Exhibit 10.1

NEITHER THIS NOTE NOR ANY SECURITIES WHICH MAY BE ISSUED UPON CONVERSION HEREOF
HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR REGISTERED
OR OTHERWISE QUALIFIED UNDER ANY STATE OR OTHER SECURITIES LAW. NEITHER THIS
NOTE NOR ANY SUCH SECURITIES MAY BE SOLD OR OFFERED FOR SALE IN THE ABSENCE OF
AN EFFECTIVE REGISTRATION STATEMENT UNDER SAID ACT AND REGISTRATION OR OTHER
QUALIFICATION UNDER ANY APPLICABLE STATE OR OTHER SECURITIES LAWS, OR AN OPINION
OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION OR OTHER
QUALIFICATION IS NOT REQUIRED.

March 20, 2007

CONVERTIBLE NOTE

FOR VALUE RECEIVED, Avicena Group, Inc., a Delaware corporation (the “COMPANY”),
hereby unconditionally promises to pay to the order of THE BIOTECHNOLOGY
VENTURES (III) CAPITAL TRUST, a trust organized under the laws of the British
West Indies (“LENDER”), at c/o Behring International, P.O. Box 747, Nassau,
Bahamas or such other address given to the Company by Lender, the principal sum
of Three Million Five Hundred Thousand ($3,500,000) Dollars, or so much thereof
as may be advanced in accordance with the terms of this Note, in lawful money of
the United States of America, together with interest (calculated on the basis of
a 360-day year) on the unpaid principal balance from day-to-day remaining,
computed until maturity at the rate per annum which shall from day-to-day be
equal to the lesser of (a) the Applicable Rate (defined below), and (b) the
Maximum Rate (defined below).

1. DEFINITIONS. When used in this Note, the following terms shall have the
respective meanings specified herein or in the section referred to:

“ADJUSTMENT EVENT” is defined in SECTION 8(d)(i) hereof.

“APPLICABLE RATE” means eight percent (8%) per annum.

“BUSINESS DAY” means any day other than a Saturday, Sunday, or other day on
which a bank is authorized to be closed under the laws of California.

“CHANGE OF CONTROL” means the consummation of any transaction or series of any
related transactions (including without limitation, by way of merger) the result
of which is that any “person” (as defined in Section 13(d) of the Exchange Act)
or “group” (as defined in Sections 13(d)(3) and 14(d)(2) of the Exchange Act)
becomes the “beneficial owner” (as defined in Rule 13(d)(3) and 13(d)(5) under
the Exchange Act) of more than fifty percent (50%) of the voting power of the
Common Stock.

“COMMON STOCK” means the Common Stock, par value $0.001 per share, of the
Company.

“COMPANY” means Avicena Group, Inc.

“CONVERSION PRICE” means $5.00 per share as adjusted as provided in SECTION 8(d)
below and as may be reduced pursuant to SECTION 8(k) below.

“CURRENT MARKET PRICE” means, when used with respect to any security as of any
date, the last sale price, regular way, or, in case no such sale takes place on
such date, the closing bid price, regular way, of such security in either case
as reported on the Nasdaq National Market, or, if such security is not listed or
admitted to trading on the Nasdaq National Market, as reported on the Nasdaq
SmallCap Market, or if such security is not listed or admitted to trading on any
national or international securities exchange or the Nasdaq National Market or
the Nasdaq SmallCap Market, the average of the high bid and low asked prices of
such security in the over-the-counter market as reported by the National
Association of Securities Dealers, Inc. Automated Quotations System or such
other system then in use or, if such security is not quoted by any such
organization, the average

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of the closing bid and asked prices of such security furnished by an New York
Stock Exchange member firm selected by the Company. If such security is not
quoted by any such organization and no such New York Stock Exchange member firm
is able to provide such prices, then the Current Market Price of such security
shall be the fair market value thereof as determined in good faith by the Board
of Directors of the Company.

“EVENT OF DEFAULT” is defined in SECTION 4 hereof.

“EXCHANGE ACT” means the Securities Exchange Act of 1934, as amended.

“INTEREST CONVERSION PRICE” means, as of any date, (a) the sum of the Current
Market Price of the Common Stock for each of the twenty (20) Trading Days
immediately preceding such date, divided by (b) twenty (20).

“INTEREST PAYMENT DATE” means (a) each January 1, April 1, July 1 and October 1
of each calendar year during the term of this Note, and (b) the Maturity Date.

“LOAN DOCUMENTS” means this Note and all other documents evidencing Obligation.

“MATURITY DATE” means March 31, 2009 or March 31, 2010, as elected by the Lender
in writing prior to the first advance on the Note.

“MAXIMUM RATE” means the highest non-usurious rate of interest (if any)
permitted from day to day by applicable law.

“NOTE” refers to this Convertible Promissory Note.

“OBLIGATION” shall mean all indebtedness, liabilities, and obligations, of the
Company arising under this Note and the other Loan Documents.

“PERSON” means any individual, corporation, limited liability company,
partnership, joint venture, association, joint-stock company, trust, charitable
foundation, unincorporated organization, government or any agency or political
subdivision thereof, or any other entity.

“REGISTRATION RIGHTS AGREEMENT” means that certain Registration Rights Agreement
dated of even date hereof, between Lender and the Company.

“SEC” means the Securities and Exchange Commission and any successor thereof.

“TRADING DAY” means each Monday, Tuesday, Wednesday, Thursday, and Friday, other
than any day on which securities are not traded on the applicable securities
exchange or in the applicable securities market.

2. ADVANCES; PAYMENT.

(a) ADVANCES.

So long as no Event of Default has occurred and the Company, then at the request
of the Company and before the Maturity Date on least three (3) days’ prior
written notice, Lender shall lend to the Company, in multiple advances, an
amount not to exceed in the aggregate $3,500,000 (the “ADVANCES”). Each Advance
shall be in the amount of $200,000, provided that an Advance may only be made if
the Company’s cash balance is less than $300,000. Notwithstanding the foregoing,
the Lender may advance the remaining available balance of the Note at any time.

(b) INTEREST AND PRINCIPAL PAYMENTS. The unpaid principal of, and interest on,
this Note shall be due and payable as follows:

(i) Interest, computed as aforesaid, shall be due and payable quarterly as it
accrues on each Interest Payment Date, commencing on July 1, 2007; and

(ii) the unpaid principal of, and interest on, this Note shall be finally due
and payable on the Maturity Date.

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(c) LENDER’S RIGHT TO CONVERT INTEREST PAYMENTS INTO COMMON STOCK. Lender may,
at its election, cause the accrued interest on this Note as of any date to be
converted into the number of Shares of Common Stock obtained by dividing
(i) such unpaid accrued interest by (ii) the Interest Conversion Price; provided
that (A) Lender shall notify the Company in writing of its election to cause a
conversion under this SECTION 2(c) at least thirty (30) days prior to the date
such interest is to be converted into Shares of Common Stock, and (B) if any
fractional share of the Common Stock would be issuable upon the conversion of
any portion of the accrued interest on this Note, then the Company shall pay a
cash adjustment therefor in respect of such fractional share equal to the
product of (x) the percentage representing such fractional share, and (y) the
Interest Conversion Price.

(d) VOLUNTARY PREPAYMENT. The Company reserves the right, upon ten (10) days’
prior written notice to Lender, to prepay the outstanding principal balance of
this Note, in whole or in part, at any time and from time to time. All
prepayments shall be made together with payment of interest accrued on the
amount of principal being prepaid through the date of such prepayment.

(e) PAYMENTS GENERALLY. Except as otherwise provided herein, all payments of
principal of and interest on this Note shall be made by the Company to Lender in
federal or other immediately available funds. Should the principal of, or any
installment of the principal of or interest on, this Note become due and payable
on any day other than a Business Day, the maturity thereof shall be extended to
the next succeeding Business Day, and interest shall be payable with respect to
such extension. Payments made to Lender by the Company hereunder shall be
applied first to accrued interest and then to principal.

3. WAIVER. Except as provided herein, the Company waives presentment, demand,
protest, notice of protest and non-payment, or other notice of default, notice
of acceleration and intention to accelerate, or other notice of any kind, and
agrees that its liability under this Note shall not be affected by any renewal
or extension in the time of payment hereof, or in any indulgences, or by any
release or change in any security for the payment of this Note, and hereby
consents to any and all renewals, extensions, indulgences, releases, or changes,
regardless of the number of such renewals, extensions, indulgences, releases, or
changes.

4. EVENTS OF DEFAULT AND REMEDIES. An “EVENT OF DEFAULT” shall exist hereunder
if any one or more of the following events shall occur and be continuing:
(a) the Company shall fail to pay when due any principal of, or interest upon,
this Note or the Obligation and such failure shall continue for five
(5) Business Days after such payment became due; or (b) the Company shall fail
to perform any of the covenants or agreements contained herein or in any other
Loan Document and such failure shall continue unremedied for thirty (30) days
after written notice thereof; or (c) any representation or warranty made by the
Company to Lender herein or in any other Loan Document shall prove to be untrue
or inaccurate in any material respect; or (d) the Company shall (1) apply for or
consent to the appointment of a receiver, trustee, intervener, custodian, or
liquidator of itself or of all or a substantial part of its assets, (2) be
adjudicated bankrupt or insolvent or file a voluntary petition for bankruptcy or
admit in writing that it is unable to pay its debts as they become due, (3) make
a general assignment for the benefit of creditors, (4) file a petition or answer
seeking reorganization or an arrangement with creditors or to take advantage of
any bankruptcy or insolvency laws, or (5) file an answer admitting the material
allegations of, or consent to, or default in answering, a petition filed against
it in any bankruptcy, reorganization, or insolvency proceeding, or take
corporate action for the purpose of effecting any of the foregoing; or (e) an
order, judgment, or decree shall be entered by any court of competent
jurisdiction or other competent authority approving a petition seeking
reorganization of the Company appointing a receiver, trustee, intervener, or
liquidator of the Company, or of all or substantially all of its assets, and
such order, judgment, or decree shall continue unstayed and in effect for a
period of thirty (30) days; or (f) the dissolution or liquidation of the
Company; or (g) a Change of Control; or (h) the Company shall default in the
payment of any indebtedness of such Company in excess of $250,000 individually
or in the aggregate or default shall occur in respect of any note or credit
agreement relating to any such indebtedness and such default shall continue for
more than the period of grace, if any, specified therein; or (i) any final
judgment(s) for the payment of money in excess of the sum of $250,000
individually or in the aggregate shall be rendered against the Company and such
judgment(s) shall not be satisfied or discharged at least ten (10) days prior to
the date on which any of the Company’s assets could be lawfully sold to satisfy
such judgment(s).

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Upon the occurrence of any Event of Default hereunder, then the holder hereof
may, at its option, (i) declare the entire unpaid principal balance and accrued
interest upon the Obligation to be immediately due and payable without
presentment or notice of any kind which the Company waives pursuant to SECTION 3
herein, and/or (ii) pursue and enforce any of Lender’s rights and remedies
available pursuant to any applicable law or agreement; provided, however, in the
case of any Event of Default specified in PARAGRAPH (d) or (e) of this SECTION 4
with respect to the Company, without any notice to the Company or any other act
by Lender, the principal balance and interest accrued on this Note shall become
immediately due and payable without presentment, demand, protest, or other
notice of any kind, all of which are hereby waived by the Company.

5. REPRESENTATIONS AND COVENANTS.

(a) REPRESENTATIONS. The Company represents and warrants to Lender that:

(i) The Company is duly organized and in good standing under the laws of the
state of its incorporation, formation, or organization;

(ii) The Company has full power and authority to enter into this Note and the
other Loan Documents, to execute and deliver the Loan Documents, and to incur
the obligations provided for in the Loan Documents, all of which has been duly
authorized by all necessary action.

(iii) the Loan Documents are the legal and binding obligations of the Company,
enforceable in accordance with their respective terms;

(iv) to the best of the Company’s knowledge, neither the execution and delivery
of this Note and the other Loan Documents, nor consummation of any of the
transactions herein or therein contemplated, nor compliance with the terms and
provisions hereof or thereof, will contravene or conflict with any provision of
law, statute, or regulation to which the Company is subject or any judgment,
license, order, or permit applicable to the Company or any indenture, mortgage,
deed of trust, or other instrument to which the Company may be subject; to the
best of the Company’s knowledge, no consent, approval, authorization, or order
of any court, governmental authority, or third party is required in connection
with the execution, delivery, and performance by the Company of this Note or any
of the other Loan Documents or to consummate the transactions contemplated
herein or therein;

(v) all audited financial statements delivered by the Company to Lender prior to
the date hereof fairly present the financial condition of the Company, and have
been prepared in accordance with generally accepted accounting principles,
consistently applied, and no material adverse change has occurred in the
financial condition or business of the Company since the date of the most recent
financial statements which the Company has delivered to Lender;

(vi) no litigation, investigation, or governmental proceeding is pending, or, to
the knowledge of any of the Company’s officers, threatened against or affecting
the Company, which may result in any material adverse change in the Company’s
business, properties, or operations;

(vii) there is no fact known to the Company that the Company has not disclosed
to Lender in writing which may result in any material adverse change in the
Company’s business, properties, or operations;

(viii) the Company owns all of the assets reflected on the Company’ most recent
balance sheet free and clear of all liens, security interests, or other
encumbrances;

(ix) the principal office, chief executive office, and principal place of
business of each Company is 228 Hamilton Avenue, 3rd Floor, Palo Alto, CA 94301;

(ix) all taxes required to be paid by the Company have in fact been paid;

(x) the Company is not in violation of any material law, ordinance, governmental
rule, or regulation to which it is subject, and is not in material default under
any material agreement, contract, or understanding to which it is a party;

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(xi) the Company and any properties or assets owned by it are not in violation
of, in any material respect, any environmental laws, nor is there existing,
pending, or threatened any investigation or inquiry by any governmental
authority pursuant to any environmental laws, nor is there existing or pending
any remedial obligations under any environmental laws;

(xii) the Company has filed all reports, schedules, forms, statements, and other
documents required to be filed by the Company with the SEC pursuant to the
reporting requirements of the Exchange Act (all of the foregoing filed prior to
the date hereof and all exhibits included therein and financial statements and
schedules thereto and documents incorporated by reference therein being
hereinafter referred to as the “SEC DOCUMENTS”);

(xiii) as of their respective dates, the SEC Documents complied in all material
respects with the requirements of the Exchange Act and the rules and regulations
of the SEC promulgated thereunder applicable to the SEC Documents and none of
the SEC Documents, at the time they were filed with the SEC, contained any
untrue statement of material fact or omitted to state a material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading; and

(xiv) all material agreements of the Company or to which the property or assets
of the Company are subject have been filed as exhibits to the SEC Documents as
required.

(b) AFFIRMATIVE COVENANTS. Until payment in full of the Obligation, the Company
agrees and covenants that the Company shall and shall cause each of the other
Company to:

(i) conduct its business in an orderly and efficient manner consistent with good
business practices and in accordance with all valid regulations, laws, and
orders of any governmental authority and will act in accordance with customary
industry standards in maintaining and operating its assets, properties, and
investments;

(ii) maintain complete and accurate books and records of its transactions in
accordance with generally accepted accounting principles, and, if an Event of
Default exists, will give Lender access during business hours to all books,
records and documents of the Company and permit Lender to make and take away
copies thereof, provided the Lender signs a confidentiality agreement;

(iii) furnish to Lender (i) unless the following are filed with the SEC through
EDGAR and are available to the public through EDGAR, within two (2) Business
Days after the filing thereof with the SEC, a copy of Company’s Annual Reports
on Form 10-KSB, its Quarterly Reports on Form 10-QSB, any Current Reports on
Form 8-K and any registration statements (other than on Form S-8) or amendments
filed pursuant to the Securities Act of 1933, as amended; (ii) on the same day
as the release thereof, facsimile or email copies of all press releases issued
by Company; and (iii) copies of any notices and other information made available
or given to the stockholders of Company generally, contemporaneously with the
making available or giving thereof to the stockholders;

(iv) furnish to Lender, immediately upon becoming aware of the existence of any
condition or event constituting an Event of Default or event which, with the
lapse of time and/or giving of notice would constitute an Event of Default,
written notice specifying the nature and period of existence thereof and any
action which the Company is taking or proposes to take with respect thereto;

(v) promptly notify Lender of: (A) any material adverse change in its financial
condition or business; (B) any default under any material agreement, contract,
or other instrument to which the Company is a party or by which any of its
properties are bound, or any acceleration of any maturity of any indebtedness
owing by the Company; (C) any material adverse claim against or affecting the
Company or any of its properties; and (D) any litigation, or any claim or
controversy which might become the subject of litigation, against the Company or
affecting the Company’s property, if such litigation or potential litigation
might, in the event of an unfavorable outcome, have a material adverse effect on
the Company’s financial condition or business or might cause an Event of
Default;

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(vi) promptly furnish to Lender, at Lender’s reasonable request, such additional
financial or other information concerning assets, liabilities, operations, and
transactions of the Company as Lender may from time to time reasonably request,
subject to restrictions imposed by state and federal securities laws;

(vii) promptly pay all lawful claims, whether for labor, materials, or
otherwise, which might or could, if unpaid, become a lien or charge on any
property or assets of the Company, unless and to the extent only that the same
are being contested in good faith by appropriate proceedings and reserves have
been established therefor;

(viii) maintain on its properties insurance of responsible and reputable
companies in such amounts and covering such risks as is prudent and is usually
carried by companies engaged in businesses similar to that of the Company; the
Company shall furnish Lender, on request, with certified copies of insurance
policies or other appropriate evidence of compliance with the foregoing
covenant;

(ix) comply with all applicable legal requirements of any governmental
authority;

(x) preserve and maintain all licenses, privileges, franchises, certificates,
and the like necessary for the operation of its business; and

(xi) pay and discharge all taxes, assessments, and governmental charges or
levies imposed upon it or upon its income or profits, or upon any property
belonging to it, before such amounts become delinquent;

(c) NEGATIVE COVENANTS. Until payment in full of the Obligation, the Company
covenants that the Company shall not:

(i) use the proceeds of any Advance to pay professional fees; or

(ii) without the prior written consent of Lender (such consent not to be
unreasonably withheld), (A) sell all or substantially all the Company’ assets,
or (B) pay any dividends on any of its outstanding capital stock, or purchase,
redeem, or repurchase any of its capital stock.

(d) REPRESENTATIONS. The Lender represents and warrants to the Company that:

(i) it is (A) an “accredited investor” as defined under the Securities Act, and
the SEC’s Regulation D promulgated thereunder; or (B) not a U.S. person (as
defined in Rule 902(o) of the Securities Act of 1933, as amended (the
“Securities Act”)), is not acquiring the shares of Common Stock purchased
hereunder for the account or benefit of any U.S. person, will resell the shares
of Common Stock purchased hereunder, and the Shares of Common Stock of Common
Stock issuable upon conversion of such shares of Common Stock, only in
accordance with (1) the provisions of Regulation S promulgated under the
Securities Act (“Regulation S”), (2) pursuant to an effective registration
statement under the Securities Act, or (3) pursuant to an available exemption
from registration under the Securities Act, and only in compliance with the
terms and provisions of this Agreement; and agrees not to engage in hedging
transactions unless in compliance with the Securities Act;

(ii) it has carefully considered the resulting answers and all other information
available to the undersigned with respect to the Company, including the
Company’s registration statement on Form SB-2, periodic reports filed with the
Securities and Exchange Commission (the “SEC”), and the risk factors contained
therein;

(iii) it has relied solely upon the investigations of the Company made by or on
behalf of the Lender in evaluating the suitability of an investment in the
Company, and the Lender recognizes that an investment in the Company involves a
high degree of risk;

(iv) it has been advised that the market for Common Stock is thinly traded and
it may be difficult to readily liquidate this investment;

(v) it understands that no securities administrator of any state has made any
finding or determination relating to the fairness of this investment and that no
securities administrator of any state has recommended or endorsed, or will
recommend or endorse, the Note, or the underlying equity of the Company into
which the Note may be converted;

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(vi) it will not attempt to sell, transfer, assign, pledge or otherwise dispose
of all or any portion of the Note or Common Stock unless it is registered under
the Securities Act or unless in the opinion of counsel satisfactory to the
Company an exemption from such registration is available; and

(vii) it has received no general solicitation or general advertising (including
communications published in any newspaper, magazine or other broadcast) and that
no public solicitation or advertisement with respect to the offering of the Note
or Common Stock has been made to it.

6. NO WAIVER. No waiver by Lender of any of its rights or remedies hereunder or
under any other document evidencing or securing this Note or otherwise, shall be
considered a waiver of any other subsequent right or remedy of Lender; no delay
or omission in the exercise or enforcement by Lender of any rights or remedies
shall ever be construed as a waiver of any right or remedy of Lender; and no
exercise or enforcement of any such rights or remedies shall ever be held to
exhaust any right or remedy of Lender.

7. USURY LAWS. Regardless of any provision contained in this Note, Lender shall
never be deemed to have contracted for or be entitled to receive, collect, or
apply as interest on this Note (whether termed interest herein or deemed to be
interest by judicial determination or operation of law) any amount in excess of
the Maximum Rate, and, in the event that Lender ever receives, collects, or
applies as interest any such excess, such amount which would be excessive
interest shall be applied to the reduction of the unpaid principal balance of
this Note, and, if the principal balance of this Note is paid in full, then any
remaining excess shall forthwith be paid to the Company. In determining whether
or not the interest paid or payable under any specific contingency exceeds the
highest Maximum Rate, the Company and Lender shall, to the maximum extent
permitted under applicable law, (a) characterize any non-principal payment
(other than payments which are expressly designated as interest payments
hereunder) as an expense or fee rather than as interest, (b) exclude voluntary
prepayments and the effect thereof, and (c) spread the total amount of interest
throughout the entire contemplated term of this Note so that the interest rate
is uniform throughout such term; provided, that if this Note is paid and
performed in full prior to the end of the full contemplated term hereof, and if
the interest received for the actual period of existence thereof exceeds the
Maximum Rate, if any, then Lender or any holder hereof shall refund to the
Company the amount of such excess, or credit the amount of such excess against
the aggregate unpaid principal balance of all advances made by the Lender or any
holder hereof under this Note at the time in question.

8. CONVERSION RIGHTS.

(a) CONVERSION PRIVILEGE. During the period of time commencing on the date
hereof and continuing until the payment in full of this Note, Lender, at its
option may convert all or any portion of outstanding principal balance of, and
all accrued interest on, this Note into the number of Shares of Common Stock
obtained by dividing (i) the unpaid principal amount of, and interest through
the date of conversion on, this Note to be converted, by (ii) the Conversion
Price.

(b) CONVERSION PROCEDURE. To convert this Note pursuant to this SECTION 8,
Lender must

(i) complete and sign a “Form of Election to Convert” attached hereto as Exhibit
A;

(ii) pay any transfer or similar tax if required by SECTION 8(f); and

(iii) if the conversion is of the entire unpaid principal of, and interest on,
this Note, then surrender this Note to the Company. As promptly as practicable
after delivery of an Election to Convert in accordance with this SECTION 8(b),
the Company shall issue and deliver to Lender (A) a certificate or certificates
for the full number of whole shares of Common Stock issuable upon the conversion
of this Note in accordance with the provisions of this SECTION 8.

(c) CASH PAYMENTS IN LIEU OF FRACTIONAL SHARES. No fractional shares of Common
Stock, scrip representing fractional shares of Common Stock, or Warrants for
fractional shares of Common Stock shall be issued upon conversion of the
principal of, or interest on, this Note. If any fractional share of Common Stock

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would be issuable upon the conversion of any portion of this Note, the Company
shall pay a cash adjustment therefor in respect of such fractional share equal
to the product of (i) the percentage representing such fractional share
multiplied by (ii) the Conversion Price.

(d) ADJUSTMENT OF CONVERSION PRICE.

(i) If the Company shall (A) pay a dividend or other distribution, in Common
Stock, on any class of capital stock of the Company, (B) subdivide the
outstanding Common Stock into a greater number of shares by any means or
(C) combine the outstanding Common Stock into a smaller number of shares by any
means (including, without limitation, a reverse stock split) (any such event
being an “ADJUSTMENT EVENT”), then in each such case the Conversion Price shall
be decreased or increased as follows: the adjusted Conversion Price shall be
equal to the Conversion Price in effect immediately prior to the effective date
of the Adjustment Event, multiplied by a fraction whose numerator is the number
of shares of Common Stock issued and outstanding immediately prior to such
effective date, and whose denominator is the number of such shares outstanding
immediately after such effective date. An adjustment made pursuant to this
SECTION 8(d)(i) shall become effective immediately after the record date for the
determination of stockholders entitled to receive such dividend or distribution
and shall become effective immediately after the effective date of such
subdivision or combination, as the case may be.

(ii) The provisions of this SECTION 8(d) shall similarly apply to all successive
events of the type described in this SECTION 8(d). Notwithstanding anything
contained herein to the contrary, no adjustment in the Conversion Price shall be
required unless cumulative adjustments would require an increase or decrease of
at least 1% in the Conversion Price then in effect; provided, however, that any
adjustments which by reason of this SECTION 8(d) are not required to be made
shall be carried forward and taken into account in any subsequent adjustment.
All calculations under this SECTION 8 shall be made by the Company and shall be
made to the nearest cent and the Company shall be entitled to rely conclusively
thereon. Notwithstanding anything contained in this SECTION 8(d) to the
contrary, the Company shall be entitled to make such reductions in the
Conversion Price, in addition to those required by this SECTION 8(d), if the
Board of Directors of the Company has made a determination that such reduction
would be in the best interests of the Company, which determination shall be
conclusive as it in its discretion shall determine to be advisable in order that
any stock dividends, subdivision of shares, distribution of rights to purchase
stock or securities, or distribution of securities convertible into or
exchangeable for stock hereafter made by the Company to its stockholders shall
not be taxable. Except as provided in this SECTION 8, no adjustment in the
Conversion Price will be made for the issuance of Common Stock or any securities
convertible into or exchangeable for Common Stock or carrying the right to
purchase Common Stock or any securities so convertible or exchangeable. In
addition, no adjustment in the Conversion Price shall be made in the event of
the issuance of Common Stock upon the conversion or exercise of options,
preferred stock or warrants of the Company outstanding on the date hereof,
unless the conversion or exercise price thereof is changed after the date hereof
(other than solely by operation of the anti-dilution provisions hereof); or
pursuant to employee stock option or stock ownership plans, duly adopted by the
Company.

(iii) Whenever the Conversion Price is adjusted as provided herein, the Company
shall promptly provide Lender with written notice of such adjustment setting
forth the Conversion Price in effect after such adjustment and setting forth a
brief statement of the facts requiring such adjustment.

(e) EFFECT OF RECLASSIFICATION, CONSOLIDATION, MERGER, OR SALE. In the event of
(i) any reclassification (including, without limitation, a reclassification
effected by means of an exchange or tender offer by the Company) but excluding a
change in par value, or from par value to no par value, or from no par value to
par value, or as a result of a subdivision or combination), (ii) any
consolidation, merger or combination of the Company with another corporation as
a result of which holders of Common Stock shall be entitled to receive
securities or other property (including cash) with respect to or in exchange for
Common Stock or (iii) any sale or conveyance of the property of the Company as,
or substantially as, an entirety to any other corporation as a result of which
holders of Common Stock shall be entitled to receive securities or other
property (including cash) with respect to or in exchange for Common Stock, then
the Company or the successor or purchasing corporation, as the case may be,
shall enter into an Amended and Restated Note providing that this Note shall be
convertible into the kind and amount of securities or other property (including
cash) receivable

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upon such reclassification, change, consolidation, merger, combination, sale or
conveyance which the Company of this Note would have received if this Note had
been converted immediately prior to such reclassification, change,
consolidation, merger, combination, sale or conveyance. Such Amended and
Restated Note shall provide for adjustments which shall be as nearly equivalent
as may be practicable to the adjustments provided for in this SECTION 8.
Whenever an Amended and Restated Note is entered into as provided herein, the
Company shall promptly provide Lender with an Officer’s Certificate setting
forth a brief statement of the facts requiring such Amended and Restated Note.
The provisions of this SECTION 8 shall similarly apply to all successive events
of the type described in this SECTION 8.

(f) TAXES ON SHARES ISSUED. The issuance of a certificate or certificates on
conversion of this Note shall be made without charge to the Lender for any tax
or charge with respect to the issuance thereof. The Company shall not, however,
be required to pay any tax or charge which may be payable with respect to any
transfer involved in the issuance and delivery of a certificate or certificates
in any name other than that of Lender, and the Company shall not be required to
issue or deliver any such certificate or certificates unless and until the
Person or Persons requesting the issuance thereof shall have paid to the Company
the amount of such tax or charge or shall have established to the satisfaction
of the Company that such tax or charge has been paid.

(g) RESERVATION OF SHARES; SHARES TO BE FULLY PAID; COMPLIANCE WITH GOVERNMENT
REQUIREMENTS. The Company shall reserve, out of its authorized but unissued
Common Stock or its Common Stock held in treasury, sufficient shares of Common
Stock to provide for the conversion of all of this Note.

Before taking any action which would cause an adjustment reducing the Conversion
Price below the then par value, if any, of the Common Stock issuable upon
conversion of this Note, the Company will take all corporate action which may,
in the opinion of its counsel, be necessary in order that the Company may
validly and legally issue Common Stock at such adjusted Conversion Price. The
Company covenants that all Common Stock which may be issued upon conversion of
this Note will, upon issuance, be duly authorized, validly issued, fully paid
and nonassessable and free from all taxes, liens and charges with respect to the
issuance and delivery thereof. The Company covenants that if any Common Stock
issued or delivered upon conversion of this Note hereunder requires registration
with or approval of any governmental authority under any applicable federal or
state law (excluding federal or state securities laws) before such Common Stock
may be lawfully issued, the Company will in good faith and as expeditiously as
possible endeavor to secure such registration or approval, as the case may be.

(h) NOTICE TO LENDER PRIOR TO CERTAIN ACTIONS. In the event that:

(i) the Company shall declare or authorize any event which could result in an
adjustment in the Conversion Price under SECTION 8(D) or require the execution
of an Amended and Restated Note; or

(ii) the Company shall authorize the combination, consolidation or merger of the
Company for which approval of any stockholders of the Company is required, the
sale or transfer of all or substantially all of the assets of the Company or the
voluntary or involuntary dissolution, liquidation or winding-up of the Company
in whole or in part; then, in each such case, the Company shall give or cause to
be given to Lender, as promptly as possible but in any event at least seven
(7) days prior to the applicable date hereinafter specified, a notice stating
the date on which a record is to be taken for the purpose of determining the
holders of outstanding Common Stock entitled to participate in such event, the
date on which such event is expected to become effective or occur and the date
on which it is expected that holders of outstanding Common Stock of record shall
be entitled to surrender their shares, or receive any items, in connection with
such event. Failure to give such notice, or any defect therein, shall not affect
the legality or validity of such event.

(k) REDUCTION IN CONVERSION PRICE AS A RESULT OF EQUITY ISSUANCES. It is
expressly contemplated that after the date hereof and prior to payment in full
of the principal and interest due to Lender hereunder, the Company may, subject
to the limitations contained herein, if any, do one or more of the following:

(i) issue Common Stock at a price which is less than the Conversion Price in
effect on the date of issuance;

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(ii) issue or incur indebtedness that is convertible into Common Stock (either
directly or indirectly) at a price which is less than the Conversion Price in
effect on the date such indebtedness is issued or incurred;

(iii) issue a class of capital stock of the Company that is convertible into
Common Stock (either directly or indirectly) at a price which is less than the
Conversion Price in effect on the date such capital stock is issued; or

(iv) enter into an agreement or arrangement which could result in the ultimate
issuance of Common Stock at a price which is less than the Conversion Price in
effect on the date such agreement or arrangement is entered into.

Each and every time that one or more of the events described in paragraphs
(i) through (iv) occurs, the Conversion Price in effect hereunder on and after
the date of occurrence of such event and until the occurrence of the next such
event shall change to the price at which: (A) such Common Stock is issued with
respect to paragraph (i) above; (B) the indebtedness incurred or issued is
convertible into the Common Stock with respect to paragraph (ii) above; (C) the
class of capital stock of the Company is convertible into Common Stock with
respect to paragraph (iii) above; or (D) such Common Stock of may ultimately be
issued with respect to paragraph (iv) above. In the event more than one of the
events described in paragraphs (i) through (iv) occur simultaneously, the
Conversion Price shall change to the lowest of the Conversion Prices determined
for such simultaneous events hereunder. The foregoing is subject to the
limitation that the amount of the principal payable hereunder to which a change
in the Conversion Price applies shall be limited to an amount equal to the total
of the amounts received by the Company in connection with each event described
in paragraphs (i) through (iv) above after the date hereof.

9. NOTICE. Whenever this Note requires or permits any notice, approval, request,
or demand from one party to another, the notice, approval, request, or demand
must be in writing and shall be deemed to have been given when personally served
or when deposited in the United States mails, registered or certified, return
receipt requested, addressed to the party to be notified at the following
address (or at such other address as may have been designated by written
notice):

 

Lender:    To the address in the first paragraph hereof The Company:    Avicena
Group, Inc.   

228 Hamilton Avenue,

3rd Floor

Palo Alto, CA 94301

10. AMENDMENT. This Note may be amended or modified only by written instrument
duly executed by the Company and Lender.

11. COSTS. If this Note is placed in the hands of an attorney for collection, or
if it is collected through any legal proceeding at law or in equity, or in
bankruptcy, receivership, or other court proceedings, then the Company agrees to
pay all costs of collection, including, but not limited to, court costs and
reasonable attorneys’ fees, including all costs of appeal.

12. SUCCESSORS AND ASSIGNS. This Note shall inure to the benefit of Lender and
its successors and assigns; provided, however, Lender may not (without the prior
written consent of the Company, such consent not to be unreasonably withheld or
delayed and such consent not to be required if an Event of Default exists)
assign or negotiate this Note to any Person.

13. GOVERNING LAW. THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED, INTERPRETED,
AND APPLIED IN ACCORDANCE WITH THE LAWS OF DELAWARE.

14. LIMITATION OF LIABILITY. Anything in this Note to the contrary
notwithstanding, it is specifically provided that the Company shall not have any
personal or corporate liability for the payment of this Note or be liable for a
money judgment or otherwise in the event of an Event of Default; provided,
however, that the

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liability of the Company shall at all times be one hundred percent
(100%) liability for (a) any and all damages, costs, and expenses suffered or
incurred by Lender as a result of, in connection with or relating to any
representation or warranty made by the Company to Lender which shall prove to be
untrue or inaccurate in any material respects, and (b) the costs, expenses, and
fees, including but not limited to, court costs and reasonable attorneys’ fees,
arising in connection with the collection of the Obligation.

15. FINAL AGREEMENT. THIS NOTE REPRESENTS THE FINAL AGREEMENT BETWEEN THE
PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR
SUBSEQUENT AGREEMENTS BETWEEN THE PARTIES (OTHER THAN SUBSEQUENT WRITTEN
AMENDMENTS). THERE ARE NO ORAL AGREEMENTS BETWEEN THE PARTIES.

 

AVICENA GROUP, INC.:

a Delaware corporation

By:

 

/s/ Belinda Tsao Nivaggioli

Name:

 

Belinda Tsao Nivaggioli

Title:

 

Chief Executive Officer

THE BIOTECHNOLOGY VENTURES (III) CAPITAL TRUST:
a trust formed under the laws of the British West Indies

By:

 

/s/ Ronald Wyles

Name:

 

Ronald Wyles

Title:

 

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EXHIBIT A

FORM OF ELECTION TO CONVERT

(To be executed by Lender upon conversion of the Note)

TO: AVICENA GROUP, INC.

The undersigned, holder of that certain Convertible Note in the original
Principal Amount of $3,500,000, dated as of                           , 2007
(the “ Note ”), issued by Avicena Group, Inc. (the “ Company ”), hereby
exercises his/her/its right to convert unpaid principal and accrued but unpaid
interest of the Note, equal to $                    , into Common Stock of the
Company pursuant to the terms of the Note.

Please issue the Common Stock, as applicable, as follows:

 

 

Print or Type Name

 

Social Security or Other Identifying Number

 

Street Address

 

City   State   Zip Code

and deliver it to the above address, unless a different address is indicated
below.

The undersigned hereby warrants and represents that it is (A) an “accredited
investor” as defined under the Securities Act, and the SEC’s Regulation D
promulgated thereunder; or (B) not a U.S. person (as defined in Rule 902(o) of
the Securities Act of 1933, as amended (the “Securities Act”)), is not acquiring
the shares of Common Stock purchased hereunder for the account or benefit of any
U.S. person, will resell the shares of Common Stock purchased hereunder, and the
Shares of Common Stock of Common Stock issuable upon conversion of such shares
of Common Stock, only in accordance with (1) the provisions of Regulation S
promulgated under the Securities Act (“Regulation S”), (2) pursuant to an
effective registration statement under the Securities Act, or (3) pursuant to an
available exemption from registration under the Securities Act, and only in
compliance with the terms and provisions of this Agreement; and agrees not to
engage in hedging transactions unless in compliance with the Securities Act

 

Dated:                       

 

  Signature