
respective employees and contractors have not, and Palvella and its Affiliates
will not, and will use good faith efforts to cause its Licensees and their
respective employees and contractors to not, directly or indirectly through
Third Parties, pay, promise, or offer to pay, or authorize the payment of, any
money or give any promise or offer to give, or authorize the giving of anything
of value to a Public Official or Entity or other Person for purpose of obtaining
or retaining business for or with, or directing business to, any Person,
including without limitation Ligand or Palvella. Without any limitation to the
foregoing, Palvella and its Affiliates and Licensees and their respective
employees and contractors have not, and Palvella and its Affiliates will not,
and will use good faith efforts to cause its Licensees and their respective
employees and contractors to not, directly or indirectly promise, offer, or
provide any corrupt payment, gratuity, emolument, bribe, kickback, illicit gift,
or hospitality or other illegal or unethical benefit to a Public Official or
Entity or any other Person;

_______________________________
[***] Certain information on this page has been omitted and filed separately
with the Commission. Confidential treatment has been requested with respect to
the omitted portions.

26

--------------------------------------------------------------------------------

9.2.15 Palvella is aware of all applicable anti-corruption and anti-bribery
laws, including without limitation the FCPA, and all applicable anti-corruption
laws in effect in the countries in which Palvella conducts or will conduct
business. Palvella and its Affiliates will not, and Palvella will use good faith
efforts to cause its Licensees and their respective employees and contractors to
not, cause any Indemnitees to be in violation of the FCPA, Export Control Laws,
or any other Applicable Laws;
9.2.16 Palvella and its Affiliates will fully cooperate and will use good faith
efforts to cause its Licensees and their respective employees, contractors, and
subcontractors to cooperate fully with the Indemnitees in ensuring compliance
with the FCPA, Export Control Laws, and all other Applicable Laws. During the
Term, Palvella will provide Ligand with such due diligence information relating
to compliance with the FCPA, Export Control Laws, and other Applicable Laws by
Palvella and its Affiliates, subcontractors, and Licensees and their respective
principals, directors, officers, employees, representatives, and contractors, as
Ligand may reasonably request; and
9.2.17 Palvella will promptly notify Ligand if Palvella has any information or
reasonable belief that there may be a violation of the FCPA, Export Control
Laws, or any other Applicable Law in connection with the performance of this
Agreement or the sale of the Product in the Territory.
9.3 Further Representations and Warranties of Ligand. Ligand represents and
warrants that, as of the Effective Date, Ligand is an Accredited Investor.
ARTICLE 10 
DISCLAIMER; LIMITATION OF LIABILITY
10.1 DISCLAIMER. EXCEPT AS PROVIDED UNDER ARTICLE 9, EACH PARTY EXPRESSLY
DISCLAIMS ANY AND ALL WARRANTIES OF ANY KIND, EXPRESS OR IMPLIED, INCLUDING
WITHOUT LIMITATION THE WARRANTIES OF DESIGN, MERCHANTABILITY, FITNESS FOR A
PARTICULAR PURPOSE, NONINFRINGEMENT OF THE INTELLECTUAL PROPERTY RIGHTS OF THIRD
PARTIES, OR ARISING FROM A COURSE OF DEALING, USAGE OR TRADE PRACTICES, IN ALL
CASES WITH RESPECT THERETO.
10.2 LIMITATION OF LIABILITY.
10.2.1 NEITHER PARTY WILL BE LIABLE FOR INDIRECT, INCIDENTAL, CONSEQUENTIAL,
SPECIAL, EXEMPLARY, PUNITIVE, OR MULTIPLE DAMAGES ARISING IN CONNECTION WITH
THIS AGREEMENT OR THE EXERCISE OF ITS RIGHTS OR PERFORMANCE OF ITS OBLIGATIONS
HEREUNDER, OR FOR LOST PROFITS OR LOSS OF USE ARISING FROM OR RELATING TO ANY
BREACH OF THIS AGREEMENT, REGARDLESS OF ANY NOTICE OF SUCH DAMAGES.
10.2.2 NOTWITHSTANDING ANYTHING IN THIS AGREEMENT TO THE CONTRARY, SECTION
10.2.1 WILL NOT LIMIT OR RESTRICT (A) DAMAGES AVAILABLE FOR BREACHES OF
CONFIDENTIALITY OBLIGATIONS UNDER ARTICLE 5, (B) THE INDEMNIFICATION OBLIGATIONS
UNDER ARTICLE 8, OR (C) THE OBLIGATIONS TO PAY MILESTONE PAYMENTS AND ROYALTIES
UNDER SECTIONS 4.2 AND 4.3.

27

--------------------------------------------------------------------------------

10.3 No Assumed Obligations. Notwithstanding any provision in this Agreement,
Ligand is not assuming any liability or obligation of Palvella or any of
Palvella’s Affiliates of whatever nature, whether presently in existence or
arising or asserted hereafter. All such liabilities and obligations shall be
retained by and remain liabilities and obligations of Palvella or its
Affiliates, as the case may be.
ARTICLE 11  
DISPUTE RESOLUTION

11.1 Resolution by Senior Executives. The Parties will seek to settle amicably
any and all disputes or differences arising out of or in connection with this
Agreement. Any dispute between the Parties will be promptly presented to the
Chief Executive Officer of Palvella and the Chief Executive Officer of Ligand,
or their respective designees, for resolution. Such officers, or their
designees, will attempt in good faith to promptly resolve such dispute.
Notwithstanding the foregoing, either Party may seek equitable or interim relief
or provisional remedy in any court of competent jurisdiction to enforce its
rights under this Agreement, including without limitation injunctive relief and
specific performance, without having to prove actual damages or post a bond. If
the Chief Executive Officers of the Parties, or their respective designees, are
unable to resolve a given dispute within thirty (30) days of the matter being
referred to them, either Party may have the dispute adjudicated in accordance
with Section 11.2.
11.2 Applicable Law and Venue. This Agreement will be governed by, enforced, and
will be construed in accordance with the laws of the State of New York, United
States of America without regard to any Applicable Law, rule, or principle that
would result in the application of the laws of any other jurisdiction. All
actions and proceedings arising out of or relating to this Agreement will be
heard and determined exclusively in any New York State or federal court sitting
in the Southern District of New York, and each Party hereby irrevocably consents
to personal jurisdiction and venue in, and agrees to service of process issued
or authorized by, such court in any such action or proceeding and irrevocably
waive any defense of an inconvenient forum to the maintenance of any such action
or proceeding. Notwithstanding the foregoing, either Party may seek injunctive
relief in any court in any jurisdiction where appropriate.
ARTICLE 12  
MISCELLANEOUS

12.1 Assignment. This Agreement may not be assigned or otherwise transferred by
either Party without the consent of the other Party, which consent will not be
unreasonably withheld, delayed, or conditioned; provided, however, that either
Party may, without such consent, assign this Agreement together with all of its
rights and obligations hereunder to its Affiliates, or to a successor in
interest in connection with the transfer or sale of all or substantially all of
its business to which this Agreement relates, or in the event of a Change of
Control, subject to the assignee agreeing to be bound by the terms of this
Agreement and, if Palvella is the assigning Party, guarantees or similar or
better credit support being provided, as necessary, to ensure that Ligand has
substantially identical credit recourse. Any purported assignment in violation
of the preceding sentences will be void. Any permitted assignee or successor
will assume and be bound by all obligations of its assignor or predecessor under
this Agreement.

28

--------------------------------------------------------------------------------

12.2 Severability. If any provision of this Agreement is held to be invalid or
unenforceable, all other provisions will continue in full force and effect, and
the Parties will substitute for the invalid or unenforceable provision a valid
and enforceable provision which conforms as nearly as possible with the original
intent of the Parties.
12.3 Notices. Any notice or other communication to a Party pursuant to this
Agreement will be sufficiently made or given on the date it was sent; provided
that such notice or other communication is sent by first class certified or
registered mail, postage prepaid, or is sent by next day express delivery
service, addressed to it at its address in this Section 12.3, below, or to such
other address as the Party to whom notice is to be given may have furnished to
the other Party in writing in accordance herewith.
If to Ligand:
Ligand Pharmaceuticals, Inc.
3911 Sorrento Valley Boulevard, Suite 110 
San Diego, California 92121, U.S.A.
Attention: Chief Financial Officer

With a copy to (which alone will not constitute notice):

Ligand Pharmaceuticals, Inc.
3911 Sorrento Valley Boulevard, Suite 110 
San Diego, California 92121, U.S.A.
Attention: General Counsel

If to Palvella, to:

Palvella Therapeutics, Inc.
125 Strafford Avenue, Suite #360 
Wayne, PA 19087
Attention: Wes Kaupinen, President and CEO

With a copy to (which alone will not constitute notice):

Hogan Lovells US LLP
100 International Drive, Suite 2000 
Baltimore, MD 21202
Attention: Asher M. Rubin

12.4 Expenses. Except as expressly set forth in this Agreement or as may be
specifically agreed to in writing by Palvella and Ligand, each Party will be
responsible for all costs and expenses it incurs in connection with this
Agreement.
12.5 Headings. The headings of Articles and Sections of this Agreement are for
ease of reference only and will not affect the meaning or interpretation of this
Agreement in any way.

29

--------------------------------------------------------------------------------

12.6 Waiver. The failure of either Party in any instance to insist upon the
strict performance of the terms of this Agreement will not be construed to be
waiver or relinquishment of any of the terms of this Agreement, either at the
time of the Party’s failure to insist upon strict performance or at any time in
the future, and such terms will continue in full force and effect.
12.7 Counterparts; Electronic Delivery. This Agreement and any amendment may be
executed in one or more counterparts (including without limitation by way of PDF
or electronic transmission), each of which will be deemed an original, but all
of which together will constitute one and the same instrument. When executed by
the Parties, this Agreement will constitute an original instrument,
notwithstanding any electronic transmission, storage and printing of copies of
this Agreement from computers or printers. For clarity, PDF signatures will be
treated as original signatures.
12.8 Use of Names. Neither Party will, without prior written consent of the
other Party, use the name or any trademark or trade name owned by the other
Party, or owned by an Affiliate of the other Party, in any publication,
publicity, advertising, or otherwise, except as expressly permitted by Article
5.
12.9 Independent Contractors. Nothing contained in this Agreement will be deemed
to constitute a joint venture, partnership, or employer-employee relationship
between Ligand and Palvella, or to constitute one as the agent of the other.
Neither Party will be entitled to any benefits applicable to employees of the
other Party. Both Parties will act solely as independent contractors, and
nothing in this Agreement will be construed to make one Party an agent,
employee, or legal representative of the other Party for any purpose or to give
either Party the power or authority to act for, bind, or commit the other Party.
12.10 Entire Agreement. This Agreement, together with the Appendices attached
hereto, constitutes the entire agreement and understanding between the Parties
with respect to the subject matter hereof, and supersedes all prior or
contemporaneous proposals, oral or written, confidentiality agreements, and all
other communications between the Parties with respect to such subject matter,
including without limitation the Prior CDA.
12.11 Modifications. The terms and conditions of this Agreement may not be
amended or modified, except in writing signed by both Parties.
12.12 Exports. The Parties acknowledge that the export of technical data,
materials, or products is subject to the exporting Party receiving any necessary
export licenses and that the Parties cannot be responsible for any delays
attributable to export controls which are beyond the reasonable control of
either Party. Palvella and Ligand agree not to export or re-export, directly or
indirectly, any information, technical data, the direct product of such data,
samples, or equipment received or generated under this Agreement in violation of
any applicable export control laws.
12.13 Further Assurances. Each Party agrees to do and perform all such further
reasonable acts and things and will execute and deliver such other agreements,
certificates, instruments, and documents necessary to carry out the intent and
accomplish the purposes of this Agreement.
12.14 Interpretation.
12.14.1 This Agreement was prepared in the English language, which language will
govern the interpretation of, and any dispute regarding, the terms of this
Agreement.

30

--------------------------------------------------------------------------------

12.14.2 Each of the Parties acknowledges and agrees that this Agreement has been
diligently reviewed by and negotiated by and between them, that in such
negotiations each of them has been represented by competent counsel and that the
final agreement contained herein, including without limitation the language
whereby it has been expressed, represents the joint efforts of the Parties and
their counsel. Accordingly, in the event an ambiguity or a question of intent or
interpretation arises, this Agreement will be construed as if drafted jointly by
the Parties and no presumption or burden of proof will arise favoring or
disfavoring any Party by virtue of the authorship of any provisions of this
Agreement.
12.14.3 The definitions of the terms herein will apply equally to the singular
and plural forms of the terms defined. Whenever the context may require, any
pronoun will include the corresponding masculine, feminine, and neuter forms.
The word “any” will mean “any and all” unless otherwise clearly indicated by
context.
12.14.4 Unless the context requires otherwise, (a) any definition of or
reference to any agreement, instrument, or other document herein will be
construed as referring to such agreement, instrument, or other document as from
time to time amended, supplemented, or otherwise modified (subject to any
restrictions on such amendments, supplements or modifications set forth herein
or therein), (b) any reference to any Applicable Laws herein will be construed
as referring to such Applicable Laws as from time to time enacted, repealed, or
amended, (c) any reference herein to any Person will be construed to mean the
Person’s successors and assigns (after any such succession or assignment),
(d) the words “herein”, “hereof” and “hereunder”, and words of similar import,
will be construed to refer to this Agreement in its entirety and not to any
particular provision hereof, and (e) all references herein to Articles,
Sections, or Appendices, unless otherwise specifically provided, will be
construed to refer to Articles, Sections, and Appendices of this Agreement.
12.14.5 References to sections of the Code of Federal Regulations and to the
United States Code will mean the cited sections, as these may be amended from
time to time.
12.15 Force Majeure Event. Except for the payment of money, neither Party will
be in breach or default, nor will either Party be liable or responsible to the
other Party for losses or damages, nor will either Party have the right to
terminate this Agreement, for any breach, default or delay by the other Party
that is attributable to an event beyond their reasonable control, including
without limitation acts of God, acts of government (including without limitation
injunctions), fire, flood, earthquake, strike, lockout, labor dispute, breakdown
of plant, shortage of equipment or supplies, loss or unavailability of
manufacturing facilities or materials, casualty or accident, stoppage or
interruption of transportation or utilities, civil commotion, acts of public
enemies, acts of terrorism or threat of terrorist acts, blockage or embargo and
the like (each, a “Force Majeure Event”); provided, however, that such Party
will use commercially reasonable efforts to avoid and/or minimize the impact of
such occurrence, and give prompt written notice of any Force Majeure Event to
the other Party.
[Signature Page Follows] 

31

--------------------------------------------------------------------------------

IN WITNESS WHEREOF, each of the Parties has caused its duly authorized officer
to execute and deliver this Agreement as of the Effective Date.

LIGAND PHARMACEUTICALS, INC.

By:  /s/ Matthew Korenberg  
Name: Matthew Korenberg   
Title: Chief Financial Officer and EVP Finance

PALVELLA THERAPEUTICS, INC.

By:  /s/ Wesley H. Kaupinen  
Name: Wesley H. Kaupinen  
Title: President & CEO   

[Signature Page to Development Funding and Royalties Agreement]

1

--------------------------------------------------------------------------------

Appendix A
PTX-022 

PTX-022 is a novel, [***] high-strength rapamycin topical [***] formulation
[***], optimized for dermal targeting, which is the subject of clinical
development pursuant to FDA IND No. 117347.

 

_______________________________
[***] Certain information on this page has been omitted and filed separately
with the Commission. Confidential treatment has been requested with respect to
the omitted portions.

2

--------------------------------------------------------------------------------

Appendix B
Palvella Patents 
[***]

_____________________________
[***] Certain information on this page has been omitted and filed separately
with the Commission. Confidential treatment has been requested with respect to
the omitted portions.

3

--------------------------------------------------------------------------------

Appendix C

Development Plan

•Secure FDA Fast Track Designation as basis for expedited development and review
(Achieved on November 5, 2018)
o Provides for rolling review of NDA submission
o Opportunity for Priority Review (Priority Review designation means FDA's goal
is to take action on an NDA within 6 months, compared to 10 months under
standard review)
•[***]

______________________________
[***] Certain information on this page has been omitted and filed separately
with the Commission. Confidential treatment has been requested with respect to
the omitted portions.

4

--------------------------------------------------------------------------------

Appendix D

Development Budget

[***]

_________________________
[***] Certain information on this page has been omitted and filed separately
with the Commission. Confidential treatment has been requested with respect to
the omitted portions.
5