EXHIBIT 10.27

 

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RESEARCH AND DEVELOPMENT OPTION AND LICENSE AGREEMENT

 

BETWEEN

 

MEDICIS PHARMACEUTICAL CORPORATION

 

and

 

ANACOR PHARMACEUTICALS, INC.

 

This RESEARCH AND DEVELOPMENT OPTION AND LICENSE AGREEMENT (the “Agreement”) is
entered into and made effective as of the 9th day of February, 2011 (the
“Effective Date”) by and between Anacor Pharmaceuticals, Inc., a Delaware
corporation having its principal place of business at 1020 East Meadow Circle,
Palo Alto, CA 94303 (“Anacor”), and Medicis Pharmaceutical Corporation, a
Delaware corporation having offices at 7720 North Dobson Road, Scottsdale, AZ
85256 (“Medicis”).  Anacor and Medicis are each referred to herein by name or as
a “Party” or, collectively, as “Parties”.

 

RECITALS

 

WHEREAS, Anacor possesses proprietary technology and know-how related to the
discovery, identification, synthesis and development of boron-based small
molecule drug candidates;

 

WHEREAS, Medicis possesses expertise in the research, development, manufacturing
and commercialization of human pharmaceuticals, and Medicis is interested in
developing such boron-based small molecule compounds as drug products;

 

WHEREAS, Medicis desires to engage in a collaborative effort with Anacor
pursuant to which Anacor will carry out a research and development program to
discover and develop boron-based small molecule compounds directed against the
Target (as defined below), and Medicis will have an option, exercisable at
Medicis’s sole discretion, to further develop and commercialize such compounds
for any and all uses in the Territory (as defined below), all on the terms and
conditions set forth herein; and

 

WHEREAS, upon exercise by Medicis of its option to such compounds, Anacor
desires to grant to Medicis, and Medicis desires to obtain, an exclusive license
under Anacor Exclusively Licensed IP (as defined below) to make, have made, use,
sell, offer for sale and import Products (as defined below) throughout the
Territory on the terms and conditions set forth herein.

 

NOW, THEREFORE, in consideration of the premises and mutual covenants herein
contained, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Parties hereto agree as
follows:

 

ARTICLE 1

 

DEFINITIONS; RULES OF CONSTRUCTION

 

1.1                                 Defined Terms.  As used in this Agreement,
the following terms shall have the meanings set forth in this Article 1 unless
context dictates otherwise:

 

1.1.1                                           “Additional Compound” has the
meaning assigned to such term in Section 2.7.

 

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1.1.2                                           “Additional Target” has the
meaning assigned to such term in Section 2.5.

 

1.1.3                                           “Affiliate” means any Person,
whether de jure or de facto, which directly or indirectly through one (1) or
more intermediaries Controls, is Controlled by or is under common Control with a
Party.

 

1.1.4                                           “Agreement” has the meaning
assigned to such term in the Preamble.

 

1.1.5                                           “Anacor” has the meaning
assigned to such term in the Preamble.

 

1.1.6                                           “Anacor Compound” means any
small molecule compound that (a) (i) is generated or discovered by Anacor during
the Term or (ii) is within Anacor’s existing compound bank, (b) is within the
Field and (c) [ * ].

 

1.1.7                                           “Anacor Compound IP” means, with
respect to an Anacor Compound, the Anacor Compound Know-How and Anacor Compound
Patents, collectively, with respect to such Anacor Compound.

 

1.1.8                                           “Anacor Compound Know-How”
means, with respect to an Anacor Compound, any Information Controlled by Anacor
or its Affiliates that is discovered, developed, invented or created on or prior
to the date on which such Anacor Compound becomes a Collaboration Compound (if
at all) and that relates directly (but not necessarily exclusively) to, or is
directly (but not necessarily exclusively) useful in connection with, the
making, having made, using, selling, offering for sale or importing of such
Anacor Compound.

 

1.1.9                                           “Anacor Compound Patents” means,
with respect to an Anacor Compound, any Patents in the Territory Controlled by
Anacor or its Affiliates that claim inventions conceived or reduced to practice
on or prior to the date on which such Anacor Compound becomes a Collaboration
Compound (if at all) and that (a) claim the composition of matter or method of
making or use of such Anacor Compound, or (b) Cover the making, having made,
using, selling, offering for sale or importing of such Anacor Compound.

 

1.1.10                                     “Anacor Diligence Failure Event” has
the meaning assigned to such term in Section 2.4.1(a).

 

1.1.11                                     “Anacor Exclusively Licensed IP”
means, collectively, (a) Anacor Compound IP with respect to the Medicis
Development Compounds; (b) Anacor Target Patents; (c) Anacor Target Know-How;
(d) Collaboration Compound IP with respect to the Medicis Development Compounds
that is owned or Controlled by Anacor or its Affiliates on the Effective Date or
at any time during the Term (to the extent of Anacor’s ownership or Control
thereof); (e) Medicis Development Compound IP owned or Controlled by Anacor or
its Affiliates on the Effective Date or at any time during the Term (to the
extent of Anacor’s ownership or Control thereof); and (f) to the extent not
included in the foregoing, Anacor Patents with respect to the Medicis
Development Compounds or Products.

 

1.1.12                                     “Anacor IP” means, collectively,
(a) Anacor Compound IP; (b) Anacor Target Patents; (c) Anacor Target Know-How;
(d) Collaboration Compound IP owned or Controlled by Anacor or its Affiliates on
the Effective Date or at any time during the Term (to the extent of Anacor’s
ownership or Control thereof); (e) Medicis Development Compound IP owned or
Controlled by Anacor or its Affiliates on the Effective Date or at any time
during the Term (to the extent of Anacor’s ownership or Control thereof); and
(f) to the extent not included in the foregoing, Anacor Patents.

 

1.1.13                                     “Anacor Patents” means any Patents in
the Territory Controlled by Anacor or its Affiliates on the Effective Date or at
any time during the Term: (a) that are (or were at the relevant time)

 

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Anacor Compound Patents, Anacor Target Patents, Collaboration Compound Patents
or Medicis Development Compound Patents or, (b) to the extent not one of the
foregoing, that (i) claim the composition of matter or method of making or use
of a Medicis Development Compound in the Field, or (ii) Cover the making, having
made, using, selling, offering for sale or importing of a Medicis Development
Compound in the Field.

 

1.1.14                                     “Anacor Target Know-How” means any
Information Controlled by Anacor or its Affiliates on the Effective Date or at
any time during the Term (but excluding Collaboration Know-How) that relates
directly (but not necessarily exclusively) to the Target in the Field or is
reasonably useful for Medicis to perform its obligations or exercise its rights
with respect to such Target in the Field under the Research Collaboration.

 

1.1.15                                     “Anacor Target Patents” means any
Patents in the Territory Controlled by Anacor or its Affiliates on the Effective
Date or at any time during the Term (but excluding Anacor Compound Patents,
Collaboration Compound Patents and Medicis Development Compound Patents) that
claim or Cover the composition or use of the Target in the Field or that would
otherwise be infringed (absent a license as provided herein) by Medicis’s
performance of its obligations or exercise of its rights under the Research
Collaboration.

 

1.1.16                                     “Annual Net Sales” means total Net
Sales in the Territory in a particular calendar year.  A “calendar year” means a
period of twelve (12) consecutive months beginning on January 1 and ending on
December 31.

 

1.1.17                                     “[ * ]” means a compound [ * ].

 

1.1.18                                     “Arbitration Request” has the meaning
assigned to such term in Section 13.2.

 

1.1.19                                     “Back-Up Compound” has the meaning
assigned to such term in Section 2.6.6(d).

 

1.1.20                                     “Back-Up Compound Election Term” has
the meaning assigned to such term in Section 2.6.6(d).

 

1.1.21                                     “BfArM” means the Federal Institute
for Drugs and Medical Devices (Bundesinstitut für Arzneimittel und
Medizinprodukte, BfArM) in Germany.

 

1.1.22                                     “Breaching Party” has the meaning
assigned to such term in Section 12.2.1.

 

1.1.23                                     “Business Day” means a day on which
banking institutions in New York, New York, United States are open for business.

 

1.1.24                                     “Calendar Quarter” means a period of
three (3) consecutive months ending on the last day of March, June, September,
or December, respectively.

 

1.1.25                                     “Candidate Selection Activities”
means, with respect to any Collaboration Compound, the activities conducted to
determine whether such Collaboration Compound meets the Candidate Selection
Criteria.

 

1.1.26                                     “Candidate Selection Activities
Report” has the meaning assigned to such term in Section 2.6.6(a).

 

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BRACKETS, IS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE
24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

 

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1.1.27                                     “Candidate Selection Compound” means
a Collaboration Compound resulting from the Program that the JRC determines
meets all of the Candidate Selection Criteria.

 

1.1.28                                     “Candidate Selection Criteria” means
the criteria for selecting a Candidate Selection Compound, as described in
Section 2.6.4.

 

1.1.29                                     “cGCP” (Good Clinical Practice) means
the current regulations adopted by the FDA or other commonly recognized group or
individual regulatory agency (e.g., EMA, MHLW, MHRA and BfArM) for research
involving human subjects.

 

1.1.30                                     “cGLP” (Good Laboratory Practice)
means the current system of management controls for laboratories and research
organizations to ensure the consistency and reliability of results as outlined
in the Organisation for Economic Co-operation and Development (OECD) Principles
of cGLP and national regulations.

 

1.1.31                                     “cGMP” means current Good
Manufacturing Practices as described in (i) the ICH Harmonised Tripartite
Guideline, Step 4 version, dated November 10, 2000 and (ii) Parts 210 and 211 of
Title 21 of the U.S.  Code of Federal Regulations, each as may be amended from
time to time, or any successor thereto.

 

1.1.32                                     “Chairperson” has the meaning
assigned to such term in Section 3.1.1.

 

1.1.33                                     “Change of Control” means, with
respect to Anacor, the occurrence of any of the following:

 

(a)                                  any “person” or “group” (as such terms are
defined below) other than Anacor (or any Controlling Affiliate of Anacor as of
the Effective Date) (i) is or becomes the “beneficial owner” (as defined below),
directly or indirectly, of shares of capital stock or other interests (including
partnership interests) of Anacor (or any Controlling Affiliate of Anacor) then
outstanding and normally entitled (without regard to the occurrence of any
contingency) to vote in the election of the directors, managers or similar
supervisory positions (“Voting Stock”) of Anacor (or its Controlling Affiliate)
representing fifty percent (50%) or more of the total voting power of all
outstanding classes of Voting Stock of Anacor (or its Controlling Affiliate) or
(ii) has the power, directly or indirectly, to elect a majority of the members
of Anacor’s (or its Controlling Affiliate’s) board of directors or similar
governing body (as the case may be, “Board of Directors”); or

 

(b)                                 Anacor (or its Controlling Affiliate) enters
into a merger, consolidation or other form of business combination, share
exchange, reorganization, recapitalization or other similar extraordinary
transaction or series of transactions with another Person (whether or not Anacor
(or its Controlling Affiliate) is the surviving entity) and as a result of such
merger, consolidation or other form of business combination, share exchange,
reorganization, recapitalization or similar extraordinary transaction, (i) the
members of the Board of Directors of Anacor (or its Controlling Affiliate)
immediately prior to such transaction constitute less than a majority of the
members of the Board of Directors of Anacor (or its Controlling Affiliate) or,
if not Anacor (or its Controlling Affiliate), such surviving Person immediately
following such transaction or series of transactions or (ii) the Persons that
beneficially owned, directly or indirectly, the shares of Voting Stock of Anacor
(or its Controlling Affiliate) immediately prior to such transaction or series
of transactions cease to beneficially own, directly or indirectly, shares of
Voting Stock representing at least a majority of the total voting power of all
outstanding classes of Voting Stock of the surviving Person in substantially the
same proportions as their

 

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24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

 

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ownership of Voting Stock of Anacor (or its Controlling Affiliate) immediately
prior to such transaction or series of transactions; or

 

(c)                                  Anacor (or its Controlling Affiliate) sells
or transfers to any Third Party, in one or more related transactions, properties
or assets representing all or substantially all of the consolidated total assets
of Anacor; or

 

(d)                                 the holders of capital stock of Anacor (or
its Controlling Affiliate) approve a plan or proposal for the liquidation or
dissolution of Anacor (or its Controlling Affiliate).

 

For the purpose of this definition: (x) “person” and “group” have the meanings
given such terms under Section 13(d)(3) and 14(d)(2) of the Securities Exchange
Act of 1934, as amended (the “Exchange Act”) and the term “group” includes any
group acting for the purpose of acquiring, holding or disposing of securities
within the meaning of Rule 13d-5(b)(1) under the Exchange Act; (y) a “beneficial
owner” shall be determined in accordance with Rule 13d-3 under the Exchange Act;
and (z) the terms “beneficially owned” and “beneficially own” shall have
meanings correlative to that of “beneficial owner.”

 

1.1.34                                     “Claims” has the meaning assigned to
such term in Section 11.1.

 

1.1.35                                     “CMC” means chemistry, manufacturing
and controls.

 

1.1.36                                     “Collaboration Compound” means each
Anacor Compound or Medicis Compound that has entered into nonclinical toxicology
and nonclinical [ * ] efficacy studies, and other testing as described in the
Research Plan, and is part of the Program.  The following Anacor Compounds,
whose structures Anacor has disclosed to Medicis prior to the Effective Date,
shall be deemed Collaboration Compounds: [ * ].

 

1.1.37                                     “Collaboration Compound IP” means,
with respect to a Collaboration Compound, any Collaboration Compound Know-How or
Collaboration Compound Patents with respect to such Collaboration Compound.

 

1.1.38                                     “Collaboration Compound Know-How”
means, with respect to a Collaboration Compound, any Information pertaining to
such Collaboration Compound that is discovered, developed, invented or created
after the date on which the applicable Anacor Compound or Medicis Compound
becomes such Collaboration Compound but prior to (i) Medicis’s exercise of the
PoC Option or expiration of the PoC Option with respect to such Collaboration
Compound and (ii) termination of the Research Collaboration under Section 2.4.1,
12.4.1, 12.5.2, 12.6.3(c) or 13.7 solely by or on behalf of (a) a Party (or its
agents or contractors), (b) the Parties jointly (or jointly through their
respective agents or contractors), or (c) either or both of their respective
Affiliates.

 

1.1.39                                     “Collaboration Compound Patent”
means, with respect to a Collaboration Compound, any Patent in the Territory
that claims or Covers an invention conceived or reduced to practice after the
date on which the applicable Anacor Compound or Medicis Compound becomes such
Collaboration Compound and before the date (if any) on which Medicis exercises
its PoC Option with respect to that Collaboration Compound or terminates the
Research Collaboration under Section 2.4.1, 12.4.1, 12.5.2, 12.6.3(c) or 13.7
(thus rendering the Collaboration Compound a Medicis Development Compound) or
expiration of the PoC Option with respect to such Collaboration Compound, and
that (a) claims the composition of matter or method of making or use of such
Collaboration Compound, or (b) Covers the making, having made, using, selling,
offering for sale or importing of such Collaboration Compound.  For the
avoidance of doubt: (i) any

 

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Patents with respect to inventions made or discovered prior to the date on which
a Collaboration Compound becomes a Medicis Development Compound shall be either
Anacor Compound Patents or Collaboration Compound Patents; and
(ii) Collaboration Compound Patents may Cover compounds in addition to a
Collaboration Compound.

 

1.1.40                                     “Combination Product” means a Product
that includes at least one Other Active Ingredient.  To be a Combination
Product, the Product and all its ingredients must be sold together as a single
product and invoiced as one product.  For clarity, drug delivery vehicles,
adjuvants, and excipients shall not be deemed to be Other Active Ingredients,
and their presence shall not be deemed to create a Combination Product.

 

1.1.41                                     “Competitive Infringement” has the
meaning assigned to such term in Section 8.4.1.

 

1.1.42                                     “Confidential Information” has the
meaning assigned to such term in Section 9.1.

 

1.1.43                                     “Control,” means, with respect to
intellectual property or an intellectual property right, possession of the
ability to grant access, license or sublicense in, to or under such intellectual
property or intellectual property right without violating the terms of any
agreement with any Third Party.  With respect to a Person, a Person shall be
deemed to “Control” another Person if it (a) owns, directly or indirectly,
beneficially or legally, at least fifty percent (50%) of the outstanding voting
securities or capital stock (or such lesser percentage which is the maximum
allowed to be owned by a Person in a particular jurisdiction) of such other
Person, or has other comparable ownership interest with respect to any Person
other than a corporation; or (b) has the power, whether pursuant to contract,
ownership of securities or otherwise, to direct the management and policies of
the Person.  In either case, “Controls,” “Controlled” or “Controlling” shall
have correlative meaning.

 

1.1.44                                     “Cover” means, with respect to
intellectual property or an intellectual property right and a composition or
method, that the possession, making, use, sale, offer for sale, import, or
disclosure of such composition or method would infringe or misappropriate such
intellectual property right absent a license grant or an exemption from
infringement for manufacturing, use, sale or offer for sale related to obtaining
Regulatory Approval.

 

1.1.45                                     “Derivative” means, with respect to a
Medicis Development Compound, (a) any compound that is derived from such Medicis
Development Compound by [ * ], or (b) any compound in the Field that (i) is
based on the same Scaffold as such Medicis Development Compound, (ii) is made
pursuant to the license granted in Section 5.3, and (iii) is a [ * ].

 

1.1.46                                     “Develop” or “Development” means
engage or engagement in activities relating to obtaining Regulatory Approval of
a Product, and engage or engagement in activities to develop manufacturing
capabilities for Products.  Development includes, but is not limited to, engage
or engagement in: nonclinical or clinical pharmacology, toxicology,
pharmacokinetic or other safety or efficacy studies, formulation activities,
analytical characterization activities, manufacturing process design,
optimization and scale-up (including bulk compound and final product production)
activities, quality assurance and quality control activities, technical support
and regulatory affairs activities.

 

1.1.47                                     “Diligent Efforts” means the
following: (a) with respect to Anacor, commercially reasonable efforts that are
consistent with the efforts and resources customarily used by a
biopharmaceutical company [ * ] in the exercise of its reasonable business
discretion relating to the research and Development progression of a potential
pharmaceutical product owned by such company (or to which it has exclusive
rights)

 

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with similar product characteristics as the Collaboration Compound, but in any
event efforts at least as great as those exercised by Anacor [ * ] in the
Development of potential products that have a [ * ]; and (b) with respect to
Medicis, commercially reasonable efforts that are consistent with the efforts
and resources customarily used by a specialty pharmaceutical company in the
exercise of its reasonable business discretion relating to a prescription
pharmaceutical product owned by it (or to which it has exclusive rights) with
similar product characteristics as the Medicis Development Compound and which is
of similar market potential at a similar stage in its Development or product
life as the Medicis Development Compound, taking into account issues of patent
coverage, safety and efficacy, the competitiveness of the marketplace, the
proprietary position, the regulatory structure involved,
profitability (including pricing and reimbursement status achieved, [ * ], and
other relevant factors, including technical, legal, scientific or medical
factors.

 

1.1.48                                     “Disclosing Party” has the meaning
assigned to such term in Section 9.1.

 

1.1.49                                     “Dollars” or “$” means the legal
tender of the U.S.

 

1.1.50                                     “Effective Date” has the meaning
assigned to such term in the Preamble.

 

1.1.51                                     “EMA” means the European Medicines
Agency of the European Union, and any successor agency thereto.

 

1.1.52                                     “European Union” means all countries
that are officially recognized as member states of the European Union at any
particular time during the Term.

 

1.1.53                                     “Executive Officer” has the meaning
assigned to such term in Section 13.1.

 

1.1.54                                     “FDA” means the U.S.  Food and Drug
Administration, and any successor entity thereto.

 

1.1.55                                     “Field” means the use of a [ * ] [ *
] for the [ * ].

 

1.1.56                                     “First Commercial Sale” means, with
respect to any Product, the first sale for which revenue has been recognized by
Medicis from an independent Third Party for subsequent sale to an end user
(i.e., not based upon a transfer price to an affiliate or distributor or
sublicensee) or consumption by the general public of such Product in any country
in the Territory after all required Regulatory Approvals have been granted, or
where such sale is otherwise permitted, by the Regulatory Authority in such
country, excluding registration samples and compassionate use.

 

1.1.57                                     “First Dosing in a Phase 1 Clinical
Trial” means the date on which the first subject is dosed in a Phase 1 Clinical
Trial for a Collaboration Compound that is conducted by or on behalf of Anacor
or Medicis (or an Affiliate or Sublicensee of Medicis).

 

1.1.58                                     “First Dosing in a Phase 3 Clinical
Trial” means the date on which the first subject is dosed in a Phase 3 Clinical
Trial for a Medicis Development Compound that is conducted by or on behalf of
Medicis (or an Affiliate or Sublicensee of Medicis).

 

1.1.59                                     “GAAP” means the then-current
applicable Generally Accepted Accounting Principles in the United States as
applied by Medicis or as recognized as generally accepted by the Financial
Accounting Standards Board.

 

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1.1.60                                     “Generic Product” means, with respect
to a Product, any pharmaceutical product sold by a Third Party that is not
authorized by Medicis, an Affiliate or Sublicensee, that is approved by a
Regulatory Authority in reliance on the prior approval of such Product as
determined by the applicable Regulatory Authority, on the basis of it being
comparable to and substitutable for such Product.

 

1.1.61                                     “HSR” has the meaning assigned to
such term in Section 4.2.2.

 

1.1.62                                     “IND” means any investigational new
drug application filed with the FDA pursuant to Part 312 of Title 21 of the
U.S.  Code of Federal Regulations, and any amendments thereto.  References
herein to IND shall include, to the extent applicable, any comparable
filing(s) outside the U.S. (such as a clinical trial application in an
individual country or in a member country of the European Union).

 

1.1.63                                     “Indemnitee” has the meaning assigned
to such term in Section 11.3.

 

1.1.64                                     “Information” means any and all
tangible and intangible information, techniques, technology, practices, trade
secrets, inventions (whether patentable or not), methods, knowledge, know-how,
skill, experience, data, results (including pharmacological, toxicological and
nonclinical or clinical test data and results), analytical and quality control
data, results or descriptions, software and algorithms.  As used herein,
“clinical test data” shall be deemed to include all information related to the
clinical or nonclinical testing of a Collaboration Compound or Product,
including patient report forms, investigators’ reports, biostatistical,
pharmaco-economic and other related analyses, regulatory filings and
communications, and the like.

 

1.1.65                                     “Insolvency Event” has the meaning
assigned to such term in Section 12.4.1.

 

1.1.66                                     “Joint Patent Subcommittee” or “JPS”
has the meaning assigned to such term in Section 3.2.

 

1.1.67                                     “Joint Research Committee” or “JRC”
has the meaning assigned to such term in Section 3.1.

 

1.1.68                                     “JRC Term” means the period
commencing on the Effective Date and extending throughout the Research
Collaboration Term.

 

1.1.69                                     “Lead Back-Up Compound” has the
meaning assigned to such term in Section 4.2.1(a).

 

1.1.70                                     “Losses” has the meaning assigned to
such term in Section 11.1.

 

1.1.71                                     “Manufacturing Cost” has the meaning
assigned to such term in Section 6.4.2(d).

 

1.1.72                                     “Materials” has the meaning assigned
to such term in Section 2.8.1.

 

1.1.73                                     “Material IP” means, collectively,
(a) Patents Covering or claiming Materials and (b) Information pertaining
specifically to Materials which, in each case (i) exist as of the date such
Materials are transferred as provided in Section 2.8.1, or (ii) are conceived by
the “Transferor” (as defined in Section 2.8.1) prior to its transfer of such
Materials to the other Party as provided in Section 2.8.1.

 

1.1.74                                     “Medicis” has the meaning assigned to
such term in the Preamble.

 

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1.1.75                                     “Medicis Compound” means any small
molecule compound that (a) is introduced into the Program by Medicis during the
Research Collaboration Term and was invented or conceived (as determined under
the inventorship laws of the United States) solely by inventors who have
assigned or agreed to assign their rights in such compound to Medicis, (b) is
not based on or derived from an Anacor Compound and was not identified or
conceived using Anacor’s Confidential Information, (c) is within the Field and
(d) is a [ * ].

 

1.1.76                                     “Medicis Development Compound” means
(a) the PoC Compound and any Provisional Back-Up Compounds, Lead Back-Up
Compound or other Back-Up Compounds selected by Medicis for further Development
in accordance with Sections 2.6.6(d) or 4.2.1(a), or (b) any Collaboration
Compounds deemed Medicis Development Compounds pursuant to Section 2.4.1(c),
12.4.1, 12.5.2, 12.6.3(c) or 13.7.

 

1.1.77                                     “Medicis Development Compound IP”
means, collectively, Medicis Development Compound Patents and Medicis
Development Compound Know-How.

 

1.1.78                                     “Medicis Development Compound
Know-How” means any Information pertaining to a Medicis Development Compound
that is discovered, invented, created or developed on or after the date on which
a Collaboration Compound becomes such Medicis Development Compound, solely by or
on behalf of (a) a Party (or its agents or contractors), (b) the Parties jointly
(or jointly through their respective agents or contractors), or (c) either or
both of their respective Affiliates.

 

1.1.79                                     “Medicis Development Compound Patent”
means, with respect to a Medicis Development Compound, any Patent in the
Territory that claims or Covers an invention conceived or reduced to practice on
or after the date on which a Collaboration Compound becomes such Medicis
Development Compound and that (a) claims the composition of matter or method of
making or use of such Medicis Development Compound, or (b) Covers the making,
having made, using, selling, offering for sale or importing of such Medicis
Development Compound.  For the avoidance of doubt: (i) any Patents with respect
to a Medicis Development Compound shall be one of Anacor Compound Patents,
Collaboration Compound Patents or Medicis Development Compound Patents; and
(ii) Medicis Development Compound Patents may Cover compounds in addition to a
Medicis Development Compound.

 

1.1.80                                     “Medicis IP” means, collectively,
(a) Medicis Research Collaboration Patents, (b) Medicis Research Collaboration
Know-How, (c) Medicis Target Patents, (d) Medicis Target Know-How,
(e) Collaboration Compound IP owned or Controlled by Medicis or its Affiliates
at any time during the Term; and (f) Medicis Development Compound IP owned or
Controlled by Medicis or its Affiliates at any time during the Term.

 

1.1.81                                     “Medicis Research Collaboration
Know-How” means any Information Controlled by Medicis or its Affiliates at any
time during the Term that relates directly (but not necessarily exclusively) to
a Collaboration Compound and is directly (but not necessarily exclusively)
useful for Anacor to conduct its obligations under the Research Collaboration in
accordance with the Research Plan.

 

1.1.82                                     “Medicis Research Collaboration
Patents” means any Patents in the Territory Controlled by Medicis or its
Affiliates on the Effective Date or at any time during the Term that claim or
Cover the composition of matter or method of use of a Collaboration Compound and
are directly (but not necessarily exclusively) useful for Anacor to conduct its
obligations under the Research Collaboration in accordance with the Research
Plan.

 

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[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
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24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

 

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1.1.83                                     “Medicis Research Compound” has the
meaning assigned to such term in Section 5.3.

 

1.1.84                                     “Medicis Target Know-How” means any
Information Controlled by Medicis or its Affiliates on the Effective Date or at
any time during the Term (but excluding Collaboration Compound Know-How and
Medicis Development Compound Know-How) that relates directly (but not
necessarily exclusively) to the Target in the Field and is reasonably useful for
Anacor to perform its obligations with respect to such Target under the Research
Collaboration.

 

1.1.85                                     “Medicis Target Patents” means any
Patents in the Territory Controlled by Medicis or its Affiliates on the
Effective Date or at any time during the Term (but excluding Collaboration
Compound Patents and Medicis Development Compound Patents) that claim or Cover
the composition or use of the Target in the Field or that would otherwise be
infringed (absent a license as provided herein) by Anacor’s performance of its
obligations with respect to such Target under the Research Collaboration.

 

1.1.86                                     “MHLW” means the Ministry for Health,
Labor and Welfare of Japan, or the Pharmaceutical and Medical Devices Agency
(the “PMDA,” formerly known as Iyakuhin Iryokiki Sogo Kiko), or any successor to
either of them, as the case may be.

 

1.1.87                                     “MHRA” means the Medicines and
Healthcare products Regulatory Agency, an executive agency of the United Kingdom
Department of Health.

 

1.1.88                                     “Mixed Patent” has the meaning
assigned to such term in Section 5.3.

 

1.1.89                                     “NDA” means a New Drug Application
(as more fully defined in 21 C.F.R.  314.5 et seq.  or its successor regulation)
and all amendments and supplements thereto filed with the FDA.

 

1.1.90                                     “Necessary License” has the meaning
assigned to such term in Section 6.4.2(c).

 

1.1.91                                     “Negotiation Period” has the meaning
assigned to such term in Section 2.7.

 

1.1.92                                     “Net Sales”  means the total of the [
* ] price charged by Medicis, its Affiliates and Sublicensees for the sale of
Products to Third Parties who are not Sublicensees less the following
deductions, to the extent included in such invoiced amounts or accrued in
accordance with GAAP:

 

·                                          cash, trade or quantity discounts,
rebates, and government-required discounts and allowances granted to buyers
(including governmental required rebates, such as, for example and without
limitation, Medicaid rebates, institutional rebates, volume discounts,
chargebacks, retroactive price adjustments and other reductions, concessions and
allowances that effectively reduce the selling price; [ * ];

 

·                                          sales, use, tariffs, import/export
duties or other excise taxes imposed on particular sales (excepting value added
taxes or income taxes);

 

·                                          discounts and rebates paid or
credited to buyers, Third Party payers, healthcare systems and administrators [
* ];

 

·                                          [ * ];

 

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24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

 

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·                                          rebates and discounts paid or
credited pursuant to applicable law;

 

·                                          transportation costs, including
insurance and shipping, freight, and handling charges, to the extent included in
the invoiced amount, and

 

·                                          allowances, refunds or credits to
buyers because of rejections or returns (including withdrawals and recalls).

 

Net Sales shall also [ * ].  Net Sales will be calculated in a manner consistent
with GAAP or at Medicis’s option similarly reputable local accounting principles
prevailing in the countries of sale, consistently applied, and in any event
amounts deducted shall be deducted only once regardless of whether it is
identified more than once above.

 

1.1.93                                     “Non-breaching Party” has the meaning
assigned to such term in Section 12.2.1.

 

1.1.94                                     “Non-Disclosure Agreement” has the
meaning assigned to such term in Section 9.4.

 

1.1.95                                     “Offer Period” has the meaning
assigned to such term in Section 2.7.

 

1.1.96                                     “Other Active Ingredient” means a
therapeutically effective active pharmaceutical ingredient that is co-formulated
or co-packaged with a Medicis Development Compound or Derivative thereof in a
Product and which is neither the Medicis Development Compound nor part of the
same molecule as that containing such Medicis Development Compound.  Drug
delivery vehicles, adjuvants, and excipients shall not be deemed to be
“therapeutically effective active pharmaceutical ingredients”.

 

1.1.97                                     “Party” or “Parties” has the meaning
assigned to such term in the Preamble.

 

1.1.98                                     “Patent” means (a) all patents and
patent applications in any country or supranational jurisdiction in the
Territory, (b) any substitutions, divisions, continuations,
continuations-in-part, provisional applications, reissues, renewals,
registrations, confirmations, re-examinations, extensions, supplementary
protection certificates and the like of any such patents or patent applications,
and (c) foreign counterparts of any of the foregoing.

 

1.1.99                                     “Patent Costs” means the reasonable
fees and expenses paid to outside legal counsel and other out-of-pocket expenses
paid to Third Parties, incurred in connection with the Prosecution and
Maintenance of Patents.

 

1.1.100                               “Person” means any individual,
partnership, joint venture, limited liability company, corporation, firm, trust,
association, unincorporated organization, governmental authority or agency, or
any other entity not specifically listed herein.

 

1.1.101                               “Phase 1 Clinical Trial” means a clinical
trial of a pharmaceutical product on subjects that generally provides for the
introduction into humans of such product with the primary purpose of determining
safety, metabolism and pharmacokinetic properties and clinical pharmacology of
such product.

 

1.1.102                               “Phase 3 Clinical Trial” means one or more
clinical trials on sufficient numbers of subjects, which trial(s) are designed
to (a) establish that a drug is safe and efficacious for its intended use;
(b) define warnings, precautions and adverse reactions that are associated with
the drug in the dosage range to be prescribed; and (c) support Regulatory
Approvals for such drug.

 

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[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
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24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

 

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1.1.103                               “PoC Compound” means a Candidate Selection
Compound that the JRC determines has satisfied the PoC Compound Criteria.

 

1.1.104                               “PoC Compound Criteria” means proof of
concept (“PoC”) criteria for selection of a clinical PoC Compound, as described
in Section 2.6.4, which shall include, among other things, CMC, safety and
efficacy standards.

 

1.1.105                               “PoC Option” has the meaning assigned to
such term in Section 4.2.1(a).

 

1.1.106                               “PoC Option Deadline Extension Period” has
the meaning assigned to such term in Section 4.2.2.

 

1.1.107                               “PoC Option Deadline Period” has the
meaning assigned to such term in Section 4.2.1(a).

 

1.1.108                               “PoC Trial” means, with respect to any
Candidate Selection Compound, a clinical trial of such Candidate Selection
Compound that is reasonably designed to successfully meet the PoC Compound
Criteria.  For clarity, the PoC Trial is intended only to demonstrate the
safety, and to provide preliminary evidence of activity, of a particular
Collaboration Compound, and is not necessarily intended to be a pivotal trial or
to otherwise provide data sufficient to support Regulatory Approvals.

 

1.1.109                               “PoC Trial Report” has the meaning
assigned to such term in Section 2.6.6(c).

 

1.1.110                               “Product” means any product that includes
a Medicis Development Compound or Derivative thereof or a Medicis Compound, or
any base form, prodrug, ester, salt form, crystalline polymorph, hydrate or
solvate thereof, whether or not as the sole active ingredient and in any dosage,
form or formulation.

 

1.1.111                               “Program” means the Research Collaboration
activities conducted by Anacor pursuant to the Research Plan for the discovery,
use, manufacture and Development of Anacor Compounds.

 

1.1.112                               “Prosecuting Party” has the meaning
assigned to such term in Section 8.2.2.

 

1.1.113                               “Prosecution and Maintenance” or
“Prosecute and Maintain” means, with regard to a Patent, the preparing, filing,
prosecuting and maintenance of such Patent, as well as re-examinations,
reissues, and requests for patent term adjustments and patent term extensions
with respect to such Patent, together with the initiation or defense of
interferences, the initiation or defense of oppositions and other similar
proceedings with respect to the particular Patent.  For clarification,
“Prosecution and Maintenance” or “Prosecute and Maintain” shall not include any
other enforcement actions taken with respect to a Patent.

 

1.1.114                               “Provisional Back-Up Compound” has the
meaning assigned to such term in Section 4.2.1.

 

1.1.115                               “Receiving Party” has the meaning assigned
to such term in Section 9.1.

 

1.1.116                               “Regulatory Approval” means any and all
approvals (including price and reimbursement approvals, if required prior to
sale in the applicable jurisdiction), licenses, registrations, or authorizations
of any country, federal, supranational, state or local regulatory agency,
department, bureau or other government entity that are necessary for the
manufacture, use, storage, import, transport or sale of a particular Product in
the applicable jurisdiction.

 

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24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

 

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1.1.117                               “Regulatory Authority” means the FDA or
any other health regulatory authority in any country in the Territory that is a
counterpart to the FDA and holds responsibility for granting regulatory
marketing approval for a Product in such country, and any successor(s) thereto,
including but not limited to the EMA, MHLW, MHRA and BfArM.

 

1.1.118                               “Regulatory Exclusivity” means any
exclusive marketing rights or data exclusivity rights conferred by any
governmental authority by statute, regulation or other governmental action with
respect to a Product in a country in the Territory, other than a Patent right,
provided that such rights (a) are specific to the composition of the Product and
not its use or indication and (b) prohibit the sale of such Product by Third
Parties in such country.

 

1.1.119                               “Research Collaboration” means the program
of research, discovery, characterization, optimization and nonclinical and
clinical testing of Collaboration Compounds and Candidate Selection Compounds
and the identification of a PoC Compound pursuant to this Agreement and the
Research Plan, as described in Article 2.

 

1.1.120                               “Research Collaboration Term” has the
meaning assigned to such term in Section 2.3.

 

1.1.121                               “Research Plan” has the meaning assigned
to such term in Section 2.2.

 

1.1.122                               “Royalty Term” has the meaning assigned to
such term in Section 6.4.3.

 

1.1.123                               “Scaffold” means a core chemical structure
that includes one or more variable structural elements within or appended to the
core structure (by insertion, deletion, substitution, or addition of one or more
bonds or atoms, or otherwise).  Any molecule containing a Scaffold as part of
its structure shall, for purposes of this Agreement, be deemed to be “based on
such Scaffold,” regardless of the nature of the variable elements associated
with the Scaffold.  The Scaffolds for the Collaboration Compounds as of the
Effective Date are described in Exhibit 10.

 

1.1.124                               “Subcommittee” has the meaning assigned to
such term in Section 3.1.6.

 

1.1.125                               “Sublicensee” means, with respect to a
particular Medicis Development Compound or Product, a Third Party to whom
Medicis has granted a sublicense or license under any Anacor Exclusively
Licensed IP or Medicis IP, including distributors (through multiple tiers) of
such Medicis Development Compound or Product.

 

1.1.126                               “Target” means the [ * ].

 

1.1.127                               “Term” has the meaning assigned to such
term in Section 12.1.

 

1.1.128                               “Territory” means the entire world.

 

1.1.129                               “Third Party” means any Person other than
Anacor or Medicis or an Affiliate of Anacor or Medicis.

 

1.1.130                               “Third Party License” has the meaning
assigned to such term in Section 4.5.1.

 

1.1.131                               “Transfer Record” has the meaning assigned
to such term in Section 2.8.1.

 

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[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
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1.1.132                               “United States” or “U.S.” means the United
States of America.

 

1.1.133                               “Valid Claim” means any claim within an
issued U.S. Patent or issued Patent in a jurisdiction outside the U.S. that has
not expired, lapsed, been cancelled or abandoned, or been held unenforceable,
invalid or cancelled by a court of competent jurisdiction in an order or
decision from which no appeal has been or can be taken.

 

1.2                                 Rules of Construction.  Interpretation of
this Agreement shall be governed by the following rules of construction:
(i) words in the singular shall be held to include the plural and vice versa and
words of one gender shall be held to include the other gender as the context
requires, (ii) references to the terms Article, Section, paragraph and
Exhibit are references to the Articles, Sections, paragraphs and Exhibits of and
to this Agreement unless otherwise specified, (iii) the terms “hereof,”
“herein,” “hereby,” “hereto,” “hereunder” and derivative or similar words refer
to this entire Agreement, including the Exhibits hereto, (iv) references to “$”
shall mean U.S.  dollars, (v) the word “including” and words of similar import
when used in this Agreement shall mean “including, without limitation,” unless
otherwise specified, (vi) the word “or” shall not be exclusive, (vii) references
to “written” or “in writing” include in electronic form, (viii) provisions shall
apply, when appropriate, to successive events and transactions, (ix) the
headings contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement, (x) the
Parties have each participated in the negotiation and drafting of this Agreement
and if an ambiguity or question of interpretation should arise, this Agreement
shall be construed as if drafted jointly by the Parties and no presumption or
burden of proof shall arise favoring or burdening any such Party by virtue of
the authorship of any of the provisions in any of this Agreement, (xi) a
reference to any person includes such person’s successors and permitted assigns,
(xii) any reference to “days” means calendar days unless Business Days are
expressly specified and (xiii) when calculating the period of time before which,
within which or following which any act is to be done or step taken pursuant to
this Agreement, the date that is the reference date in calculating such period
shall be excluded, and if the last day of such period is not a Business Day, the
period shall end on the next succeeding Business Day.

 

ARTICLE 2

 

RESEARCH AND DEVELOPMENT COLLABORATION

 

2.1                                 Overview.  Pursuant to this Agreement and
the Research Plan, and as further provided in this Article 2, Anacor will
undertake the Research Collaboration, the scope of which is the discovery,
identification and Development of compounds directed toward the Target, which
compounds Medicis shall have certain options to exclusively license on a
worldwide basis, as provided in Article 4.  The goal of the Research
Collaboration will be to present to the JRC at least [ * ] JRC-approvable PoC
Compound for consideration within [ * ] of the Effective Date.

 

2.2                                 Research Plan.  The Research Collaboration
activities will be carried out by Anacor pursuant to an operating plan (the
“Research Plan”), which will outline anticipated discovery, research, and
nonclinical and clinical Development activities to be conducted by Anacor during
the Research Collaboration Term, and shall include a mechanism for
identification of promising Anacor Compounds, the structure of tests to be
performed on such compounds and personnel commitments (if any).  The initial
draft of the Research Plan is attached hereto as Exhibit 1.  From time to time
during the Research Collaboration Term (but no less frequently than [ * ] per
year), the JRC shall update the Research Plan (or applicable portions thereof). 
Once approved by

 

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the JRC, the updated Research Plan shall replace the Research Plan previously in
effect.  The Research Plan will be reviewed as necessary at each meeting of the
JRC, and at any other time upon the request of either Party, and may be modified
by the JRC, as appropriate, to reflect material scientific or commercial
developments.  In the event of any inconsistency between the Research Plan and
this Agreement, the terms of this Agreement shall prevail and any such
inconsistent portion of such Research Plan shall hereby be expressly rejected.

 

2.3                                 Research Collaboration Term.  The Research
Collaboration shall commence at the Effective Date and shall expire upon the
earlier of (a) Anacor’s completion of a PoC Trial and delivery of a PoC Trial
Report to the JRC under Section 2.6.6(c), and (b) [ * ] after the Effective
Date, unless extended upon Medicis’s election pursuant to Section 2.6.6(d), or
unless earlier terminated as provided herein (the “Research Collaboration
Term”).  Except as otherwise specified herein, upon the expiration of the
Research Collaboration Term, all obligations of Anacor to conduct research
pursuant to the Research Collaboration shall terminate (although Anacor’s
requirement to participate on the JRC and consult following the JRC Term as
provided in Section 3.1.5 shall not be affected by expiration of the Research
Collaboration Term), but the other rights and obligations under this Agreement
shall not otherwise be affected.

 

2.4                                 Research Efforts; Diligence.  During the
Research Collaboration Term, Anacor shall use Diligent Efforts to discover and
Develop Anacor Compounds and Medicis Compounds (if any) in accordance with the
terms of this Agreement, the Research Plan and as reasonably directed by the JRC
in accordance with the purposes of this Agreement, subject to Section 2.6.6(d). 
Unless Medicis elects Back-Up Compound Development under Section 2.6.6(d),
Anacor shall not be obligated to progress more than [ * ] to the stage of being
approved as a Candidate Selection Compound.  Anacor shall not be obligated to
progress more than [ * ] through completion of a PoC Trial.  Anacor shall
document its activities hereunder in writing with reasonable detail and in
accordance with the requirements of Section 2.9.2 and taking into account the
obligations to provide the summaries, reports and other work product called for
in Section 4.4.  In support of such Diligent Efforts, Anacor shall maintain and
utilize scientific and technical staff, laboratories, offices and other
facilities as needed to perform its Research Collaboration activities as set
forth in the Research Plan.  Anacor shall use personnel with sufficient skills
and experience as are required to accomplish efficiently and expeditiously the
objectives of the Research Collaboration as set forth in the Research Plan in
good scientific manner and in compliance in all material respects with all
requirements of applicable laws, rules and regulations and in such number and
with such expertise as specified in the Research Plan.  At any time reasonably
requested by Medicis during the Research Collaboration Term, Anacor will
promptly provide Medicis with any reasonably requested Information relating to
its Diligent Efforts applied in fulfilling the Research Plan.

 

2.4.1                                           Anacor Diligence Failure Event.

 

(a)                                  If at any time during the Research
Collaboration Term Anacor materially fails to conduct the Research Collaboration
in accordance with the Research Plan and its diligence obligations in Sections
2.4, 2.6.6(a) or 2.6.6(d) (an “Anacor Diligence Failure Event”), including for
example, by failing to commence appropriate toxicology testing on one or more
promising Anacor Compounds in accordance with the Research Plan or by allocating
materially insufficient resources for Development activities hereunder, then
Medicis shall have the right to allege an Anacor Diligence Failure Event by
providing written notice of same to Anacor, such notice setting forth the basis
for such alleged failure of diligence.  For clarity, any delay or failure to
achieve a milestone or deliverable set forth in the Research Plan, to the extent
caused by a scientific or technical failure or difficulty, shall not be
considered a breach of this Agreement so long as Anacor is conducting the
activities set forth in the Research Plan that are instructed by results of
previous activities under the Research Plan.

 

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(b)                                 Subject to Sections 2.4.2 and 12.2.3, upon
receipt of notice of an Anacor Diligence Failure Event, Anacor shall have [ * ]
within which to cure such Anacor Diligence Failure Event; [ * ]

 

(c)                                  Subject to Sections 2.4.2 and 12.2.3, if
Anacor has not cured an Anacor Diligence Failure Event by the conclusion of the
applicable [ * ], [ * ], Medicis shall have the following rights:

 

(i)                                     If such Anacor Diligence Failure Event
occurred with respect to activities other than Development efforts conducted
under Section 2.6.6(d) with respect to Back-Up Compounds and is therefore prior
to achievement of the PoC Criteria by a Collaboration Compound, Medicis shall
have the right to immediately terminate the Research Collaboration Term upon
written notice to Anacor.  Notwithstanding anything to the contrary in this
Agreement, Anacor shall have no further obligations to conduct the Program as of
the effective date of termination of the Research Collaboration Term by Medicis
under this Section 2.4.1(c)(i).  Upon any such termination of the Research
Collaboration Term by Medicis under this subsection (c)(i), (A) all
Collaboration Compounds identified prior to said termination date shall be
deemed to be Medicis Development Compounds, and (B) subject to the terms and
conditions of this Agreement, Anacor shall grant and does hereby grant, as of
the effective date of such termination and election by Medicis, an exclusive
(even as to Anacor and its Affiliates), worldwide license (with the right to
grant sublicenses) under the Anacor Exclusively Licensed IP, to make, have made,
use, sell, offer for sale and import such Medicis Development Compounds and
Derivatives thereof as and into Products in the Territory during the Term.
Medicis will have the right to continue the Development of any such deemed
Medicis Development Compounds as of such termination event on its own or through
Sublicensees.  Following any termination of the Research Collaboration Term by
Medicis under this Section, Medicis shall pay to Anacor (x) a royalty on Annual
Net Sales of Products at a rate that is equal to [ * ] of the applicable royalty
rates set forth in Section 6.4 and (y) non-royalty payments at a rate that is
equal to [ * ] of the applicable rate set forth in Section 6.5.  Medicis shall
further pay to Anacor [ * ] of the applicable milestone payments due under
Sections 6.2 or 6.3 for any milestones achieved subsequent to Medicis’s
termination under this Section.

 

(ii)                                  If such Anacor Diligence Failure event
occurred with respect to Development efforts conducted under
Section 2.6.6(d) for a particular Back-Up Compound, Medicis shall have the right
to immediately terminate Anacor’s Development of such Back-Up Compound upon
written notice to Anacor.  Upon any such termination under this subsection
(c)(ii), if Medicis has not previously exercised the PoC Option, (A) such
Back-Up Compound shall be deemed to be a Medicis Development Compound,
(B) subject to the terms and conditions of this Agreement, Anacor shall grant
and does hereby grant, as of the effective date of such termination and election
by Medicis, an exclusive (even as to Anacor and its Affiliates), worldwide
license (with the right to grant sublicenses) under the Anacor Exclusively
Licensed IP, to make, have made, use, sell, offer for sale and import such
Medicis Development Compound and Derivatives thereof as and into Products in the
Territory during the Term, and (C) such Medicis Development Compound shall be in
addition to the [ * ] Medicis Development Compounds under Section 4.2.1(a). 
Medicis will have the right to continue the Development of any such Medicis
Development Compound as of such termination event on its own or through
Sublicensees.  Following any termination of development of a Back-Up Compound by
Medicis under this Section, Medicis shall pay to Anacor (x) a royalty on Annual
Net Sales of Products containing such Back-Up Compound at a rate that is equal
to [ * ] of the applicable royalty rates set forth in Section 6.4 and
(y) non-royalty payments attributable to such Back-Up Compound at a rate that is
equal to [ * ] of the applicable rate set forth in Section 6.5.  Medicis shall
further pay to Anacor [ * ] of the applicable milestone payments due under
Section 6.2 for any milestones achieved by a Product containing such Back-Up
Compound subsequent to Medicis’s termination under this Section.

 

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(d)                                 The Parties understand and agree that, due
to the nature of the collaboration under this Agreement, damages to Medicis
resulting from a material breach by Anacor of its diligence obligations under
Section 2.4 or 2.6.6(d) would be difficult to calculate accurately, and thus the
remedies set forth in this Section 2.4.1 represent a rational relationship
between the damages from the material breach by Anacor of its diligence
obligations on the one hand, and the cumulative loss to Medicis of its
expectation interest, its lost investment and its lost potential return on
investment due to the upfront payment and milestone payments made.  The remedies
set forth in this Section 2.4.1, if elected by Medicis, shall be Medicis’s sole
and exclusive remedies for an Anacor Diligence Failure Event.

 

2.4.2                                           Disputes Relating To Alleged
Anacor Diligence Failure Events.  In the event that Anacor, in good faith,
disputes the existence of an Anacor Diligence Failure Event, Anacor shall have
the right to submit such dispute to the Executive Officers in accordance with
Section 13.1 within [ * ] after receipt of notice of a termination under
Section 2.4.1(c)(i) or (ii) from Medicis.  If the Executive Officers are unable
to resolve the dispute, Anacor decides to resolve such dispute through
arbitration as provided in Section 13.2, and the adjudication by arbitration
pursuant to Section 13.2 or settlement of such dispute is solely in Medicis’s
favor, the license described in Section 2.4.1(c)(i) or (ii) shall be thereafter
be deemed granted subject to the terms and conditions of this Agreement, and
Anacor will be responsible for [ * ] of Medicis’s reasonable and documented
costs in adjudicating the arbitration, which shall immediately become due and
payable.  If the adjudication by arbitration pursuant to Section 13.2 or
settlement of such dispute is solely in Anacor’s favor, any license described in
Section 2.4.1(c)(i) or (ii) shall be revoked, and Medicis will be responsible
for [ * ] of Anacor’s reasonable and documented costs in adjudicating the
arbitration, which shall immediately become due and payable, provided that
during the entire time pending the final resolution of any such dispute, Medicis
shall not be responsible for making payments hereunder and Anacor shall not have
any obligations to conduct further work under the Research Collaboration, and
Anacor shall not grant any license to any Third Party under any Anacor
Exclusively Licensed IP with respect to the same subject matter as, nor take any
other action or inaction that would conflict or otherwise interfere with, the
potential exclusive license to Medicis described under Section 2.4.1(c)(i) or
(ii), as applicable.

 

2.5                                 Additional Target; Additional Scaffolds.

 

2.5.1                                           If (a) either Party identifies
another [ * ] during the Research Collaboration Term that [ * ] [ * ] [ * ] [ *
] and is not encumbered by a pre-existing agreement between Anacor and a Third
Party or (b) a PoC Compound has not been selected and the JRC recommends that a
new target be evaluated or selected instead of the Target, then in either case,
the JRC may propose an amendment to this Agreement modifying or adding such
additional target (the “Additional Target”), as well as additional conforming
changes; provided, however, that (i) such Additional Target under clause
(b) shall be selected within [ * ] after the JRC determines by consensus not to
pursue the Target, and (ii) such amendment shall require mutual written consent
of the Parties in accordance with the requirements of Section 13.12.  Any
amendment of the Agreement pursuant to this Section 2.5 shall include reasonable
payments to Anacor (including upfront and milestone payments and royalties) for
its anticipated contributions; provided that “reasonable payments” shall be
deemed to consist of (a) [ * ], in consideration for exclusivity with respect to
such Additional Target at the time of addition of such Additional Target under
this Agreement substantively equivalent to the exclusivity with respect to the
Target under Sections 7.1 and 7.2, and (b) the [ * ] due to Anacor hereunder,
unless in either case (a) and (b) either Party can demonstrate a compelling
justification for an alternative payment structure.  If an Additional Target is
approved by the Parties as set forth herein the JRC shall update the Research
Plan accordingly within [ * ] of such approval to reflect the anticipated
discovery, research, and nonclinical and clinical Development activities to be
conducted by Anacor in connection with such Additional Target.

 

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2.5.2                                           If, during the Research
Collaboration Term, either Party identifies a compound that (a) [ * ], (b) [ * ]
[ * ] [ * ], (c) is not encumbered by a pre-existing agreement between Anacor
and a Third Party and (d) does not contain one of the Scaffolds listed in
Exhibit 10, the Parties may amend Exhibit 10 to add the Scaffold on which such
compound is based as a Collaboration Compound Scaffold, as well as additional
conforming changes to this Agreement.  If the Parties so amend Exhibit 10, the
JRC shall also update the Research Plan accordingly within [ * ] of such
amendment to reflect the anticipated discovery, research, and nonclinical and
clinical Development activities to be conducted by Anacor in connection with
such new Collaboration Compound Scaffold; provided that, if such amendment
occurs after Anacor has [ * ], then such efforts [ * ].  In any event, to the
extent that such identified compound does not satisfy the definition of Anacor
Compound or Medicis Compound, the Scaffold shall no longer be considered a
Collaboration Compound Scaffold.

 

2.6                                 Development of Collaboration Compounds.

 

2.6.1                                           Anacor Responsibility.  Prior to
Medicis’s exercise of its PoC Option, Anacor shall have primary responsibility
for conducting the nonclinical and clinical Development activities for each
Collaboration Compound in connection with the Program (including clinical trials
and submissions to Regulatory Authorities) in accordance with this Agreement,
the Research Plan and as reasonably directed by the JRC in accordance with the
purposes of this Agreement.

 

2.6.2                                           Additional Development Work by
Medicis.  During the Research Collaboration Term Medicis may conduct additional
research (directly or through subcontractors or Sublicensees) on Collaboration
Compounds in support of the Research Plan, provided that such research is
conducted under the guidance of the JRC and any results of such research are
reported to the JRC and further provided that Medicis will bear all
responsibility for any costs associated with such additional research.  At
Medicis’s cost and expense, Anacor will provide any reasonable assistance
requested by Medicis in connection with such additional research, subject to
Medicis’s payment to Anacor of reasonable compensation for such assistance in an
amount agreed by the Parties at the time of request.  Such assistance may
include providing reasonable sample quantities of compounds to Medicis or its
Sublicensees, it being understood that Anacor may, if required, manufacture or
have manufactured compounds to the extent not then currently available in the
quantities requested.

 

2.6.3                                           Encumbered Compounds.  Anacor
shall not include in the Program an Anacor Compound that is encumbered by a
grant of rights to a Third Party for an indication outside the Field.

 

2.6.4                                           Candidate Selection Criteria;
PoC Compound Criteria.  The Parties acknowledge and agree that the selection
criteria for Candidate Selection Compounds (the “Candidate Selection Criteria”)
and the initial criteria for PoC Compounds (the “PoC Compound Criteria”) are
attached hereto as Exhibits 2 and 3, respectively.  The Candidate Selection
Criteria and PoC Compound Criteria may be amended by the Parties as set forth in
Section 3.1.4(c).  The Parties anticipate that the PoC Compound Criteria will be
amended upon recommendation from the JRC, with the aim to define a set of
criteria that best enables the Parties to select a PoC Compound and other
Medicis Development Compound(s) with the greatest likelihood of success in
Development, as the understanding of the Program increases during the Research
Collaboration Term, such as on the first achievement of Candidate Selection
Criteria, the filing of an IND by Anacor for a Candidate Selection Compound, or
the failure of a Candidate Selection Compound to achieve desired endpoints in a
clinical trial.

 

2.6.5                                           Reports and Information.  During
the Research Collaboration Term, Anacor shall provide reasonable written
progress updates at each meeting of the JRC on the status of activities within
the

 

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24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

 

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Program.  Without limiting the foregoing, Anacor shall notify the JRC in a
timely fashion upon including any Anacor Compound as a Collaboration Compound
(other than Collaboration Compounds [ * ].

 

2.6.6                                           Evaluation of Candidate
Selection Activities and PoC Trial Results.

 

(a)                                  Development Funnel.  Anacor shall use
Diligent Efforts to evaluate and test a number of promising Anacor Compounds or
Medicis Compounds in accordance with the Research Plan and shall present regular
written summaries of the results to the JRC as provided in Section 2.6.5;
provided, however, that Anacor shall not be obligated to conduct [ * ]. 
Notwithstanding the foregoing, if at the time of [ * ], the JRC reasonably
believes that Anacor has not Developed a reasonable number of other viable
Collaboration Compounds that have the potential to serve as possible Lead
Back-Up Compounds or other Back-Up Compounds, the JRC shall modify the Research
Plan to include reasonable additional screening or lead optimization activities
by Anacor, [ * ].  In any event, any failure by the JRC to reach consensus on
any modification of the Research Plan to include such additional activities
shall not be deemed a breach of this Agreement by Anacor.  Anacor shall identify
to the JRC all Collaboration Compounds.  In the event that Anacor determines
that a Collaboration Compound meets the Candidate Selection Criteria, Anacor
shall promptly notify Medicis in writing of such event and shall provide to the
JRC, not less than [ * ] prior to the next regularly scheduled meeting, a data
package containing a reasonably complete set of analyses, results and raw data
from the Candidate Selection Activities for such Collaboration Compound and
related correspondence or Information received from or sent to any Regulatory
Authority relating to such Collaboration Compound, if any (collectively, for the
purpose of this Section 2.6.6(a), the “Candidate Selection Activities Report”). 
The JRC will, at its next regularly scheduled meeting or at an ad hoc meeting
scheduled by the JRC (and in any event within [ * ] after the JRC’s receipt of
the Candidate Selection Activities Report), review the Candidate Selection
Activities Report to confirm whether the Collaboration Compound meets the
Candidate Selection Criteria.  If the JRC determines that the Collaboration
Compound did not meet the Candidate Selection Criteria, Medicis shall
nonetheless have the right to deem such Collaboration Compound a Candidate
Selection Compound by paying the applicable milestone payment set forth in
Section 6.2.1 (it being understood that Anacor shall not be obligated to conduct
additional Development of such Collaboration Compound unless and until such
election and payment are made by Medicis).

 

(b)                                 PoC Trial Design.  Medicis shall prepare an
initial PoC Trial design for the applicable Candidate Selection Compound, for
review, modification and approval by the JRC.  Such PoC Trial shall include the
requirements of the Phase 1 Study Synopsis and PoC Trial Synopsis, attached
hereto as Exhibit 5.  For clarity, Anacor shall not be obligated to conduct more
than [ * ] or more than [ * ].

 

(c)                                  PoC Compound Confirmation.  The JRC will
select among the Candidate Selection Compounds to determine which one(s) will be
developed to the stage of filing an IND and which one will be evaluated in a PoC
Trial.  Following the PoC Trial, Anacor shall promptly notify Medicis in writing
and shall provide to the JRC a data package containing all analyses, results and
raw data from the PoC Trial for such Candidate Selection Compound, and any
related correspondence or Information received from or sent to any Regulatory
Authority relating to such Candidate Selection Compound (collectively, the “PoC
Trial Report”).  Unless otherwise agreed to by the Parties, the JRC will
schedule an ad hoc meeting not more than thirty [ * ] after receipt of such PoC
Trial Report to review such PoC Trial Report and determine whether or not such
Candidate Selection Compound meets the PoC Compound Criteria.  If the JRC agrees
that the Candidate Selection Compound meets the PoC Compound Criteria, Medicis
shall have a right to exercise its PoC Option pursuant to Section 4.2.1(a).  If
the JRC determines that the Candidate Selection Compound did not meet the PoC
Criteria, Medicis shall nonetheless have the right to deem such Collaboration
Compound a PoC Compound and exercise the PoC Option for such Candidate Selection
Compound pursuant to Section 4.2.1(a).  If, during

 

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[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
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the Research Collaboration Term, a Candidate Selection Compound completes a PoC
Trial and does not satisfy the PoC Compound Criteria, [ * ].

 

(d)                                 Back-Up Development. In addition to the
Development required in Section 2.4 above, at Medicis’s written election prior
to the earlier of (i) [ * ] of the Effective Date and (ii) first NDA approval of
a Product by FDA (the “Back-Up Compound Election Term”), at Anacor’s sole cost
and expense (but subject to the milestone payments set forth in Section 6.2.2),
Anacor shall use Diligent Efforts to provide such Development services as
Medicis may find necessary or useful to progress [ * ] additional Collaboration
Compound selected by Medicis (the “Lead Back-Up Compound”) to the stage where
Medicis may prepare an IND for submission (which activities by Anacor will not
include Anacor’s conduct of any human clinical trial) and up to [ * ] additional
Collaboration Compounds selected by Medicis (each a “Back-Up Compound”) to the
stage of being approved by the JRC as Candidate Selection Compounds pursuant to
subsection (a) above; provided, however, that Medicis may make such elections as
follows: the first such election for a Back-Up Compound may be made no sooner
than [ * ] following commencement of the [ * ] referenced on page 3 of the
Research Plan and no later than [ * ] after the [ * ], and each subsequent
election for a different Back-Up Compound may be made no earlier than [ * ]
after the previous election.  For clarity, each such election shall be for one
(1) Back-Up Compound only.  At the time of Medicis’s election under this
Section, the Parties shall amend the Research Plan and shall mutually agree
whether an extension of the Research Collaboration Term is necessary to complete
the associated Development work; provided that the Research Collaboration Term
may not be extended beyond [ * ] after the Effective Date.  Any such extension
of the Research Collaboration Term shall be agreed in writing by the Parties
pursuant to Section 13.12.  For the avoidance of doubt, Anacor shall not
continue any such Development work beyond achievement of the milestone events
identified above for each Lead Back-Up Compound or other Back-Up Compound. 
Should Medicis make an election under this Section, Anacor’s resulting diligence
obligation shall continue until the earlier of: (A) [ * ], (B) [ * ] or (C) for
the applicable Back-Up Compound only, the JRC’s decision to terminate
development of such Back-Up Compound.  Following Medicis’s election hereunder,
at any time during the Back-Up Compound Election Term, Medicis may, upon notice
to Anacor, substitute any of the Lead Back-Up Compounds or other Back-Up
Compounds in lieu of the PoC Compound elected under Section 4.2.1 or substitute
a different Collaboration Compound in lieu of the initially elected Lead Back-Up
Compound or other Back-Up Compound. If such substitution occurs after the PoC
Option has been exercised by Medicis, such substitution shall not obligate
Anacor to conduct any additional Development activities or in any way affect the
payments due to Anacor hereunder.  If such substitution occurs before the PoC
Option has been exercised, Anacor shall Develop the Collaboration
Compound(s) substituted by Medicis hereunder in lieu of the previously
designated Lead Back-Up Compound or other Back-Up Compound; [ * ]; and provided
further that each applicable milestone payment under Section 6.2.2 shall be due
for each such Collaboration Compound, regardless of whether such milestone was
paid for the Back-Up Compound that was replaced by such Collaboration Compound. 
Notwithstanding anything to the contrary herein, the total number of
Collaboration Compounds for which Medicis may request Development services under
this Section 2.6.6(d) is [ * ].  Upon receipt of such notice of substitution,
Anacor’s diligence obligations (as well as any applicable license grants under
Section 4.2.1) hereunder shall apply to the newly elected Lead Back-Up Compound
or other Back-Up Compound(s) and shall terminate for the previously elected Lead
Back-Up Compound or other Back-Up Compound(s).

 

2.7                                 Development of Additional Compounds.  From
the Effective Date through the PoC Option Deadline Period and, if Medicis
exercises its PoC Option, extending through [ * ] from the Effective Date,
should Anacor identify any compound that Anacor desires to make, have made, use,
sell, offer for sale, import or otherwise exploit as [ * ] for treating [ * ]
(an “Additional Compound”) or grant rights to any Third Party to do so,  Medicis
shall have a right of first offer with respect to such Additional Compound, as
follows: Anacor

 

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shall notify Medicis in writing and Medicis shall have the right to present a
written proposal (including financial and other terms) to Anacor regarding the
rights to such Additional Compound.  Medicis shall have [ * ] after receipt of
such notice from Anacor (the  “Offer Period”), to respond with (a) a written
proposal or (b) a notice that it intends to submit a written proposal within [ *
] followed by a proposal within such [ * ] period.  If Medicis fails to provide
such proposal within the specified time period, then Anacor shall be deemed to
have fulfilled its obligations under this Section 2.7 and shall be free to offer
a Third Party the right to make, have made, use, sell, offer for sale, import or
otherwise exploit such Additional Compound, or make, have made, use, sell, offer
for sale, import or otherwise exploit such Additional Compound itself, so long
as doing so is not in violation of Anacor’s obligations under Section 7.1.  If
Medicis submits a written proposal with respect to an Additional Compound
hereunder, Anacor shall negotiate with Medicis for a period of at least [ * ]
(the “Negotiation Period”).  If a definitive agreement with respect to such
Additional Compound is not consummated within such Negotiation Period, subject
to any obligations Anacor may have under Section 7.1, Anacor shall be free to
(i) offer a Third Party rights to make, have made, use, sell, offer for sale,
import or otherwise exploit such Additional Compound [ * ], or (ii) make, have
made, use, sell, offer for sale, import or otherwise exploit such Additional
Compound itself.  For clarity, this Section 2.7 is not intended and shall not be
interpreted to limit or affect Anacor’s obligation under Section 7.1.

 

2.8                                 Material Transfer.

 

2.8.1                                           Transfer.  To facilitate the
Research Collaboration, either Party (the “Transferor”) shall, upon request by
the other Party (“other Party”), provide the other Party (collectively, the
“Recipient”) certain biological materials or chemical compounds, such as
cell-based assays or research tools owned by or licensed to the Transferor (such
materials or compounds provided hereunder are referred to, collectively, as
“Materials”) (a) for use by the Recipient in furtherance of the Research
Collaboration pursuant to the Research Plan or (b) where the other Party is
Medicis, for verification and validation of test results reported by Anacor. 
All transfers of such Materials by the Transferor to the Recipient shall be
documented in writing (the “Transfer Record”), which Transfer Record shall set
forth the type and name of the Material transferred, the amount of the Material
transferred, the date of the transfer of such Material and the proposed use of
such Material by the Recipient.

 

2.8.2                                           Ownership; Use.  Except as
otherwise provided under this Agreement, all such Materials delivered by the
Transferor to the Recipient shall remain the sole property of the Transferor and
shall only be used by the Recipient in furtherance of the Research
Collaboration, provided, however, that the Recipient may provide such Materials
to a Third Party laboratory for verification and validation of test results in
accordance with Section 2.8.1; provided that the Recipient shall not disclose
the chemical structure of the Materials to such Third Party laboratory and shall
require the Third Party laboratory, prior to receiving any Materials, to enter
into an agreement with the Recipient assigning all of its rights in the results
of the testing, and any inventions made in the course of or as a result of
conducting such testing, to the Recipient.  Other than as provided herein, the
Recipient shall not cause the Materials be used or delivered to or for the
benefit of any Third Party without the prior written consent of the Transferor. 
Further, the Recipient shall not use the Materials in research or testing
involving human subjects, unless expressly agreed by the Transferor in writing.

 

2.8.3                                           License.  At the time the
Transferor provides Materials to the Recipient as provided herein, the
Transferor shall grant, and hereby does grant to the Recipient, subject to the
terms and conditions of this Agreement, a non-exclusive license under the
Material IP Controlled by the Transferor or its Affiliates to use such Materials
for the purpose set forth in the Transfer Record.  In any event, Material IP
shall not become nor be deemed Collaboration Compound IP solely by virtue of the
transfer.

 

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[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
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24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

 

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2.8.4                                           Prosecution; License Back. 
Subject to Article 8, the Transferor shall have sole control over all matters
pertaining to the Prosecution and Maintenance of Material IP and the defense and
enforcement of any Patents included in the Material IP, in each case which
Material IP is Controlled by such Transferor or its Affiliates.  In the event
that the Recipient conceives an invention based on its use of any Materials from
the Transferor as provided in the Transfer Record and obtains Patent protection
therefor, any such Patents shall not fall within the Material IP Controlled by
the Transferor or its Affiliates.  However, subject to the terms and conditions
of this Agreement, the Recipient shall grant and hereby does grant to the
Transferor and its Affiliates a non-exclusive, non-sub-licensable, perpetual,
worldwide, fully-paid and royalty-free license, under all of the Recipient’s
rights in and to such Patents and specifically related know how, to conduct any
research, Development or commercial activities outside the scope of this
Agreement (provided that if Medicis is the Transferor, such license shall only
be outside the Field).

 

2.8.5                                           DISCLAIMER.  THE MATERIALS
SUPPLIED BY THE TRANSFEROR UNDER SECTION 2.8.1 ARE SUPPLIED “AS IS” AND THE
TRANSFEROR MAKES NO REPRESENTATIONS AND EXTENDS NO WARRANTIES OF ANY KIND,
EITHER EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED TO WARRANTIES OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, OR THAT THE USE OF THE
MATERIALS DOES NOT INFRINGE ANY PATENT, COPYRIGHT, TRADEMARK, OR OTHER
PROPRIETARY RIGHTS OF A THIRD PARTY.

 

2.8.6                                           Liability.  The Recipient
assumes all liability for damages which may arise from its use, storage or
disposal of the Materials.  The Transferor will not be liable to the Recipient
for any loss, claim or demand made by the Recipient, or made against such
Recipient by any Third Party, due to or arising from the use, storage or
disposal of the Materials except, to the extent permitted by law, when caused by
the gross negligence or willful misconduct of the Transferor.

 

2.8.7                                           Clinical Testing and Supply. 
The provisions of this Section 2.8 shall not apply to any materials to be used
for clinical testing.

 

2.9                                 Regulatory Matters; Compliance.

 

2.9.1                                           Compliance.  Each Party shall
conduct all nonclinical activities, pre-clinical activities and clinical trials
in good scientific manner, and in compliance in all respects with all
requirements of applicable United States laws, rules and regulations, as well as
all applicable laws, rules and regulations of other nations with jurisdiction
over the nonclinical activities, pre-clinical activities and clinical trials,
and all other applicable requirements of cGMP, cGLP and cGCP.

 

2.9.2                                           Data Integrity.

 

(a)                                  Anacor acknowledges the importance to
Medicis of ensuring that the Program is undertaken in accordance with the
following good data management practices:

 

(i)                                     data is being generated using sound
scientific techniques and processes;

 

(ii)                                  data is being accurately and reasonably
contemporaneously recorded in accordance with good scientific practices by
Persons conducting research hereunder;

 

(iii)                               data is being analyzed appropriately without
bias in accordance with good scientific practices; and

 

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(iv)                              data and results are being stored securely and
can be easily retrieved.

 

(b)                                 Anacor agrees that it shall use Diligent
Efforts to carry out the Research Collaboration so as to collect and record any
data generated therefrom in a manner consistent with the requirement set forth
in subsection (a) above.

 

2.9.3                                           Ownership.  Anacor shall own and
maintain all regulatory filings for Collaboration Compounds Developed during the
Research Collaboration Term pursuant to this Agreement, including all INDs.  In
the event that any Regulatory Authority requests a teleconference,
videoconference, or meeting with Anacor with respect to a particular
Collaboration Compound during the Research Collaboration Term, Anacor shall
provide Medicis with prompt notice and shall endeavor to coordinate an
opportunity for the Parties to jointly strategize with respect to the handling
of the teleconference, videoconference, or meeting.  Anacor shall orally present
the Parties’ position(s) at such teleconference, videoconference, or meeting and
shall use reasonable efforts to communicate with the Regulatory Authority
regarding any Collaboration Compound in such a manner as mutually agreed at such
joint strategy session.  One or more representative(s) of Medicis’s choice may
appear as a [ * ] participant at any such teleconference, videoconference, or
meeting.  Anacor shall not [ * ] a Regulatory Authority on any matter relating
to a Collaboration Compound without consulting with Medicis and providing
Medicis with at least [ * ], to the extent practicable and permitted by the
applicable Regulatory Authority; provided, however, that Anacor shall not [ *
].  Upon exercise by Medicis of its PoC Option with respect to a Collaboration
Compound, Anacor (or its successor in the event of a Change of Control) shall
transfer ownership of such regulatory filings for such Medicis Development
Compounds, including all relevant INDs, to Medicis, and shall provide Medicis
with (i) copies of such INDs and other regulatory filings and all final study
reports for clinical trials of such Medicis Development Compounds within [ * ],
and (ii) all other nonclinical and clinical data and results (including
pharmacology, toxicology, formulation, and stability studies) related to such
Medicis Development Compounds as soon as reasonably practicable, in accordance
with Section 4.4.  Thereafter, Medicis (or one of its Affiliates) shall own and
maintain all regulatory filings and Regulatory Approvals for Medicis Development
Compounds.

 

2.9.4                                           Adverse Event Reporting. 
Beginning on the Effective Date and continuing during the Term until such time,
if any, that Medicis exercises its PoC Option with respect to a Collaboration
Compound, or until such time, if any, that Medicis exercises its right to
terminate the Research Collaboration under Section 2.4.1(c), 12.4.1 12.5.2,
12.6.3(c) or 13.7, Anacor shall be responsible, at Anacor’s sole cost, for
investigating and monitoring all adverse drug reaction experiences related to a
Collaboration Compound in connection with the activities of Anacor under this
Agreement and for reporting all serious adverse events to the appropriate
Regulatory Authorities in the countries in the Territory in which the
Collaboration Compound is being Developed, in accordance with the appropriate
laws and regulations of the relevant countries and Regulatory Authorities. 
Anacor shall provide Medicis notice of any serious adverse events within [ * ]
and notice of any other adverse events as soon as reasonably practicable, and
shall provide copies of all reports of serious adverse events filed with a
Regulatory Authority within [ * ] after the applicable event.  Anacor shall, at
Anacor’s sole cost, comply with any requests for remedial action required by a
Regulatory Authority with respect to a Collaboration Compound.  Through the JRC,
Medicis shall have the right to review from time to time Anacor’s
pharmacovigilance policies and procedures.  Medicis and Anacor agree to
cooperate and use good faith efforts to ensure that data from Anacor’s adverse
event database is organized in a format reasonably acceptable to Medicis. 
Anacor shall provide to Medicis consolidated written summaries of the data and
information set forth in such database regarding all adverse events at least
quarterly.  Commencing on the date that Medicis exercises its PoC Option, or
until such time, if any, that Medicis exercises its right to terminate the
Research Collaboration under Section 2.4.1(c), 12.5.2, 12.4.1, 12.6.3(c) or
13.7, at Medicis’s reasonable request and

 

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[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
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24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

 

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expense, Anacor shall cooperate with Medicis on all matters relating to conduct
of adverse event reporting/pharmacovigilance in respect of any Medicis
Development Compound.

 

2.10                           Research Collaboration Costs.  Each Party shall
bear its own costs in connection with performing Research Collaboration
activities.

 

2.11                           Subcontracting.  Subject to the terms of this
Agreement, each Party shall have the right to engage Affiliates or Third Party
subcontractors to perform certain of its obligations under this Agreement.  Any
Affiliate or subcontractor to be engaged by a Party to perform a Party’s
obligations set forth in the Agreement shall meet the qualifications typically
required by such Party for the performance of work similar in scope and
complexity to the subcontracted activity.  Notwithstanding the preceding, any
Party engaging an Affiliate or subcontractor hereunder shall remain principally
responsible and obligated for such activities.  In addition, any Party engaging
a subcontractor shall in all cases retain or obtain Control of any and all
intellectual property created by or used with the relevant Party’s permission by
such subcontractor directly related to such subcontracted activity.  However, it
is understood that, in some cases, it may not be commercially reasonable for
such Party to obtain exclusive Control of trade secrets or know-how to be
created by such subcontractor.  To the extent that such exclusive rights cannot
be obtained with respect to any intellectual property from any such
subcontractor, prior to entering into such arrangement with such subcontractor,
such Party shall bring such matter to the JRC for a determination of whether to
enter into such arrangement.

 

ARTICLE 3

 

MANAGEMENT OF THE COLLABORATION

 

3.1                                 Joint Research Committee.  The business and
affairs of the Parties’ collaboration hereunder shall be primarily coordinated
by a committee (the “Joint Research Committee” or “JRC”) as more fully described
in this Section 3.1.  The JRC shall have review and oversight responsibilities
for all Development activities within the Research Collaboration.  Each Party
agrees to keep the JRC informed of its progress and activities under the
Program.

 

3.1.1                                           Membership.  The JRC shall be
comprised of [ * ] (each, a “Representative”).  The initial representatives for
each Party shall be provided via written notice to the other Party within [ * ]
of the Effective Date.  Each Party may replace any or all of its Representatives
at any time upon written notice to the other Party in accordance with
Section 13.8 of this Agreement.  Each Representative of each Party shall have
expertise (either individually or collectively) in pharmaceutical drug discovery
and development.  Any Representative may designate a substitute to attend and
perform the functions of that member at any meeting of the JRC.  Each Party may,
in its reasonable discretion, invite non-member representatives of such Party to
attend meetings of the JRC as a non-voting participant, subject to the
confidentiality obligations of Article 9.  Medicis shall designate one of its
Representatives as a chairperson (each, a “Chairperson”) to oversee the
operation of the JRC and prepare minutes.  The Chairperson shall prepare and
circulate to the JRC members an agenda for each meeting reasonably in advance of
such meeting.  The JRC shall have the right to remove a Representative by a vote
of the members in accordance with Section 3.1.3.  The Party of a removed
Representative shall appoint a new Representative in accordance with this
Section 3.1.1 within [ * ] of the removal.  Should a Party fail to appoint a new
Representative within such [ * ] period, the JRC shall nevertheless be deemed
operational without such new Representative following such [ * ] period.

 

3.1.2                                           Meetings.  Subject to
Section 3.1.5, during the JRC Term, the JRC shall meet in person or otherwise at
least once each Calendar Quarter, and more frequently as the Parties mutually
deem

 

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[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, IS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE
24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

 

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appropriate, on such dates, and at such places and times, as provided herein or
as the Parties shall agree.  Meetings of the JRC that are held in person shall
alternate between the offices of the Parties, or such other place as the Parties
may agree.  The members of the JRC also may convene or be polled or consulted
from time to time by means of telecommunications, video conferences, electronic
mail or correspondence, as the Parties deem necessary or appropriate.  Each
Party will bear all expenses it incurs in regard to participating in all
meetings of the JRC, including all travel and living expenses.

 

3.1.3                                           Decisions.  All decisions of the
JRC shall be made by consensus, with each Party having collectively one (1) vote
in all decisions, with a quorum requiring the presence of one or more
Representatives from each Party and [ * ]; provided, however, that if consensus
cannot be obtained Medicis shall have the determinative vote in (a) deciding
whether a particular Anacor Compound or Medicis Compound should be included in
the Program (but subject to clause (i) below); (b) selecting among the Candidate
Selection Compounds to determine which ones will be developed to the stage where
an IND may be filed and which one will be evaluated in a PoC Trial, and
(c) designing a PoC Trial; and provided further, that Medicis shall not have the
right to [ * ] without the prior written consent of Anacor.  For clarity,
amendments to the Candidate Selection Criteria or PoC Compound Criteria require
the Parties’ mutual written agreement.

 

3.1.4                                           Responsibilities.  During the
JRC Term the JRC shall perform the following functions, some or all of which may
be addressed directly at each meeting of the JRC:

 

(a)                                  review and coordinate all activities under
the Program;

 

(b)                                 review the progress of the Program against
the Research Plan and related budget;

 

(c)                                  recommend revisions of the Candidate
Selection Criteria or PoC Compound Criteria based on developments in the Field
or in the Program (including after any failure of a Candidate Selection Compound
to achieve the PoC Compound Criteria), provided that any such revisions must be
agreed in writing by the Parties before taking effect;

 

(d)                                 prepare, review, modify, update and approve
the PoC Trial design consistent with the synopses in Exhibit 5;

 

(e)                                  review, comment on, approve and update the
Research Plan and related budget;

 

(f)                                    advise whether particular Anacor
Compounds or Medicis Compounds should be introduced into, progressed within or
prioritized (in relation other Collaboration Compounds) within the Program;

 

(g)                                 advise whether a new target be evaluated or
selected as an Additional Target;

 

(h)                                 confirm that a Collaboration Compound has
satisfied the Candidate Selection Criteria or PoC Compound Criteria;

 

(i)                                     discuss and attempt to resolve any
deadlock issues submitted to it by any Subcommittee; and

 

(j)                                     such other responsibilities as may be
assigned to the JRC pursuant to this Agreement or as may be mutually agreed upon
in writing by the Parties from time to time.

 

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[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
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24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

 

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For clarity, the JRC shall not have any authority beyond the specific matters
set forth above in this Section 3.1.4, and in particular shall not have any
power to amend or modify the terms or provisions of this Agreement.  In
addition, Medicis (and not Anacor or the JRC) shall have the sole right to make
decisions in its sole discretion with respect to (i) whether to exercise the PoC
Option; and (ii) the Development and commercialization of Medicis Development
Compounds (and resultant Products) after exercise by Medicis of the PoC Option
with respect thereto.

 

3.1.5                                           Post PoC Exercise.  Anacor shall
have the right to withdraw from participation on the JRC at any time after the
JRC Term on [ * ] written notice to Medicis; provided, however, that upon
Medicis’s request, Anacor shall continue to consult with Medicis on an as-needed
basis; provided that the first [ * ] per month of consulting during the [ * ]
after the JRC Term shall be at no cost to Medicis, the first [ * ] per month of
consulting during the period commencing on the [ * ] after the JRC Term and
terminating upon FDA approval of a Product shall be at no cost to Medicis and
for any additional consultation work, Medicis shall pay Anacor a reasonable
consulting fee of no more than [ * ].  After the JRC Term, the JRC shall cease
to serve the functions set forth in Section 3.1.4 and shall instead serve as an
Information transfer vehicle to facilitate the discussion of Development and
commercialization of Medicis Development Compounds and Products.  Following the
JRC Term, the JRC shall meet annually unless the Parties mutually agree that
more frequent meetings are desired.

 

3.1.6                                           Subcommittee(s).  From time to
time, the JRC may establish subcommittees to oversee particular projects or
activities, as it deems necessary or advisable (each, a “Subcommittee”).  Each
Subcommittee shall consist of such number of members as the JRC determines is
appropriate from time to time.  Such members shall be individuals with expertise
and responsibilities in the areas of nonclinical development, clinical
development, Patents, process sciences, manufacturing, regulatory affairs,
product development or product commercialization, as applicable to the stage of
development of the project or activity.

 

3.2                                 Joint Patent Subcommittee.  Within [ * ]
after the Effective Date, the JRC shall establish a Subcommittee to be
responsible for the coordination of the Parties’ efforts in accordance with
Article 8 of this Agreement during the Research Collaboration Term (the “Joint
Patent Subcommittee” or “JPS”), including the Prosecution and Maintenance of
Patents, with an aim of maximizing patent protection, and assessments of
inventorship of inventions created pursuant to the Research Collaboration.  The
JPS shall be comprised of an equal number of representatives from each of
Medicis and Anacor and shall meet on such dates and at such places and times
agreed to by the Parties.  Prior to each meeting of the JPS, Anacor shall
provide the JPS with a then-current list of all Collaboration Compounds and any
Patents that disclose or claim such Collaboration Compounds.  All decisions of
the JPS on matters for which it has responsibility shall be made by consensus,
with each Party having collectively one (1) vote in all decisions.  In the event
that the JPS is unable to reach a consensus decision within [ * ] after it has
met and attempted to reach such decision, then either Party may, by written
notice to the other, refer the matter to for expedited resolution by a mutually
agreed attorney acting as an independent subject matter expert and who has
agreed to terms providing that the Parties share a common legal interest in the
matters under dispute and calculated to minimize the extent to which the
disclosure of information to the expert would result in the loss of or otherwise
impair the attorney-client privilege, attorney work product doctrine or similar
protection.  The decision of such person shall be binding on the Parties.  Each
Party will bear all expenses it incurs in regard to participating in all
meetings of the JPS, including all travel and living expenses; provided,
however, that if a matter is submitted to a mutually agreed attorney acting as
an independent subject matter expert in accordance with this Section, the costs
of such attorney shall be allocated between the Parties as part of his/her
decision hereunder, taking into account the relative merits of the Parties’
respective positions.

 

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[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, IS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE
24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

 

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ARTICLE 4

 

GRANT OF RIGHTS

 

4.1                                 Exclusivity of License and License Option. 
During the Term, Anacor will not grant to any Third Party rights to any Anacor
IP that are inconsistent with or would interfere with the grant of the licenses
resulting from the exercise of the PoC Option by Medicis (including with respect
to any applicable Anacor Compounds or Collaboration Compounds).

 

4.2                                 PoC Option.

 

4.2.1                                           Exercise And Expiration Of the
PoC Option.

 

(a)                                  Subject to Section 4.2.1(b), commencing
upon the date that the JRC confirms that a Candidate Selection Compound
satisfies the applicable PoC Compound Criteria (or, if the Candidate Selection
Compound did not satisfy the PoC Compound Criteria but Medicis deems such
compound a PoC Compound under Section 2.6.6(c), the date that the JRC confirms
such failure to satisfy the PoC Compound Criteria) and continuing for [ * ]
thereafter (the “PoC Option Deadline Period”), Medicis may in its sole
discretion exercise its exclusive option (the “PoC Option”) to Develop and
commercialize such PoC Compound, any additional Collaboration Compound that has
been subject to an election by Medicis pursuant to Section 2.6.6(d), and, so
long as no more than [ * ] Collaboration Compounds are elected in total, up to [
* ] additional Collaboration Compounds of Medicis’s choosing (the “Provisional
Back-Up Compounds”), by delivering to Anacor a written notice of Medicis’s
exercise of the PoC Option, specifying the PoC Compound, Provisional Back-Up
Compounds, Back-Up Compounds and Lead Back-Up Compound (if any) for which such
PoC Option is being exercised.  Upon Medicis’s exercise of its PoC Option,
(i) each such PoC Compound, Provisional Back-Up Compound, Back-Up Compound and
Lead Back-Up Compound (but no more than [ * ] such compounds in total at any
particular time) shall be deemed a Medicis Development Compound and (ii) Anacor
shall deliver to Medicis the items required by Section 4.4, Section 2.9.3 and
Exhibit 6 with respect to such Medicis Development Compounds.  Any PoC Option
exercised by Medicis shall be irrevocable.  Following Medicis’s election
hereunder, Medicis may, during the Back-Up Compound Election Term, upon notice
to Anacor, substitute one or more Collaboration Compounds in lieu of the
initially elected Provisional Back-Up Compounds.  Should Medicis make an
election pursuant to Section 2.6.6(d) whereby an additional Collaboration
Compound becomes a Back-Up Compound or Lead Back-Up Compound subsequent to the
date upon which Medicis exercises its PoC Option or should Medicis substitute a
new Collaboration Compound as a Provisional Back-Up Compound as provided herein,
as of the date of Medicis’s election or substitution (as applicable), such
Back-Up Compound, Lead Back-Up Compound or Provisional Back-Up Compound (as
applicable) shall be deemed a Medicis Development Compound, any previous
Provisional Back-Up Compound shall no longer be a Medicis Development Compound
and Anacor shall deliver to Medicis the items required by Section 4.4,
Section 2.9.3 and Exhibit 6 with respect to such new Medicis Development
Compounds.

 

(b)                                 Subject to Sections 2.6.6(d) and 3.1.5,
following exercise of its PoC Option, Medicis shall have sole responsibility,
and Anacor shall have no obligations, for the further Development,
manufacturing, and registration of the Collaboration Compounds that became
Medicis Development Compounds (including clinical activities and submissions to
regulatory agencies) pursuant to the terms of this Agreement.

 

4.2.2                                           HSR And Equivalent Foreign
Laws.  If Medicis reasonably determines in good faith prior to the expiration of
the PoC Option Deadline Period that the exercise of its PoC Option by Medicis
under

 

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[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
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24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

 

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this Agreement is required to be filed with the Federal Trade Commission (the
“FTC”) under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (15 U.S.C.
§18a) (“HSR”) or with equivalent foreign governmental authorities under any
similar foreign law, the PoC Option Deadline Period shall be extended
automatically by [ * ] from the original expiration of the PoC Option Deadline
Period (the “PoC Option Deadline Extension Period”) in the event that: (a) the
HSR (or similar foreign law) initial waiting period is still pending as of the
original date of the expiration of the PoC Option Deadline Period; or (b) a
“Second Request” to which Medicis intends to respond is received from the FTC
(or equivalent foreign authority) in connection with such filing and clearance
has not been granted as of the PoC Option Deadline Period.  Each Party agrees to
cooperate at the request of the Party that decides in its sole discretion to
respond to any such request for Information to expedite review of such
transaction.  In the event that HSR (or similar foreign law) clearance has still
not been granted as of the expiration of the PoC Option Deadline Extension
Period, (x) Anacor and Medicis shall promptly meet to negotiate in good faith
whether an additional extension of the PoC Option Deadline Extension Period is
required and (y) Medicis shall provide Anacor with copies of all written
correspondence from the FTC (or equivalent foreign authority) within Medicis’s
custody or control that relates to such HSR (or similar foreign law) clearance. 
In such event, such extension of the PoC Option Deadline Extension Period shall
only be effective with the mutual written approval of the Parties, not to be
withheld by Anacor unless Anacor can demonstrate a credible basis to believe,
based on documented correspondence from the FTC (or equivalent foreign
authority) that such HSR (or similar foreign law) clearance is unlikely to be
forthcoming.  In the event that HSR (or similar foreign law) clearance is not
granted upon expiration of the PoC Option Deadline Extension Period, the PoC
Option shall be deemed to have expired unexercised.

 

4.3                                 License Grants.

 

4.3.1                                           Research Collaboration.  Subject
to the terms and conditions of this Agreement, Medicis hereby grants to Anacor a
non-exclusive, non-royalty bearing license under the Medicis Research
Collaboration Patents and Medicis Research Collaboration Know-How (if any),
solely as and to the extent necessary or important to enable Anacor to conduct
activities for which Anacor is responsible under the Research Plan during the
Research Collaboration Term, including any activities conducted by Anacor
pursuant to Section 2.6.6(d).  Subject to the terms and conditions of this
Agreement, Anacor hereby grants to Medicis a non-exclusive, non-royalty bearing
license, with the right to grant sublicenses, under the Anacor IP, solely as and
to the extent necessary or important to enable Medicis to exercise its rights
under Section 2.6.2.

 

4.3.2                                           Development And
Commercialization.

 

(a)                                  Subject to the terms and conditions of this
Agreement and upon Medicis’s exercise of its PoC Option in accordance with
Section 4.2.1(a) or 12.5.2, Anacor shall be hereby deemed to have granted and
hereby grants to Medicis the exclusive (even as to Anacor) right and license in
the Territory, with the right to grant sublicenses (through multiple tiers) in
accordance with subsection (b), under the Anacor Exclusively Licensed IP, to
make, have made, use, sell, offer for sale, import and otherwise exploit the
Medicis Development Compounds and any Derivatives thereof as and into Products
during the Term.

 

(b)                                 The license granted by Anacor to Medicis in
subsection (a) may be sublicensed by Medicis to an Affiliate (without notice to
Anacor) or Third Party (with prior written notice to Anacor being required if
the sublicense is as to all of Medicis’s rights with respect to a particular
Medicis Development Compound in a particular territory).  Medicis shall provide
Anacor with a copy of each agreement under which it grants a sublicense under
its commercialization rights promptly upon execution thereof, to the extent
permitted under the terms of such agreement; provided that [ * ].  If Medicis
cannot obtain such right, Medicis shall provide Anacor with a redacted copy of
such sublicense agreement, provided that all terms related to

 

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[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
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24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

 

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Medicis’s rights and obligations under this Agreement, including payment
obligations to Anacor, may not be redacted.   For each other sublicense
agreement, Medicis shall inform Anacor of the identity of such Sublicensee, as
well as the term and scope of the sublicense, promptly upon execution of such
sublicense agreement.  Medicis shall, in each sublicense agreement, require the
Sublicensee to provide the following to Anacor if this Agreement terminates and
to Medicis if only such sublicense agreement terminates: (i) the assignment and
transfer of ownership and possession of all Regulatory Approvals and other
regulatory materials related to a Medicis Development Compound or Product held
or possessed by such Sublicensee, and (ii) the assignment of, or a freely
sublicensable exclusive license to, all intellectual property Controlled by such
Sublicensee that Covers or embodies a Medicis Development Compound or Product
and that was created by or on behalf of such Sublicensee during the exercise of
its rights or fulfillment of its obligations pursuant to such sublicense
agreement.  Upon any termination of this Agreement by Anacor that results in a
loss of Medicis’s license under Section 4.3.2 hereunder, the rights of each
Sublicensee shall survive such termination, but only if the Sublicensee is in
compliance with all terms of the sublicense agreement and cures any breach of
this Agreement by Medicis, [ * ].  Each sublicense agreement shall be subject to
the applicable terms and conditions of this Agreement and any Third Party
licenses sublicensed to the Sublicensee.

 

4.4                                 Technology Transfer after Medicis’s PoC
Option Exercise.  Within [ * ] after Medicis exercises its PoC Option, Anacor
and Medicis shall meet to develop a plan for Anacor’s delivery to Medicis, at no
cost to Medicis other than for Medicis’s costs and expenses, all Information and
material in Anacor’s possession and Control relating to such Medicis Development
Compounds, including quality/CMC written final study or Development reports,
nonclinical and clinical final study reports, along with all supporting cGLP and
cGMP written final reports, and in any event shall use reasonable efforts to
provide all such Information as soon as practicable and, unless [ * ], within no
more than [ * ] of the exercise of the PoC Option other than for delays due to
the request or inability of Medicis to accept or arrange receipt of such
Information.  As part of such transfer, Anacor shall provide Medicis with all
remaining supplies of Medicis Development Compounds in Anacor’s possession that
were manufactured under the Research Plan, at no cost to Medicis, and shall
assist Medicis, at Medicis’s reasonable request, in a technology transfer to a
Third Party supplier of Medicis Development Compounds to Medicis.  Other than
for delays due to the request or inability of Medicis to accept or arrange such
transfer, the transfer shall be completed in [ * ] or less.  The Parties shall
use reasonable efforts to cooperate to provide Medicis, at no cost to Medicis
other than for Medicis’s costs and expenses, with any other Information relating
to such Medicis Development Compound as may be Developed or identified by Anacor
during the Term, to the extent that Medicis has a license under this Agreement
to such Information. In addition, both Parties shall use commercially reasonable
efforts with respect to those activities for which it is responsible to
reasonably ensure orderly transition and uninterrupted Development of the
Medicis Development Compounds and to provide a reasonable amount of technical
assistance, subject to Section 3.1.5, in the transfer of the technology.

 

4.5                                 Third Party Licenses.

 

4.5.1                                           During the Research
Collaboration Term, [ * ] all costs and payments of any kind (including all
upfront fees, annual payments, milestone payments and royalty payments) for any
license(s) required from a Third Party for (a) use of any Anacor Compounds, in
the form provided by Anacor to Medicis, in connection with the Program (each a
“Third Party License”), or (b) the use of Anacor’s proprietary technology as
contemplated hereunder for the discovery, research, manufacture or use of Anacor
Compounds or Targets in connection with the Program in either case prior to
expiration of the Research Collaboration Term.  During the Research
Collaboration Term, [ * ] satisfying all costs and payments of any kind
(including all upfront fees, annual payments, milestone payments and royalty
payments) for any license(s) required from a Third Party for the use of any
Medicis Compounds in connection with the Program.  In addition, [ * ] all costs

 

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[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, IS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE
24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

 

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and payments of any kind (including all upfront fees, annual payments, milestone
payments and royalty payments) on account of the use of Anacor Compounds in the
form delivered by Anacor to Medicis for any license from a Third Party to Anacor
that exists as of the Effective Date.  [ * ]  Notwithstanding anything to the
contrary herein, this Section 4.5.1 does not apply to any license from a Third
Party to Medicis that exists as of the Effective Date, and [ * ] all costs and
payments of any kind thereunder.  For the avoidance of doubt, if Medicis
modifies the form of an Anacor Compound in such a way as to necessitate taking
an additional license from a Third Party, [ * ] for obtaining and paying for
such Third Party license.  However, if Medicis’s modification does not trigger
the need for an additional license, the fact of the modification itself shall
not relieve [ * ] of its responsibilities pursuant to Sections 4.5.1 and 4.5.2.

 

4.5.2                                           If Medicis determines that it
needs to obtain one or more licenses from one or more Third Parties (other than
any license described in Section 4.5.1) to manufacture, have manufactured,
import, use, sell, offer for sale, or otherwise commercialize any Medicis
Development Compound, Medicis shall inform Anacor.  Medicis shall have the first
right to obtain such license(s).  In the event that Medicis decides not to
pursue such license(s), Anacor may do so.  To the extent a license obtained by
Medicis pursuant to this Section 4.5.2 is a Necessary License, Medicis shall be
entitled to the credit set forth in Section 6.4.2(c).  In the event that Anacor
obtains such a license, any intellectual property licensed to Anacor under such
license shall be deemed to be Collaboration Compound IP Controlled by Anacor or
its Affiliates, and all costs and expenses incurred by Anacor under such
license(s) shall be [ * ], to the extent attributable to an Anacor Compound in
the form delivered by Anacor to Medicis.  Medicis shall be responsible for all
costs and expenses incurred by either Party under any license(s) to Third Party
intellectual property to the extent attributable to Medicis Compounds (or
Collaboration Compounds or Medicis Development Compounds derived therefrom).

 

4.5.3                                           Except as set forth in Sections
4.5.1 and 4.5.2, Medicis shall be solely responsible for obtaining any licenses
from Third Parties that Medicis determines, in its sole discretion, are required
in order to lawfully research, Develop, manufacture, and commercialize Medicis
Development Compounds and Products in the Field in the Territory.  Medicis shall
be solely responsible for any costs associated with such licenses, subject to
the royalty adjustment set forth in Section 6.4.2(c), if applicable.

 

ARTICLE 5

 

POST-RESEARCH COLLABORATION ACTIVITIES

 

5.1                                 Medicis Development and Commercialization. 
Subject to the continuing obligations of Anacor under Section 2.6.6(d),
following exercise of its PoC Option or termination of the Research
Collaboration pursuant to Section 2.4.1(c), 12.4.1, 12.5.2, 12.6.3(c) or 13.7,
Medicis, either itself or by and through its Affiliates, Sublicensees or
contractors, shall be responsible for all Development, manufacturing, marketing,
advertising, promotional, launch and sales activities in connection with the
marketing of the Medicis Development Compounds and Products containing the
same.  Except as set forth in Sections 4.4 and 4.5, all costs associated with
such activities shall be borne solely by Medicis.

 

5.2                                 Medicis Diligence.  Following Medicis’s
exercise of its PoC Option or termination of the Research Collaboration pursuant
to Section 2.4.1(c), 12.4.1, 12.5.2, 12.6.3(c) or 13.7, Medicis shall use
Diligent Efforts to Develop and commercialize (either itself or through
Sublicensees) the Medicis Development Compounds into Products throughout the
Territory.

 

5.3                                 Medicis Derivatives Research.  Following
Medicis’s exercise of the PoC Option and the expiration or termination of the
Research Collaboration Term, or following termination of the Research

 

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[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
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Collaboration pursuant to Section 2.4.1(c), 12.4.1, 12.5.2, 12.6.3(c) or 13.7,
Medicis shall have the right during the Term to conduct research in the Field on
Medicis Development Compounds, for the sole purpose of identifying compounds in
the Field that (a) are based on the same Scaffold as a Medicis Development
Compound, and (b) [ * ] (collectively, the “Medicis Research Compounds”), and
solely using employees or agents who are under written obligation to assign all
rights in inventions made in the course of such research to Medicis; provided
that such right to conduct research shall apply only to the PoC Compound until
the end of the Back-Up Compound Election Term, after which it shall apply to all
Medicis Development Compounds.  On a Calendar Quarterly basis until the end of
the Term, Medicis shall disclose to Anacor all Information discovered,
developed, invented or created by or on behalf of Medicis in the course of or as
a result of conducting such research, including a list of all compounds
(including Derivatives).  Under the oversight of the JPS, Medicis shall employ
commercially reasonable efforts and cooperate with Anacor in adopting
Prosecution and Maintenance strategies for such Medicis Research Compounds that
are [ * ].  If Medicis files an application for a Patent that claims the
composition of matter of a Medicis Research Compound and subject matter related
to Medicis Research Compounds other than the composition of matter of a Medicis
Research Compound (a “Mixed Patent”), Medicis shall, upon request by Anacor,
employ commercially reasonable efforts to [ * ]. Further, Medicis [ * ] of such
Medicis Research Compounds.  Medicis agrees to take all reasonable actions to [
* ] as reasonably requested by Anacor, at Anacor’s reasonable expense.  Prior to
Medicis’s commencement of any such research, the Parties shall determine the
applicable Scaffolds from which such compounds may be generated.  Subject to the
terms and conditions of this Agreement, Anacor hereby grants to Medicis a
non-exclusive, worldwide license under the Anacor Exclusively Licensed IP,
commencing upon the expiration or termination of the Research Collaboration and
continuing for the remainder of the Term, solely to conduct the research
described in this Section 5.3.  Any compound resulting from such research that
is a Derivative shall be included in the license granted to Medicis in
Section 4.3.2(a).

 

ARTICLE 6

 

MILESTONES AND ROYALTIES; PAYMENTS

 

6.1                                 Upfront Payment.  In consideration of
Anacor’s willingness to devote its pre-existing know-how  and expertise to the
identification and Development of Collaboration Compounds hereunder, Medicis
shall pay to Anacor a non-refundable, non-creditable payment of Seven Million
Dollars ($7,000,000) within five (5) days after execution of this Agreement.

 

6.2                                 Development Milestones Payable by Medicis to
Anacor.

 

6.2.1                                           Initial Development Milestones. 
Subject to Sections 2.4.1(c), 12.4, and 12.5, during the Term, Medicis shall
make the non-refundable, non-creditable milestone payments to Anacor that are
set forth below upon occurrence of the corresponding Development milestone event
with respect to a Collaboration Compound or Derivative.  If a milestone event
occurs and the payment for occurrence of a previous milestone event has not yet
been made by Medicis, then payments for both such milestone events shall be paid
together.  For the avoidance of doubt, all milestone payments under this
Section 6.2.1 shall be due only upon the first (1st) occurrence of the
Development milestone event at issue, regardless of whether the Development
milestone event may subsequently be met by another Collaboration Compound or
Derivative.

 

Development Milestone Event

 

Milestone Payment 
(Million US $)

 

[ *]

 

[ *]

 

 

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[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
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Development Milestone Event

 

Milestone Payment 
(Million US $)

[ * ]

 

[ * ]

[ * ]

 

[ * ]

[ * ]

 

[ * ]

[ * ]

 

[ * ]

[ * ]

 

[ * ]

 

6.2.2                                           Back-Up Compound Milestones. 
Subject to Sections 2.4.1(c), 12.4, and 12.5, during the Term, Medicis shall
make the following additional non-refundable, non-creditable milestone payments
to Anacor that are set forth below upon occurrence of the corresponding
Development milestone event with respect to the Lead Back-Up Compound or other
Back-Up Compound as designated by Medicis pursuant to Section 2.6.6(d).  If a
milestone event occurs with respect to a Lead Back-Up Compound or other Back-Up
Compound and the payment for occurrence of a previous milestone event for such
Lead Back-Up Compound or other Back-Up Compound has not yet been made by
Medicis, then payments for both such milestone events shall be paid together. 
If Medicis substitutes a Lead Back-Up Compound or other Back-Up Compound for a
Provisional Back-Up Compound, Lead Back-Up Compound or other Back-Up Compound,
Medicis shall make each applicable payment below for each such substituted
compound.  For clarity, the maximum amount payable under this Section 6.2.2 is [
* ] (including a maximum of one payment for milestone #3).

 

Development Milestone Event

 

Milestone Payment 
(Million US $)

[ * ]

 

[ * ]

[ * ]

 

[ * ]

[ * ]

 

[ * ]

 

6.3                                 Sales Milestones Payable by Medicis to
Anacor.  Subject to Sections 2.4.1(c), 12.4, and 12.5, during the Term, Medicis
shall also make the non-refundable, non-creditable milestone payments to Anacor
that are set forth below upon occurrence of the corresponding sales milestone
event with respect to all Products (cumulatively).  For the avoidance of doubt,
such milestone payments shall be due only upon the first (1st) occurrence of the
sales milestone event at issue, regardless of whether the sales milestone event
may subsequently be met.

 

Sales Milestone Event

 

Milestone Payments 
(Million US $)

[ * ]

 

[ * ]

[ * ]

 

[ * ]

 

6.4                                 Royalties.

 

6.4.1                                           Incremental Royalty.  Subject to
the terms of this Article 6 and Sections 2.4.1(c), 12.4, and 12.5, during the
Term, Medicis shall pay to Anacor an incremental royalty equaling a percentage
of aggregate Annual Net Sales by Medicis and its Affiliates and Sublicensees to
Third Parties in the Territory.  Such royalty shall be calculated at the rates
as set forth in the table below; provided, however, that in the case of
transfers or sales of any Product between Medicis and an Affiliate or
Sublicensee of Medicis, a royalty shall not be payable.  For clarity, the
royalty rates set forth in this Section are incremental rates that apply only
for the

 

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[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
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24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

 

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respective increment of Annual Net Sales described.  Accordingly, once a total
Net Sales figure is achieved for the year, the royalties owed on any lower-tier
portion of Annual Net Sales are not adjusted to the higher rate.  For example,
if total Net Sales in the Territory for 2011 is [ * ], Medicis would pay to
Anacor a royalty for 2011 in [ * ] as follows:  [ * ].

 

Annual Net Sales (Million US $)

 

Royalty Rate

[ * ]

 

[ * ]

[ * ]

 

[ * ]

[ * ]

 

[ * ]

[ * ]

 

[ * ]

 

6.4.2                                           Royalty Adjustments.

 

(a)                                  Know-How Royalty.  If, on a
country-by-country and Product-by-Product basis, there is (a) no Valid Claim of
an issued Patent [ * ] (or, solely in the case of Medicis Compounds, [ * ]) that
in either case claims or Covers [ * ] the Medicis Development Compound or
Derivative included in such Product, either at the time of First Commercial Sale
or anytime thereafter, and (b) no Regulatory Exclusivity for such Product, then
Medicis shall have no obligation to pay to Anacor royalties on Net Sales of such
Product in such country at the royalty rates set forth in Section 6.4.1;
provided, however, that if [ * ], then Medicis shall pay Anacor a know-how
royalty on a country-by-country and Product-by-Product basis on Net Sales of
such Product in such country at a royalty rate of [ * ] of those set forth in
Section 6.4.1 above; and provided further that in no case shall Medicis be
obligated to pay a know-how royalty to Anacor after [ * ] following the date of
First Commercial Sale.  Following issuance of [ * ], Medicis shall pay royalties
for the applicable Product and country under Section 6.4.1.

 

(b)                                 Royalty Reduction for Competition.  If at
any such time that a Generic Product having the same or substantially the same
active ingredient as a Product incorporating a Medicis Development Compound
enters the market in a given country, and such Generic Product(s) accounts for [
* ] of Product and all Generic Products in the given country in any given
Calendar Quarter according to data published by IMS Health Inc. (or any similar
Person mutually agreed by the Parties), the royalty rates payable pursuant to
this Section 6.4 for such Calendar Quarter shall be [ * ].

 

(c)                                  Necessary Licenses.  If any intellectual
property rights of a Third Party should exist in any country during the Term
Covering the composition of matter or manufacture of a Medicis Development
Compound that was an Anacor Compound, or the use of a Medicis Development
Compound that was an Anacor Compound in the Field, and Medicis determines in
good faith and [ * ] such Medicis Development Compound without obtaining a
royalty-bearing license from such Third Party under such intellectual property
in a particular country (a “Necessary License”), then Medicis shall be entitled
to a credit, against any royalty payments due to Anacor upon sales of a Product
containing such Medicis Development Compound in such country, in an amount
totaling [ * ] by Medicis to such Third Party for acquiring such Necessary
License in such country, provided that in no event shall the royalty payment due
to Anacor upon sales of such Product in any Calendar Quarter be [ * ] of the
amount otherwise due under Sections 6.4.1 or 6.4.2, as applicable.

 

(d)                                 Combination Product.  In the event a royalty
under Section 6.4.1 is due on Net Sales of a Product that is in the form of a
Combination Product, the Net Sales of the Combination Product in a country shall
be adjusted by multiplying the Net Sales of the Combination Product calculated
in accordance

 

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[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, IS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE
24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

 

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with Section 1.1.91 by a fraction A/(A+B) where A is the established market
price in such country of the Combination Product without the Other Active
Ingredient(s), and B is the established market price in such country of a
product containing only the Other Active Ingredient(s).  If the market price for
the Other Active Ingredient(s) is not established, then the Parties shall
estimate the market price for such Other Active Ingredient(s) by subtracting
from the Net Sales of the Combination Product (as determined without reference
to this paragraph) [ * ].  However, in case that any Other Active Ingredient
that is not sold separately is [ * ] in the country of sale, the [ * ].

 

6.4.3                                           Royalty Term.  The royalties due
under Section 6.4.1 with respect to a Product, even if reduced as provided
herein, shall commence upon the First Commercial Sale of such Product in a
particular country in the Territory and will expire on the later of
(a) expiration on a country-by-country basis of the last to expire Valid Claim
of an issued Patent [ * ] (or, solely in the case of Medicis Compounds, [ * ])
claiming or Covering [ * ] the Medicis Development Compound or Derivative
included in such Product or (b) expiration on a country-by-country basis of
Regulatory Exclusivity for such Product, or in the case of Products containing
only unpatented technology, [ * ] from First Commercial Sale of such Product. 
The period during which Medicis is paying any royalty to Anacor as provided in
this Section 6.4 is referred to in this Agreement as the “Royalty Term”. 
Following the expiration of the Royalty Term, the license granted pursuant to
Section 4.3.2 (or Section 2.4.1(c)) shall be fully paid.

 

6.5                                 Non-Royalty Payments.  Medicis shall pay to
Anacor [ * ] of any non-royalty payments received from Sublicensees, including
upfront payments, development and regulatory milestones and sales milestones
(excluding, in any event, payments that are reimbursements for research and
Development activities or fees for data or services provided by Medicis).

 

6.6                                 Reports and Payment of Milestones.  Medicis
shall notify Anacor in writing promptly, but in no event later than [ * ], after
the achievement of milestone [ * ] and milestone [ * ].  Medicis shall notify
Anacor in writing promptly, but in no event later than [ * ], after the
achievement of [ * ] milestone [ * ].  Medicis shall pay the appropriate
milestone payments due for exercising the [ * ] as set forth in Section 6.2
within [ * ] after notifying Anacor that it has exercised [ * ], as provided in
Section 4.2.1(a).  For all milestone payments other than for PoC Option
exercise, Medicis shall pay the milestone payment due within [ * ] after receipt
of an invoice therefor from Anacor following the achievement of the
corresponding milestone event.

 

6.7                                 Reports; Royalty and Non-Royalty Payments. 
Until the expiration of Medicis’s royalty obligations under this Article 6 and
non-royalty payment obligations under Section 6.5, Medicis agrees to make
written reports to Anacor within [ * ] covering all sales of Products in the
Territory by Medicis, its Affiliates and Sublicensees for which invoices were
sent during such Calendar Quarter and all payments from Sublicensees subject to
Section 6.5, each such written report in reasonable detail as available to
Medicis stating for the applicable period:  (a) the total Net Sales for each
Product (including an itemization of the deductions applied to such gross sales
to derive such Net Sales); (b) a calculation of the amount of royalty payment
due on such Net Sales pursuant to Article 6; and (c) the total amounts received
under Section 6.5 from each Sublicensee and the applicable milestone event.  The
Information contained in each report under this Section 6.7 shall be considered
Confidential Information of Medicis.  Concurrent with the delivery of each such
report, Medicis shall make the royalty payment due to Anacor under Section 6.4
and the non-royalty payment due to Anacor under Section 6.5 for the Calendar
Quarter covered by such report.

 

6.8                                 Methods of Payments.  All payments due from
Medicis to Anacor under this Agreement shall be paid in Dollars by wire transfer
to a bank in the United States designated in writing by Anacor.

 

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[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
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24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

 

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6.9                                 Accounting.  Medicis agrees to keep full,
clear and accurate records as required by applicable laws, but in no event for
less than [ * ] after the relevant payment is owed pursuant to this Agreement,
setting forth the sales and other disposition of Product sold or otherwise
disposed of, and amounts received from Sublicensees, in sufficient detail to
enable royalties and compensation payable to Anacor hereunder to be determined. 
Medicis further agrees, upon not less than [ * ] prior written notice, to permit
the books and records relating to such [ * ] period to be examined by an
independent accounting firm selected by Anacor and reasonably acceptable to
Medicis for the purpose of verifying reports provided by Medicis under
Section 6.7.  Such audit shall not be performed more frequently than [ * ] per
calendar year and shall be conducted under appropriate confidentiality
provisions, for the sole purpose of verifying the accuracy and completeness of
all financial, accounting and numerical Information and calculations provided
under this Agreement.  Such examination is to be made at the expense of Anacor,
except in the event that the results of the audit reveal an underpayment of
royalties, milestone payments, or other payments to Anacor under this Agreement
of [ * ] or more over the period being audited, in which case reasonable audit
fees for such examination shall be paid by Medicis.  When calculating Net Sales,
the amount of such sales in foreign currencies shall be converted into Dollars
using the standard methodologies employed by Medicis for consolidation purposes,
or if such methodologies do not exist, based upon the daily average of the
calendar quarter for which such Net Sales are calculated, as published by the
Financial Times or The Wall Street Journal.  Medicis shall provide reasonable
documentation of the calculation and reconciliation of the conversion figures on
a country-by-country basis as part of its report of Net Sales for the period
covered under the report.  All amounts payable by Medicis hereunder shall become
final and not subject to further challenge except to the extent subject to an
audit initiated by Anacor within [ * ] of the due date of the relevant payment.

 

6.10                           Taxes.  If a law or regulation of any country of
the Territory requires withholding of taxes of any type, levies or other charges
with respect to any amounts payable hereunder to Anacor, Medicis shall promptly
pay such tax, levy, or charge for and on behalf of Anacor to the proper
governmental authority, and shall furnish Anacor with documentation of such
payment.  Medicis shall have the right to deduct any such tax, levy or charge
actually paid from payment due Anacor or be promptly reimbursed by Anacor if no
further payments are due Anacor.  Medicis agrees to assist Anacor in claiming
exemption from such deductions or withholdings under double taxation or similar
agreement or treaty from time to time in force and in minimizing the amount
required to be so withheld or deducted.  The recipient of any transfer under
this Agreement of Patents, Information, Collaboration Compounds, or Products, as
the case may be, shall be solely responsible for any sales, use, value added,
excise or other taxes applicable to such transfer.

 

6.11                           Late Payments.  Any amount owed by Medicis to
Anacor under this Agreement that is not paid within the applicable time period
set forth herein shall accrue interest at the rate of [ * ] above the
then-applicable prime commercial lending rate of Citibank, N.A., San Francisco,
California, or, if lower, the highest rate permitted under applicable law.

 

ARTICLE 7

 

EXCLUSIVITY

 

7.1                                 Anacor Exclusivity Obligation.  Subject to
Sections 7.3, 12.5.2, 12.6.2(c), and 12.6.4(b)(i), for eleven (11) years from
the Effective Date, except pursuant to this Agreement, Anacor shall not, either
alone or with or for any Third Party, conduct any research, Development,
manufacturing, or commercialization activities with respect to any small
molecule compound [ * ].  The obligation set forth in this Section 7.1 shall
survive termination of this Agreement by Medicis under Section 12.6.3.

 

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[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
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24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

 

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7.2                                 Medicis Exclusivity Obligation.  Subject to
Sections 7.3, 12.5.2, 12.6.2(c), and 12.6.3(b)(ii), for nine (9) years from the
Effective Date, except pursuant to this Agreement, Medicis shall not, either
alone or with or for any Third Party, research, Develop, manufacture, or
commercialize any small molecule compound [ * ], and that either (a) contains
boron or [ * ]; provided, however, that the foregoing exclusivity obligation
will expire on the fourth (4th) anniversary of the Effective Date if [ * ] by
such date.

 

7.3                                 Exceptions.  Notwithstanding the foregoing
in this Article 7, the Parties shall have the right, either alone or with or for
a Third Party, to conduct research with any target that, at the time such Party
initiates research on such target, is not the Target or an Additional Target.

 

ARTICLE 8

 

INTELLECTUAL PROPERTY RIGHTS

 

8.1                                 Ownership.

 

8.1.1                                           Solely-Owned Intellectual
Property.  Anacor shall retain all of its rights, title and interest in and to
the Anacor IP, and Medicis shall retain all of its rights, title and interest in
and to the Medicis IP, except to the extent that any rights, licenses or
assignments are expressly granted by one Party to the other Party under this
Agreement.

 

8.1.2                                           Collaboration Compound IP,
Medicis Development Compound IP and Other Information.

 

(a)                                  Medicis shall be the sole owner of any
Collaboration Compound IP, Medicis Development Compound IP or other Information
discovered, developed, invented or created solely by or on behalf of Medicis
personnel, and Medicis shall retain all of its rights, title and interest
thereto, except to the extent that any rights, licenses or assignments are
expressly granted thereunder by Medicis to Anacor under this Agreement;

 

(b)                                 Anacor shall be the sole owner of any
Collaboration Compound IP, Medicis Development Compound IP, or other Information
discovered, developed, invented or created solely by or on behalf of Anacor
personnel, and Anacor shall retain all of its rights, title and interest
thereto, except to the extent that any rights, licenses or assignments are
expressly granted thereunder by Anacor to Medicis under this Agreement; and

 

(c)                                  Any Collaboration Compound IP, Medicis
Development Compound IP or other Information that is discovered, developed,
invented or created jointly by or on behalf of Medicis and Anacor shall be owned
jointly by Medicis and Anacor, and all rights, title and interest thereto shall
be jointly owned by the Parties, except to the extent that any exclusive rights,
licenses or assignments are expressly granted to a Party under this Agreement.

 

Notwithstanding the foregoing, Anacor shall be the sole owner of any Information
[ * ], and Medicis shall be the sole owner of any Information [ * ].  Each Party
hereby assigns to the other Party such of its right, title and interest in and
to such Information as is necessary to effect the ownership set forth in the
preceding sentence, and agrees to take all reasonable actions to evidence such
assignment as reasonably requested by the other Party, at such other Party’s
reasonable expense.

 

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24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

 

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Except as expressly provided in this Agreement, neither Party shall have any
obligation to account to the other for profits, or to obtain any consent of the
other Party to license or exploit patented jointly-owned subject matter, by
reason of joint ownership thereof, and each Party hereby waives any right it may
have under the laws of any jurisdiction to require any such consent or
accounting.

 

8.2                                 Prosecution and Maintenance of Patents.

 

8.2.1                                           Responsibility for Prosecution
and Maintenance of Patents.  Subject to Section 8.2.2, during the Term, Medicis
will be responsible for Prosecution and Maintenance of all solely-owned Patents
included in the Medicis IP, Anacor will be responsible for Prosecution and
Maintenance of all Collaboration Compound Patents jointly owned by Medicis and
Anacor, and Anacor will be responsible for Prosecution and Maintenance of all
other Patents included in the Anacor IP.  Anacor will employ commercially
reasonable efforts and cooperate with Medicis in adopting Prosecution and
Maintenance strategies for Anacor-owned or jointly-owned Patents Prosecuted and
Maintained by Anacor hereunder that are designed to separate, as much as
possible without substantively jeopardizing its other rights in Anacor-owned
Patents, Patents that claim Medicis Development Compounds from Patents that
either do not claim or claim, but not specifically, Medicis Development
Compounds.  In the event of termination of this Agreement for material breach of
either Party or by Medicis for convenience, Anacor shall be solely responsible
for Prosecuting and Maintaining all jointly owned Patents.

 

8.2.2                                           Prosecution Standards and
Cooperation - Generally.

 

(a)                                  The Party responsible for Prosecution and
Maintenance of any Patents (the “Prosecuting Party”) shall use Diligent Efforts
to obtain a reasonable scope of protection and issued claims as free of
invalidity or unenforceability risks as commercially reasonable for
Collaboration Compounds prior to the expiration or Medicis’s exercise of the PoC
Option or termination of the Research Collaboration Term under Section 2.4.1(c),
12.4.1, 12.5.2, 12.6.3(c) or 13.7, and for Medicis Development Compounds
thereafter, using in-house or external counsel of its own choice, but reasonably
acceptable to the other Party.  For the avoidance of doubt, there shall be no
attorney-client relationship between such other Party and the in-house or
external counsel selected by the Party responsible for such Prosecution and
Maintenance.

 

(b)                                 Each Party agrees that in connection with
its Prosecution and Maintenance of Patents hereunder, it shall comply with all
applicable rules and standards of the United States Patent and Trademark Office
and equivalent offices in foreign jurisdictions.  Each Party shall keep the
other Party informed as to material developments with respect to the Prosecution
and Maintenance of all Patents directed to a Collaboration Compound, including
by promptly providing complete copies of all office actions or any other
substantive documents that such Party receives from any patent office, including
notice of all interferences, reissues, re-examinations, oppositions or requests
for patent term extensions, and by providing the other Party the timely
opportunity to consider and provide reasonable input into the strategic aspects
of such Prosecution and Maintenance, including having the opportunity to
(i) attend any proposed interviews, oral arguments or other proceedings
regarding such Patents and (ii) consider any proposed filings and substantive
submissions in any Patent and to comment thereon, which comments shall, if
timely and reasonably provided, be considered, and, unless the Party responsible
for such Prosecution and Maintenance reasonably believes that such comments are
not in furtherance of the aims of this Agreement or are not otherwise
reasonable, acted on in good faith by such responsible Party.  Should the
Parties fail to agree on the ownership or Prosecution and Maintenance of any
Patents directed to a Collaboration Compound, or if any Party believes that the
other Party proposes taking an action that is likely to adversely affect its
rights under this Agreement or with respect to the Anacor Patents, the matter
will be presented to the JPS for resolution in accordance with Section 3.2.

 

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24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

 

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(c)                                  If Medicis is not satisfied with counsel
used by Anacor with respect to Patents that claim Medicis Development Compounds,
Medicis has the right to request that Anacor transfer responsibility for
Prosecution and Maintenance of such Anacor Patents to counsel appointed by
Medicis and reasonably acceptable to Anacor, which request will not be
unreasonably denied by Anacor.  If Prosecution and Maintenance of any Anacor
Patent transferred to new counsel at Medicis’s request affects Anacor’s rights
or those of a Third Party licensee of the Anacor Patents, Medicis will consult
with Anacor in accordance with Section 8.2.2(b) before making any decision
relevant to the Prosecution and Maintenance of such Anacor Patent, and such
consultation will be concluded in a timely manner so as not to adversely affect
the rights of any Party under the Anacor Patents.  If Medicis and Anacor are
unable to agree on Prosecution and Maintenance of such Anacor Patents, the
matter will be decided by the JPS in accordance with Section 3.2.  Requests by
Medicis that, in the judgment of Anacor, will adversely affect the existing
Third Party rights will be referred to the JPS for resolution in accordance with
Section 3.2.

 

(d)                                 Notwithstanding anything to the contrary in
this Article 8, after Medicis’s exercise of the PoC Option or termination of the
Research Collaboration Term under Section 2.4.1(c), 12.4.1, 12.5.2, 12.6.3(c) or
13.7, Medicis’s rights and Anacor’s obligations under this Article 8 with
respect to Prosecution and Maintenance and enforcement of any Patents in the
Anacor IP shall apply only to Patents in the Anacor Exclusively Licensed IP.  In
light of the likelihood for future changes in the U.S.  Patent system and future
changes to the European Patent Convention (EPC) (collectively, “New Rules”), the
Parties will come to an agreement on filing strategy in view of any New Rules.

 

(e)                                  Medicis and Anacor have a common legal
interest in the Prosecution and Maintenance of Patents included in the Anacor IP
and Medicis IP.  The parties hereby acknowledge and agree that the provision to,
receipt by, retention, permitted use or sharing between the Parties (for common
legal interest purposes or otherwise) of Confidential Information relating to
those Patents shall not diminish the confidentiality of such Confidential
Information, but shall be subject to all privileges under applicable laws,
including any attorney-client privilege, attorney work product doctrine, legal
advice privilege and litigation privilege or any other privilege, doctrine or
protection applicable to the Confidential Information, and shall not be deemed
to be a waiver of any such privileges, applicable laws or doctrines, all of
which are expressly preserved.  Each Party shall remain entitled to such
protection under the common interest doctrine.

 

8.2.3                                           Anacor Patents Licensed to Third
Parties.  In recognition that one or more of the Anacor Patents is or may be
licensed to one or more Third Parties, as described in Section 8.5, during the
Term, Anacor shall use commercially reasonable efforts to work in consultation
with Medicis to Prosecute and Maintain its Anacor Patents in a manner that
reasonably separates (a) the compounds and related rights licensed to such Third
Parties from (b) those Collaboration Compounds and Medicis Development Compounds
and related rights licensed or to be licensed (pursuant to the PoC Option) to
Medicis as contemplated by this Agreement.  Such consultation with Medicis shall
be done in a manner allowing a reasonable opportunity by Medicis and Anacor to
provide input in view of the New Rules, and each Party agrees to give such input
due consideration.  Input shall be provided and consideration undertaken and
concluded in a timely manner so as not to jeopardize the pendency of the
application under review or otherwise negatively affect or limit the rights of
Anacor, Medicis or any Third Party licensee of Anacor IP.  Should the Parties
fail to agree on any matter in this Section, such matter will be presented to
the JPS for resolution in accordance with Section 3.2.

 

8.2.4                                           Target IP.  Anacor shall use
commercially reasonable efforts to work in consultation with Medicis to
Prosecute and Maintain its Anacor Target Patents, and Medicis shall use
commercially reasonable efforts to work in consultation with Anacor to Prosecute
and Maintain its Medicis Target Patents; provided, however, that neither Party
shall be required to disclose any Confidential Information that is not

 

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[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, IS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE
24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

 

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specific to the Research Collaboration.  Input shall be provided and
consideration undertaken and concluded by the Parties in a timely manner so as
not to jeopardize the pendency of the application under review or otherwise
negatively affect or limit the rights of any Party hereto.  Should the Parties
fail to agree on any matter in this Section, such matter will be presented to
the JPS for resolution in accordance with Section 3.2.

 

8.2.5                                           Prosecution Lapse.  If, during
the Term, the Party responsible for Prosecuting and Maintaining a Patent in the
Anacor Patents or Collaboration Compound IP intends to allow such Patent to
lapse or become abandoned without having first filed a continuation, divisional,
or substitute, the Prosecuting Party shall notify the other Party of such
intention at least [ * ] prior to the date upon which such Patent shall lapse or
become abandoned, and such other Party shall thereupon have the right, but not
the obligation, to assume responsibility for the Prosecution and Maintenance
thereof at its own expense with counsel of its own choice; provided, however,
that after Medicis’s exercise of the PoC Option or termination of the Research
Collaboration Term, the foregoing obligation shall apply to Anacor only with
respect to Patents in the Anacor Exclusively Licensed IP.

 

8.2.6                                           Cooperation in Prosecution and
Extensions.  Each Party shall provide the other Party all reasonable assistance
and cooperation in the Prosecution and Maintenance efforts provided above in
this Section 8.2, including providing any necessary powers of attorney and
executing any other required documents or instruments for such Prosecution and
Maintenance.  Each Party shall consult with the other Party before applying for
or obtaining any patent term extension or related extension of rights, including
supplementary protection certificates and similar rights for any Collaboration
Compound Patents or Medicis Development Compound Patents.  Neither Party shall
proceed with such an extension until the Parties have agreed to a strategy
therefor, with any disagreements on such strategy to be resolved by the JPS;
provided that Medicis shall have the right to decide any matter related to
patent term extension of a Collaboration Compound Patent or Medicis Development
Compound Patent that claims Medicis Development Compounds.  Each Party shall
provide reasonable assistance to the other Party in connection with obtaining
any such extensions consistent with such strategy.

 

8.3                                 Patent Costs.

 

8.3.1                                           Collaboration Compound Patents. 
Except as provided in Section 8.3.3, each Party shall be responsible for Patent
Costs associated with the Prosecution and Maintenance of any Collaboration
Compound Patents that it is responsible for Prosecuting and Maintaining.

 

8.3.2                                           Existing Anacor IP and Medicis
IP.  Except as provided in Section 8.3.3, Anacor shall be responsible for [ * ]
of the Patent Costs [ * ].  Medicis shall be responsible for [ * ] of the Patent
Costs [ * ].

 

8.3.3                                           Patent Costs Following Medicis’s
Exercise of the PoC Option.  Notwithstanding the foregoing in this Section 8.3,
following Medicis’s exercise of its PoC Option or termination of the Research
Collaboration Term pursuant to Section 2.4.1(c), 12.4.1, 12.5.2, 12.6.3(c) or
13.7, Medicis, following receipt of invoice from Anacor, shall reimburse Anacor
[ * ].  Patent Costs charged to Medicis associated with the Prosecution and
Maintenance of an Anacor Patent that is also licensed to one or more Third
Parties shall be limited to [ * ].  All such reimbursements shall be limited to
those expenses [ * ].

 

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[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, IS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE
24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

 

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8.4                                 Enforcement of Anacor or Medicis
Intellectual Property Rights.

 

8.4.1                                           Duty To Notify Of Competitive
Infringement.  If any Party learns of an infringement, unauthorized use,
misappropriation or other such activity, or any threat thereof, by a Third Party
with respect to any Anacor IP, by the making, use, sale, offer for sale or
export of [ * ] that is identical or substantially similar to a Collaboration
Compound (“Competitive Infringement”), such Party shall promptly notify the
other Party and shall provide such other Party with available evidence of such
Competitive Infringement.

 

8.4.2                                           Prior To Exercise Of PoC
Option.  Prior to Medicis’s exercise of its PoC Option, with respect to any
Competitive Infringement, Anacor shall have the primary right, but not the
obligation, to institute, prosecute, and control any action or proceeding with
respect thereto by counsel of its own choice, and Medicis shall have the right,
at its own expense, to be represented in that action by counsel of its own
choice.  If Anacor fails to bring any such action or proceeding within a period
of [ * ] after first being notified (or notifying Medicis) of such Competitive
Infringement, so long as [ * ], then Medicis shall have the right, but not the
obligation, to bring and control any such action by counsel of its own choice,
and Anacor shall have the right to be represented in any such action by counsel
of its own choice at its own expense.

 

8.4.3                                           Following Exercise Of PoC
Option.  Following Medicis’s exercise of its PoC Option or termination of the
Research Collaboration Term under Section 2.4.1(c), 12.4.1, 12.5.2, 12.6.3(c) or
13.7, with respect to any Competitive Infringement, but only with respect to a
Medicis Development Compound, Medicis shall have the primary right, but not the
obligation, to institute, prosecute, and control any action or proceeding with
respect thereto by counsel of its own choice, and Anacor shall have the right,
at its own expense, to be represented in that action by counsel of its own
choice.  If Medicis fails to bring any such action or proceeding within a period
of [ * ] after first being notified (or notifying Anacor) of such Competitive
Infringement, so long as [ * ], Anacor shall have the right, but not the
obligation, to bring and control any such action by counsel of its own choice,
and Medicis shall have the right to be represented in any such action by counsel
of its own choice at its own expense.

 

8.4.4                                           Recoveries.  If one Party brings
any such action or proceeding in accordance with this Section 8.4, the second
Party agrees to be joined as a party plaintiff where necessary, at the first
Party’s expense, waives any objection which it may have pertaining to improper
venue or forum non conveniens and shall give the first Party reasonable
assistance and authority to file and prosecute the suit.  The costs and expenses
of the Party bringing suit under this Section 8.4 shall be borne by such Party,
and any damages or other monetary awards recovered shall be first applied to
repay the reasonable expenses of the Parties in connection with the suit, and
any excess shall be allocated [ * ] to the Party bringing the suit and [ * ] to
the other Party.  A settlement or consent judgment or other voluntary final
disposition of a suit under this Section 8.4 may be entered into without the
consent of the Party not bringing the suit; provided that such settlement,
consent judgment or other disposition does not admit the invalidity or
unenforceability of the relevant Patent in the Anacor Patents, Anacor Target
Patents, Medicis Patents, Medicis Target Patents, Collaboration Compound IP or
Medicis Development Compound IP and, provided further, that any rights granted
under the relevant Patent to continue the infringing activity in such
settlement, consent judgment or other disposition shall be limited to those
rights that the granting Party otherwise has the right to grant.

 

8.4.5                                           Other Infringement.  Subject to
Sections 8.4.1 through 8.4.4 above, with respect to the infringement of jointly
owned Collaboration Compound IP which is not a Competitive Infringement, each
Party may proceed in such manner as the law permits.  Each Party shall bear its
own expenses, and any recovery obtained by either Party may be retained by such
Party unless otherwise agreed.  In addition, Anacor shall retain all rights to
pursue an infringement of any Patent solely owned by Anacor that is other than a
Competitive Infringement, and Medicis shall retain all rights to pursue an
infringement of any Patent solely owned by Medicis that is other than a
Competitive Infringement.

 

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[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, IS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE
24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

 

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8.4.6              35 U.S.C. § 271(e)(2) Infringement.  Notwithstanding anything
to the contrary in this Section 8.4, for infringement under 35 U.S.C.
§ 271(e)(2) where Medicis has exercised its PoC Option, and where Medicis is the
holder of the applicable NDA, and for so long as Medicis maintains or retains
its exclusive license under such PoC Option, Medicis has the sole right to
initiate legal action to enforce all Anacor IP licensed to it pursuant to
Section 4.3.2 against infringement, unauthorized use, misappropriation, or other
such activity, or any threat thereof, by Third Parties or defend any declaratory
judgment action relating thereto or alleging the invalidity, unenforceability,
or ownership of such Anacor IP at its sole expense.

 

8.5           Other Agreement(s).  Medicis’s rights under this Article 8 with
respect to any Anacor Patents or Collaboration Compound Patents shall be subject
to the rights that one or more Third Parties may have, or the obligations that
Anacor may have, in each case to file, prosecute, maintain, or enforce such
Patents under the agreement(s) listed in Exhibit 4.

 

ARTICLE 9

 

CONFIDENTIALITY

 

9.1           Confidentiality; Exceptions.  Except to the extent expressly
authorized by this Agreement or otherwise agreed in writing, the Parties agree
that the receiving Party, its Affiliates, and their respective employees,
representatives, agents, consultants and Sublicensees, collectively (the
“Receiving Party”) shall keep confidential and shall not publish or otherwise
disclose or use for any purpose other than as provided for in this Agreement any
Information or other confidential and proprietary information and materials,
patentable or otherwise, in any form (written, oral, photographic, electronic,
magnetic, or otherwise) which is disclosed to it by the other Party or its
Affiliates or their respective employees, representatives, agents, consultants
or Sublicensees (the “Disclosing Party”) or otherwise received or accessed by a
Receiving Party in the course of performing its obligations or exercising its
rights under this Agreement including trade secrets, know-how, inventions or
discoveries, proprietary information, formulae, processes, techniques and
information relating to a Party’s or its Affiliate’s past, present and future
marketing, financial, and research and Development activities of any product or
potential product or useful technology of the Disclosing Party and the pricing
thereof (collectively, “Confidential Information”), except to the extent that it
can be established by the Receiving Party that such Confidential Information:

 

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

 

9.1.2              was generally available to the public or otherwise part of
the public domain at the time of its disclosure to the Receiving Party;

 

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

 

9.1.4              was disclosed to the Receiving Party, other than under an
obligation of confidentiality, by a Third Party who had no obligation to the
Disclosing Party not to disclose such Information to others.

 

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[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, IS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE
24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

 

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9.2           Authorized Use and Disclosure.

 

9.2.1              General.  Except as expressly provided otherwise in this
Agreement, a Receiving Party may use and disclose Confidential Information of
the Disclosing Party as follows: (a) under appropriate confidentiality
provisions similar to those in this Agreement, in connection with the
performance of its obligations or exercise of rights granted or reserved in this
Agreement (including the rights to commercialize Products and to grant licenses
and sublicenses hereunder); or (b) to the extent such disclosure is reasonably
necessary in filing, prosecuting, maintaining, defending, or enforcing Patents,
copyright and trademark applications, prosecuting or defending litigation,
complying with applicable governmental regulations, obtaining Regulatory
Approval, conducting pre-clinical activities or clinical trials, marketing
Products, or otherwise required by law; provided, however, that if a Receiving
Party is required by law or regulation to make any such disclosure of a
Disclosing Party’s Confidential Information it will, except where impracticable
for necessary disclosures, for example in the event of medical emergency, give
reasonable advance notice to the Disclosing Party of such disclosure requirement
and, except to the extent inappropriate in the case of Patent applications, will
use its reasonable efforts to secure confidential treatment of such Confidential
Information required to be disclosed; or (c) in communication with employees,
representatives, Affiliates, Sublicensees, investors, consultants, advisors or
others on a need to know basis, in each case under appropriate confidentiality
provisions or legal obligations at least as stringent as those of this
Agreement; or (d) to the extent mutually agreed to in writing by the Parties.

 

9.2.2              Post-PoC.  For the avoidance of doubt, following Medicis’s
exercise of the PoC Option, Medicis may use and disclose any Confidential
Information provided to it by Anacor prior to exercise of the PoC Option, to the
extent such information relates directly to the Medicis Development
Compound(s) identified pursuant to Section 4.2.1(a), to the extent such use or
disclosure is in connection with Medicis’s exercise of its rights or performance
of its obligations hereunder.

 

9.3           Press Release; Disclosure of Agreement.  Anacor shall have the
right to make an 8-K filing with the Securities and Exchange Commission
substantially in the form attached as Exhibit 7 on or after the Effective Date. 
Anacor shall have the right to make a public announcement of the execution of
this Agreement substantially in the form of the press release attached as
Exhibit 8 on or after the Effective Date.  Neither Party shall be free to issue
any other press release or other public disclosure regarding the Agreement or
the Parties’ activities hereunder, or any results or data arising hereunder,
except with the other Party’s prior written consent, or except as necessary to
comply with all applicable national securities exchange listing requirements or
laws, rules or regulations.  The Parties agree to consult with each other
reasonably and in good faith, and each Party shall reasonably consider the other
Party’s comments, with respect to the text and timing of any such press releases
or other public disclosure prior to the issuance thereof.  Except as otherwise
permitted in accordance with this Section 9.3, neither Party shall make any
public announcements concerning this Agreement or the subject matter hereof
without the prior written consent of the other.  The principles to be observed
by Anacor and Medicis in any such permitted public disclosures with respect to
this Agreement shall be: accuracy and completeness, the requirements of
confidentiality under this Article 9, and the normal business practice in the
pharmaceutical and biotechnology industries for disclosures by companies
comparable to Anacor and Medicis.  Notwithstanding the foregoing, to the extent
Information regarding this Agreement has already been publicly disclosed other
than through any act or omission of a Party in breach of this Agreement, either
Party may subsequently disclose the same Information to the public without the
consent of the other Party.  Each Party shall be permitted to disclose the terms
of this Agreement, in each case under appropriate confidentiality provisions
substantially equivalent to those of this Agreement, to any actual or potential
acquirers, merger partners, and professional advisors.  Each Party shall give
the other Party a reasonable opportunity to review all filings with the United
States Securities and Exchange Commission describing the terms of this Agreement

 

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[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
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24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

 

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prior to submission of such filings, and shall consider any reasonable comments
by the non-filing Party relating to such filing, including the provisions of
this Agreement for which confidential treatment should be sought.

 

9.4           Termination of Prior Agreements.  This Agreement supersedes the
confidentiality obligations set forth in the [ * ] (the “Term Sheet”) and the [
* ] (the “Non-Disclosure Agreement”).  The Term Sheet and the Non-Disclosure
Agreement and all Information exchanged between the Parties in connection
therewith shall be deemed Confidential Information hereunder and shall be
subject to the terms of this Article 9.

 

9.5           Remedies.  Each Party shall be entitled to seek, in addition to
any other right or remedy it may have, at law or in equity, a temporary
injunction, without the posting of any bond or other security, enjoining or
restraining the other Party from any violation or threatened violation of this
Article 9.

 

9.6           Publications.  Except as provided in this Agreement, during the
Term, neither Party or its Affiliates shall publish or publicly disclose the
results of any of the research or Development activities conducted under this
Agreement, without the prior written consent of the other Party, such consent
not to be unreasonably withheld, except that after Medicis’s exercise of the PoC
Option, the foregoing shall not apply to Medicis for results that relate
directly to any Medicis Development Compounds.  It shall be deemed reasonable
for either Party to withhold consent hereunder to prevent the disclosure of such
Party’s independently developed trade secrets or other confidential information
of such Party.  Each Party shall provide to the other Party at its earliest
practical opportunity any proposed abstracts, manuscripts or summaries of
presentations that cover the results of research or Development activities under
this Agreement, for review and comment as to matters relating to Patents and
Confidential Information.  The non-submitting Party shall respond in writing
promptly and in no event later than [ * ] after receipt of the proposed
material, or within such reasonably shorter period as is required (and promptly
communicated to the non-submitting) by the relevant publication deadline, with
comments on the proposed material or a specific statement of concern, based upon
the need either to seek patent protection or to delete Confidential
Information.  In the event of concern, the submitting Party agrees not to submit
such publication or to make such presentation that contains such information
until the other Party is given a reasonable period of time (not to exceed [ * ]
to seek patent protection for any material in such publication or presentation
which it believes is patentable or to resolve any other issues.

 

ARTICLE 10

 

REPRESENTATIONS AND WARRANTIES

 

10.1         Representations and Warranties of Both Parties.  Each Party hereby
represents, warrants, and covenants to the other Party, as of the Effective
Date, that:

 

10.1.1            such Party is duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation and has full
corporate power and authority to enter into this Agreement and to carry out the
provisions hereof;

 

10.1.2            such Party has taken all necessary action on its part to
authorize the execution and delivery of this Agreement and the performance of
its obligations hereunder;

 

10.1.3            this Agreement has been duly executed and delivered on behalf
of such Party, and constitutes a legal, valid, binding obligation, enforceable
against it in accordance with the terms hereof;

 

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[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
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24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

 

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10.1.4            the execution, delivery and performance of this Agreement does
not conflict with any agreement, instrument or understanding, oral or written,
to which it is a party or by which it is bound, nor violate any law or
regulation of any court, governmental body or administrative or other agency
having jurisdiction over such Party;

 

10.1.5            no government authorization, consent, approval, license or
exemption of with any court or governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign, under any applicable
laws, rules or regulations currently in effect, is or will be necessary for, or
in connection with, the transaction contemplated by this Agreement or any other
agreement or instrument executed in connection herewith, or for the performance
by it of its obligations under this Agreement and such other agreements except
as may be required to obtain HSR clearance; and

 

10.1.6            it has not employed and in the future will not employ (and, to
the best of its knowledge without further duty of inquiry, has not used a
contractor or consultant that has employed or in the future will employ) any
Person debarred by the FDA (or subject to a similar sanction of EMA or other
regulatory agency), or, to the best of its knowledge without further duty of
inquiry, any Person which is the subject of an FDA debarment investigation or
proceeding (or similar proceeding of EMA or other regulatory agency), in the
conduct of the nonclinical activities or clinical studies of Collaboration
Compounds and its activities under the Research Collaboration.

 

10.2         Deficit Reduction Act Compliance Policy.  In accordance
with Section 6032 of the Deficit Reduction Act of 2005, Pub.  Law No.  109-171,
Medicis has adopted a policy, entitled “Medicis Employee Education Policy
Concerning the Prevention and Detection of Fraud, Waste, and Abuse in Government
Health Care Programs:  Compliance Policy Pursuant to the Deficit Reduction Act
of 2005” (hereinafter “Medicis’s Deficit Reduction Act Compliance Policy”),
which establishes a written protocol for educating all employees (including
management) of Medicis, and any contractors or agents who may on behalf of
Medicis furnish or authorize the furnishing of Medicaid health care items or
services, perform billing or coding functions, or become involved in monitoring
any health care provided by Medicis (hereinafter “Applicable Agents”), about
Medicis’s internal policies and procedures as well as various federal and state
statutes and administrative remedies related to detecting and preventing fraud,
waste, and abuse in government health care programs.  It is a condition of
this Agreement that throughout the Term Anacor comply with the Deficit Reduction
Act and Medicis’s Deficit Reduction Act Compliance Policy, and that Anacor
provide the educational Information required under the Deficit Reduction Act to
all employees who bear any responsibility in the performance of this Agreement. 
A copy of Medicis’s Deficit Reduction Act Compliance Policy, as well as an
addendum entitled “Federal and State Statutes and Administrative Remedies
Related to Preventing and Detecting Fraud, Waste, and Abuse in Government Health
Care Programs,” is available at [ * ] and is incorporated herein by reference. 
Medicis will notify Anacor of any update to Medicis’s Deficit Reduction Act
Compliance Policy within [ * ] of the date in which such policy is updated. 
Anacor represents and warrants that, in the course of performing the Services
described in this Agreement throughout the Term, it will comply with the Deficit
Reduction Act and Medicis’s Deficit Reduction Act Compliance Policy.  Medicis
represents and warrants to Anacor that it will comply with the Deficit Reduction
Act and Medicis’s Deficit Reduction Act Compliance Policy throughout the Term.

 

10.3         Representations and Warranties of Anacor.  Anacor hereby
represents, warrants, and covenants to Medicis, as of the Effective Date, that:

 

10.3.1            To the best of its knowledge, Anacor is the owner of, or has a
license to, make, use, sell or offer for sale each Anacor Compound, in the form
provided to Medicis, including the compounds [ * ];

 

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[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
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24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

 

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10.3.2            To the best of its knowledge, Anacor has the right to grant
all rights, licenses and assignments it purports to grant to Medicis under this
Agreement;

 

10.3.3            Anacor has no present knowledge that any claims of any Anacor
Patents or Anacor Target Patents or any claims directed to the compounds [ * ]
are unpatentable, invalid or unenforceable;

 

10.3.4            There are no settled, pending or threatened Claims or lawsuits
or legal proceedings by a Third Party against Anacor alleging that the making,
composition or method of use of any boron-containing small molecule compound in
Anacor’s library, including the compounds [ * ], infringes, uses without
authorization, misappropriates or otherwise violates in part or in whole the
intellectual property or intellectual property rights of such Third Party;

 

10.3.5            Anacor has not granted as of the Effective Date, and during
the Term shall not grant, any right or license to any Third Party relating to
any of the Anacor IP that would conflict with any of the rights or licenses
granted to Medicis hereunder;

 

10.3.6            Without limiting the foregoing Sections 10.1.4 and 10.3.5, the
execution, delivery and performance of this Agreement does not breach nor
conflict with any agreement, instrument or understanding, oral or written, that
Anacor has undertaken with SmithKline Beecham Corporation d/b/a/
GlaxoSmithKline;

 

10.3.7            Except pursuant to the agreements set forth on Exhibit 9,
there are no obligations of Anacor to any Third Party that would encumber the
compounds [ * ] or any other Collaboration Compound; and

 

10.3.8            To its knowledge, Anacor has disclosed to Medicis all material
data and Information, all material correspondence to/from any Regulatory
Authority regardless of whether such data and Information would have a positive,
neutral or negative impact on the potential commercial, scientific or strategic
value or attractiveness of the Anacor Compounds in existence as of the Effective
Date.

 

10.4         Mutual Covenants.  Each Party hereby covenants to the other Party
that:

 

10.4.1            All employees and independent contractors of such Party or its
Affiliates and working under this Agreement shall be under the obligation to
assign all right, title and interest in and to their inventions and discoveries,
whether or not patentable, if any, to such Party as the sole owner thereof;

 

10.4.2            Such Party shall not employ (or, to the best of its knowledge
without further duty of inquiry, shall not use any contractor or consultant that
employs) any Person debarred by the FDA (or subject to a similar sanction of EMA
or other regulatory agency), or, to the best of its knowledge without further
duty of inquiry, any Person which is the subject of an FDA debarment
investigation or proceeding (or similar proceeding of EMA or other regulatory
agency), in the conduct of its activities hereunder; and

 

10.4.3            Such Party shall, except as otherwise specified in this
Agreement or Research Plan, perform its activities pursuant to this Agreement in
compliance with good laboratory (cGLP), clinical (cGCP) and manufacturing (cGMP)
practices and other applicable ICH guidelines, in each case as applicable under
the laws and regulations of the country and the state and local government
wherein such activities are conducted, and with respect to the care, handling
and use in research and Development activities hereunder of any non-human
animals by or on behalf of such Party, shall at all times comply (and shall
ensure compliance by its subcontractors) with all applicable federal, state and
local laws, regulations and ordinances, and also with the

 

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24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

 

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most current best practices in the industry for the proper care, handling and
use of animals in pharmaceutical research and Development activities, subject to
the other Party’s reasonable right of inspection.

 

10.5         Continuing Covenant of Non-Contravention.  Anacor covenants to
Medicis that at all times during the Term (a) each Collaboration Compound and
the associated Anacor IP shall be free of liens, mortgages, security interests
and similar encumbrances except such encumbrances granted in favor of a lender,
provided that Anacor shall use commercially reasonable efforts to obtain an
acknowledgement from each such lender of Medicis’s rights hereunder and that
such lender shall not seek to interfere with such rights; and (b) the Anacor IP
shall not be subject to any license to a Third Party that would allow the Third
Party to make, use, sell, offer to sell, import or otherwise exploit any of the
Collaboration Compounds in the Field.

 

10.6         Disclaimer.  EXCEPT AS OTHERWISE EXPRESSLY SET FORTH IN THIS
AGREEMENT, NEITHER PARTY MAKES ANY REPRESENTATION OR EXTENDS ANY WARRANTY OF ANY
KIND EITHER EXPRESS OR IMPLIED, INCLUDING ANY WARRANTY THAT ANY PATENTS ARE
VALID OR ENFORCEABLE OR THAT THEIR EXERCISE DOES NOT INFRINGE ANY PATENT RIGHTS
OF THIRD PARTIES.  WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, EACH PARTY
DISCLAIMS ANY WARRANTIES WITH REGARDS TO:  (A) THE SUCCESS OF ANY RESEARCH,
STUDY OR TEST COMMENCED UNDER THIS AGREEMENT, (B) THE SAFETY OR USEFULNESS FOR
ANY PURPOSE OF THE TECHNOLOGY OR MATERIALS, INCLUDING ANY COLLABORATION
COMPOUNDS, IT PROVIDES OR DISCOVERS UNDER THIS AGREEMENT; OR (C) THE VALIDITY,
ENFORCEABILITY, OR NON-INFRINGEMENT OF ANY INTELLECTUAL PROPERTY RIGHTS OR
TECHNOLOGY IT PROVIDES OR LICENSES TO THE OTHER PARTY UNDER THIS AGREEMENT,
EXCEPT IN EACH CASE (A)-(C) AS OTHERWISE EXPRESSLY SET FORTH IN THIS AGREEMENT.

 

10.7         LIMITATION OF LIABILITY.  EXCEPT FOR A BREACH OF ARTICLE 9 OR FOR
CLAIMS OF A THIRD PARTY THAT ARE SUBJECT TO INDEMNIFICATION UNDER ARTICLE 11 OR
AS OTHERWISE EXPRESSLY STATED IN THIS AGREEMENT, NEITHER ANACOR NOR MEDICIS, NOR
ANY OF THEIR AFFILIATES OR SUBLICENSEES, WILL BE LIABLE TO THE OTHER PARTY, ITS
AFFILIATES OR ANY OF THEIR SUBLICENSEES FOR ANY INDIRECT, INCIDENTAL,
CONSEQUENTIAL, SPECIAL, RELIANCE OR PUNITIVE DAMAGES OR LOST OR IMPUTED PROFITS
OR ROYALTIES, LOST DATA OR COST OF PROCUREMENT OF SUBSTITUTE GOODS OR SERVICES,
WHETHER LIABILITY IS ASSERTED IN CONTRACT, TORT (INCLUDING NEGLIGENCE AND STRICT
PRODUCT LIABILITY), INDEMNITY OR CONTRIBUTION, AND IRRESPECTIVE OF WHETHER SUCH
PARTY OR ANY REPRESENTATIVE THEREOF HAS BEEN ADVISED OF, OR OTHERWISE MIGHT HAVE
ANTICIPATED THE POSSIBILITY OF, ANY SUCH LOSS OR DAMAGE.

 

ARTICLE 11

 

INDEMNIFICATION; INSURANCE

 

11.1         Indemnification by Medicis.  Medicis shall indemnify, defend and
hold harmless Anacor and its Affiliates, and its or their respective directors,
officers, employees and agents, from and against any and all liabilities,
damages, losses, costs and expenses, including the reasonable fees of attorneys
and other professionals (collectively, “Losses”), arising out of or resulting
from any and all Third Party suits, claims, actions, proceedings or demands
(“Claims”) based upon:

 

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[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
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24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

 

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11.1.1            the negligence, recklessness or wrongful intentional acts or
omissions of Medicis or its Affiliates and its or their respective directors,
officers, employees and agents, in connection with Medicis’s performance of its
obligations or exercise of its rights under this Agreement;

 

11.1.2            any breach of any representation or warranty or express
covenant made by Medicis under Article 10 or any other provision under this
Agreement; or

 

11.1.3            the Development that is actually conducted by or on behalf of
Medicis (excluding any Development carried out by Anacor hereunder), the
handling and storage by or on behalf of Medicis of any chemical agents or other
compounds for the purpose of conducting Development by or on behalf of Medicis,
and the manufacture, marketing, commercialization and sale by Medicis, its
Affiliate or Sublicensees of any Medicis Development Compound or Derivative
thereof or Product, including Third Party Claims that any such activity
infringes, misappropriates or otherwise violates such Third Party’s intellectual
property or other proprietary rights, but only to the extent such Third Party
Claims do not arise from or involve an allegation that an Anacor Compound as
introduced into the Program by Anacor infringes, misappropriates or otherwise
violates such Third Party’s intellectual property or other proprietary rights;

 

11.1.4            except, in each case 11.1.1 – 11.1.3 above, to the extent such
Claim arose out of or resulted from or is attributable to the negligence,
recklessness or wrongful intentional acts or omissions of Anacor or its
Affiliates, or their respective directors, officers, employees or agents.

 

11.2         Indemnification by Anacor.  Anacor shall indemnify, defend and hold
harmless Medicis and its Affiliates, and its or their respective directors,
officers, employees, representatives, and agents, from and against any and all
Losses, arising out of or resulting from any and all Third Party Claims based
upon:

 

11.2.1            the negligence, recklessness or wrongful intentional acts or
omissions of Anacor or its Affiliates or its or their respective directors,
officers, employees and agents, in connection with Anacor’s performance of its
obligations or exercise of its rights under this Agreement;

 

11.2.2            any breach of any representation or warranty or express
covenant made by Anacor under Article 10 or any other provision under this
Agreement; or

 

11.2.3            the research or Development actually conducted by or on behalf
of Anacor (excluding any Development carried out by Medicis), including Third
Party Claims that such research or Development, or any Anacor Compound resulting
therefrom, infringes, misappropriates or otherwise violates such Third Party’s
intellectual property or other proprietary rights;

 

11.2.4            except, in each case 11.2.1 – 11.2.3 above, to the extent such
Claim arose out of or resulted from or is attributable to the negligence,
recklessness or wrongful intentional acts or omissions of Medicis or its
Affiliate, or their respective directors, officers, employees and agents.

 

11.3         Procedure.  In the event that any person (an “Indemnitee”) entitled
to indemnification under Section 11.1 or Section 11.2 is seeking such
indemnification, such Indemnitee shall (a) inform, in writing, the indemnifying
Party of the Claim as soon as reasonably practicable after such Indemnitee
receives notice of such Claim, (b) permit the indemnifying Party to assume
direction and control of the defense of the Claim (including the sole right to
choose counsel and settle it at the sole discretion of the indemnifying Party,
taking into consideration in good faith any reasonable concerns or objections
raised by the Indemnitee; provided that such settlement does not impose any
obligation on, or otherwise adversely affect, the Indemnitee or other Party),
(c)

 

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[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
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24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

 

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cooperate as reasonably requested (at the expense of the indemnifying Party) in
the defense of the Claim, and (d) undertake all reasonable steps to mitigate any
loss, damage or expense with respect to the Claim(s).

 

11.4         Insurance.

 

11.4.1            Anacor’s Insurance Obligations.  Anacor shall maintain, at its
cost, with effect from prior to the date of first administration of any
Collaboration Compound (including all Products and any product based thereon)
for testing in humans hereunder and during the Research Collaboration Term plus
[ * ] thereafter, insurance from an insurance company or companies having a
Best’s Financial Performance Rating  (“BFPR”) of A+/A++ and a minimum Financial
Size Category (“FSC”) of VIII or higher (if BFPR is A/A-, then FSC must be IX or
higher) as follows: (a) workers’ compensation in the amount required by
applicable state law in which the Program will be conducted; (b) commercial
general liability insurance, including premises and operations coverage, with
minimum limits of not less than [ * ] for Claims against Losses; (c) product and
professional liability insurance appropriate for the conduct of clinical trials
similar to those to be included in the Program with minimum limits of [ * ]. 
Such insurance shall designate Medicis and its Affiliates as “additional
insureds” on commercial general liability policies.  Anacor shall furnish to
Medicis evidence of such insurance, upon request.

 

11.4.2            Medicis’s Insurance Obligations.  Medicis hereby represents
and warrants to Anacor that it has and will maintain sufficient insurance
(either through self-insurance or through Third Party policy(ies)) against the
types of liability and other risks that reasonably would be expected to be
associated with its activities and obligations under this Agreement in such
amounts and on such terms as are customary for prudent practices for
pharmaceutical companies in the pharmaceutical industry for the activities to be
conducted by it under this Agreement. Medicis shall furnish to Anacor evidence
of such insurance or self-insurance, upon request.  From and after the date of
the exercise of the PoC Option by Medicis hereunder and thereafter through the
Term plus [ * ] thereafter, Medicis shall obtain and maintain insurance from an
insurance company or companies having a BFPR of A+/A++ and a minimum FSC of VIII
or higher (if BFPR is A/A-, then FSC must be IX or higher) as follows:
(a) workers’ compensation in the amount required by applicable state law in
which Development and commercialization by Medicis will be conducted;
(b) comprehensive general liability insurance, including premises and operations
coverage, with minimum limits of not less than [ * ] for all Claims against all
Losses; and (c) product and professional liability insurance appropriate for the
conduct of clinical trials with minimum limits of [ * ].  As applicable, such
insurance shall provide coverage for all Claims against all losses, claims,
demands, proceedings, damages, costs, charges and expenses for injuries or
damage to any person or property arising out of or in connection with Medicis’s
Development and commercialization of a Product, including its performance or
nonperformance under this Agreement.  Such insurance shall designate Anacor and
its Affiliates as “additional insureds” on comprehensive general liability
policies.

 

11.4.3            The terms of this Section 11.4 shall not be deemed to limit
the liability of either Party hereunder or to limit any rights either Party may
have against the other, including, without limitation, indemnity or
contribution.

 

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[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
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24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

 

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ARTICLE 12

 

TERM AND TERMINATION

 

12.1         Term; Expiration.

 

12.1.1            This Agreement shall become effective as of the Effective Date
and, unless earlier terminated pursuant to the other provisions of this
Article 12, shall expire as follows:

 

(a)           Upon expiration of the PoC Option Deadline Period or, if
applicable, the PoC Option Deadline Extension Period, if Medicis has not then
exercised the PoC Option, or

 

(b)           If Medicis exercises the PoC Option:

 

(i)            On a Product-by-Product and country-by-country basis, on the date
of the expiration of all payment obligations under this Agreement with respect
to such Product in such country; and

 

(ii)           In its entirety upon the expiration of all payment obligations
under this Agreement with respect to the last Product in all countries in the
Territory.

 

12.1.2            The period from the Effective Date until the date of
expiration of this Agreement in its entirety, or as the case may be, until the
date of the expiration of this Agreement in part with respect to a given
Product, is referred to herein as the “Term.”

 

12.2         Termination for Cause.

 

12.2.1            Termination For Material Breach.  Either Party (the
“Non-breaching Party”) may, without prejudice to any other remedies available to
it at law or in equity, terminate this Agreement, in the event the other Party
(the “Breaching Party”) shall have materially breached or defaulted in the
performance of any of its material obligations hereunder, and such default shall
have continued for [ * ] after written notice thereof was provided to the
Breaching Party by the Non-breaching Party, such notice describing with
particularity and in detail the alleged material breach.

 

12.2.2            Disagreement.  If the Parties reasonably and in good faith
disagree as to whether there has been a material breach, the Party which seeks
to dispute that there has been a material breach may contest the allegation in
accordance with Section 13.1.  Notwithstanding the above sentence, the cure
period for any allegation made in good faith as to a material breach under this
Agreement will run from the date that written notice was first provided to the
Breaching Party by the Non-breaching Party, but will be suspended during the
pendency of any dispute resolution process under Section 13.1 or 13.2. 
Irrespective of the length of the cure period, should the dispute resolution
process extend beyond [ * ] after written notice was first provided to the
Breaching Party by the Non-breaching Party hereunder, all Development and
payment obligations of the Non-breaching Party under this Agreement shall be
suspended pending resolution of the dispute and shall not be reinstated unless
and until the dispute resolution process results in a final determination in
favor of the Breaching Party.  Any termination of the Agreement under this
Section 12.2 shall become effective at the end of the [ * ], unless the
Breaching Party has cured any such breach or default prior to the expiration of
such [ * ] period.  The right of either Party to terminate this Agreement as
provided in this Section 12.2 shall not be affected in any way by such Party’s
waiver or failure to take action with respect to any previous default.

 

12.2.3            Anacor Diligence Failure Event.  Upon the occurrence of an
Anacor Diligence Failure Event that also constitutes a material breach, Medicis
may either (a) elect the procedures and remedies set forth in Section 2.4.1,
which shall be Medicis’s sole and exclusive remedy for such material breach or
(b) proceed in accordance with this Section 12.2 and Section 12.6.3.

 

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[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
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12.3         Medicis Unilateral Termination Rights.  Medicis shall have the
right, at its sole discretion and without any penalty or liability, exercisable
at any time during the Term unless Medicis is a Breaching Party at the time of
any proposed notice, to terminate this Agreement for any reason or no reason at
all, in its entirety upon (a) [ * ] written notice to Anacor if delivered [ * ],
or (b) [ * ] written notice to Anacor if delivered [ * ], subject to the
obligations set forth in Sections 12.6.2 and 12.6.5.  Notice of termination
pursuant to this Section shall not be deemed to limit or terminate any rights or
obligations accrued or continuing through the effective date of termination.

 

12.4         Termination for Insolvency.

 

12.4.1            Either Party may terminate this Agreement if, at any time, the
other Party shall file in any court or agency pursuant to any statute or
regulation of any state or country, a petition in bankruptcy or insolvency or
for reorganization or for an arrangement or for the appointment of a receiver or
trustee of the Party or of substantially all of its assets, or if the other
Party proposes a written agreement of composition or extension of substantially
all of its debts, or if the other Party shall be served with an involuntary
petition against it, filed in any insolvency proceeding, and such petition shall
not be dismissed within [ * ] after the filing thereof, or if the other Party
shall propose or be a party to any dissolution or liquidation, or if the other
Party shall make an assignment of substantially all of its assets for the
benefit of creditors (each an “Insolvency Event”).  Upon any termination of the
Agreement by Medicis under this Section during the Research Collaboration Term
and prior to the JRC’s confirmation of a PoC Compound: (a) all Collaboration
Compounds identified prior to said termination date shall be deemed to be
Medicis Development Compounds, (b) subject to the terms and conditions of this
Agreement, Anacor shall grant and does hereby grant, as of the effective date of
such termination and election by Medicis, an exclusive (even as to Anacor and
its Affiliates), worldwide license (with the right to grant sublicenses) under
the Anacor Exclusively Licensed IP, to make, have made, use, sell, offer for
sale and import such Medicis Development Compounds and Derivatives thereof as
and into Products in the Territory, (c) Medicis will have the right to continue
the Development of any such deemed Medicis Development Compounds as of such
termination event on its own or through Sublicensees, and (d) following any such
termination by Medicis under this Section during the Research Collaboration Term
and prior to the JRC’s confirmation of a PoC Compound, Medicis shall pay to
Anacor (i) a royalty on Annual Net Sales of Products at a rate that is equal to
[ * ] of the applicable royalty rates set forth in Section 6.4, (ii) non-royalty
payments at a rate that is equal to [ * ] of the applicable rate set forth in
Section 6.5, and (iii) [ * ] of the applicable milestone payments due under
Sections 6.2 or 6.3 for any milestones achieved subsequent to Medicis’s
termination under this Section.  Notwithstanding anything to the contrary in
this Agreement, Anacor shall have no further obligations to conduct the Program
as of the effective date of such termination by Medicis under this Section.  For
clarity, the foregoing license and payment reductions apply only for termination
under this Section during the Research Collaboration Term and prior to the JRC’s
confirmation of a PoC Compound.

 

12.4.2            All rights and licenses granted under or pursuant to any
section of this Agreement are and shall otherwise be deemed to be for purposes
of Section 365(n) of Title 11, United States Code (the “Bankruptcy Code”)
licenses of rights to “intellectual property” as defined in Section 101(35A) of
the Bankruptcy Code.  The Parties shall retain and may fully exercise all of
their respective rights and elections under the Bankruptcy Code.  Upon the
bankruptcy of any Party, the non-bankrupt Party shall further be entitled to a
complete duplicate of, or complete access to, any such intellectual property,
and such, if not already in its possession, shall be promptly delivered to the
non-bankrupt Party, unless the bankrupt Party elects to continue, and continues,
to perform all of its obligations under this Agreement.

 

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[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
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12.5         Anacor Change of Control.

 

12.5.1            Notice.  If Anacor enters into an agreement that results in,
or if the transaction (or series of transactions) contemplated thereby if
completed would result in, a Change of Control of Anacor, Anacor shall provide
Medicis with prompt written notice describing such Change of Control in
reasonable detail (the “Anacor Change of Control Notice”).  The Anacor Change of
Control Notice shall be provided by Anacor promptly following the earlier of
(a) the public disclosure of the entry into such agreement and (b) consummation
of the transaction (or series of transactions) resulting in the Change of
Control.

 

12.5.2            Consequences of Change of Control of Anacor.  Upon the
occurrence of any Change of Control of Anacor during the Research Collaboration
Term and prior to the JRC’s confirmation of a PoC Compound, Medicis shall have
the right to either (a) continue the Research Collaboration Term in accordance
with the terms of this Agreement, or (b) within [ * ] after receipt of the
Anacor Change of Control Notice, terminate the Research Collaboration Term and
exercise the PoC Option by written notice to Anacor specifying up to [ * ]
Collaboration Compounds to be deemed Medicis Development Compounds,
notwithstanding that the JRC has not identified a PoC Compound.  Following
Medicis’s exercise of the PoC Option under this Section, Anacor shall provide
Medicis with the Information and other materials required by Section 4.4, and
Medicis shall have the license set forth in Section 4.3.2 with respect to such
Medicis Development Compounds.  For clarity, all payment obligations in
Article 6 shall apply to such Medicis Development Compounds and any Products
containing such compounds; provided, however, that milestone payments 1 through
3 as set forth in Section 6.2.1 (if not already paid) shall be [ * ].  If
Anacor’s acquirer is, at the time of the closing date of the Change of Control,
developing or commercializing any compound or product whose research,
Development, or commercialization by Anacor would violate any exclusivity
obligation under Section 7.1, (x) such activities shall be excluded from the
limitations of and deemed not to violate Section 7.1 and (y) [ * ].  In any
event, at the time of the closing date of the Change of Control, Section 2.7
shall immediately terminate and no longer be of any force or effect.

 

12.6         Effect of Termination or Expiration

 

12.6.1            Upon Expiration.  Following the expiration of the Term
pursuant to Section 12.1, Medicis shall return to Anacor all Confidential
Information of Anacor then in its possession.  If the Term expires following
Medicis’s exercise of the PoC Option, Medicis shall have, and Anacor hereby
grants to Medicis, an exclusive, fully-paid (only upon such expiration) and
royalty-free right and license, with the right to grant sublicenses, under the
Anacor Exclusively Licensed IP to make, have made, use, sell, offer for sale,
import and otherwise exploit the Medicis Development Compounds as and into
Products in the Territory, for so long as it continues to do so.

 

12.6.2            Upon Unilateral Termination By Medicis.  In the event of a
unilateral termination of this Agreement by Medicis pursuant to Section 12.3,
the following terms shall apply, in addition to Section 12.6.5:

 

(a)           Notwithstanding anything contained herein to the contrary, all
licenses granted to Medicis with respect to Medicis Development Compounds, if
any, shall terminate;

 

(b)           Any unexercised PoC Option as of the date that Anacor receives
such termination notice from Medicis shall be cancelled and of no force and
effect; and

 

(c)           The exclusivity obligations under Article 7 shall immediately
terminate and no longer be of any force or effect.

 

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[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
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24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

 

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12.6.3            Upon Termination By Medicis For Cause.

 

(a)           In the event of a termination of this Agreement in its entirety by
Medicis pursuant to Section 12.2.1 or 12.4.1 before the end of the Research
Collaboration Term, the Research Collaboration Term shall terminate.

 

(b)           In the event of a termination of this Agreement by Medicis
pursuant to Section 12.2.1, 12.4.1 or 13.7:

 

(i)            Any unexercised PoC Option as of the effective date of
termination shall be cancelled and of no force and effect; and

 

(ii)           All of Medicis’s exclusivity obligations under Section 7.2 shall
immediately terminate and no longer be of any force or effect, but Anacor’s
exclusivity obligations under Section 7.1 shall survive.

 

(c)           If Medicis has the right to terminate this Agreement under
Section 12.2.1 during the Research Collaboration Term and prior to the JRC’s
confirmation of a PoC Compound, then in lieu of terminating this Agreement,
Medicis may instead terminate only the Research Collaboration Term, in which
case all Collaboration Compounds identified prior to said termination date shall
be deemed to be Medicis Development Compounds.  Subject to the terms and
conditions of this Agreement, Anacor shall grant and does hereby grant, as of
the effective date of such termination and election by Medicis, an exclusive
(even as to Anacor and its Affiliates), worldwide license (with the right to
grant sublicenses) under the Anacor Exclusively Licensed IP, to make, have made,
use, sell, offer for sale and import such Medicis Development Compounds and
Derivatives thereof as and into Products in the Territory.  Medicis will have
the right to continue the Development of any such deemed Medicis Development
Compounds as of such termination event on its own or through Sublicensees. 
Following any termination of the Research Collaboration Term by Medicis under
this Section prior to the JRC’s confirmation of a PoC Compound, Medicis shall
pay to Anacor either (x) a royalty on [ * ] at a rate that is equal to [ * ] of
the applicable royalty rates set forth in Section 6.4; non-royalty payments at a
rate that is equal to [ * ] of the applicable rate set forth in Section 6.5; and
[ * ] of the applicable milestone payments due under Sections 6.2 or 6.3 for any
milestones achieved subsequent to Medicis’s termination under this Section, or
(y) all payments as set forth in Article 6, except that Medicis may offset
against any milestone and royalty payments to Anacor under this clause (y) an
amount equal to [ * ] as of the date of Anacor’s receipt of notice from Medicis
under Section 12.2.1.  Medicis shall elect between clauses (x) and (y) in the
preceding sentence by written notice to Anacor on or before the effective date
of termination of the Research Collaboration Term. Notwithstanding anything to
the contrary in this Agreement, as of the effective date of such termination of
the Research Collaboration Term by Medicis under this Section 12.6.3(c), Anacor
shall have no further obligations to conduct the Program.  If Medicis elects to
terminate the Research Collaboration Term under this Section 12.6.3(c), such
election shall be Medicis’s sole and exclusive remedy for the applicable
material breach by Anacor.

 

12.6.4            Upon Termination By Anacor For Cause.  In the event of a
termination of this Agreement by Anacor pursuant to Section 12.2.1, 12.4.1 or
13.7, the following terms shall apply, in addition to Section 12.6.5:

 

(a)           In the event of a termination of this Agreement by Anacor pursuant
to Section 12.2.1 or 12.4.1 before the end of the Research Collaboration Term,
the Research Collaboration Term shall terminate.

 

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[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
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24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

 

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(b)           In the event of a termination of this Agreement by Anacor pursuant
to Section 12.2.1, 12.4.1 or 13.7:

 

(i)            All of Anacor’s exclusivity obligations under Section 7.1 shall
immediately terminate and no longer be of any force or effect; and

 

(ii)           Any unexercised PoC Option as of the effective date of
termination shall be cancelled and of no force and effect.  For clarity, Medicis
shall not be permitted to exercise its PoC Option after receiving notice of
Anacor’s termination under Section 12.2.1 or 12.4.1, without Anacor’s prior
written consent, unless and until Anacor agrees, or it is determined pursuant to
Section 13.1, that Medicis has cured the applicable breach in a timely manner.

 

12.6.5            Additional Effects of Termination.  Upon termination of this
Agreement by Anacor pursuant to Section 12.2.1, 12.4.1 or 13.7 or by Medicis
pursuant to Section 12.3:

 

(a)           License.  Medicis hereby grants to Anacor, effective only upon
such termination, a perpetual, irrevocable, exclusive (even as to Medicis),
royalty-free right and license in the Territory, with the right to grant
sublicenses (through multiple tiers), under the Medicis IP, to make, have made,
use, sell, offer for sale and import the Medicis Development Compounds as and
into Products.

 

(b)           Regulatory Filings.

 

(i)            If Prior to First Commercial Sale of Product: At no cost to
Anacor, Medicis would exclusively license or assign and deliver to Anacor all
relevant documents, safety databases, regulatory filings, Regulatory Approvals
and Development and manufacturing Information to the extent pertaining
specifically to any Products and which is necessary or important for commercial
use and exploitation in the Territory; and

 

(ii)           If Following First Commercial Sale of a Product: At no cost to
Anacor and with respect to all affected countries, Medicis would exclusively
license or assign and deliver to Anacor all relevant documents, safety data,
regulatory filings, Development and manufacturing Information, trademarks as
well as any other Information, data and materials reasonably requested by
Anacor, to the extent pertaining specifically to any Products and which is
necessary or important for commercial use and exploitation in the Territory.  In
addition, at no cost to Anacor, Medicis shall provide for reasonable
transitional support, such support to be not less than [ * ] in countries in
which the Product is approved for marketing.

 

(c)           Each Party shall return to the other Party all of such other
Party’s Confidential Information, and Medicis shall return to Anacor all other
Information provided by Anacor to Medicis related to the Program, Anacor
Compounds and Collaboration Compounds.

 

12.7         Accrued Rights; Surviving Provisions of the Agreement.

 

12.7.1            Termination, relinquishment or expiration of this Agreement
for any reason shall be without prejudice to any rights that shall have accrued
to the benefit of any Party prior to such termination, relinquishment or
expiration including the payment obligations under Article 6 hereof and any and
all damages arising from any breach hereunder.  Such termination, relinquishment
or expiration shall not relieve any Party from obligations which are expressly
indicated to survive termination of this Agreement.

 

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[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
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24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

 

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12.7.2            The provisions of Article 9 and Article 11 and Sections 2.8.2,
2.8.4, 2.8.5, 2.8.6, 6.9, 6.10, 8.1, 8.2.1 (last sentence only), 10.5, 12.6,
12.7, 13.4, 13.8, 13.10, 13.11, 13.13, 13.16, 13.17, 13.18 and 13.19, as well as
any applicable definitions in Article 1, shall survive the termination,
relinquishment or expiration of this Agreement for any reason, in accordance
with their respective terms and conditions, and for the duration stated, and
where no duration is stated, shall survive indefinitely.

 

ARTICLE 13

 

MISCELLANEOUS

 

13.1         Dispute Resolution.  Unless otherwise set forth in this Agreement,
in the event of a dispute arising under this Agreement between the Parties,
either Party shall have a right to refer such dispute to an individual holding a
position with said Party of Senior Vice President or higher (each an “Executive
Officer”) who shall attempt in good faith to resolve such dispute.  If the
Parties are unable to resolve a given dispute pursuant to this Section 13.1
within [ * ] of referring such dispute to the Executive Officers, either Party
may have the given dispute settled by binding arbitration pursuant to
Section 13.2.

 

13.2         Arbitration Request.  If a Party intends to begin an arbitration to
resolve a dispute arising under this Agreement, such Party shall provide written
notice (the “Arbitration Request”) to the other Party of such intention and the
issues for resolution.  From the date of the Arbitration Request and until such
time as the dispute has become finally settled, the running of the time periods
as to which Party must cure a breach of this Agreement becomes suspended as to
any breach that is the subject matter of the dispute.

 

13.2.1            Additional Issues.  Within [ * ] after the receipt of the
Arbitration Request, the other Party may, by written notice, add additional
issues for resolution.

 

13.2.2            No Arbitration of Patent/Confidentiality Issues.  Unless
otherwise agreed by the Parties, disputes relating to Patents and
non-disclosure, non-use and maintenance of Confidential Information shall not be
subject to arbitration, and shall be submitted to a court of competent
jurisdiction.

 

13.2.3            Arbitration Procedure.  The Arbitration shall be held in
Wilmington, Delaware by JAMS pursuant to the Comprehensive Arbitration Rules and
Procedures of JAMS then in effect (the “JAMS Rules”). The arbitration shall be
conducted by [ * ] who are knowledgeable in the subject matter at issue in the
dispute.  [ * ]will be selected by Anacor, [ * ] will be selected by Medicis,
and [ * ] will be selected by mutual agreement of the [ * ] selected by the
Parties.  The arbitrators may proceed to an award, notwithstanding the failure
of either Party to participate in the proceedings.  The arbitrators shall,
within [ * ] after the conclusion of the arbitration hearing, issue a written
award and statement of decision describing the essential findings and
conclusions on which the award is based, including the calculation of any
damages awarded.  The arbitrators shall be authorized to award compensatory
damages, but shall not be authorized to award non-economic damages or punitive
damages, or to reform, modify or materially change this Agreement.  The
arbitrators also shall be authorized to grant any temporary, preliminary or
permanent equitable remedy or relief the arbitrators deem just and equitable and
within the scope of this Agreement, including an injunction or order for
specific performance.  The award of the arbitrators shall be the sole and
exclusive remedy of the Parties (except for those remedies set forth in this
Agreement).  Judgment on the award rendered by the arbitrators may be enforced
in any court having competent jurisdiction thereof, subject only to revocation
on grounds of fraud or clear bias on the part of the arbitrators. 
Notwithstanding anything contained in this Section 13.2 to the contrary, each
Party shall have the right to institute judicial proceedings against the other
Party or anyone acting by,

 

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through or under such other Party, in order to enforce the instituting Party’s
rights hereunder through specific performance, injunction or similar equitable
relief.

 

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

 

13.4         Governing Law.  This Agreement and any dispute arising from the
construction, interpretation, performance, or breach hereof shall be governed by
and construed and enforced in accordance with the laws of the State of Delaware
without reference to conflicts of laws principles.

 

13.5         Assignment.  Either Party may assign this Agreement to any
Affiliate of such Party without the prior written consent of the other Party;
provided that such Party provides the other Party with written notice of such
assignment and remains fully liable for the performance of such Party’s
obligations hereunder by such Affiliate.  Further, subject to Section 12.5, each
Party may assign this Agreement without the prior written consent of the other
Party, to its successor in interest by way of merger, acquisition, or sale of
all or substantially all of its assets to which this Agreement relates; provided
that such Party provides the other Party with written notice of such
assignment.  The terms and conditions of this Agreement shall be binding upon
and shall inure to the benefit of the successors, heirs, administrators and
permitted assigns of the Parties.  Any purported assignment in violation of this
Section shall be null and void and of no force and effect.

 

13.6         Performance Warranty.  Each Party hereby acknowledges and agrees
that it shall be responsible for the full and timely performance as and when due
under, and observance of all the covenants, terms, conditions and agreements set
forth in, this Agreement by its Affiliate(s) and Sublicensees.

 

13.7         Force Majeure.  No Party shall be held liable or responsible to the
other Parties nor be deemed to be in default under, or in breach of any
provision of, this Agreement for failure or delay in fulfilling or performing
any obligation (other than a payment obligation) of this Agreement when such
failure or delay is due to force majeure, and without the fault or negligence of
the Party so failing or delaying.  For purposes of this Agreement, force majeure
is defined as causes beyond the control of the Party, including acts of God;
acts, regulations, or laws of any government; war; civil commotion; destruction
of production facilities or materials by fire, flood, earthquake, explosion or
storm; labor disturbances; epidemic; and failure of public utilities or common
carriers.  In such event Anacor or Medicis, as the case may be, shall
immediately notify the other Party of such inability and of the period for which
such inability is expected to continue.  The Party giving such notice shall
thereupon be excused from such of its obligations under this Agreement as it is
thereby disabled from performing for so long as it is so disabled for up to a
maximum of [ * ], after which time the Party not affected by the force majeure
may terminate this Agreement upon written notice to the other Party.  To the
extent possible, each Party shall use reasonable efforts to minimize the
duration of any force majeure.  If Medicis has the right to terminate this
Agreement under this Section during the Research Collaboration Term and prior to
the JRC’s confirmation of a PoC Compound, then in lieu of terminating the
Agreement, Medicis may instead terminate only the Research Collaboration Term,
in which case all Collaboration Compounds identified prior to said termination
date shall be deemed to be Medicis Development Compounds.  Subject to the terms
and conditions of this Agreement, Anacor shall grant and does hereby grant, as
of the effective date of such termination of the Research Collaboration Term and
election by Medicis, an exclusive (even as to Anacor and its Affiliates),
worldwide license (with the right to grant sublicenses) under the Anacor
Exclusively Licensed IP, to make, have made, use, sell, offer for sale and
import such Medicis Development Compounds

 

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24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

 

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and Derivatives thereof as and into Products in the Territory.  Medicis will
have the right to continue the Development of any such deemed Medicis
Development Compounds as of such termination event on its own or through
Sublicensees.  For clarity, all payment obligations in Article 6 shall apply to
such Medicis Development Compounds and any Products containing such compounds;
provided, however, that milestone payments 1 through 3 as set forth in
Section 6.2.1 (if not already paid) shall be [ * ].  Notwithstanding anything to
the contrary in this Agreement, Anacor shall have no further obligations to
conduct the Program as of the effective date of termination of the Research
Collaboration Term by Medicis under this Section.

 

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

 

If to Anacor, addressed to:

Anacor Pharmaceuticals, Inc.

 

1020 East Meadow Circle

 

Palo Alto, CA 94303-4230

 

Attention: Chief Executive Officer

 

Facsimile:   (650) 543-7660

 

 

with a copy to:

Cooley LLP

 

3175 Hanover Street

 

Palo Alto, CA 94304-1130

 

Attention: Glen Y. Sato, Esq.

 

Facsimile:   (650) 849-7400

 

 

If to Medicis, addressed to:

Medicis Pharmaceutical Corporation

 

7720 North Dobson Road

 

Scottsdale, AZ 85256

 

Attention: Legal Department

 

Facsimile: 480-291-5163

 

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

 

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

 

13.10       Waiver.  Neither Party may waive or release any of its rights or
interests in this Agreement except in writing in accordance with Section 13.8. 
The failure of either Party to assert a right hereunder or to insist upon
compliance with any term or condition of this Agreement shall not constitute a
waiver of that right

 

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24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

 

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or excuse a similar subsequent failure to perform any such term or condition. 
No waiver by either Party of any condition or term in any one or more instances
shall be construed as a continuing waiver of such condition or term or of
another condition or term.

 

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

 

13.12       Entire Agreement.  This Agreement, together with the Schedules and
Exhibits hereto, set forth all the covenants, promises, agreements, warranties,
representations, conditions and understandings between the Parties hereto and
supersede and terminate all prior agreements and understanding between the
Parties, including the Term Sheet and the Non-Disclosure Agreement.  There are
no covenants, promises, agreements, warranties, representations, conditions or
understandings, either oral or written, between the Parties other than as set
forth herein and therein.  No subsequent alteration, amendment, change or
addition to this Agreement shall be binding upon the Parties hereto unless
reduced to writing and signed by the respective authorized officers of the
Parties.

 

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

 

13.14       Books and Records.  Any financial books and records to be maintained
under this Agreement by a Party or its Affiliates or Sublicensees shall be
maintained in accordance with U.S.  generally accepted accounting principles.

 

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

 

13.16       Parties in Interest.  All of the terms and provisions of this
Agreement shall be binding upon, and shall inure to the benefit of and be
enforceable by the Parties hereto and their respective successors, heirs,
administrators and permitted assigns.

 

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

 

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24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

 

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13.18       Supremacy.  In the event of any express conflict or inconsistency
between this Agreement and the Research Plan or of any Schedule or
Exhibit hereto, the terms of this Agreement shall control.  The Parties
understand and agree that the Schedules and Exhibits hereto are not intended to
be the final and complete embodiment of any terms or provisions of this
Agreement, and are to be updated from time to time during the Term, as
appropriate and in accordance with the provisions of this Agreement.

 

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

 

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24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

 

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IN WITNESS WHEREOF, the Parties have caused this Research and Development Option
and License Agreement to be executed by their duly authorized representatives as
of the Effective Date.

 

 

Anacor Pharmaceuticals, Inc.

 

 

 

By:

/s/ David P. Perry

 

 

 

Name:  David P. Perry

 

 

 

Title: President & Chief Executive Officer

 

 

 

 

 

Medicis Pharmaceutical Corporation

 

 

 

By:

/s/ Richard D. Peterson

 

 

 

Name:

Richard D. Peterson

 

 

 

 

Title:

Executive Vice President, CFO, Treasurer

 

 

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Exhibits

 

 

Exhibit 1

Research Plan

Exhibit 2

Candidate Selection Criteria

Exhibit 3

PoC Compound Criteria

Exhibit 4

Third Party Agreements

Exhibit 5

Phase 1 Synopsis

Exhibit 6

Post PoC Transfers

Exhibit 7

8-K Filing

Exhibit 8

Press Release

Exhibit 9

Encumbrances

Exhibit 10

Collaboration Compound Scaffolds

 

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24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

 

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CONFIDENTIAL TREATMENT REQUESTED

 

EXHIBIT 1

Research Plan

 

[ * ]

 

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24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

 

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EXHIBIT 2

Candidate Selection Criteria

 

[ * ]

 

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24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

 

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EXHIBIT 3

PoC Compound Criteria

 

The following represent acceptance criteria for a PoC Compound:

 

[ * ]

 

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CONFIDENTIAL TREATMENT REQUESTED

 

EXHIBIT 4

Third Party Agreements

 

[ * ]

 

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24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

 

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EXHIBIT 5

Phase 1 Study Synopsis

 

[ * ]

 

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PoC Trial Synopsis

 

[ * ]

 

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24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

 

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EXHIBIT 6

Post PoC Transfers

 

[ * ]

 

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24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

 

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CONFIDENTIAL TREATMENT REQUESTED

 

EXHIBIT 7

8K Filing

 

ITEM 1.01            ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT.

 

On February 9, 2011, we entered into a Research and Development Option and
License Agreement (the “Agreement”) with Medicis Pharmaceutical Corporation
(“Medicis”) to discover and develop boron-based small molecule compounds
directed against a specified target for the potential treatment of acne.  Under
the terms of the Agreement, we will receive a $7 million upfront payment and
will be primarily responsible, during a defined research collaboration term, for
discovering and conducting early development of product candidates for which
Medicis would have an option to obtain an exclusive license.  We would also be
eligible for future research, development, regulatory and sales milestones of up
to $153 million, as well as high single-digit to low double-digit royalties on
sales of products which Medicis licenses pursuant to its option.  Following
option exercise, Medicis would be responsible for further development and
commercialization of product candidates on a worldwide basis.

 

If Medicis exercises its option for a product candidate, the Agreement will
continue in effect until the expiration of royalty payment obligations, which
obligations will run through the later of patent or regulatory exclusivity and 7
years from first commercial sale, on a product-by-product basis.  Upon the
expiration of such payment obligations for a product under the Agreement,
Medicis will retain an exclusive, fully paid and royalty-free right and license
in such product.  The Agreement allows for at-will termination by Medicis upon
written notice, and either party may terminate for the other party’s uncured
material breach of the agreement or specified activities related to insolvency. 
In the event of at-will termination by Medicis or termination by us for material
breach or insolvency activities by Medicis, all rights granted by us to Medicis
would revert to us, and Medicis would be required to grant to us a non-exclusive
license under its patent rights covering products under the Agreement.  If we
materially breach the Agreement prior to the completion of the research
collaboration term and exercise of the option, Medicis would be entitled to
either terminate the Agreement or continue with the Agreement and terminate the
research collaboration term, in which case Medicis would have a right to reduce
its financial obligations to us or recover its costs to mitigate the damages
resulting from such breach.

 

We have agreed not to research or develop, with respect to the target that is
the subject of the Agreement, any small molecule products in a specified field
for use in humans for a period of 11 years.  Medicis has agreed not to research
or develop with respect to the target that is the subject of the Agreement any
boron-containing compound for 9 years from the date of the Agreement or, if a
certain milestone is not met, for 4 years from the date of the Agreement.

 

The foregoing is only a brief description of certain of the terms of the
Agreement, does not purport to be complete and is qualified in its entirety by
reference to the Agreement that will be filed as an exhibit to our quarterly
report on Form 10-Q for the quarter ending March 31, 2011.

 

A press release announcing the foregoing is attached as Exhibit 99.1 attached
hereto.

 

ITEM 9.01     FINANCIAL STATEMENTS AND EXHIBITS.

 

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(d)  Exhibits.

 

Exhibit Number

 

Description

99.1

 

Press Release announcing entry into Research and Development Option and License
Agreement

 

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24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

 

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CONFIDENTIAL TREATMENT REQUESTED

 

EXHIBIT 8

Press Release

 

[g115621km15i001.jpg]

GRAPHIC [g115621km15i002.jpg]

 

CONTACT:

 

Medicis

Anacor

Kara Stancell (media)

DeDe Sheel

(480) 291-5454

(650) 543-7575

Sean Andrews (investors)

 

(480) 291-5854

 

 

MEDICIS AND ANACOR ENTER INTO RESEARCH AND DEVELOPMENT COLLABORATION FOR THE
TREATMENT OF ACNE

 

SCOTTSDALE, Ariz. and PALO ALTO, Calif.—February XX, 2011—Medicis Pharmaceutical
Corporation (NYSE:MRX) and Anacor Pharmaceuticals, Inc. (NASDAQ:ANAC) today
announced that the two companies have entered into a research and development
agreement to discover and develop boron-based small molecule compounds directed
against a target for the potential treatment of acne.

 

Under the terms of the agreement, Anacor will receive a $7 million upfront
payment from Medicis and will be primarily responsible for discovering and
conducting early development of product candidates which utilize Anacor’s
proprietary boron chemistry platform.  Medicis will have an option to obtain an
exclusive license for products covered by the agreement.  Anacor will be
eligible for future research, development, regulatory and sales milestones of up
to $153 million, as well as high single-digit to low double-digit royalties on
sales by Medicis.  Medicis will be responsible for further development and
commercialization of the licensed products on a worldwide basis.

 

“We are pleased to announce this important collaboration with Anacor,” said
Jonah Shacknai, Chairman and Chief Executive Officer of Medicis.  “Anacor and
its scientists are well respected in the scientific community, and Medicis is
proud to be among other significant organizations who have partnered with them
to explore the pharmaceutical development of the Anacor boron chemistry
platform.  We will together be working hard to achieve breakthroughs with this
proprietary technology in the treatment of acne.”

 

“We have demonstrated that boron-based chemistry is productive in creating novel
small molecule therapeutics, and we are excited to work with Medicis to apply
this technology to the development of a unique,

 

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patented treatment for acne,” said David Perry, Anacor’s Chief Executive
Officer.  “With our technology and Medicis’ expertise in developing and
commercializing pharmaceuticals, we hope this collaboration will result in
innovative products to help the patients who suffer from this condition.”

 

About Medicis

 

Medicis is the leading independent specialty pharmaceutical company in the
United States focusing primarily on the treatment of dermatological and
aesthetic conditions.  The Company is dedicated to helping patients attain a
healthy and youthful appearance and self-image.  Medicis has leading branded
prescription products in a number of therapeutic and aesthetic categories.  The
Company’s products have earned wide acceptance by both physicians and patients
due to their clinical effectiveness, high quality and cosmetic elegance.

 

The Company’s products include the brands DYSPORT® (abobotulinumtoxinA) 300
Units for Injection, PERLANE® Injectable Gel, PERLANE-L® Injectable Gel with
0.3% Lidocaine,  RESTYLANE® Injectable Gel, RESTYLANE-L® Injectable Gel with
0.3% Lidocaine, DYNACIN® (minocycline HCl Tablets, USP), LOPROX® (ciclopirox)
Gel 0.77% and Shampoo 1%, PLEXION® (sodium sulfacetamide 10% and sulfur 5%)
Cleanser, Cleansing Cloths and SCT, SOLODYN® (minocycline HCl, USP) Extended
Release Tablets, TRIAZ® (benzoyl peroxide) 3%, 6% and 9% Cleansers, Pads and
Foaming Cloths, VANOS® (fluocinonide) Cream 0.1%, ZIANA® (clindamycin phosphate
1.2% and tretinoin 0.025%) Gel, AMMONUL® (sodium phenylacetate and sodium
benzoate) Injection 10%/10%, BUPHENYL® (sodium phenylbutyrate) Tablets and
Powder, the LIPOSONIX™ system(1) and the over-the-counter brand ESOTERICA®.

 

For more information about Medicis, please visit the Company’s website at
www.Medicis.com.  Printed copies of the Company’s complete audited financial
statements are available free of charge upon request.

 

Medicis Forward-Looking Statements

 

This press release contains “forward-looking statements” within the meaning of
the Private Securities Litigation Reform Act.  All statements included in this
press release that address activities, events or developments that Medicis
expects, believes or anticipates will or may occur in the future are
forward-looking statements.  These statements are based on certain assumptions
made by Medicis based on its experience and perception of historical trends,
current conditions, expected future developments and other factors it believes
are appropriate in the circumstances.  No assurances can be given, however, that
these activities, events or developments will occur or that such results will be
achieved. Such statements are subject to a number of assumptions, risks and
uncertainties, many of which are beyond the control of Medicis. Several of these
risks are outlined in the Company’s most recent annual report on Form 10-K for
the year ended December 31, 2009, and other documents we file with the
Securities and Exchange Commission.  Forward-looking statements represent the
judgment of Medicis management as of the date of this release, and Medicis
disclaims any intent or obligation to update any forward-looking statements
contained herein, which speak as of the date hereof.

 

NOTE: Full prescribing information for any Medicis prescription product is
available by contacting the Company or by visiting www.Medicis.com.  All
trademarks are the property of their respective owners.

 

About Anacor Pharmaceuticals

 

Anacor is a biopharmaceutical company focused on discovering, developing and
commercializing novel small-molecule therapeutics derived from its boron
chemistry platform. Anacor has discovered five clinical compounds which are
currently in development, including its three lead programs: AN2690, a topical
antifungal for the treatment of onychomycosis; AN2728, a topical
anti-inflammatory PDE-4 inhibitor for the treatment of

 

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[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, IS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE
24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

 

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psoriasis; and GSK 2251052, or GSK ‘052 (formerly referred to as AN3365), a
systemic antibiotic for the treatment of infections caused by Gram-negative
bacteria, which has been licensed to GlaxoSmithKline under the companies’
research and development agreement. In addition, Anacor is developing AN2718 as
a topical antifungal product candidate for the treatment of onychomycosis and
skin fungal infections, and AN2898 as a topical anti-inflammatory product
candidate for the treatment of psoriasis and atopic dermatitis.   For more
information visit www.anacor.com.

 

Anacor Forward-Looking Statements

 

This release contains forward-looking statements, including statements regarding
the success of and any payments that may result from Anacor’s collaboration with
Medicis, as well as other matters that are described in Anacor’s Registration
Statement on Form S-1 filed with the Securities and Exchange Commission. 
Investors are cautioned not to place undue reliance on these forward-looking
statements, which speak only as of the date of this release.  The Company
undertakes no obligation to update any forward-looking statement in this press
release.

 

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(1) The LIPOSONIX™ system is not approved or cleared for sale in the U.S.

 

#  #  #

 

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[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, IS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE
24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

 

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CONFIDENTIAL TREATMENT REQUESTED

 

EXHIBIT 9

Encumbrances

 

Loan and Security Agreement No. 5251 by and between Lighthouse Capital Partners
V, L.P. and Anacor Pharmaceuticals, Inc., dated June 30, 2006, as amended as of
the Effective Date

 

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[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, IS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE
24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

 

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EXHIBIT 10

Collaboration Compound Scaffolds

 

The following scaffolds: [ * ].

 

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[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, IS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE
24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

 

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