Exhibit 10.35

LOGO [g51019image-001.jpg]

March 27, 2006

Hoffmann-La Roche Inc.

F. Hoffmann-La Roche Ltd

Mr. Dennis E. Burns

Hoffmann-La Roche Inc.

340 Kingsland Street

Nutley, New Jersey 07110

Re: Cross License Agreement with Bristol-Myers Squibb Company

Dear Mr. Burns:

This letter confirms our mutual understanding and agreement regarding that
certain Cross License Agreement between Kosan Biosciences Incorporated (“Kosan”)
and Bristol-Myers Squibb Company (“BMS”), effective as of March 24, 2006 (“BMS
Agreement”) as follows. Capitalized terms used but not defined in this letter
have the meanings given in that certain Collaborative Research, Development and
Commercialization Agreement between Kosan and Roche dated as of September 19,
2002 (“Roche Agreement”). Notwithstanding the foregoing, as used herein Net
Sales (with respect to Roche’s, its Affiliates’ or Sublicensees’, Net Sales
under the BMS Agreement and Roche Agreement are identical), Licensed Product and
Cancer Field shall have the meaning set forth in the BMS Agreement.

 

  1. Royalty Payments.

 

  a. Royalty Payments to BMS. As between Roche and Kosan:

 

  (i) Kosan shall be obligated to pay [*] of the royalty obligations due to BMS
based on Roche’s, its Affiliates’ or Sublicensees’ Net Sales of Licensed Product
in the Cancer Field; and

 

  (ii) Roche shall be obligated to pay [*] of the royalty obligations due to BMS
based on Roche’s, its Affiliates’ or Sublicensees’ Net Sales of Licensed Product
in the Cancer Field;

to the extent required to be paid pursuant to the BMS Agreement.

 

CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS,
HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.

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Mr. Dennis E. Burns

March 27, 2006

Page 2

 

  b. Royalty Payments from BMS. As between Roche and Kosan:

 

  (i) Kosan shall receive a [*] share of the royalty payments due to Kosan based
on BMS’, its Affiliates’ or Sublicensees’ Net Sales of Licensed Product in the
Cancer Field; and

 

  (ii) Roche shall receive a [*] share of the royalty obligations due to Kosan
based on BMS, its Affiliates’ or Sublicensees’ Net Sales of Licensed Product in
the Cancer Field.

 

  (iii) Roche shall not receive any percentage of royalty payments made by BMS
based on Net Sales of Licensed Products by BMS, its Affiliates or Sublicensees
outside the Cancer Field.

 

  c. Payments to Sloan-Kettering Institute for Cancer Research (“SKI”). If any
payments must be made to SKI as a result of the BMS Agreement, then Kosan shall
be solely responsible for making any such payments out of its share. In no event
shall any payments to SKI impact upon Roche’s right to receive its [*] share of
the royalties paid by BMS to Kosan.

 

  2. Payment Process.

 

  a. Payments to BMS. The parties may agree to modify the final details of the
payment process, however, it is currently the parties’ intent that for payment
due to BMS based on Net Sales of Licensed Product by Roche, its Affiliates or
Sublicensees in the Cancer Field, after receipt of Roche’s royalty report and
royalty payment pursuant to the Roche Agreement, Kosan will transmit relevant
information from Roche’s royalty report (pursuant to Section 4.4 of the BMS
Agreement) to BMS together with payment of one hundred percent (100%) of the
royalty owed to BMS under the BMS Agreement. Thereafter, Kosan will invoice
Roche for Roche’s [*] share of the royalty payment to BMS. Within thirty
(30) days after receipt of an invoice from Kosan, Roche shall be obligated to
reimburse Kosan in Dollars for Roche’s [*] share of royalties paid to BMS.

 

  b. Payments from BMS. The parties may agree to modify the final details of the
process for royalty payments paid by BMS, however, it is currently the parties’
intent that for all payments due to Kosan under the BMS Agreement, based on Net
Sales of Licensed Product by BMS, its Affiliates or Sublicensees in the Cancer
Field, Kosan will receive one hundred percent (100%) of the payments from BMS.
Within thirty (30) days of receipt of such payment from BMS, Kosan will transmit
to Roche the relevant information from the BMS royalty report together with [*]
of the royalty payments paid by BMS based on Net Sales of Licensed Product by
BMS, its Affiliates or Sublicensees in the Cancer Field.

 

  3. [*] Milestone. Section 4.5 of the Roche Agreement is hereby deleted and
shall be replaced with the following:

 

  a. The BMS Agreement contemplates a settlement process to finally resolve U.S.
Interference No. 105,298 (the “Interference”). Following final resolution of the
Interference, regardless of the outcome, Roche will reimburse Kosan for Kosan’s
Expenses associated with the Interference up to [*] U.S. Dollars [*] by paying
Kosan a single, one-time, lump sum payment. Specifically, within thirty (30)

 

CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS,
HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.

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Mr. Dennis E. Burns

March 27, 2006

Page 3

 

     days of receipt of an invoice from Kosan, Roche shall reimburse Kosan in
Dollars for its Expenses associated with the Interference. “Expenses” shall mean
documented out of pocket costs actually paid by Kosan to third parties in
connection with the Interference, including but not limited to outside counsel
fees, USPTO fees, expert witness fees, fees associated with expert review of
priority documents in the settlement process, and the like.

 

  4. General. In the event of any conflict, inconsistency or incongruity between
any provision of this letter agreement and the Roche Agreement, this letter
agreement shall govern and control. The signatories hereto represent that they
have the requisite power and authority to enter into this letter agreement on
behalf of the respective parties hereto. This letter agreement may be executed
in any number of counterparts, each of which shall be deemed an original, but
all of which together shall constitute one and the same document.

This letter is being provided in triplicate originals. If you are in agreement
with the foregoing, please sign and date where indicated below and return one
signed original to Margaret A. Horn of Kosan. The other two originals are for
your corporate records.

 

Very truly yours,

/s/ Robert G. Johnson, Jr.

Robert G. Johnson, M.D., Ph.D.

Chief Executive Officer

Accepted and Agreed:

 

Hoffmann-La Roche Inc. By:  

/s/ Dennis E. Burns

Name:   Dennis E. Burns Title:   Vice President, Global Head   of Business
Development

 

F. Hoffmann-La Roche Ltd   F. Hoffmann-La Roche Ltd By:   

/s/ Robin Breckenridge

  By:  

/s/ Melanie Frey Wick

Name:    Dr. Robin Breckenridge   Name:   Melanie Frey Wick Title:    Pharma
Partnering   Title:   Authorized Signatory

 

CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS,
HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.